[closing bell ringing] alix: u.s. stocks closing this lower, snapping a three-day rally. joe: the question is "what'd you miss?" alix: will prime minister david cameron win enough concessions to pave the way for a referendum as soon as june? joe: how much debt is too much? we talk about which countries may be flirting with danger. and negative rates are not a good idea according to blackrock's peter fisher. we will ask him why. we begin with market minutes. we had a monster three-day rally in stocks could not hold on to their gains. the s&p finishing off by not too much but not having a rally there. in terms of sectors, you are and bigat health care

gainers giving up some momentum. in the markets, but a pause. joe: the dow's smallest move in six days. the first day the s&p did not move a percent in either direction. so a pause is a good way to describe the day. at no point did it ever get a that exciting. except maybe for ibm. ibm added 47.2 the dow. the idea that whatever kind of support we did was just buy one company. walmart selling off, so there were interesting stories on the individual level. alix: i did want to point out where we came from in just one week. we saw that low and the huge , nonetheless seen

climbing higher. it was such a stark reversal from just seven days ago. really an unbelievable comeback. joe: one interesting thing is despite the egg rally we have seen since thursday, still not much signs of life in the interest rate market. hitting their lowest since february 11. not seeing much of a bounce back in yields. alix: which is interesting. another interesting thing on the currency front -- the british pound seeing a lot of volatility. what's going to happen with the summit and what's going to happen with the referendum. you can see volatility surging to its highest level, so we will be talking about that shortly. alix: commodities across the

board, oil and gold -- oil finish little higher despite the inventory building. positive for just a second. talking about the risk off kind of day, but nasa lien was really the standout of the commodity market. gasoline was the standout of the commodity market. if you have too much inventory, refiners are going to cut their runs and that leads to a backup in crude inventories and that hurts the oil price. and what does that say about in demand in the u.s.? some people think it has ominous signals. alix: gold did have a nice rally today but hold stocks, one stock cut to junk today. go figure.

those are today's market minutes. i want to take a deep dive into the bloomberg to see what caught our eye today. i'm looking at u.s. financial conditions index. ss it goes negative, condition tighten. we've seen financial conditions loosen as we've seen the rally in stocks but this decline can be very significant. deutsche bank saying if the tightening we have seen in last few weeks can be sustained, it is the equivalent of two rate hikes from the fed and would be an equivalent drag on growth. nonetheless, a significant tightening we have seen. it also shows these financial conditions models, how much the stock market influences them. i should have correlated that. joe: i want to go to the

bloomberg and talk about the stark difference we were seeing. this is the chart function on your terminal comparing the market implied rates today versus a week ago. code,reen line is today's 0% last week, basically a chance of any hiking this year. year.es this still not very much but you can out there, there's little more hiking priced in. basically the markets have gone from no hiking to we might get a hike. alix: nothing in the economic it is all about

sentiment and everything moving together. alix: lord roberts the ski is a member of the u.k. house of lords. u.k. prime minister david cameron is meeting about a potential brexit. mr. cameron: we've got work to do and it is going to be hard. i will be battling for britain, but i will not take a deal that doesn't mean -- it's much more important to get this right. but with goodwill and hard work, we can get a better deal for britain. this meeting is moving the markets in a major way. joe: thank you for joining us. david cameron is negotiating with his brussels counterpart and wants to enhance competitiveness.

dealing with social benefits for non-british citizens. will david cameron get any kind of deal he won't be able to sell to his countrymen and convince him to stay in the eu? guest: that is a big question. at the moment, sentiment is very narrowly in favor of staying in. 52-48.ls suggest i think people have known for some time what cameron has been trying to do. are whetherations they can get the draft agreement ratified by the members of the eu and that is what is being renegotiated. fromof them, especially eastern europe, the attempt to restrict social benefits to migrants and others are saying

they don't want to give written an op out. others are reject thing to opt out. there's still a lot to play for, whether in the end the deal will be acceptable, i think it probably will. understandable that markets are rather volatile at the moment. alix: does this open a can of worms and give france and germany the ability to say we are not going to play by these banking rules and we don't want to give social benefits to migrant workers? guest: i think there is a danger of that. if certain concessions are given written, others will ask why they haven't been given the same concessions. i think migration is a huge problem.

for britain, it is a big problem because there is a net immigration per year close to 200,000. so, they are coming from east to west. other countries are facing similar problems. me real thing that strikes is what isn't being debated at all in all of this is the future of the european union itself. it is assumed it is moving toward local and economic union and written wants to stay , but the real question is whether it is going to break up because the european project is in a huge crisis. ?oe: what is the answer to that will the eu breakup or be closer together 20 years from now? that, it hinges on whether you can resolve to issues. first of all, the eurozone

crisis. the eurozone is a flawed institution. it logically should break up because it hasn't got any mechanisms for dealing with the kinds of crisis it faces. jellyfisha great without a central nervous system if you like, and it faces a big problem on its eastern and southern borders. not just syrian refugees, but a lot of the middle east is in turmoil. alix: and that is what we are seeing play out on this brexit issue. where the people come from most is really from poland. why would those countries want u.k. is notthe

giving individual benefits? in essence, that is the issue. joe: what is the incentive for these countries to acquiesce? guest: they want to keep britain in. they do recognize if written left, it would be the first country to join the eu to have left it. that would be a big blow to the whole eu project and they are prepared to make concessions to you written in, but then have the question who are they? you have 27 decision-makers and they all have different interests. people who come to britain to do are not interested in getting benefits, they are interested in work. they say we will restrict the benefits in the first year and

get them increase. that is just barnstorming. it's not really serious and i don't think it is serious in a wider sense for britain either. money it would save by these restrictions is absolutely my new. the bureaucratic activity to enforce them is colossal. so he is barnstorming as well. it is undoubtedly a popular site in britain. how economically costly would it be if written word to leave the eu? are the economic voteications if the brexit goes against cameron? guest: britain will find it more

difficult to export to europe. the city of london might cease to be one of the world's major financial centers. there are other restrictions that would be put on british economic activity. a lot of that is hugely overwritten. a financial center depends on the financial services it divides and london will not lose that as a result of britain leaving the european union. are hardly any external tariff areas. what will be gained if britain gaingrow is that it will control over its own borders as far as migration is concerned. that is what cameron asked for but did not get. alix: thank you very much.

you are staying with us. is tooup, how much debt much debt? we take a look at the growing risk to the global economy, next. ♪

>> a message today for donald trump -- anyone who wants to build a wall along the border with mexico is not a christian, says pope francis. donald trump says it is disgraceful to question a person's faith. americans are divided over president obama nominating a replacement for antonin scalia. next president should make the pick according

to a cbs news poll. scalia died unexpectedly on saturday. google, facebook, and other tech companies are supporting apple's fight against the government. a coalition of big-name tech companies said the firm should not the forced to build backdoors into their own products. puerto rico says it is buying blood from the red cross after the federal government said territories affected by the zika virus should limit the use of locally donated blood. more than 30as conformed cap -- confirmed cases of the virus. 24 hours abal news day powered by our 2400 journalists and more than 150 news bureaus around the world. "what'd you miss?" by $57debt has grown

trillion since the great recession, raising the ratio of debt to gdp by 17% according to a new report. riskst levels rise, so do to financial stability around the world. our guest wrote about this in his latest piece for private syndicate. joe: how much debt is too much? are you talking of public debt or private debt? i think one has to make a distinction between those two. there is certainly no magic number for either of them. argue that tried to 90%hat to gdp ratio reaches , this starts having a bad impact on growth, but i don't think that is very soundly based.

a lot of people have argued some version of the point you are making, that the world is on a swimming in debt and grand scale, there hasn't been all that much deleveraging. but what are the policy steps you can do to get rid of debt without causing a major slowdown , wrenchinginful depression? of reducingo ways the debt burden. to inflate your rate out of it. is to have real growth. you do a bit of both, but at the moment, we have a deflationary environment and over much of the world, especially in the euro area, there is no growth. so of course debt then becomes

more of a burden and it is a big greece.n countries like the burden is increasing and in italy, there's not only no growth, but there is negative growth. you made an important distinction at the beginning -- not all debt is the same. the government that of greece is different -- there is a lot of anxiety in the last year about the amount of credit in china and how much of china's growth has been credit driven. measures canpolicy china take more would you recommend for china so it continues to have growth or increase the standard of living but it's off this debt treadmill as some argue there is? baron skidelsk: china has to find activities that justifies the credit its banks are

issuing. one of china's big problems is a lot of the credit just went into subsidizing or making a state known enterprise. if they can go into productive activity, that would be helpful. .redit isn't a bad thing it is where the credit goes that is important. if it just goes into speculative activities and no growth comes out of it then the debt just becomes more and more unsupportable. gdp growthntion real is one way economies can deal with that, but as china has shown, it's not easy for central authorities to create real gdp growth or know what they are creating is going to be efficient as opposed to speculation or excess capacity. is getting real gdp growth to difficult? is that not a realistic option?

baron skidelsk: it has a lot of gdp growth, it has just been slowing down. china has a huge amount of saving. it has an almost 50% saving ratio. the question is, where does that go? a lot of that goes into speculation. partly because the banking system is directed by the state to invest those savings in the state's own enterprises and their lossmaking. so there's got to be a big reform of the banking system. some diversionbe of investment into profitable enterprises, and that requires more efficient allocation of capital. that is the problem with china. capital is being in official --

inefficiently allocated. up, goldman sachs out with a bold call on gasoline. it's all part of the recession debate, next. getting hitrdstrom hard in after-hours trading. the retailer missing fourth-quarter earnings and lowering its earnings forecast for the fiscal year. ♪

alix: i'm alix steel. "what'd you miss?" is trading as if the u.s. is nearing a recession according to goldman sachs. basically, contracts for delivery in the summer are less then $20 a barrel higher than crude oil and if realized, it will be the smallest and 2010 u.s. unemployment was above 9%.

what we are talking about here are cracked spreads. when margins wind up making off of reducing a gallon of gasoline. and morew the chart time, that white line there which is current gasoline prices is actually backward. now arey prices right more expensive than prices in the future and the concern is that reflects weaker demand going forward. so much supply wound up in the markets that demand is falling off a little bit in the u.s. and china and growth is not as strong and that is a global concern. if you wind up having a lot of gasoline inventory, that is going to feedback to the refiners and they are going to work less and you have another leg lower in the oil price for top -- the oil price. joe: inventories are starting to

build up. thingsesn't say good about and demand. goldman sachs gasoline futures pricing in a recession. some of the data looks fine, but when you see this kind of ldap, it doesn't look like an economy of people driving to get to work. alix: we are two weeks into february and we have seen in the tory old in the u.s.. droply we see a draw -- a in people using gasoline. both sides. big takeldman sachs' away is the market is too pessimistic and you're going to be driving more in july and using gasoline and that will help the market. so they say. our -- our negative rates helping or hurting the economy? our next guest inks they are a

bad idea.

the conference call. the ultimate arena for business. hour after hour of diving deep, touching base, and putting ducks in rows. the only problem with conference calls: eventually they have to end. unless you have the comcast business voice mobile app. it lets you switch seamlessly from your desk phone to your mobile with no interruptions. i've never felt so alive. make your business phone mobile with voice mobility. comcast business. built for business.

ramy: let's get to first word news this afternoon. pope francis had some words for donald trump -- anyone who wants to build a wall along the u.s. border is not a christian. the pope on board a plane to mexico said christians build bridges, not walls. pope francis: i will leave it up to your judgment. a person who only thinks of making walls again and again and not bridges is not a christian. ramy: trump wasted little time responding via twitter saying it is disgraceful to question a person's faith. ted cruz has won endorsements from more than 300 pastors and other religious leaders in the state.

the texas senator's when in the iowa caucuses was filled by -- was fueled by similar evangelical support. president obama has signed legislation to hit north korea with sanctions for refusing -- four refusing to stop us to element of nuclear weapons. the michigan house approved $30 million to pay water bills in the aftermath of the lead contamination prices -- lead contamination crisis. global news 24 hours a day howard by our 2400 journalists and more than 150 news bureaus around the world. alix: let's get a quick recap on how u.s. markets close. u.s. markets ending their -- a-day winning streak monster rally but we could not hold on today.

nonetheless, not a lot of damage done there. the nasdaq down by 1%. walmart and ibm kind of illustrate what was happening. ibm adding 43 points to the dow. walmart after those horrible earnings numbers subtracting 13 points from the dow. joe: you mentioned this is kind of like a little pause. 2.4al markets have added trillion dollars from their lows last week to last night, so we saw this huge reversal. today, just very quiet and subdued. alix: one stock that is not acquire -- that is not quiet and subdued is nordstrom. missing on fourth-quarter revenue estimates and lowering its forecast for the fiscal year ahead. it sees the first half of 2017 earnings to be down 30% from one year ago. "what'd you miss?" larry summers thinks negative

rates could be a positive thing. mr. summers: we will have to watch the experience over a longer time. is easier money, even if it means a move toward negative rates tends to be stability. our next guest does not agree and thinks negative rates are a terrible idea. why do you hate them so much? peter: it's important to separate how we think monetary policy works. there's the exchange rate channel where you can influence the exchange rate or there is the wealth effect where you can make people richer. negative rates are not a cure-all. larry's point is no matter what ails you, take negative rates and they will make you feel better, i disagree. i get it on the exchange rate. if you are a little country like sweden or denmark and you're

trying to avoid your currency appreciating, you just have the , you canld curve probably avoid a further appreciation. you cannot weaken your currency much but let's be clear -- negative effects for the us x rate is a race to the bottom of competitive devaluation. wasnational monitoring fund established to prevent us from doing that again. 30'swe did in the 20's and that was such a disaster. if you think every country can devalue their current see negative rates, you can't get there from here. some other places are trying it and it gives them a little negative, but maybe it works for little countries, but i don't see it working for big countries on the exchange rate channel. chart that shows what happens to countries currencies that have gone negative. joe: what about the credit

channel? just make it cheaper to borrow and lend? peter: that is the trick. aro, yes, lend, no. brilliant economist like larry tend to think of the demand side of credit. how do you feel about lending more when the spread you are earning is compressing. that is why european bank stocks have gotten crushed and why japanese stocks were hurting so much. it's about the shape of the yield curve. imply thates it interest margin compression? peter: can the commercial bank pass along? central bank deposits or a closed system. people talk about of the central bank within negative rates that people will take their money from the central banks. the fed decides how big its balance sheet is.

if you are jpmorgan and take your money out of the fed, where do you put it? you put it in another bank. banks arecial unlikely to be able to pass along, in which case, you cut the yield curve. 1992,about this -- it's the u.s. economy has a slow recovery and i want to assure you alan greenspan went to bed every night saying thank you, lord, thank you for the steep yield curve helping us to recapitalize the american banking system. in 2002, alan, greenspan went to bed every night and said why me? why are you giving me this conundrum of low, long-term interest rates. don't you know it makes it harder to stimulate credit? in 2012, central bankers lost their minds and now they celebrate every time the yield curve latins.

channel is one that negative rates is just not going to work. alix: it's not like inks were killing it with their net interest margins. in theory, if demand picks up, can you make up for it? peter: if it is narrower, getting less reward. if i pass along the deposit rate, my balance sheet shrinks and i can't lend. ae: why the seeming zeal and part of central bankers to experiment with negative rates? you make a lot of sound arguments and markets don't seem to be particularly enthused or working particularly well in terms of generating inflation. on the other hand, some of the tools, you had a good reaction to that. why are they interested in them these days? peter: they don't want to admit they are running out of ammunition.

it has become an article of faith that in order to have credibility, they have to say things that don't have credibility. they want to present the face that they are still in charge. the last one is the wealth effect. if we put through a negative interest rate and pass it through to consumers, they will and spend money. this is the opposite of the wealth effect. we're going to get people to spend more because we will make the import by taxing their savings in the bank. it makes no sense at all for the u.s. deutsche bank has made the point that could encourage people to save more. they have to put in more. peter: and what the population aging, more of the population has a savings target. if you are a young household formation, you are thinking about how do you build up your house?

if you are on the retirement and of the cycle, you are going to have a savings target, so it's really not going to work then. alix: is the solution a coordinated action or fiscal stimulus instead? peter: the latter. i don't think it's going to get the u.s. to a 3% growth rate. people it is time for and i think larry summers believes this, but he can speak for himself. fiscalime for serious stimulus. the monetary tool has run out of gas and it's time for the next secretary of treasury or next president to take -- to think seriously about how we get our infrastructure growing. in china, they need to do the opposite. we need investment and less consumption and it's time to stimulate that way. that is not something this crop of politicians wants to hear.

joe: do you think that explains why we have been seeing so much nervousness in the market? that we are not going to get the fiscal part because of the political situation and central banks are out of ? peter: i think that's part of it. they push the wealth effect and got equities nice and high, but where is the follow-through? that central bankers want to prop it up. bank startstral targeting asset prices, how do you stop? the exit is not about shrinking the fed's balance sheet, it is stop pushing you asset prices? alix: peter fisher, thank you so much. is it time to reevaluate tech stocks? we will speak to the expert on valuation. ♪

alix: i'm alix steel. time for the bloomberg business flash. nordstrom's coming up short in the fourth quarter, the retailer missing revenue and earnings due to poor holiday sales. forecast foreek the fiscal year ahead. shares are falling in late u.s. trading. mcdonald's is boosting the pay of its ceo by 18%. his base salaries went point $3 million. the stock is up 23% over last year. citigroup is running to exit its retail operations in resell and argentina. has maintained operation into countries for more than a century. back tohas been scaling

cut costs and boost profits. financial services company will not be exiting a line of his this in the institutional division. the government wants to make it to buy new cable boxes from companies other than your cable provider. proposal onoved the a 3-2 partyline vote. the new rules will likely take several months to write. companies could be allowed to deliver a cable feed as part of their streaming tv devices. that is your bloomberg business flash. is it time to buy stocks? the s&p is down 6% this year. it almost slipped into correction territory and has clawed its way back. joining us is the master of valuation who wrote the book. what do youlloff,

think of valuations in the market? ok with them. i think there are worries on a macro level but i have no idea what's coming in china or what's happening in commodities. i've got to make judgments based on what i see on the ground right now. looking across companies, i don't see any reason to panic and run into the forest. let's talk about the trees in the forest and specific companies. obviously lots of interest in tech stocks that have gotten slammed this year. can a court coming out saying amazon is at its most compelling valuation. the note said amazon has fallen or mid-december all-time high. say we believe this pullback represents an opportunity and the evaluation looks as reasonable as it has in many years and they are raising their price target. is a stock that has always

confounded value investors. but that hasn't been wrong. is that reasoning sound? i have no idea what they mean because what they are talking about is pricing. i will cut to the chase. they think it is a compelling buy because the prices come down about 20%. that is a pricing judgment and i have no problem with people making that pricing judgment. from a valuation perspective, amazon is difficult to justify, even with a 25% drop from its high simply because what it has to accomplish is perfection. the businessesoy and become the's sole player. it has to find a way to make margins that are almost unsustainable. i can look at the company and marvel at it, but i cannot justify buying it. go on to say the

stock is unlikely to retreat into true value territory. is there some reasoning to that? is why i drew the distinction between investors and traders. they buy the low price and the reality is they don't care about value. they make money from the price going up. investors have to worry about value. if you want to trade amazon, go for it. it's got nothing to do with fundamentals, so let's stop talking about fundamental than talk about mood and momentum. to 750 butd go back that doesn't make it a good investment. you wrote about apple and concluded apple is significantly undervalued. a lot depends on how you think of the company.

you think of apple is a slow growing company still spinning off tons of cash. other people don't like it because it's not growing up vastly more and it's not exciting. how important is it to figure out the frame with which the market is doing the stock? guest: it is absolutely critical. one of the problems with apple is people punish it for delivering zero growth. if you price it for 20% growth, apple has been priced as if it's margins are going to shrink about 25%. positiveelivers relative to the expectation, traders punishment. joe: do you just point out that irrationality and expect the market will come to see it? guest: i am careful about using the word irrational because it suggests traders are crazy.

i have to look at the cash flows. i don't trust my views on apple and other people. for me, apple is a good investment and i'm waiting it out. i'm still ok with it. alix: on the flipside, you make the point about google where the market only sees the good news in google not matter what they do. guest: that is the nature of momentum. everything google does might be terrible. for the moment, the momentum is with google because it is perceived to be on a good trade. much more on valuations coming up. we will talk about facebook and twitter. ♪

alix: i'm alix steel. "what'd you miss?" we are back with our guest talking valuations. joe: we were talking about google or alphabet in this current frame that market is where it can basically do no wrong. you wrote that much like apple, google is a one trick pony. it's an online advertising company. they can say they are a diversified company but is really just one thing. guest: it does one thing and it does it really well. i'm not going to underplay the fact that it's one of the most incredible cash machines in corporate history. that said, nothing else google has done has added to the online advertising art. now that alphabet has let off the rest of google, we'll have to see if there is anything since left. joe: you think it's great they are doing it transparently, but there's nothing to show. twitter, talking about

your valuations -- you twitter at fair value. talk about that. guest: it is interesting. when they went public, i valued them at about $18. it is a testimonial to how little management is done that three years later, the value i get is $18. strengthny's rigorous was they had 240 million users , has 320 years later million users and very little to show for it. i want to break it with some breaking news. citigroup is lifting michael corbat's pay, reaching $16.5 million through 2015. that includes 1.5 million dollars in salary and $15 million in variable compensation for a total package of $16.5

million. on twitter, if you still have an $18 valuation for the stock, is it time to nibble on it? guest: i nibbled one year ago, so i'm feeling the pain. i got valuations as high as 25. lower caning how much the company go? they keep testing me on that. i lost about 30% of the stock it's'm still holding but always when you are investing for value reason that people use the argument that it could have that and it is desperation time. m&a speculation with twitter is all over the place. is this a good time? guest: when you use acquisition

is your justification, you've reached the dregs of your fundamentals to do that. on the flipside, facial seems to be crushing it. and investorsc seem to love it. what do you see? guest: it is a company i've been wrong on every step of the way. i viewed it as a google want to be. a company that wanted to be like google by the time i got to year 10. i think it is a company that will outstrip google and i think of it as the biggest challenge google faces in the online advertising space. speculation was 30, it is now 90. that shows you the company is changing the game as it goes along and it amazes me how much the company has changed the game. do you value a company

when it changes what it is and there's no come harrison for what it is? guest: -- there's no comparison for what it is? guest: you have to not just look at the numbers come he had to look at how it acts. one of the things they spoke has shown his while it is building a user's comments got a second channel going saying we have to build up a business. i wish twitter had that same attitude about holding up a business while building users. joe: great stuff. thank you. alix: speaking of tech, google senior vice president for "ndroid joins "bloomberg west at 6:00 eastern time. you don't want to miss it. here's what you need to know to gear up for tomorrow's trading day. ♪

alix: don't miss this -- we have earnings out tomorrow. joe: that's all for "what'd you miss?"

john: i'm john heilemann. matt: and i'm mark halperin. 2 and with all due respect, this election is now hope and strange. a glory, glory hallelujah hello to all of i from south carolina. new poll flubs from the palmetto state survey for you tonight. fuffers -- but first, once again the news of the day has almost everyone saying oh, my goodness. many people scr