economy. is this, i guess, a frozen conflict, and what else can we anticipate? what has had a greater impact on the russia -- russia's economy is the precipitous drop of oil. 37, 30 eighting at dollars a barrel, if that, and the planning they have used is $50 a barrel. so, sanctions have contributed to that, but the major impact has been with oil. considerhe russians the ukraine little russia. i think it is deeply steeped in their history and their culture, so they are going to attempt to sustain influence, particularly ,n the two separatist publics

and obviously with the russians most feared and are most the ukraineout is gravitating to the west more than it already has, meaning becoming part of the european union, or nato. .ussia will be proxies the separatist will sustain their influence in the ukraine in that manner. mr. quigley: do you see the status remaining the way it is -- everything there is renewed conflict at different times, but no dramatic change recently --it is? obviously there is renewed conflict at different times, but no dramatic change recently. mr. clapper: i think they will maintain the status quo, but there are incidents occurring on

the line that has been drawn the of the minsk agreement based on upstart separatists that the russians do not control. john, do you want to add to that? john: there has been some movement with the minsk agreement, but are have been shortcomings. your characteristic -- characterization of a frozen conflict -- there are questions about how the russians will extricate themselves from this, which is taking a toll because of sanctions. mr. kugler: -- mr. quigley: given the economy, do you sense that mr. putin feels they have their hands full or are you concerned about efforts to destabilize the baltic region? mr. clapper: well, there are concerns about that, but right now that is more in the soft arena rather than a hard

military assault on the baltics, which does not seem to be in the cards right now. i do think the russians are preoccupied right now with syria , and they have put more into that. they are confronting the possibility -- bonnie: you are watching bloomberg markets. i am vonnie quinn in for betty liu. on are watching a hearing thoughts on apple, and their moving to other issues including worldwide threats. the cia director is also present. let's get more from "bloomberg " anchor david westin who joins me and is an expert on illegal opinion of the matter. us concentrate on apple because that is where the public is focusing its interests.

this is about overreach and apple is the key player. david: that is right. james comey is a very experienced lawyer. i know him well. the members of the committee were asking two questions that i think are terribly important. one is if you're going to make apple affirmatively go out and write code, where does that stop? could you ask apple to write other codes or other companies to write codes? how far can you go with that, and secondly, if you get this done with apple, why couldn't other governments do this, some that do not have our interests at heart. vonnie: this will go to the courts at some point. how do we divide up the question? david: this is pending before a

magistrate in california with a san bernardino shootings happened. the apple phone was owned by one of the shooters who is that now, and what has happened is the government has gone and said we need -- we would like to get into the photo. todayneeds to respond by to the motion to compel them to write this code. then it will go to the magistrate. then it will go to a district court judge, the court of appeals, and hopefully the supreme court, and tim cook said they will take it all the way to the supreme court. speaking of tim cook, your former covenant, abc, did a news interview with tim cook yesterday, and we have a sound bite. let's listen to what he said. mr. cook: some things are hard, some things are right, and some things are about. -- this is one of those things. vonnie: some things are hard, right, go -- arbitrate?

-- who arbitrate? vonnie: -- the prosecutors want to handle it in the court, and in all likelihood, it will be the court to decide that. it is a prosecutor seeking the information. that is where we will start out. it is hard, as tim cook says, for various reasons. it is hardly a terrorist, certainly a murderer, and also, who is now dead. for apple to say we need to protect privacy, typically privacy rights do not survive your death. they are for living people. i do not think we have a reasonable expectation that after we have gone from this earth, we can still protect our iphones. it is a hard case to apple to argue based on the facts. vonnie: speaking of the argument, we have tiffany carry covering this as well, writing stories on bloomberg. she is joining us on set.

we'll go to tiffany in a moment. arguments,he legal if you were leading the team of lawyers, where would you start? david: for apple, or prosecutors? as lawyers, we could do either side. similar things have been done with apple in the past. this is part of their argument. i would also say this is a terribly important issue. we have somebody that has murdered 12 people. they are now dead themselves. they have no privacy rights. how can you stand between us, the prosecutor, and finding out whether they might have been in contact with other potential terrorists who could kill americans in the future? that is what i would argue. vonnie: tiffany, you are here. what are other lawyers saying? have you heard wild arguments? tiffany: there are things such as free speech -- computer code is free speech.

i think with the interesting question is is what kind of technological issues they are going to have to get into. apple seems to see this as a big security risks, but we do not know exactly how that will happen. some people have speculated if they respond to this, they will have to respond to thousands of other requests, set up a compliance department. that is where the weak link comes in. the compliance department could be the target of malicious hackers. and, david, before we even get there, we have to have definitions -- decide what is code. david: what is so adjusting to me, typically after the passing of justice scalia, the all this 1789, and itd in getcally says courts could you to do anything to you have a statute written in 1789, and now we're talking about code in 2016, and with justice scalia

wanting to go to the original intent -- i am not sure how a court applies that. vonnie: is it fair for apple to take this squarely on their own shoulders? this could go on for years. david: first, it is a big company. we do not have to worry about apple too much. goes way back -- we have taken important decisions -- school desegregation -- and put them in front of the courts. this is the way we resolve things in this country. we take big social issues and put them in court proceedings and have judges decide them. vonnie: david westin, this is not the last time we will be speaking about this, i guarantee. thank you. "lso, our own "bloomberg anchor. also, tiffany kary, covering legal angles on bloomberg.com.

let's get to the markets. julie hyman has the latest. julie: stocks have turned slightly negative. earlier we had a booth at the open following the heels -- on the heels of gains in europe. the dow is very little changed, down about 12 points right now. the nasdaq leading clients. look at the bloomberg with the -- leading declines. look at the bloomberg with the various sectors on the move. energy continuing to way things down. technology as well. and you have a lift in a significant number of groups. most of them the more defensively oriented once -- telecom, utilities, consumer staples -- that trio gaining just a little bit. up just about 1%. we have seen some strength in banks. we have tended to see banks and technology trade in tandem, recently, but today it looks like there is more of a split. actually, it looks like there is a split within the banks. .e have a mixed picture as for european trading, there has been a follow on effect in

the u.s., or at least had been, until the last half hour or so, really after we got out of the gate of trading in the u.s.. here is the list we saw in the european trading. lloyd's of london, the u.k. bank , had been leading gains in financials there. now, again, we see a reversal of those gains in the united states. vonnie: we have, and the focus turning away from commodities. a little relief. julie: to some extent, yes. if you look at oil, we see in extend some losses now, so that seems to be having a little bit more of an effect on u.s. stocks, but certainly the magnitude of the losses is nowhere near the 2% drop we have seen. gold futures, little changed. copper trading a little lower. it does not seem to be exerting the pressure we had been seen. the dollar also not seen huge movement. also trading little changed. the 10-year note -- we have been watching that as well, because we have seen the yield come down. that movement continues. buying of treasuries.

1.71%. stocks bouncing around a little bit here along the bottom, vonnie. we will keep you updated. vonnie: a little volatility creeping in. thank you. more bloomberg markets day next. he will keep you updated on the hearing, and apple ceo tim cook takes to the airwaves about why he opposes hacking into a phone used by a suspected terrorist. you can watch this live on the bloomberg. mr. comey: why it is factually appropriate. i think i have to leave it there. >> we will leave it there and wait for the court filing to see what their claims may be. i yield back, mr. chair. >> mr. carson. mr. carson: thank you, mr. chair, director coming -- ♪

vonnie: good morning.

you are watching bloomberg markets. i am vonnie quinn. another interesting overnight session in asia. we saw the shanghai composite index dropped almost 4%. we also had the yuan change and we can. u.s. stocks fluctuating now, falling. there has been a slot in crude oil prices while investors selloff.at a rallying european shares as well. for a closer look at mark's wings ahead of the g20, let's bring in -- market swings, let bring in michael darda who joins us from stamford, connecticut. let's begin where we have to -- the swings in china -- another big drop, 6.4% for the shanghai composite index. what you make of that -- is that something we should ignore? hi.darda:

thank you for having me on. we should not ignore it. china has some challenges, not the least of which it has this quasi-regime to the dollar. with the taper, the end of qa, and the beginning of rate rises, corresponding to a rise in the dollar exchange rate and a -- abrupt monetary changes in china, as long as the current setting the things to be the case for them, exchange-rate -wise, i think there will have to be let's ahead. --they will have some turbulence ahead. vonnie: the chinese finance said theyasically yuan exchange rate will be determined by a basket of currencies and not just the dollar, and a new accord is fantasy. we can forget about that. gingwe forget about it unpeg

completely? mr. darda: i think at some point they will be forced to let the exchange rate will down in a more dramatic way. if we pay close attention to what is happening, reserves have been plummeting as they tried to prevent the currency from moving down. is pbo's balance sheet tightening. despite the interest rate cuts, they have tightened to prevent the u.n. from declining much more than it has. at some point, i think we will see a much more significant devaluation in the currency. either that, or if the fed decides to step away from the phillips curve and starts to reverse course on monetary tightening and the dollar drops, that could be a release valve for china, but that will be one or the other, in my opinion. vonnie: let's look at stocks -- two days left of trading february, if you count monday, i

guess. what will be the driver in march? mr. darda: i would tell investors to watch the credit market carefully. they foreshadowed a pickup in volatility starting last summer and rolling selloffs in the s&p 500. corporate bond spreads are close to the highs for the cycle and very high on an historical basis. watch inflation expectations in the bond market. the fed, for whatever reason, is discounting, almost ignoring this signal, but inflation expectations are very close to the recent lows, and those things have both been associate volatility, and, you know, big drops in the equity market, so -- oil,e: our bottoms in in five years forward, and can we expect something more stable going ahead? mr. darda: very hard to say. i do not see evidence the fed

will stay away from the phillips curves, and they're sticking with phillips curves models, and that was is in a challenging spot. --nie: michael darda are michael darda, thank you so much for joining us today. mr. darda: thank you. vonnie: much appreciated. as we go to break -- a live shot , testifying on the apple case for merrily, but it is a -- primarily on the apple case, but it is a world threat case. you can watch coverage if you type bloomberg go. mr. comey: there is no substance -- substitute for a judge ordered. our job is not to tell the american people what to do about it. we are here to tell you there is a big problem, and that darkness will grow, and grow, and grow, and change our world. >> director brandon, would you

were mr. levitt -- ♪

>> i think the american people need to have -- we talked a little bit about 702, and the pathway forward with that as well, but it seems to me -- vonnie: you are watching bloomberg markets. i am vonnie quinn. -- fbi director comey is testifying on capitol on worldwide threats. all a lot of time is being devoted to apple and issues surrounding the iphone and whether there should be a backdoor created by the company in order for intelligence bureaus and agencies to be able to get in in cases of terror threats. you will be able to watch more type go onhat if you your bloomberg. donald trump mixed know sigrid that he is involved in meant -- makes no secret that he is involved in big-money deals around the world. but house excess will are these deals?

-- how successful are these deals? tim higgins hasn't taken a closer look. he joins us from washington, d.c. to our. -- thank you. you would have had a lot of running around to do given donald trump has so many deals in so many parts of the world. give us the broad takeaway. tim: we found he made a lot of money, but in some cases he chose inexperienced runners and some customers are unhappy. we look at places in toronto, where his name is on a luxury tower there, and his partner is trying to get rid of him there. we have talked to sources in istanbul, where his name is on a luxury tower there, and they are trying to break a deal with him to get out of business with him. you look at places like panama, where he was part of the development there, has his name on a luxury tower, and the condo association there is trying to get rid of him as well.

vonnie: what portion of his deals would you say there is trouble with, and would this be typical for a real estate? developer -- real estate developer? tim: he would say these are outliers, and the other thing is he made money with these. he did well himself, so as a businessman he negotiated good deals for himself. that is why he would say as a president he would negotiate these kinds of good deals for the u.s.. vonnie: exactly. these details are all public, part of court filings, and anyone can access them? he is not try to hide them? vettings is part of the that goes on when you emerge as the front runner on the republican side. scrutiny, and perhaps litigation that in the past would not have attract as much attention, people start looking at that.

on a global scale, you start to see more of his business. also, the records he has submitted as part of his run give us new insight into his private dealings. it is a privately held company, and you do not always have that kind of insight into how he is doing personally. --lly, it gives us a window his international deals, really, were about him selling his name to developers. so he could profit off the brand he created. vonnie: exactly, condos, golf courses, hotels, some that were successful, and some were not. is there material for negative ad campaign from some of the other candidates? tim: everything is potential for material in the world of politics. what we have seen in the campaigns is really a lack of ads hitting him hard. there are not been as many as you expect given his position as a front-runner, and part of that is once you go after trump, he goes back after you. can see alikely we question of his business dealings.

he has made that a core tenet of his campaign -- the argument for why he should be president is he has been a successful businessman and can negotiate with u.s. partners and drive better deals. how many courta cases he is personally involved in right now? tim: well, the trump organization is involved in litigation in many places over many issues. i think that is not surprising, given the scope of his business. to bes interesting is able to, kind of thomas c where he is doing well and where he is of, to bewell -- kind able to see where he is doing well and where he is not doing well. ♪

. .

vonnie: live from bloomberg world headquarters, you're watching bloomberg television. i'm vonnie quinn in for betty liu.

let's go to the news desk. matt miller is manning that desk for us. greekey: -- matt: officials announced a group led by austria -- denounced a group led by austria. syrian government troops backed by russian airstrikes captured a town in aleppo province, a key advance just ahead of a u.s. and russia-engineered cease-fire. after three days of the battles. somalia's president says at least 180 kenyan soldiers were killed in a militant attack by al qaeda. spokesman disputed those

figures, but declined to give an toll.al death in kalamazoo, investigators are still trying to determine what caused and uber driver -- an u ber driver to gun down strangers. the family knows no motive for the killings. with six charged counts of murder. and spacex well attempt to launch today, after a postponement last night due to bad weather. set expectations low, saying he is not expecting a successful landing this time. global news 24 hours a day powered by 2400 journalists in 150 bureaus around the world. i matt miller. much.: thanks a we will check back with you in a little bit. index, it at the reit

is down 4% so far this year. let's bring in a $10 billion retailer that has been doing extraordinarily well. our guest joins us from our los angeles bureau. 'sl right, the reit environment is an asset cap in itself, and they have been doing pretty well recently? say?does this is this about real estate or the healthy consumer? vonnie, itmy gosh, is about the consumer. it is about the changing consumer. i do think lower gas prices have had a positive impact. i know it is hard to measure, but it is there. and not all reads -- not all are created equal. you need to look at where those markets are and the propensity of the consumer to spend in

those places. a lot of change in the product these days. and today, specifically in the 's, this center reit needs to be a place where people want to shop because they do not need to shop as much. vonnie: so the particular for and particular reit is srt, it looks to me that it may be at an all-time high. is there a problem that investors are rushing into reit's where it is one of the only things where it looks like there is a return for your money? you know as well as i do, it's all about growth and where the future last. ourseason hours have -- have strong growth prospects, will propelat growth over the next few decades, that is not everywhere. it is attractive. vonnie: are you saying that the

growth in the reit industry will come from expansion, as opposed to higher rents or better occupancy? there's no question coming out of the recession that a lot of portfolios were in the high 80's low 90's percent range, and today most are 94%, 95%, 96% occupied. long time of a leasing up. up.they are leased you cannot depend on occupancy gains. there is so far to go. but you have to look at an external growth in that comes from development and the occasional acquisition that can be redeveloped. vonnie: you have a unique insight into commercial lending, given what you do. tell us about the state of commercial lending. more difficult to get

loans and so forth? don: you have to look at the difference between the public --t's and total real estate the reit's can do a lot, today have access to capital that is really, really broad. vonnie: so you are saying banks have tightened up? don: i'm not. i am saying that long track record are really important today. those track records are more important than they have been in the past. vonnie: there have been rumors and more than rumors, the push for the likes of department stores, like macy's for example. macy's is resisting that. taking thatlor's option. it is more of a real estate company now. what would your advice to terry lundgren be? advice told not give

him. he has a business. not think laying out the business as a reit is the answer to the underlying business. the reit model is all about long-term growth and value in real estate. to me, it is not a mechanism to create a benefit for financial purposes. it is about how to get real estate in the hands of a broader audience. vonnie: if the step outside retail reit's, and i think we are going to pull up this graphic of their performance in every sector, where do you see where the -- the performance where they happen suffering and, you know, maybe mergers, asset buys or so forth? comesook at, it really down to company by company and you have to look at those growth plans. a rising tide lifts all boats. i do not think that will be the

case in 16 and 17 and 18 because of what i said previously about where we are today. you have to look at specific company business plans. i would not lump all of these in one place. pick a company where you believe in the growth plans and put your money there. vonnie: [indiscernible] certainly not compared to the market for real estate, be,h is, and continues to red hot. there's plenty of capital to it, so those supply and demand dynamics would suggest we continue. right, just to give people a look at my bloomberg at the moment. if we can. congratulations. thank you to don wood for joining us today. appreciate it.

he is the ceo of federal realty investment. still ahead on bloomberg markets restructuring talks for puerto rico heat up. we will discuss the state of for strategies for companies and cities for more than 30 years. ♪

vonnie: this is "bloomberg markets." i'm vonnie quinn. time for the bloomberg business flash. a joint venture to buy generators in the u.s. -- the price tag $3.3 billion, less than the cost of building new plants. dynegy would control the day-to-day operation of the

plants in the east, midwest, and texas. consumer spending powered the british economy through a fourth straight quarter of growth. an increase in household spending helped offset declines in exports and business investment therein and pretty soon, china could be the biggest market in the world for movies. the record for the weekend. at the current rate, china could overtake the u.s. as early as year. that is her latest bloomberg business flash. let's head to europe where mark barton sees a european stocks higher. thanks to a rally in energy, mark? mark: -- yes, that is the area where you need to be looking. it's not every day we shrug off a 6% decline.

you said it. it is all up to lloyd's today, dividend, and a strip payout, maybe the worst of the insurance payment rejection scandal is behind it. up to 3.5%. i want to show you draw the's preferred -- mario draghi's preferred inflation game. it was below the initial estimate of 4%. this is preferred, the five-year forward inflation swap rate, which is at a record low. that is a record as the ecb meets in two weeks. we are counting down. i know you love your sterling chatter, vonnie. versus the pound dollar. the three levels for accounting 13727,9, 13750 3, 2001, and 1.05. not too many analysts, i have noticed, have talked about the

pound/dollar parity, but it is worth remembering what happened back in 1985. is the absolutely, 1.10 lowest i have heard. we will be talking about brexit in the next hour. let's get a check on the markets with julie hyman. julie? julie: i want to talk about emerging markets. there is a rising tide of strategist calling for a buy recommendation for emerging markets. the latest to make this call -- research affiliates, which is a , a firmsor to pimco that manages a couple of pimco firms -- one man there, the officer saysent "emerging markets is quite possibly the trade of a decade." among other things he is looking for evaluations. i made a chart of the price to have seenatio and we

it has declined -- right now is 11 point three on a trailing basis. in particular, brightman is p/eing at the schiller ratio, and i could not cyclically look at that, so i e ratio moree p/ generally. some managers are more bullish on emerging markets. if you look at that index over the last five years, you will see it has been a rough ride over the -- it has been a rough ride. or over the last year where it has been down. by size ine funds the united states over the past year that follow emerging markets have not done well. take a look again at the bloomberg. this is highlighted in the gadfly column today that looks

struggling of emerging markets. down pretty sharply over the past year, tracking fairly decline inh that 26% emerging markets, and if i can bring backup that other screen i ratio, if you look at the last year, it looks pretty good right now, but finally i want to mention citigroup is upgrading emerging markets, saying they have been waiting on the sidelines because the strong dollar was also hurting emerging markets, but citigroup's outlook for the dollar is not as strong and that is why they think emerging markets are going to turn the corner here. a wonderful is report. thank you so much, julie hyman. we will keep an eye on that. that's amazing. a busy day down on capitol hill.

hearings on the budget and another hearing on puerto rico's debt crisis and its affect on financial markets. this as debt restructuring talks with puerto rico investors continue. cofounder ande president of a company that is thelead advisor in restructuring of companies and cities, most notably the city of detroit. thank you for being here. you are saying there is nothing here of any importance? guest: i would not say it is not of importance, but the focus efforts --onwealth's they have declining tax base,

declining economic performance, and that is leaving to an inevitable default. the problem is how do you restore growth? reallocateyou value among interested parties? vonnie: and there are many. you are working with $1.6 billion worth of debt. they are a small group in the overall scheme of things to a certain extent. you would say the other creditors need to listen to this group of creditors and work together with them? the creditors we advisor not creditors of puerto rico itself. we have no interest in the negotiations going on in the commonwealth and other creditors. we have the greatest long-term interest in puerto rico because we want people to stay on the island, generate economic activity and pay sales tax. vonnie: give us some of the proposals you're making. creditorst other

bitnet this? to be treatednt differently even if, from a financial perspective, they are exactly the same. use the unsecured creditors, general obligation bond holders want to be treated, in effect, more senior than secured credit the facewhich flies in of law. what we are joined to do is really what the u.s. treasury is trying to do -- focus on growth and get the commonwealth time to grow. vonnie: how long will it take to grow? the numbers are staggering. the problem here is the same problem we faced in the city of detroit. obviously it is bigger. decadesot turn around of decline unless it you restore services and stop people from leaving. vonnie: how do you take $17 these revenues and

turn it around? it is probably more than that. there is no way to do that. that is why they are trying to be treated specially. the u.s. treasury has said they would like to see treasuries -- like to see pensions totally protected. their obligation is to protect the sovereign credit of the united states. the last thing they should want -- and as a u.s. taxpayer i agree with this -- is for the entire population of puerto rico to be in the federal audit. but if the pensions are paid by theey are paid for commonwealth. vonnie: what did it take to restore detroit? to thewe went bondholders, including pensions, and we said we will pay. were treated

equally. that principle is not being followed here. they do not have a plan -- sure.: how many tears do you think there will be when it's finally resolved? guest: there are only two classes of creditor. the unsecured creditors will get their money back. there are not so many of them. the unsecured creditors might get nothing. n buckfire,nie: ke come back and speechless when you get this creditors to go along. we have a preview coming up and we look at the oracle of omaha fell past device. ♪

vonnie: you are watching "bloomberg markets."

i'm vonnie quinn. saturday the oracle of oman releases his annual letter joined best or's online. 'sre to discuss warren buffett fame as it do's and don'ts in asset management, our guest. we will hear some famous phrases from the oracle of omaha, but what will be the main message after having written a pretty difficult year? normal he will point out what went well and what went poorly for berkshire. in the first category, you do deals.ber of really big he did one of his biggest acquisitions ever by a company , that precision castparts was completed last month. he might talk about the performance of the stock for folio. a number of big holdings like ibm and american express have been struggling as late. are off the highs,

but still trading way, way up there. like you said there were a few difficult patches, including some [indiscernible] -- guest: i think, you know, buffett is very candid. he likes to point out things that did not go so well in the year. i think we should expect him to do the same this year. vonnie: he has been a great champion of the american recovery and u.s. resilience. i would imagine he will spend some time on that this year, given that at the end of the year there is that rate increase and talks of a new recession? if it isah, certainly a huge optimist when it comes to the u.s. the past several years he has had language in his letters that has been very boosterish. up withoes back it investment.

he is spending billions of dollars on the u.s. and he makes the point to shareholders in the investment community at large that america's best days lie ahead. that the great used to doournalist the writing. will she do the writing this year? she actually edits. warren buffett turns to carol loomis for help in editing the report. it's a collaboration going on for decades. i think the fact that some eight people want to review letter and enjoy the writing is a testament -- annie: on that note we have article on the bloomberg by one of your colleagues and which buffett talks about different things, geico and baseball and country music, so it's a real down-home sort of popular

investor letter, isn't it? guest: it sure is. it sure is. don'ts wehat are thedon' should take from the letter? we will have to see. i could see him giving advice about how to think of moves in the stock market. in the past he has said, do not worry about daily fluctuations. if you do not like to think about stock moves on saturday and sunday, do not worry about it monday and friday. thank you so much for that. it will be online, by the way. the european close is next on "bloomberg markets." ♪

vonnie: it is 11 a.m. in new york. i'm vonnie quinn in for betty liu. live from london, i

mark barton. this is "the european close." vonnie: we are going to take you from new york to london in the next hour. here is what we are watching. shares of lloyd soaring after the bank increased its dividend payout after fines from past misconduct may be coming to an end. the bank has its biggest boost since 2011. saffron'sll look at four year earnings, coming up. 4-year earnings, coming up. vonnie:a