Transcripts For BLOOMBERG In The Loop With Betty Liu 20141230

Princeton professor alan krueger will be joining us. He has argued all year long the u. S. Has to address income inequality. Will that change in 2015 . Here they look at top stories is morning. A breakthrough in the search for the missing air asia passenger jet. Debris has reportedly been found. Indonesias navy has spotted debris that says may be an emergency exit door. At least six bodies have been found. The air asia plane disappeared while flying from central indonesia to singapore. Stocks are falling around the world this morning. Futures indicate u. S. Stocks will be lower at the open. Energy stocks are leaving the decline. The price of oil fell again to a fiveyear low. Tom petri of petri partners has devised u. S. And saudi arabia on oil. Heres his advice for president obama. The white house will view this as a plus for the u. S. Economy and therefore they will let those sources run as well. The row question would be will they approve the keystone pipeline, will they move forward on some kind of liberalizing of oil exports . If they do, then a there will be even greater benefits in terms of the functioning of the market. Meanwhile, u. S. Oil stockpiles are the highest for this time of year in more than three decades. Our u. S. Banks trying to hack the hackers are u. S. Banks trying to hack the hackers . According to people familiar with the investigation jpmorgan advocated such a move almost two years ago, a spokesman for the bank says, no action was ever taken. It is the hamburger chain started as a public service. Now it may be worth 1 billion. Shake shack has filed for an ipo and is aiming for a 1 billion valuation. The chain was started more than a decade ago to help in the restoration of new york citys Madison Square park. It has more than 60 outlets from new york, london, to dubai. And memory problems ups had last christmas . Things were better this year. They deliver 98 of express packages ontime christmas eve. Last year, fedexs rate was 90 and ups at 83 . The companies spent of millions of dollars to improve. Indonesian rescuers found debris and bodies floating in the ocean. Were joined from hong kong with the latest on this discovery. Sherry, what did they manage to find in full from the ocean so far . Betty, rescuers are trying to find and pull as many bodies as possible. Local media, they are saying around 40 bodies have been recovered as dusk fell from the sea off the coast of borneo. Indonesian Officials Say they have discovered objects that appear to be part of the plane. Local media report seeing an evacuation slide, a box, a life jacket, and other objects, but so far the black box has not been found. The crash site is about 1000 kilometers southeast of singapore and 10 kilometers from the planes last known coordinates. Flight 8501 was headed there from indonesia with 100 62 people on board. Water around the crash site is shallow at 25 meters to 30 meters deep and authorities are working with diverse to try to find the data recorders, but officials there say the rough sea is hampering the Recovery Process. The indonesian president is holding a press conference right now as to the confirmation of bodies that have been told and debris that have been found in the ocean, as you just mentioned, so right now as you speak he is talking about this discovery, this grim discovery. I imagine that one of the main questions to him will be what caused this flight to go down . Do we have any more close on the . Any more clues on that . At this point, we do not have any more information as to the probable cause of the crash, but weather could have been a crasher. The plane disappeared off radar after the pilot request a higher altitude because of stormy clouds. This is pretty normal procedure. April former pilot for British Airways telling us that the weather itself should not have cause what apparently is a catastrophic accident, so we are finding the voice and data recorders will be keen to discovering why the airbus a320 1, found from the front of the plane, as well as key data points that will help recreate the last moment of the flight. Shery, we are looking at the live feed of djokovicjoko widodo. He is less than a year into his presidency. Do we know how good of a job he has done in handling this so far . Well, right now, they are trying to put everything in perspective to try to get all of the bodies that they have found out of the water first. Right now, indonesia is leading the operations, and you mentioned that joko widodo the president , is heading where they will get the bodies that they retrieved from the water in order to identify them but they are getting a lot of help from other countries around malaysia, australia, south korea jumping in, conjuring ships, planes, authorities helped widen the search area across the java sea as chinese and also u. S. Military ships headed to the region, and now officials there in surabaya will give an update on the Recovery Process tomorrow morning. All right, shery thank you so much for joining us for joining us. Id way, the indonesia president , widodo, says they will put all of their assets in recovering the debris. Shery, thank you so much, shery ahn. Lets take a look at what is on our minds this morning. Betty, you kick things off. Ok, we were speaking about housing earlier. Caseshiller will be coming out at 9 00 a. M. So i thought i would focus on the Housing Market. Housing has not been a beacon of growth here in the economy in the last several months. In the last month as you remember we had home sales down a surprising 6. 1 new home sales off 1. 6 , we are about to get the s p case schiller numbers. Remember that back in september these are numbers from several months back, in september, the growth rate for the top 20 metropolitan areas was just up by four point , the first time below 5 since 2012. It has got people wondering maybe in 2015 housing will be the odd man out in terms of recovery. Are we just looking at a wave that is going to go back up, or habits as far as housing goes has it changed permanent the . That is what i would like to talk to Robert Shiller about. Millenials who are renting versus buying. You hear quite a bit about that. If there is a problem. It is not exactly that the housing recovery is running out of steam every recovery has to run out of gas or fuel whatever. If it does we will see when the case schiller index comes out, but right now 60 below its peak. Construction was 8 of the economy, then went down to 4 , does it ever get back to 8 , or do something take its place . I am looking at afghanistan. The nato mission in afghanistan inended. We are to handling it or looking at it as a security challenge. The world bank came out with numbers looking at afghanistan as an economy, independent of the very grave and serious security challenges they have. There has actually been some social progress in the last 10 years. I think of it as a wash, but look at this School Enrollment in 2001 was one million, now 9. 2 million in 2013. Increased access to water. If you look at gdp growth, 9. 4 . A lot of countries would be desperate for that. That is an isolated areas around the capital, we are not talking about the entire country because there is not control the entire country. Gdp per capita was 186, now 188, so the real problem that they still have is that aid is still about half of the gdp of the country, so can they wean themselves off of aid . I think there is some small room to feel hope that there has been some economic and social growth in the last 10 years. As you say, much of that or half of that at least that Economic Growth comes from eight. What about the other half . Where is that coming from . Businessweek had a great story, some entrepreneurial growth in kabul. There is a real consumerbased economy there. I will switch my attention from afghanistan to what is happening in oil. Oil was that a big story in 2014 . [laughter] a company in the Oilfield Services business specifically provides temporary housing to Energy Projects and coal projects in canada, the United States i like the way you put it before these are man camps. That is what they are referred to generically in the industry, so you would expect as other end thats as other Oil Companies have suffered, that civeo would suffer as well for step two years ago, it did at 1 billion in business. It is now expecting 540 million to 600 million dollars. A drop of 40 over the space of two years. It does most of its business up in alberta where the oilsands are. Only 35 to 40 occupied now. The company is a spinning its dividend and slashing capex while most 75 . This gives you a sense of the kind of shock that is rippling through the Oilfield Services business as the oil price drops. To 53. In canada, canada produces at least in alberta heavy crude. This stuff requires a lot of refining. Needs added value in order to become a marketable product. 37 a barrel that is all they are getting for this stuff. We are about to find out something scary for stop you look at stateside north dakota and texas they have had a tremendous boom in last seven years to 10 years around growth and will stop we are about to find out, a lot of these projects already online are going to continue producing, but we are about to find out the difference in jobs between growth and production. Some of these states were at full employment, some of the cities, thus the need for the man camp. You just like saying man camp. Man camp i credit erik for that. Air asia disaster once again took the spotlight in Southeast Asia and also these lowbudget carriers. Stick around for two big names. We will talk about the economy would be former chairman of the Federal Reserve. Alan greenspan joins us. Also, bob schiller of caseshiller index joins us. Indonesian search crews are finally finding debris and bodies from the air asia flight that went missing three days ago. That makes this search different from that of the still disappeared Malaysian Air flight so why do air disasters keep happening in Southeast Asia . One potential answer a boom in regional air travel. Based in and serving indonesia and malaysia including a good number with safety regulations that do not meet western standards. With us is john rose, chief operating officer at ijet. John, good morning to you. There is lots we still do not know, but at this point, when we look at what happened to the Malaysian Airlines jet, when we look at what happened to this airasia jet, can we draw conclusions about the safety standards, the speed at which these airlines have grown and expanded their service, and the increasingly bad Safety Record that we are beginning to see . I think you can draw a little bit of conclusion. Some of it is just bad luck, but part of it is when you have a concentration of risk because there is a lot more flights in a lot new entrants into the market, bad things can happen. A lot of it has to do with the infrastructure the training, and the Safety Records of the overall regulations in the region. How difficult is that . We were talking about some of these numbers yesterday. Airasia has 160 nine jets roughly today. 60 years ago had 78 jets. How difficult is it for any airline, airasia or any other for that matter, to grow at that pace and maintain the necessary standards . Find the competent pilots, the mechanics, etc. Needed to keep the planes in the air and not in the sea . I think they can do it. They will not expand recklessly but it will be a stretch on the system, such as the air Traffic Control system, the monitoring of the weather, how they will change flight patterns. In the change of this particular flight there was a change in weather, but that should not have caused the crash. That will lead to speculation in what caused this was a pilot error mechanical error gekko all of these factors play into the situation that companies have to know what Airlines Travelers are flying on, and what are the risks because as you said not everywhere in the world meets western standards when it comes to civil aviations. Indonesian is not meet the faas standards for air Traffic Control, but other developing countries like india, also has an expanding middleclass, they have a start up by the airlines that are experiencing the same kind of boom in air travel. Does it have to be this way . Doe indonesias have a particularly bad record, or is this what happens in a developing economy . It is a combination of both. You look at anywhere in the world that is rapidly expanding in emerging markets, and you have interests entrants into the market. Some but he has to monitor those entry airlines, especially small, regional airliners. Some cut corners, i am not saying airasia did that, but somebody needs to be monitoring this. This is not readily available, Public Information that any Business Traveler can go out and read up on. You have to have somebody monitoring the Training Records the Safety Records, how they are addressing any potential security situation, safety situation, Pilot Training if a summary is no monitoring all of that, you are potentially putting your travelers at risk. I imagine, john, as you are saying, it would be great for passengers to have a kind of information, but that information is not readily available, even here in the u. S. That leads to the question, not just about the expansion and the maintenance of this aircraft, but really also about the Pilot Training. When i am reading about now about airasia is that many of these pilots had lots of complaints about their own aircraft, they were not addressed. I do not know if that is part of the problem here with airasia, but what about the training in some of these countries . That is a huge issue. If you look at a lot of these past events that were really negative, where there were crashes, what you have is often pilot error, such as the athens air flight in 2007, almost exact same routing is this flight, also had a weather situation, but the weather did not cause the cross, the pilot did. You have to look at the Pilot Training, the experience, and you have to have a company like ours that monitors every airline in the world and the Safety Records because as you said it is not readily available information to the general public. John, thank you very much, john rose, chief operating officer of ijet. Much more ahead, guys. How the author of that wellknown book on inequality got it wrong. We will talk with princeton economist alan krueger. You know what book i am talking about. We will be back. You are watching a special edition of in the loop live on Bloomberg Television streaming on mobile and bloomberg. Com. Good morning. I am betty liu here with Erik Schatzker and Brendan Greeley. Good morning. Erik helped me time i tie this morning. Thank you. I am learning. You had to learn how to tie ties . Brendan another vehicle recalls links to a fatal accidents, almost 60,000 older dodge and mitsubishi pickups are being recalled. The problem a faulty clutch that let a child start a truck and run over another one. That has been a record year for recalls. The biggest drugstore chain in the u. S. Will now own all of the biggest ones in the u. K. Shareholders of walgreens voted in favor of paying almost 60 billion to complete the purchase of alliance in 2012. Walgreens got almost half of that chain. And the rich getting richer. 92 billion added to their collective fortune. Alibaba cofounder jack mas fortune rose by him was 25 billion thanks to alibabas 6 gain to the ipo in september. It is twice xmas man is past the hour, which means lumbar television is on the markets and where have the markets been it is 26 minutes past the hour which means Bloomberg Televisions on the markets. Where of the markets been . The cooperative oil prices are down again, and that is dragging down the equity index. We are on the markets again in 30 minutes as we count down to the open. This year, america developed a crush on an economist, thomas ticky published a bestseller come a 700page bestseller, and name checked karl marx. We got to talk about it on tv. Erik schatzker spoke to the author earlier this year. There has been a large rise of inequality, so i think as a particular concern in this country i think im touching a nerve because there is a buffer, the financial crisis of 2008 incomes for a large group of the population, there he large rise in incomes, many people believe i think rightly, that this country is headed to financial fragility because of rising debt, so in this country, there is a big concern to a large extent for a good reason. Alan krueger joins us from miami, professor of economics at princeton, and you were writing about incoming inequality before income inequality was cool. [laughter] do you think thomas pi kettys book has been good or bad for the debate . It is hard to find a book that is attracted so much attention, and that by itself is good. It has provided a provocative theory. I think it misses the main reasons for the rise in inequality, and it misses the main reason why i think inequality will likely continue to grow, but none the less, i think it was positive for the country to have this debate. The main reason, alan being . If you look at what is happened to the bottom 99 , it is more significant than the top 1 pulling away from everyone else. There has been an enormous increase in inequality along educational lines, among other Lines Associated with the bottom 99 . If you look at College Graduates versus high school graduates, we have seen a huge shift in inequality. That has contributed in the grand scheme of things much more to the rise in inequality, and that is why we are seeing something of an inequality trap coming through union capital, not through financial capital, which is what piketty argued. The advantages for the wealthy is likely to be passed onto their children through investments at home, through connections they have in the workplace, and that has been contributing to this kind of inequality trap where the inequality builds on itself and makes it much more difficult for children of disadvantaged parents to move up. It has been ever thus though, hasnt it alan . People trapped in low income pockets in the economy can remain there for a long time. This overtime just creates more and more wealth. What about some of the other factors in your mind that are going to increase inequality in the next several years . It is absolutely right that we have had lower social mobility than we would like to think of a nation but i think that situation is going to get worse, and we see the seeds of that being sown already. We see, for example, gap growing and the likelihood that children participate in extracurricular activities. We see a gap growing between children born to disadvantaged or dennis families in terms of the amount of tutoring they get, in terms of the amount of total years of education they get. Most of the expansion in Higher Education has taken place upon the must among the top 50 and that will feed on itself and make it harder for children to move up from the bottom. Alan i want to take the other side of the argument for the moment. I am not sure if you are going to be able to see this, but we have a chart from the cbo, who has done their own they have obviously crunched data on incomes over the last several decades. There is one chart where from 1979 to 2010 yes, it shows that for the top 1 , income has grown tremendously and outpaced the bottom 99 , but middle incomes during that period, the cbo wrote, were up about 40 , so it is not as if their wages were stagnant or declined, and yes for the top 1 it rose, but there were also moments where the income for the top 1 declined and declined in both republican and democratic administrations. This is essentially a problem for both political parties, but it also shows that perhaps that wage gap is more fluid and flexible than it has been in the last several years, and it is not any worse, alan, in some ways, the social mobility not any worse than what we have seen in other parts of the world. Inequality has been growing in many parts of the developed world, but it has increased much more in the u. S. I think it is a problem for the country. I think it is a problem for both democrats, republican, independents, people who dont vote. What we have seen is as i said before the 98 pulling away the 97th percentile is pulling away from the median, and the median has pretty much stagnated. We have had periods where the bottom 10 , bottom 20 saw enormous the kleins and their income after declined in other income after deflation, from the late 1970s until the early 1990s, so youre right it is fluid, except it is not moving in the right direction, and this is a trend that has been taking place for over three decades. Now. Alan, you like a lot of ticket pikettys critics, argue about the data. Income inequality all the way back to the gilded age and in france back to the prerevolutionary france is there a value to these historical comparisons, or do they just throw it off . I think they are two Different Things in that the data we have once the income tax started are pretty accurate. I think going back 200 years, 300 years is a tremendous amount of speculation that takes place. Certainly since the 1940s, since the Population Survey started, we also have Household Survey data, which are pointing in the exact same direction, so i think there is a wealth of data indicating that the last three decades for the u. S. Have been unusual and as i said before, inequality has increased in a number of countries, but it has increased to a greater extent in the u. S. Than just about anywhere else. Alan krueger of princeton, he will stay with us this hour, and again he has been talking about income inequality way longer than the rest of us. Still ahead, we stay with the u. S. Economy. Unemployment fell to 5. 8 postup those numbers, however leave a great deal out and it has a lot to do with new jobs. Good morning once again. I am Erik Schatzker on a special edition of in the loop with Brendan Greeley n betty liu. Jobs reports, payrolls have extended by an average of 231,000 a month, adding a total of 2. 6 million new jobs to the american economy. That is the most of any year since 1999, back when the economy was growing in almost 5 . The labor picture is improving but not universally. The Participation Rate remains low and there is not a lot of ways growth yet. For more, lets get back to miami and alan krueger, fester economics at princeton. What does or what should a labor force for dissipation of 62. 8 tell us that a jobless rate of 520 does not . Is most important thing it is selling us is that the future is here that the baby boom is starting to retire, that is the main reason why we have seen labor force dissipation participation decline. It was a clinic before the Great Recession. It fell more after the Great Recession than during. Secondly, there have been other shifts taking place apart from the recession that have been affecting Labor Force Participation for sucking her people are taking longer to get started in their careers, partly because they are going to school more but partly because they are having trouble in the labor market. Women who had been fueling the postwar rise in labor force for dissipation have peaked in terms of their Participation Rate. In 2001, Labor Force Participation of women peaked and that is an indication that we need changes in the workplace to make working more hospitable for women and for younger workers and also frankly for Older Workers because we have an older workforce. When you say that it sounds like it is almost a policy problem, not an economic problem, in the sense that we need policies that make childcare cheaper. Is that what you are driving at . It is partly policy but also partly private businesses. I think they are going to recognize that the workforce is changing. It will have increasing difficulty recording the type of workers that they want, and it will be in the interest of companies to make employment more flexible, to make it easier to take care of parents as well as children, for both men and women to expand the workforce. Where does that fault come down on, alan . Does that come down on u. S. Policy, or how does that get worked, then . It is a mixture of things. I think our tax code is a disincentive affecting workers. Some companies, which have much more progressive Income Taxation transfer systems like sweden due taxed income at the individual level, so it has less of a second earner tax penalty. I think there are some policies that are at work but i also think Companies Need to look through their personnel policies and say can we be a bit more flexible gekko can we get more paid time off if parenting to take care of a sick child . I think they will see that increasingly in their Interest Rate in the bottom line because it will make it easier to track a more skilled workforce. At what point will Companies Feel the need to do that because yes, the economy is greeting jobs, but we do the comparison to job growth in 1999, back in 1990 nine, alan, as you know well, the Unemployment Rate was just a shade over 4 so there still appears to be a fair amount of labor market slack for companies to pick up before they would feel compelled to change policies such that it makes it easier. As much as i might agree with you, it makes it easier for women, for example, to work or makes it easier for them to bring in aging employees and retrain them in such a way that they become more useful for them. Two things going on one is a structural change that started before the recession and has been accelerating, and the second as we have a lingering effect of the Great Recession, and i do believe there are some there is some labor market slack. I think it is evaporating pretty quickly. Well see the Unemployment Rate come down pretty rapidly. I think the Unemployment Rate is still the best single indicator of how much slack there is in the job market but the composition of the unemployed has changed also and almost 1 3 of the unemployed has been out of work for more than half a year and the longterm unemployed are finding it increasingly difficult to get back on their feet. They are exiting the labor force at a growing rate. That is part of the reason why the labor force Participation Rate is lower now than it was two years ago why it was lower on average in 2014 that it was in 2013, and i think we are going to see that pattern continue. I think that is an issue which businesses and Public Policy should address because we are seeing the labor force to climb because longterm unemployed are disseminated against by employers, they are also becoming increasingly discouraged and leaving the labor force. I think that should probably come to an end in 2015, and i think we are going to see a stronger wage growth in 2015 as we saw at the end of 2014, so we are at a turning point where the slack is getting to the point where it will start to put upward pressure on employment. Alan krueger, thank you so much. We will continue the discussion about the jobs economy and the fed with the former chairman of the Federal Reserve himself Alan Greenspan later in the show. Much more ahead, who new gourmet burgers could be a 1 billion business . More on shake shacks ipo and why chains like this are given the golden arches another headache to think about. Plus 2015 kicks off with an out of this world event courtesy of elon musk. We will talk with former nasa astronaut mae jamison on the year in space. Speaking about minimum wage and inequality, this years all fast food giants like mcdonalds and wendys and burger king skewered for not raising the minimum wage, but that has not stopped the best burger. Case in point, shake shack to his file to raise 100 million in the latest food ipo to hit the market. They have done quite well in 2014. The gourmet burger chain is valued at 1 billion. Despite this craze lets put it all in perspective. A 1 billion valuation is just 1 100th the value of mcdonalds, wendys is valued three times as much and burger king 12 times as much, so why have we heard so much about the death of the fast Food Industry . Here to help answer that perhaps is the founder of fair burger, that makes organic burgers that are locally sourced looking to add another dozen locations by the end of 2015. I know brendan is a big fan by the way. I am. We take our family there. I think we have some pictures of some greeleys at shake shack actually. Do we . There they are. Way too many. I have an issue, actually, can you show the second picture . I need you to show to turn off the television, because these are my children and nasa sized anesthesized. I do not know if there is enough barn boards in the world to expand infinitely. How much can you continue growing . How much of an appetite is there for this very specific model of brooklyn sheikh, highend burgers brooklyn chic, highend burgers . This may not sound like a huge number, but 100 restaurants i was felt was a good, solid numbers for us. 100 restaurants we can open up and probably the best cities in the country and hopefully in the world. That is always our target. We do not have a brand or company that can be on every corner in every location. Because of our price point pretty much. That is exactly what i want to talk to you about because your average customer spends about how much echo about 18 give or take. A hamburger, fries and a milkshake minnesota will run you 17, 18. At a Quick Service restaurant i. E. A mcdonalds, the ever spent is five dollars, . 30, so we are talking about a third. Brendan, i see this picture of your kids at a bareburger. Those kids 20 years ago maybe at a mcdonalds. I can tell you it cost me 98 yesterday. [laughter] you would never spend that at mcdonalds. I am not saying bareburger, with all due respect, is going to bring down mcdonalds, but there will be several bareburg ers and other smaller chains that present gourmet food that eventually is undercutting mcdonalds business model, right . Absolutely. We will put a small miniscule dentin what mcdonalds, wendys, and burger king the big players in the burger world. I think they need to be more concerned about guys like danny meyer and the shake shack because he is competing directly with them, especially at this price point. I was at his place, and the price of a burger, fries minnesota was 11, double what you would pay a mcdonalds will stop are willing to pay a premium for a better product. Does it make sense that shake shack would be worth 1 billion . He is hoping yes. [laughter] through september, they were on a run rate to generate about 112 million a year in revenue. Now they may be growing faster than that, but lets to say it is 112 million full stop at 1 billion, they would be trading at more than eight times revenue, which is like a tech lab. There are only two companies in america, Restaurant Companies i could find, eat at joes and pollo coloco that trade at that level. On paper today, it may not have a 1 billion valuation, but the future of that brand in the cold following that that brand has built in the last 10 years, it is almost a polilike almost chipotlelike. I think that future that they have dont get me wrong they have got the best real estate in the world. I have been to some of their restaurants overseas as well. They always grab the best real estate, and that is a whole other part of this equation that a lot of people really like starbucks does. Yeah. Being on the right corner factor. I have to try one of these bareburgers. Bareburger founder and ceo. Well be back on two minutes on in the loop. And it is 56 minutes up the hour, which means Bloomberg Televisions on the market. Equity futures you can see are slightly lower at this point, just a few hours from the opening bell. Dow futures down by about. 2 caseshiller numbers will be out in an hour. Are they going to show any further growth in the Housing Market echo we are on the markets again in 30 minutes. Do not forget former fed chairman Alan Greenspan will be joining us. Much more ahead, 2014 was it the year of the recall . Can the Auto Industry turn a corner next year . We will look at new models coming out that will get you excited. We have a look at what is down the road, and from cars to movies, a preview of the mustsee movies coming out in the new year. There is Jurassic World star wars, and of course 50 shades of gray. You are watching in the loop live on Bloomberg Television streaming on your tablet, and at bloomberg. Com. Good morning. Live from bloomberg headquarters you are in the loop. I am betty liu with Erik Schatzker this morning. Here is a look at a top stories. A new development in the passenger jet. The crew has found rescue. The Indonesian Air force aircraft spotted an object under water that resembled an airplane. We conducted more searches and found a body floating on the water. More ships are headed to the actual flight central indonesia. 162 people were onboard. Oil prices have rebounded after falling as much as 3 . Still trading near five year lows. Tom petrie of Petrie Partners said why they want lower prices. To have an economic stimulus to asia, in particular in europe, secondarily. That will take several quarters at least. The earliest, i would look for a real relief from the conditions we have got early in the second half of this year. It could extend into next year for a while. Meanwhile, u. S. Stock has not been this high at this time of year since 1982. A new report is casting doubt on the eis claims that north korea was behind the hack attack on sony. At least one former employee of sony may have helped the hackers. All the north korean leaves discovered turned out to be dead ends. A number of u. S. Law of Law Enforcement officers killed on duty. 126 officers were killed last year and there was a 56 increase in the number killed by gunfire. How will these data be interpreted in the outcry of unarmed black men being killed by police officers. Terms of the deal of murray has not been disclosed. He ranks sixth in the world. A big signing for whose company has not yet been named. Bodies floating in the sea from the plane missing two days ago. We had heard from the indonesian president and we also just got the headlines pair they have very much been communicating with the public through his coat twitter account and he has now made more comments about the accident and what they found. What has he said so far . Right now, Tony Fernandes is telling the public this is a terrible moment for him. Not a single accident or fatality since he was found back in 2001. Also through his twitter account , words cannot express how sorry he is and he will do whatever he can to support the rescue operations going on in indonesia now turning into recovery. How has indonesia so far compared to malaysia what is the assessment so far . Indonesia has been leading the search. Passengers, crew members, then more ships are headed to the crash site and that they will deploy the assets needed for a massive recovery effort. They have been on the ground, trying to talk to relatives, where he just gave a press reefing to the public there. He has been getting help from neighboring countries as well. United china, malaysia, just some of the countries contributing ships. Indonesia media grafting images of the body floating at sea. All these images had to be taken to hospital. The bodies being retrieved from the crash site where the president thank you so much. In hong kong on the latest. The hacks are trying to hack the hackers. With a little help from some coding of their own. Robinson is with us from washington. Jordan, the details of what you and mike have reported sound like the wild west. The fbi has two roles here, look into whether any u. S. Bank hacked back against iranian attack servers last year. It is unclear where it is going to go what it shows the agency really has conflicting roles right now, trying to force u. S. Hacking laws. They know where theyre coming from ma know where their data is from and they want to hit back and recover stolen data. Often times, the help is not coming. That is the question i was going to ask. How willing is the government to do the companys thing . The government has a lot of interest in intelligence gathering. A common complaint among companies that call the fbi after a cyberattacks is that even if the agency is helpful in terms of writing information, they often want to gather intelligence as the attack is going on. Companies are reluctant to let that happen, especially in the case of a fastmoving attack like he iranian denials services attack last year. These are noisy attacks. The banks knew exactly which service these attacks were coming from and you could sense the frustration in the security ranks there, we know where the attacks are coming from, lets shut things down. The u. S. Has relied more on diplomacy and state to state rest are pressure to get those stable. It takes far too long and it may be ineffective. Part of the problem with using state to state fresh or is a lot of these are only quasidatabase. It does seem like the problem is we do not really know whether the states are doing this or not. That is exactly why the fbi is looking into the alleged incident because a lot of times the attack servers may be my or your university computer. It likely would not be long belong to the attacker. You risk being accused of an act of cyber warfare from another country. That is what a lot of Security Experts would say the area for the government. It is not an area of private company should play in. Both legally and practically speaking, the law is not settled on this. There are a lot of stipulations for selfdefense and other forms of legislation. When it comes to cyberattacks, it does not really exist. Lets say jpmorgan because that has been at least dennis identified or wanted to strike back against iran, correct . That is right. Information we have from sources is that there was a meeting in new york in the midst of these attacks, and a jpmorgan official put forward the idea that the banks should go offshore and disable the servers, and everyone knew where the attacks are coming from, jpmorgan told us they were questioned and the fbi was satisfied and they were involved in hacking. When it comes from jurisdictions, legal experts the fbi may investigate this but would be unlikely to bring charges because it would destroy any relationship they have paired furthermore, do they have jpmorgan has no business in iran. There are a couple of questions there. Can they be penalized or do something against jpmorgan here . That is the heart of the question. Lets say the fbi found someone hacked into a server, lets say iran. Could they penalize that company and would they . In theory, yes, if they have credible evidence. In practice, would they . Probably not. It would set a difficult precedent for any federal agency then to ask the company to cooperate in the future. A lot of folks are saying this is an area of the law to be updated because there is a right to selfdefense in the law, just not this one. Another fascinating angle in the ongoing story of cyber hacking. Thank you very much. In just about an hour, we will get a snapshot of u. S. Housing data when home prices are released. Robert will be joining us and he not only has his own index, but a nobel prize. He will tell us what to back in 2015. This year so far, the data showed tax you top u. S. Markets we are joined to let us know where the best and worst places in the country are to be buying a home now. Lets just say i have 300,000 rattling around in looking for an investment. When i go . Austin, texas, usually tops many different housing agencies. In this case, local markets topping the list and houston is where i would tell you to put your money next. Their rubric is a little different. Theyre looking at population growth 4 or higher and a current job rate growth of 2 . If you want to put your dollars to work and have the ability to sell it, so we are looking at the investment side of it. Detroit . Detroit is on the list. It is north dakota, followed by iowa and wyoming. These are the worst in terms of Real Estate Investment. A bust oil is almost certain. You might not be able to time it but it is certain. Prices have escalated so much and some of the cities we saw if it is of us, one of the Energy Related workers, they will have to be selling. A lot of it is more space. New york city is land constraint so you cannot build out. You can only build up. A Huge Population of young workers, university of texas at austin. Engineering degrees. Theyre putting those degrees away. A lot of these individuals are getting money to pay for homes and other side events. Thank you so much. Just about an hour. Coming up, two steps forward and one step back here at that is the story this year. Nasa astronaut is joining us in a few moments. One man who has made it his mission to change space travel and one day travel to march is elon musk. He is about to kick off 2015 with an out of this world event. He will attempt to land a rocket next month, as soon as january 6. Were joined now by astronaut and first africanamerican woman to travel to space. An initiative working to ensure capability for human travel to another star within 100 years. We are joined on the phone from houston, texas. Just described to us how difficult, first off, we will see in a few weeks how difficult it is to see elon musk bring the rocket down on a tiny little platform in the middle of the ocean . Of course, it will be a difficult task. I cannot give you a comparison parent is not the same as going to the moon but it is difficult. What it tells us is were starting to make the changes in Space Technology now that makes more infrastructure. Up and down into the orbit without having it to be happening when the Space Shuttle blows up, that it is more accessible. The cost is lower. Part of this whole demonstration, he wants to demonstrate that it is practical to use a reusable rocket. Right. The whole idea of reusable is using the solid rocket boosters. Using the shuttle itself. If we really want to talk about commercial space, i think we have to understand it in the context of the fact that it is private organizations who actually have the impetus. They are designing things and doing the operation and it is originating i would say forprofit and nonprofit. Doing things we are changing the way we look at it, this has really been a banner year in space. We paid attention to it, whether it was because something was wrong because he expected everything to go well, because it had been going so well in space, or whether it is because of remarkable accomplishments of things like nasa rewarding two companies, the task to create a vehicle to take the crew up and down the space station. That will be completely new where you have a privately designed vehicle that takes cruise up and down the space station. That will be very important. Thank you for joining us. Coming up, detroit 2014, may be the year of the recall. You are watching a special edition of in the loop live this morning. I am betty liu with Erik Schatzker and brendan this morning. We are about an hour away from the opening bell, 26 minutes past the hour. 30 minutes from now, another read on the Housing Market. We are on the market again in 30 minutes. A big story we have been watching all week long air asia. Officials confirming the debris found in the ocean is from the asia Airline Flight missing this weekend. One of the search planes trying to locate a missing flight just arrived in singapore. She joins us by phone. First off, where were you exactly and what did you see . I was on 130, which took off that singapore today. We took off southeast to an area near the city 180 nautical miles north east. We were supposed to search there and get back here about 830 tonight, but that search was cut short after the rescue Coordination Center informed them that although it was confirmed to be the wreckage, it returned early. What exactly did you see . How the search worked was there were 12 scanners on the plane, along with the aircrew. We passed over islands and lands. We did not see anything today. That is one of the challenges that volunteers from the air force involved in such searches face. They can experience a peak after hours after searching such a vast area. We did not see anything today because the area where the debris was found was just 30 miles away from the area. We were talking earlier about how this is now turning from a Search Mission to a recovery mission. The singapore airports was not able to tell us what their role would be going forward. They are taking instruction from indonesians leading the search. On the ground in singapore, you have seen so many photos of family members waiting for their family members to arrive on the flight. What is the reaction so far in singapore . There are mixed emotions. This case, at least there is now a chance for closure where we still do not know what is happened, but it is obviously a tragic situation. The aircrew that spoke to us when we landed said there were mixed feelings about being told to return early, because on the one hand, there is at least some resolution but on the other hand, it just points to the tragedy that has occurred. Thank you for joining us. We really appreciate it. Sharon was on one of the rescue missions. He look at the Bloomberg Top company news this hour. A stake in the troubled Real Estate Investment trust. Capital properties launched 32 since closing accounting errors. Run by a former carl icahn kurdish day. Expect it is microsoft may make changes to its Internet Explorer browser. A new browser crashed. Windows 10 will have both explorer and the new browser codenamed spartan. It may be unveiled next month. When ford starts for the new f 150 pickup, commercials brag, should the pickup can haul and so, but it will not mention the fuel economy the automaker has been expressing. Better mileage is better mileage. Sales of u. S. Cars and trucks are running above 17 million a year for the First Time Since 2000. Pent up demand from the post crisis hangover, that is one factor. There are a lot of vehicles on the road. Automakers here in the United States and europe and asia are rolling out some of the best cards cars in years. It is only getting better. A look at what to expect, michael. Michael, lets fast forward 12 months, december of 2015. We will be looking back and talking about what car is the most successful of the year. That is a lot of pressure. Your microphone is dead. We will fix that. I love the idea that even though fuel economy, it is incredible for a pickup truck. That is what they have been asking for. Even so, for it is not willing to admit that is what the new truck as. The timing for fuel economy is not great. There is something about, you have to sell trucks. With some horses, you need to take them somewhere. That is the thing. Trucks are sold on what they can do and the possibilities. Fuel economy, especially right now, not exactly the best cell. Has it ever been a big cell . Exactly, it is not traditionally the thing that sells pickup trucks. Lets go back to the question , it depends on how you define success. Exactly. Contact suvs have cracked the top 10. The honda is now one of the top 10. It is really that segment were seeing a lot of weird who is that catering to, soccer moms . They like to say it is sort of an urban family kind of thing, young families. But you get both sides. You get young families, but you also get downsizing, retirees, maybe emptynesters if you want to call it that. Are there going to be new models in 2015 that hit this segment then . If yes, actually, below that people are talking about the really hot for next year. There are a lot of things coming out. I was reading coverage and the things people were asking for. We want a reasonable fuel economy, flexible cargo space. Didnt we used to call those station wagons . We did. Really, i think the big thing about suvs is that people got used to the high seating position. They do not want to go back to sitting on the ground anymore. Every segment of the car market has an suv now. It has traveled from the biggest cars down to the smallest. Is there one of those compact suvs, because the potential in 2015 to be the ford fusion of 2013 the runaway success because of everything, fuel economy, styling, if that is what youre asked there, and from a manufacturing point of view, sales. The buick oncor has been a big success. That is a sub compact suv that has more premium styling and better interior and that sort of thing. You definitely did not know how much of these they would sell. I sold a lot more than projected. It will be out hes year . You know it is funny. The audi bmw, it started the year with a super bowl commercial. I do not know if you remember. It ended the year with record sales, 1. 7 million, something around there. Bmw is still ahead, but the Volkswagen Group is going to spend a ton of money a crazy amount of money. To make 60 models. Is that too many . How many can i count that out he makes, maybe a dozen . I was surprised there were that many models already. Classic depends on what you consider a model. It depends on what you consider a model. What about hybrids . I have one by the way. Yes, you know, again with fuel prices falling, we are going to see, it is kind of a thing where we will see whether people sort of move up into the higher horsepower, luxury cars, that are not necessarily hybrids. They will always be part of the mix but what do you mean . To set up by a hybrid electric car, they would go for a fuelefficient luxury car . Smaller engines are providing a similar fuel economy. Before you leave we need to tap into your inner matt miller. What are you most excited for . I am a here head knuckle dragger, so i go for whatever can smoke the most tires. I am looking forward to the corvette next year. A picture of it . Asked early the basis of performance . X yes, but also corvette has not always had the respect of the european car guys. It does not look as good. Sorry. It is kind of flashy. But they really up to their game in terms of performance technology. I think they may get the respect that has eluded them these many years with muscle cars. Michael, producer of editoratlarge cruiser of youtubes drive and editoratlarge. From cars to movies, a look at some of the most anticipated movies of 2015. Star wars, anybody . Yes, yay. Good. And netflix is getting in on the new years eve action. Stay in the loop. I saw this the first chance i got, last weekend. It opened with a 4000 teachers in the summer come it brought in 333 million in domestic austin to message sales. It just made 15 million in clutch or days as digital sales. Joining us now, thank you for coming in, editor davis. It is a comedy, a sub genre comedy. Will this change the way theaters release movies . It is hard to say. It is unprecedented what theyre doing now. It made 15 million in its first days online. A lot of people ive talked to watched it because it was patriotic not because it was the new seth rogen and james franco movie. All the press leading up to it, everyone was talking about the movie every civil day, so people were interested in watching it. You do not think we learned anything about it. I dont think so. Your big movies with your big stars and big effects are still going to be on the big screen. It is a crowd comedy. You will experience it and enjoy it more if you watch it with a crowd. What is a breakout for you . Actors directors fandango fans . The one i love is guardians of the galaxy. It was an amazing movie. I just watch it. It is super quotable. No one expected this movie to be as big as it was. This will be the movie that knocks marvel out of the game. I am amazed by this. The same thing sam raimis spiderman did it had the audacity to do a super mate superhero movie but wrote a real story about real people. Why doesnt that happen more often . Marvel is trying to make take those chances. Directors known to be risky who play by their own rules guys who did guardians of the galaxy who infuse his own personality into it and it brings up the movie a level where people relate to it more. Who is the most a couple star in 2015 . West jennifer lawrence. Her movie will be one of the biggest films of the year. The xmen franchise will also be one of the biggest of the year. Next year, the movie, star wars. The avengers, hunger games, and also 50 shades. 50 shades of grey what is interesting is you look at the most viewed trailers on youtube in 2014, 50 shades of grey there is an appetite for this movie and it is coming out in february. We will get and i at the box office. I think that will open up huge. Disney is stacked. Youre talking an avengers movie, a star wars movie, a cinderella movie that has a new frozen short in front of it. All my goodness. A Steven Spielberg movie, as well as two pixar movies, not just his name. Youre talking terminator. Minions, the most anticipated family movie that franchise. Everyone is looking forward to that area that. Who will live the oscar . Boyhood, where it is shaffer 12 years. It is heartwarming, comingofage, everyone can watch it and relate. Movie voters will vote with their hearts and little bit and i think that will win. We are learning something about you. You like complex movies. The grand Budapest Hotel is one of your favorite. Thank you for coming in. Thanks a lot. We will talk about alibaba going public. Jack ma, a big year, a look at the biggest billionaire poems of 2014. Plus, the home price index will be out at the top of the hour. Looking back at november. One of the men whose names name is on. The importance of the data. The richest people on earth, billionaires, they got even richer. Allen would be steaming mad that. 92 billion to their net worth four point 1 trillion as of yesterday according to the bloomberg lane as index. Here to discuss the biggest winners and losers is lumbered ozzies managing editor, matthew miller. Of hey, this is the year of jack ma. Alibaba stocks soaring as much as it did, almost all of its 28 lane dollars was made this year. A massive pop. The ipo was the biggest in history. Last time, i had singles they. Jack ma got 5 billion that day because it was a huge success. You look at him and all of alibaba, and there are many raters and alibaba, people who own. 25 of the company and as soon as we find out who those people are, of course place they like they were on facebook. John parker people with alibaba, there were truly hit billionaires. What about the visit the biggest loser . Just did not have the year they usually did. It under did what analysts wanted to do. He lost 8 billion. Is there competition from Online Gambling . Definitely not Online Gambling are there were government restrictions and whatever those restrictions come in, that is reflected in the stock prices. 50 of his of the revenue comes from that and 30 come from singapore. It is an Asian Company really. Part of it has to do with expectation. That is right. He was one of the biggest gainers of 2013. He still were is worth 25 billion parent to the break in 2008. He was almost a billionaire and had to put a billion dollars of his own money into the company to keep it afloat during the financial crisis. Worth almost 3540 last year, is still a comeback. You could almost call him one of asias richest men. On record many times saying the wind resort is an Asian Company based in las vegas. How about the Oil Prices Fall . 35 down, 1 billion of it because he got divorced. He got to keep his two favorite horses. He did. And 8 billion frankly for a for a guy who is worth 15 billion. You have the price of oil and sanctions and a lot of the things playing. The russians are definitely trying to get all their money out of russia. Question member a lot of that money, if you look at liquid assets, it is in london, and there are a lot of ways. The top three billionaires, the names are always the same. There is still only a 2 billion difference between the two. One of the secondbiggest gainers of the year this is a number after he gives away 5 of his shares every july here in he would be worth well more 400 billion if he had not been so philanthropic. But he is not regretting that. Absolutely not. Thank you very much, our bloomberg billionaires editor. Coming up, the valuation rises 45 nine dollars. We will be talking out it. About it. Crisis 56 minutes past the hour which means Bloomberg Television is on the markets. Equity futures are lower as we head toward the open. 30 minutes away. Also moments away at the top of the 9 00 our, and we will get those numbers. On the markets again in 30 minutes. Much more is ahead. We are moments away from that room for an well see what it says about the recovery in the Housing Market. Plus, will the u. S. Economy continued to thrive, even in the wake of rising Interest Rates . Alan greenspan is joining us. Youre watching in the loop live on Bloomberg Television and streaming on your tablet and bloomberg. Com area bloomberg. Com. Welcome back. We are minutes away from the opening bell. I am betty liu. Futures indicate stocks, as you can see behind me, peak. 162 people on board. It seems as if worst fears are coming true. Bouncing back today after falling as much as 3 . Crude is trading near a fiveyear low. It feels like he could be more than half. Numbers are just coming out right now. They are in fact beating economist estimates. On the breaking news desk, more on the numbers. [inaudible] we have breaking news. Coming in at 4. 5 . We have got to pause because there is something going on with your microphone. I will go through the numbers you were just talking about. 0. 76 bp Economist Survey of a gain of 0. 4 . This is for the month of october. What is important here is overall year on year, up only 4. 5 in prices. You have been trending 5 for quite a few months. The vision for last month also a bit lower. Raising again the question of whether the housing recovery is essentially sputtering. It is most definitely alive and well in some parts of the country and not so much in other parts. In San Francisco and miami, home prices are still up 10 yearoveryear and almost 10 in new york city. We do get some regional numbers. A drop in prices in the shale producing areas. Five plus county down with the opening to the top 10 airlines. Michael joining us now, the chairman, our guest host for the hour here lets start off the countdown. Air asia is on our radar. You have been monitoring the news, but he has an very active on twitter, indicating to the public debt stricken with the public about the plane. He says whatever we can do it air asia we will be doing. A contrast to what we saw from malaysia airlines, heavily criticized for their lack of communication. He bought air asia for 29 cents, to aids in 2001, and he has reached all these markers of success. You see here he is doing exactly what youre supposed to do in a horrible situation, be as open as awful. Opening up with the comment this is my worst nightmare. That is what you want to hear from the ceo. Being unusually frank in a culture not that frank, kind of taking some of his western management techniques and applying thats an Asian Company. To a lighter subject, and he married signing a fouryear agreement with the u. S. Company under armour, replacing adidas as his name sponsor. Terms were not disclosed there is no stopping this guy. I am fascinated by this story and he just identify the next market he wants to conquer. Under armour while we were in the midst of a commercial break i went to the under armour website and was able to find only 15 items in the mens tennis section. Then i went to nike and ran out of time to count at a hundred. Once upon a time, nike was nowhere in tennis. How big is the tennis market . How big is that for under armour . Less you are not looking at the tennis market. You are looking at a market for active clothing. The lululemon market. People want to wear comfortable clothing while they sit around the house, perhaps watching tennis. Look, you guys were tennis polos look at how many guys wear tennis polos. Not for golf or tennis, but just for hanging around. The game is on. I am with you as well. Activewear is everywhere right now. As soon as i get on a set, i am in my yogurt yoga pants. Companies delivering an estimated 98 of its rest packages on time on december 24 compared to a year ago when the rates were lower. Customers missed their christmas deliveries. Amazon is one of the few companies i saw that said we will guarantee that we will deliver the package for you by december 24. What was interesting last year and this year, for 10 years, we have been looking at ecommerce and what would happen, and what will when will it change cultural habits. We saw a huge change this year and a huge problem last year for the shipping companies. These last few years are when these arrived. The Tipping Point happened 10 years ago and this was the final grace time for anyone competing. When apple pay kicks in just imagine what it would be like for next year. One of the things that fascinates me about the comparison is that it is forever wrong to think of this as ms. As monolithic. For years and years, fedex underperformed ups, and i am looking at the chart and it has caught up. Number seven, an interesting story out of south korea. And 80 price increase has actually driven consumers to quit smoking. Higher taxes and driving up prices. Stock has vomited. Lost 21 in trade through yesterday. If you hit people in their pocketbooks, they will change their behavior. Follow the money. Mike bloomberg did. I do not know who you are talking about. One thing i thought was interesting looking at this article is the current smoking rate of south korea is 44 for men. Do you think that is low . To 100 years ago. The smoking thing is way down. You almost feel like there is something wrong because use the all the smoke. What is driving the decrease in the last 10 years . It has become fashionable. Number six, netflix. Netflix can help you get your kids to bed earlier this year. 34 of parents already fooled their kids into thinking it is midnight or earlier. What has netflix done . They are helping parents by creating an ondemand countdown start trading at any time you want. I love that. We this is actually the first year our teachers told a fiveyearold about the ball dropping. Now they want to watch it. That was not my idea. It is education that ruined it for me. In some small way, trying to append what had been a Big Television event there first it was casey kasem . Dick clark. Terrible. Ondemand cannot be live, but maybe, maybe a can. The countdown to the opening bell continues. How the company the rise of a Young Chinese consumer. We continue down to the opening bell. The deep dive. Number five, the chinese smartphone maker that has been around for only four years. In china, it is beating out apple, samsung. It is valued at 45 billion dollars. Expanding overseas, it has bought start ups him i come those the hunger of a chinese consumer. When you go over there, is this a phenomenon you could actually see in the streets . Yes, be up to date ms. Of the generation, everything is different for these people versus their parents and grandparents. They are plugged into everything going on. California used to lead the u. S. In stuff like this. Just the opposite, i think the high price up, theyre going for quality and best price. It aint that good, except if you are really good at what you do. I think a lot of the chinese consumers, they do not have access and they seem to prefer some of these locally branded content if companies. It is the future, betty, the government told me they want all of the stuff eventually to be homegrown. At 45 billion dollars, it seems expensive, but you say overall, chinese stocks this year, is say stocks are cheap in china. Yes, the valuation today versus any time in the last 20 years is so compelling versus anything else in the world the Chinese Market year to date is up over 15 percent. It is still less than 10 times earnings. We invest in companies over there. A lot of people say, appropriately, the numbers out of china, you cannot trust them. Company numbers because it is about cash. The market is to be 40, 50, 60 times earnings in 1998. The slowdown in the Housing Market, the debt problem those things dont scare you . They are real problems and they have been there. If you could grow enough because they dont take you down. This is a problem because the chinese government, if it cannot guarantee, it cannot survive on that front. It used to be 10 and it is now less than 7 . All the predictions about the world coming to an end in china, have been false. They have been able to do things we cannot to hear. Some say a recession in china is very different. Anything less than 7 starting to feel like the economy into recession. Going eight to 10 and earnings, it feels like this isnt growth at all. They are growing and earnings that make no sense, they are silly cheap. Even after a 49 run. The last several years went from 60 times, 50 times, 20 times, 10 times. The worst performing market in the world. You buy more . If i had fresh cash, certainly. I think it is possible that the next several years, thisll be the best market in the world. You had the retailers out of this market. Michael holland, new job is to go abroad and then come home and tell us what to do but thank you for coming. He is staying with us. We will not let you go. [laughter] we have another big name in the news with us their the former fed chairman him a Alan Greenspan will be joining us in a moment. Welcome back. Lets get back to bring you the most important stories you need to know before the opening bell. And. Is here. Number four, will the Washington Post to become a Software Provider of other news organizations. Amazon founder jeff bezos wants to develop new revenue streams. So that is why he bought it. He wanted to figure out how but im willing to bet jeff bezos would pull it off where chris hughes wouldnt. It is a much better franchise but also, the Editorial Staff we are prickly if we are handled correctly. Sure if people he will be around a long time. Also, we will do this other thing. What is interesting is if he does want to make Washington Post more of a Technology Company provider you it is a must as good as working for question you go. Number three wheres our shameless plug thing . A decade ago in the hot doug vendor. More than 60 locations now. A billiondollar evaluation there what do you think about that . Too Many Companies 2540 25 45 . It is getting a little local. As well as pop of murphys, a pizza chain. They have not been a huge seller. Yes, they had a surge, in the early months, alibaba did the same thing. And then people traded off. He may lose some money. Question used to trade chipoltle used to trade and now it is a 21 billiondollar company. A price index for for wifi percent a year ago. The month on month rights as well as ecommerce estimates. The wealth effect is continuing and it started and is continuing. Ben bernanke said he would lift financial crisis. They have both done well. He predicate any Investment Decisions today on the housing recovery . No. A great question. Absolutely not. As we near the opening bell Bloomberg Television is on the markets area our top story in the opening bell is next. Welcome back to in the loop. The number one story Oil Continues its slide after a brief rise yesterday, falling for a fourth straight day, trading near a fiveyear low. You say oil prices will go where . Right now, shortterm the supply demand argues you cannot go up from here because they have to go down a little bit. The u. S. Is now the number one producer and we are told we will go through 15. Opec is not turning it off. We had a supply disruption in the middle east the last few days. You are good at talking about the psychology and long ways that people think about the markets. Watching the oil, we keep recommend we keep getting recommendations that it will go back to the way it was. Mohamed elerian just wrote a piece saying it that it will not go back to the way it was. We are in a new normal in oil. The decline in the price of oil has been nothing short of breathtaking. As of this morning, Brent Crude Oil is down 50 from his recent high in june. We heard a couple of weeks ago that jenna and yellen that janet yellen talked about the collapse of oil. Lets talk to her most esteemed predecessor, Alan Greenspan. Thank you for spending time with us. I suppose this is the best place to start on oil what oil price should economists be modeling into economic forecasts for 2015 and the next one or two years out from that . I dont want to get very specific with numbers but i will say thisthere is something fundamental going on and we saw it quietly by while back in saudi arabia who would ordinarily be cutting back to gain restability in the market chose not to. Prices began to fall and continue to fall and the markets continue to weaken. Its largely because the structure of the market has changed. The marginal producers are gradually becoming shale producers. The role of opec has always been to rebalance supply and demand and they had an extraordinarily successful period over the years and decades in doing that. The difference between shale and the opectype crude is that the shale can be offered in production very rapidly and we are and we will see this shortly. What is occurring is that opec is no longer the marginal producer and as far as im concerned, at the moment, opec is not functioning and im not at all convinced that short of a major change in the saudi view of the future that that will fundamentally change. The implications of that or what . Should we expect oil to remain low . There are certain types of things we cannot do. There is so Little Information that we have on this very new structure of the market. We cannot pinpoint exactly where brent crude will sell six months or now or a year from now. That is a coin toss. We have not yet seen the structure of the market as stabilized. Until we begin to see that functioning with the curtailing of shale crude we are seeing a significant cutback in investment and significant cutbacks in drilling, until we basically get an idea of how this is maneuvering, i dont think we know what the purpose of oil will be. What the price of oil will be. If Oil Continues to fall or even stays at these levels could that eventually delay the Federal Reserve and their outlook on inflation and delay their move to raise Interest Rates . Yes and no. I know think the degree of uncertainty that is being created by oil that policy can give us a definitive view of where its likely to go. I would basically say that it is other factors that will determine what the fed will do but i dont want to get close to that issue. I will say this we have a huge qe 1, 2, and 3 and until very recently, earlier this year, there was no evidence that the extraordinary buildup in Bank Reserves obviously, if you increase the asset side of the feds balance sheet, you will increase the liability side and because only depository institutions can hold deposit that the fed, we have a very restricted pattern. My basic view is that there is an awful lot of a position where pulling back which investors will have to do cap be done easily but in a way that may create somewhat less disruption than i had previously thought but the disruption will be there. When that pattern starts, we are going to find the type of volatility we are seeing on the upside in the stock market show up on the downside. You said in october of this year that the one lever the fed still has that can have an effect on the economy is the interest it pays on required reserves, the money that banks are parking with the Federal Reserve. They floated that idea about a year ago and the banks had a freak out about it. Do you think that is a realistic move politically . Might we see that in the coming year . I dont think its in the control of the central bank. Remember, the 25 basis points which is being paid to induce commercial banks to hold deposits at their local Federal Reserve bank that is basically a market rate. Its a right at the moment which is pretty good. It is holding the deposits in place. If the fed is going to simultaneously maintain the same level of reserve balances in total in a market which is beginning to move funds at this moment, there is very modest evidence that funds are being moved out of the reserve allen says into the commercial out of the reserve balances and into commercial lending. We are seeing a rise in commercial and industrial loans fairly recently. Its in fact almost a spike that is going up which is the first sign we are seeing that those balances are beingrelent into the marketplace and when they do that, they lose the balance. They basically get a c i loan at the fed. The fed has little control over that the markets will determine what Interest Rate will be required to keep the level of assets in place. You cannot have both Federal Reserve control the asset level of the commercial of the asset level of the Federal Reserve and simultaneously the issue of what interest is paid without a lot of extraordinary developments to go on. We met many years ago and you are very worried about inflation. Today, many critics of the fed for the past several years have been saying that what they view his extraordinary measures will in a verbally end up in high inflation. Do you share those concerns . I do over the longer run. There is nothing in monetary history that would suggest that you can create the degree of balances of Central Banks that we have now without ultimately engendering pickup in the price struggle. We are far removed from that now because we are still in a position where the economy, despite the recent indications of middle of the year rise despite those indications, we still have a very sluggish economy. Effective demand in the United States is weak, effective demand in europe is worse. Needless to say, there are problems in china. The Global Economy is not doing well. The United States is doing better than anybody else but we are still not doing all that well. The Fourth Quarter gdp is going to be something under 3 growth rate. We are seeing capital goods markets quite weak. As i have been arguing for a long time, almost all of the weakness in the last six years or so has been in Investment Capital goods investments, real estate. That elements of the economy has been cut almost in half. If you take something which is 8 of the gdp and you cut it in half, that is for Percentage Points equivalent of an Unemployment Rate. All of the change that has occurred as a result of the crash is basically a reduction in these assets and until they begin to pick up, we will not get the kind of vibrant growth that everyone is hoping for. Dr. Greenspan, we thank you very much. The former chairman of the Federal Reserve and we will be back in two minutes. Bob schiller will be coming up. Home prices in 20 u. S. Major cities rose at a slower pace in the year than it did in october. The case schiller index of Property Values increased 4. 5 from october of the year before. Its the smallest again in two years. Joining us now to discuss whether the Housing Market is on better footing is Robert Shiller , the professor at Yale University and cofounder of the case shiller home price index and mike holland is staying with us. Dr. Schiller, we just spoke with Alan Greenspan who says inflation does not seem to be a problem in the short term. He says the markets are going to be disrupted by the fed pulling back on their balance sheet. And the economy is still sluggish. That does not sound what a great prescription for a continued housing recovery. Yeah, he mentioned quantitative easing which is already over. And the possibility of higher Interest Rates and i agree that that is a concern. The boom has been hindered by Interest Rates since 2012. We have seen record low Interest Rates but not at the moment. I think that stimulates peoples excitement about buying a house. They think that Interest Rates of only one way to go which is up so they are rushing into b uy. That something that may end soon. I am not forecasting it but i think there is a possibility of a correction in home prices. You are not forecasting . Its very risky, any investment is risky and the risk that is on my mind its early that the slowdown in the rate of reentry of home prices is the harbinger of actual price decline. The forecast tends to be for home prices to go up at more than the rate of inflation. We spoke two years ago about your concern that too much of americans wealth was tied up in the value of their home. As home prices continue to rise, do you worry that that trend will continue and we will put 60 of what we have into a risky asset . Part of this is institutional. Young people want a home and this is the time to buy and they dont have much money so it ends up being more than their total wealth. I think this is unfortunate. I think we need to redo the mortgage market. Doddfrank called for a study of share of appreciation mortgages. It has not happened. I think we need to think about how to get people out of the institutional constraint that pushes them to put all their wealth into housing when they are in that phase of the lifecycle. We have been able to get Alan Greenspan back with us from washington. Dr. Greenspan, we have been talking to bob schiller at Yale University about the recent numbers in the caseshiller price index which came out this morning and perhaps some of the wrongheaded incentives that were in the Housing Market relative to low Interest Rates and low mortgage rates. Dr. Schaller just mentioned the big question about what to do with fannie mae and freddie mac. Can you envision a u. S. Housing market without government backed insurers like fannie mae and freddie mac . They are responsible for 90 of the market right now. Could we get back to where we were at 50 or so . Remember, we spent a very large proportion of the life of this country without fannie mae and freddie mac. The markets were working perfectly well. They were working well right after world war ii and the need to have Government Intervention in markets the way we have had with fannie mae and freddie mac is not been a history that has been helpful. As i outlined in the book i just wrote recently, i attribute h uds mandate of fannie mae and freddie mac prior to the 2008 crisis as a major factor why subprime mortgages became a huge problem. Fannie mae and freddie mac were mandated to hold those type of assets. Because they could not get hold mortgages inadequate volumes they began to buy securitized subprimes. S. That was a major problem in the financial crisis. My view is that fannie mae and freddie mac of never existed is if they had never existed, we would have had a bubble problem but not the severity in the way we did. What do you make of that statement, dr. Schiller . Fannie mae and Freddie Mac Fannie mae was started in 1938 in response to a housing crisis. Before that, dr. Greenspan is right, we did not have Government Support for the Housing Market and they did not think we needed it. This was the American Dream back then. It was a new idea. We could get along without it but certainly, that would be a downer for the Housing Market. If we get any whiff that fannie mae and freddie mac will be curtailed, that will have a psychological effect even sooner on the market. How much of a downer for the Housing Market . If fannie mae and freddie mac did not exist, its impossible to conceive right now, but if they did not exist and homebuyers were dependent on private capital to provide credit, where would home prices be . Are you asking me for an estimate . I am throwing the question out there. Home prices are usually driven by construction costs. We can see a period of home prices below construction costs. That would be temporary and eventually they would come up to construction costs. That would be the fact. There might be a smaller housing side and people would not feel the same urge for having a giant house. They would live in more modest quarters. We went through a period of shelley holmes, the mcmansions and that could be one of our cultural history. Home ownership rates are going down even as the market overall is rising. The reason for that is an ever increasing proportion of singlefamily units that are now rentals. Indeed, the evidence of people skewering assuring homeownership is the same reason they are cutting back on Capital Investments namely the discount rate applied to incomes weather in puget incomes or real incomes web whether it is imputed incomes or real incomes and they are high. You can see it in the spread that exists between the 30 year u. S. Treasury bond and the 5year note. At the height of the crisis, that the spread was at the highest level in american history. It has come down partly but we still have a situation where singlefamily construction is still only 1 3 of where it was in 2007. Weve got a long way to go and i think robs price index has been extraordinarily useful to what we do try to look at this market see. Now everybody is following the same procedure but they are the originator. Dr. Greenspan, thank you so much for joining us. Also thank you to dr. Robert schiller at yelp university. And to Michael Holland for staying with us. Come back anytime. That does it for all of us on in the loop. Of the megadeal. Johnnie mae with a look at big mergers and what we might see in 25th a joining me lets talk about the broader picture of what we can expect in 2015. We think it will be part two of what we saw this year. All the factors that drove the big mergers and 2014 are still there so that is no reason i year would be any different. We still have low Interest Rates and Companies Running out of ways to grow and tons of activist shareholder itching to spend cash. The cash equation on the Balance Sheets looks good. Lets talk about the oil industry because you rarely see consolidation but the way we have seen oil prices go will that change . Absolutely, the Energy Industry for the past two years has been a lot of asset sales and land grabs but oil prices are so low that analysts say that if they are the same by next spring, even the big guys will start to feel the pressure and they will have to start looking at mergers because that would be full of synergies and they could cut costs and we are seeing Companies Like bp feeling the effects of low oil prices. They said they have to fire people as a result of it. They might get scooped up by a bigger competitor like exxon. They have to really watch out. From oil to health care pfizer is one on your radar. I spoke to an analyst to told me that perhaps with what is happening more broadly, you can see pfizer come into cap deals. They showed they want to do something they buy looking at astrazeneca. They will probably do something. Everyone says they are the the one to watch. There are many other companies they could look at. We are watching allergan as well. They could scoop up the combined company. There is a huge market for pharmaceutical companies which is perfect for the pfizer establishment. It would make sense, there is a lot they can do. Are there industries you could not see activity . The industries you will not see in a lot of activity is private equity. The interest is in Smaller Companies than years past. We are not seeing the big 30 billion leveraged buyouts, more like the one billion 3 billion retailer that is struggling. You will see a lot of that but you will not see huge buyouts. 2015 could perhaps be to 2014 . It might, we almost got up to 3 trillion in this year. Not even todays left. We might not make 3 trillion. Thank you so much for that we are on the markets again in 30. This is a Bloomberg News update we have the december index of Consumer Confidence sentiment coming and lower than what economists have been looking for. Its an increase from the previous month, 92. 6 is the latest read. They were looking for a read of 93. 9 but it marks an improvement over the november read. In terms of impact on financial markets, its early trading right now but we are looking at declines in u. S. Equities and we have extended those declines a bit, u. S. Stocks are down and the s p 500 is retreating from its record high yesterday