>> before we get to the vault and if you did not know, young eric had a birthday over the weekend. happy birthday. >> the wrong side of 40, folks. that is just the way it is. cannot do anything about it. cannot do anything about the news either. the top stories of the morning. news forecast from goldman sachs. it will not curtail shale drilling at least not until it falls to $40 per barrel. goldman sachs cut the forecast for the west texas intermediate rate benchmark to $39. prices fell more than 4% today. now below $47 per beryl. the biggest acquisition yet for a shyer -- for shire. this gives them treatment for rare diseases. they have been trying to boost growth since a proposed $52 billion sale collapsed last year. genetic testing partnering with the biggest drugmaker in the united states. sharing dna data at 350 thousand people with pfizer. the data will allow new targets to treat dizziness and -- diseases and design clinical trials. maybe the end of the road for peyton manning. struggling as denver loss in the nfl playoffs. manning says he is disappointed and does not yet know if he will return for an 18th season. >> he does have the papa john's pizza if it does not work out for him. cyber security will be on top of the agenda in washington this week. president obama will spend the next four days promoting ideas to protect online privacy. he wants to prevent half hack attacks like target and home depot to name just a few. he is in the seat. what is this all about? >> kind of never let a crisis or crises go to waste and the view from the white house right now. what they have been trying to do since they have been in office get congress, private industry and the federal government behind a comprehensive set of roles on how to counter cyberattacks and have not been able to do it. what they are trying to do is use what we have seen with jpmorgan, sony and targets as a way to jump off and add new momentum to the plan. they will start off by announcing a legislative proposal that any private company will have to inform their consumers within 30 days if there is a major hacked taking some of their private information. i think the most important thing by wednesday of this week they will lay out some type of proposal talking about information sharing. that is the big issue in terms of trying to combat the cyberattacks. >> the white house is going to make a big presentation lots of ideas. how real are they? what are the actual action steps? >> this is something everyone agrees on. the fbi put on a classified demonstration inside congress for all lawmakers are they basically did the worst-case scenario. members were walking up action based. they were terrified what it would mean. i think what the president is hoping with a push right now is legislative proposal has gotten the floor action just not the final area of agreement that this push could help. not just demonstration stuff. the idea of being hacked over the past couple of months is a can pressure lawmakers. that is what they're trying to jump on throughout the week. >> can we go back to the substance of the proposal that atmosphere surrounding it is important but does not address another problem, which is in many cases companies do not know they have been hacked and cannot inform anybody. as you well know a criticism levied is they are not working closely enough together. anything the president is going to say today or over the course of the week to address that? >> this is going to be the focus wednesday. the big issue and where stephanie's point is actual details of the proposal, the frustrating part is no one can figure out the specifics of how information sharing between the private sector and government would work. the private sector on stomachs or they are exempt from liability. the white house very concerned about privacy and things of that nature. what the president says wednesday is important on that. will they set a marker down for what they need to see in a legislative proposal going forward? the white house has taken executive action, talked and worked on capitol hill but reluctant to weigh in heavily on legislation. the lack of details is frustrating. the detail is whether or not the president will get behind one of them and throw the weight behind it and go forward. that is the issue i am interested in seeing what happens with that wednesday. lex i know you are also interested everything that will be covered in the state of the union address. what else will he cover? >> last week he made three stops in michigan and arizona and tennessee. they are calling them sneak peeks of the state of the union. very rarely does the white house talk about this early what they will unveil he will lay out executive action he can take. you will see some stuff on education, what he can do on the economy and then the display to proposals. friday we saw the big community college initiative. i think on cyber there will be issues to. i think he will say things are good but we can get better. usually presidents wait until after the speech. this year doing it before. >> giving us the latest out of washington, i think we have a little more time sorry, all out of time. when we return going live to the detroit auto show. matt miller will be here with the top executive of north america to tell us how gas prices are changing his strategy. >> dial-in island vacation spot where crowds are never a problem. ♪ -- plus the island vacation spot where crowds are never problem. lex this is "market makers." >> sap shares suspended from trading and the company came out with headquarters think the fourth quarter software matching estimates and the company based in germany does not report earnings until january 20, a little bit of a financial update. what is interesting is oracle shares dropped lower following the suspension of sap shares and have since paired the losses following the latest losses. as for the overall market looking for declines of .9% for the s&p 500. we are continuing to keep an eye on the weakness in equities extending after the selloff. like thank you very much. talk about what is happening in detroit. automakers flexing mode -- muscles and the motor city. a year of booming sales. toward the end, plunging oil prices so it should not surprise you auto bookmakers have -- automakers have new hardware to show off. who should be there but our own matt miller? i want you to share with us some of the highlights thus far from the auto show. what are the major trends emerging? >> for me the exciting thing is it is not so much about hybrids or autonomous car or cut -- conductivity, it is all about cars. or conductivity. it is all about cars. the horsepower. sorry? >> who cares about the future and technology, let's go tough that asked -- bad ass trucks right? >> with dollar -- with one dollar 77 gas, it seems like that is what it should be about. a lot of they suv's. it is a huge car. i am a bit of a caveman. i did excited about that stuff. there are a lot of hybrids lightweight technologies important here. i think that is the name of the game disguising these big, strong powerful cars or selling them as powerful cars and the consumer almost does not even realize and right now the consumer probably does not care about. >> it is really all about where the consumer is putting the accent because it is not as if someone could design and manufacture prototype of a big suv in six months. this has been years in the making. >> that is for sure. all of the automakers are really paying attention to mpg. to them it does that matter if the price of gas goes down, they know it will come back up. that may bring in jim wentz to the discussion. consumers have a short-term memory but you have to pay attention to the bottom line as far as mpg all the time. >> the bottom line, you have to offer broad portfolio. the drop in fuel prices has just been in the past few months. when we were planning what to show and display, none of us knew her that was going to be. it just happened to be a lot of people bringing up performance cars and trucks. it is difficult to say, only time the price of fuel only going up. >> you have a consumer looking at a new tacoma excited about buying the truck, they see truck and feel like they can do it because the price of gas is low, although it is a fairly fuel-efficient vehicle. >> what is interesting is whether it is a full-size truck or midsize truck fire, full-size truck fuel efficiency is about number 20 on the buy-in priority. a little bit higher on midsized whatnot the key driver. this will have much better eat mpg. >> midsize trucks are so hot right now. how does that happen? a really heated combat zone for the automakers, especially the big four. >> tough to say what the others were thinking. we have been in the business never got out of the business. a 60% share today of the truck. this is the ninth generation. by far the best generation. >> i have been asking a lot of guys today about the euro and in your case the yen. the first thing that comes to mind when i think about toyota or some of the german automakers coming to the u.s. that you have tens of thousands here. does it affect you at all? >> obviously a little bit of the tailwind, it but when you build over 70% in north america, 75% part, it does not have that much of an impact. and you look at the yen it has weakened. the dollar has strengthened. i would not say one is weak one is strong. pre-lehman brothers the yen was around $1.20 and no one was talking about how weak it was. >> what is your manufacturing plant looking like? a lot of manufacturers new to the game from overseas getting into production over here. tell you the producing -- toyota producing arrear for decades and decades. >> we are exporting to over 40 different countries. just about every model made in the u.s. is now x ported somewhere else. obviously the production capacity is right around 2 million. as we see the market continuing to improve long term, we have to make new -- with to make decisions about whether to we bring in more products from around the world or expand in north america. >> volkswagen that in her heels in terms of total production numbers. seems to be very important to them. how important to you to maintain the crown of the world's biggest car producer? >> it is not. it is a benchmark i guess. away for you to measure how well customers are accepting of the product. but in the end, the number will be what it is. >> i imagine there are benefits that come with scale but also drawbacks for sure. you had recall problems before most other automakers on a big scale. how have you managed to avoid it this time? >> we took a step back and re-examine all of the processes major communication was transparent throughout the country and put it three-year hiatus on building new plants because we wanted to make sure we have processes in place, utilizing the capacity and most important, that we had human capital, resources of people to run the plants before we started expanding. >> how do you feel about the way to conduct -- the tway tacata has reacted to this? >> tough to say because i am not sitting in his shoes. all i can say is we want to make sure customers are safe and feel safe. as an industry i think we are all getting together to examine what happened and what the fixes will be. we're are confident going forward customers are safe. >> focusing on the luxury brand lexus. toyota has a crossover brand out. are they going to regain the crown are the biggest selling luxury vehicle in america? they work for 11 years. >> i am not sure it will. we sold over 300,000 for the first time since 2007. a lot of what is -- what was luxury today was not luxury back then. we choose not to play in that game. >> a shot across the bow at the germans. >> it is a great vehicle. i am driving a hybrid and tremendous vehicle. >> obviously almost synonymous to think of hybrids and toyota. are you committed to gas powertrain? is hydrocarbon a great part of your future? >> i think the plan all along, when we started developing the preassigned hybrid you were developing fuel cell at the same time. the plan was the short to midterm was going to be hybrid. we still believe that is what it is going to be. the infrastructure is not there. if you look at california as an example, 70 fueling stations in the right locations will get customers convenience of no more than 10 minutes to refuel and can handle over 10,000 vehicles in operation. i think hydrogen refueling, you do not need four hydrogen stations on every corner like you do with gas stations today. i am a texas native now. >> enqueue. we really appreciate it. toyota has recently left the golden state and gone to the lone star state and now in plano, texas. >> thank you for joining us. a lot more from the detroit auto show all day long. our own matt miller back with matt fields. at 12:00 he has the ceo of nissan. at 3:30 obviously you know matt is excited about this one maserati ceo harold mason. -- harald wester. >> i was just wondering if they would talk about low end luxury below $30,000. >> what is that? that is called an bloomberg. low end luxury. >> the first car i ever owned? a rocky. if anyone knows what it is, i want you to tweet me right now. that was in chile. >> can you guess mine? >> a volkswagen beetle. >> no. a white chrysler lebaron convertible. thank you, new jersey. retails new normal. the industry likely to shrink. on the other hand cheaper gas. you know this kills me. let me buy some jeans. makes no sense. ♪ ♪ >> we just wanted to give you an update on sap, the german software maker. it has resumed training and higher by about 4% right now in early trading. the company announced first quarter software revenue would be 1.7 billion euros on a right in line with what analysts had been looking for. the stock higher after the announcement. oracle recovering all of its losses from earlier. at had fallen after sap was suspended from trading. back where it was. >> when we return, retail therapy. big chain stores, will shoppers provide secure? ♪ >> live from bloomberg headquarters in new york, this is "market makers."" with erik schatzker and stephanie roll. >> you are watching "market makers." i am erik schatzker. this year retail facing something of a new reality. many are shrinking hundreds of closures planned. it's oil prices tumbling, consumers might have cash to bring back to the market. with us is ceo of by manco -- fi nanco. goldman sachs just came out to say oil prices will drop to $39 per barrel. there have to be retailers who feel that is great news. >> no doubt about that. with oil prices lower, consumers will spend significantly lower. >> i cannot get my head around the fact people go fill up their car with gas and say look where gas prices are, let me run out and get myself a pair of jeans and the loss? >> if you fill up your car once per week , the end of the month that at that. >> at the end of the month you say look at the money, let me head to see wonder but i can't because they're going out of business. help us there. >> not so sure what you're going to do without them. could be a crisis. the consumer in america has so many choices not only of storefront but online. they will find a place to buy what they need. you have lower cotton prices. again, that may not sound like a big deal on the face of it but for the garments we are wearing, honda is a big part. that goes down and we'll probably see price deflation or margin expansion. >> how much pricing power -- how vicious is it at that end of the retail? when we talk about the extra money because of cheap task they are not spending it at tiffany's but the mid to low end of the market and competition is pretty intense. they may not be able to keep much of the extra margin. >> it is more of how can i capture sales versus margin? >> that is not even an option at this point? >> it is tough. they may be able to squeeze a little bit out but it is all about her motion. >> what about luxury? with europe in bad shape russians not spending, what will this mean for lux rebrand? >> i think north american luxury will be fine. europe in the doldrums. russia has stopped spending effectively. china with the crackdown on corruption, likewise much less intellectually. luxury sales should be doing ok. >> what does that mean for the individual company? which ones do best and which ones are most reluctant on chinese? >> growth over the past 3-5 years has come from the emerging markets, china in particular. now that has stopped. does not mean necessarily they will move backwards but that growth will not be there this year. >> men's wearhouse mergers activists, what do we have to look forward to? >> three major consolidations and retail last year all had activists involved in them. men's wearhouse buying joseph a banks or office april fighting officemax, all of them had officemax -- all of them had activists involved. activists are involved. the staples, office depot conversation is driven in part by activists. the average market value of the three big mergers last year, up over 50%. that is a very big driver for the activists to get involved in stirring the pot. >> how about the individual company's ceo gas so how badly do they want to be consolidators ? >> depends if you're the winner or the loser. >> the name of the game -- >> but is a problem because of the end of the day what matters most is the shareholder value. it comes at enough of a premium that shareholders should be all for it. >> if you are in a consolidating industry coming your growth is flat to nonexistent. you can restructure the company multiple times or you can consolidate for a huge value for the shareholder, benefit for the business long-term. lex what is a non-consolidating industry? they are all right for consolidation. >> that is true but for sectors new and growing rapidly less means. athletic wear would be a great example. lululemon unlikely to consolidate that sector. it was not a thought -- consolidation within the industry, expanding to a new category. flex is there a consolidation play for abercrombie & fitch? >> we talked about the team retail space. >> hard to sell wearing them. >> i think they do not want it emblazoned across the chest. >> underneath my chair -- shirt. >> that is where the major shift in what the consumer wants. it is not as brain conscious. does not want to scream out who is what i identify with. the secular trends are away from spending in that category. two or three getting together does not necessarily solve the problem in the sector sales aren't climbing so rapidly. >> it is and was such an awesome little store. i love going to see wonder. you can almost always walk out with something fun and unique. i think the problem was they were fairly large. a lot of different products. very high price retail space. price points not that affordable. you walk in and what do they really stand for at the end of the day? a must-have item they have? more that i need a gift and see what i can find. >> ifs wondered did not work and many people say it is a ripoff of tory burch, what does it mean for tory burch? >> i think they are very different rams. tory burch has done an unbelievable job of building the brand and category and expanding to new categories. >> is there a company you are worried about that has expanded very aggressively and now might face tough times? >> coach obviously expanded many -- very rapidly for many years. >> and diluted their brand. >> michael kors also expanded rapidly. still doing well. >> there is one everywhere you look. >> that is the challenger retail. do you grow yourself out of what made your brand special in the first place? >> i will learn a lot more because today is a conference. i will sit down with the brooks others portland. >> the ceo. >> when we return, no fashion the mc or. as social media site where the fashion is in focus and all about the close. >> the art of fashion is more about data these days. just ask the socially e-commerce company who recently launched a new iphone app that makes personalized closing recommendations -- clothing recommendations. we are here now with the ceo to talk about what the company is trying to do in terms of reinventing the company. a great place for style invention. instead of it coming from fashion editors they come from fashionistas all over the world go pull together their favorite look and you can instantly by and pass -- shop anything. >> your average price point is higher than most. >> our average price point is higher in the average order value is eventually higher because we are all about shopping. people come there and are inspired and want to buy more and more things. we attract an affluent customer but younger people there to buy smaller things. >> what do people typically come looking for were -- come they're looking for? do they know what they want or are they browsing? >> we get people of both kinds. if you do not know what the latest looks are, you can come to polyvore or if you know exactly what leather jacket we're great to buy the items to see how much they cost across the different retailers. >> how big is user engagement? can i tell them what i want them to wear? >> that is a big part. you can pull together your favorite look and ask other people on the site for advice. they can give you a joan rivers, i don't think so. >> you will probably get a lot of constructive criticism and loved. >> where is the crossover between your background of technology and engineering and retail? >> my background is computer science and i used to work at google but you see the world of dachshund in an manufacturing and the lads -- knowing what the latest trends are moving closer and closer to digital because online shopping is where it is at. it generates a lot of interesting data about what is trending. all of that big day that really helps retailers understand. -- big data really helps retailers understand. >> are they responsible enough to know? >> some retailers really get it and are on top of the trends. some don't. some websites barely work on a mobile phone. >> name a retailer you think it is getting it right in terms of adapting the data. there are department stores that pay a lot of attention and do retargeting campaigns. >> you are in the online world only. it is very important but i do not think anyone has track that yet. it is very difficult to track not only for us but for everyone. i am excited about the new technologies that allow you to do off-line. apple technology that says this consumer is near the beacon. polyvore that's a check out the outfit we have created just for you that you can buy right now that it's 20 feet away from you. >> when are we going to get you on android? >> we are on android. >> where is your customer? >> for the most part, in silicon valley. >> if the percent of users out -- from outside the united states. >> if we are talking about deadlines, when will there be a plolyvore for men? >> that is an aspiration of mine. >> is there a market for men? >> there should be. more women know how to dress more men don't. >> not as much selection as there are in women's shirts but the art of mixing and matching is something that polyvore does really uniquely. we can say here is a different shirt and here are the different ways to wear it. i think men can really appreciate that. >> in general white shirt navy suit, snooze. thank you so much for joining us. this girl is amazing. cofounder and ceo of polyvore. when we return we are talking haiti. the government says five years after the earthquake the government is moving forward. i went there last month to find out if they were bright. the preview was pretty bleak. >> [inaudible] >> [inaudible] >> 400 foods which is like two dollars. ♪ \ ♪ >> welcome back to "market makers." >> officially five years since i earthquake devastated haiti. now the government says it is ready and full of lucrative opportunities for private investors, but is it enough to help the millions of struggling haitians? i went there to find out. half a decade has passed the rubble has been cleared. most of the aid agencies have gone home. haiti has a democratically elected president in the country has a new slogan, haiti is open for business. >> a lot of investors are looking around the country to invest. >> appointed prime minister in 2012 a former telecommunications ceo, he set out to transform haiti's image. from a poor aid-dependent country to a land of opportunity. >> what industry should come here? if you are to say this is a business that would thrive in haiti, what is it? >> manufacturing for example. we see traction now with large investors coming in. the marriott hotel is going to open its doors. >> the marriott hotel being funded by an irish billionaire who calls him 80's number one salesperson. >> we will probably lose money for the first 6-9 months him and then we will turn a profit. we will get a good return on investment, no problem. >> the marriott downtown to the company headquarters. digital still operates in 33 countries but haiti is the largest arquette, accounting for one third of the 12.8 million customers. >> when you speak to american ceos and tried to sell them on haiti and they say look at the track record, it does not make sense, that country has problems right left and center, what do you tell them? >> i tell them my own experience. we have had absolutely no issues. no red tape. businesses have performed well and has been a good investment. our experience is an example for everyone else. >> do not miss the exclusive interview with the former prime minister in the next hour. he will talk about haiti i'd years after the earth quake and tonight bloomberg tv will premiere haiti "business at 9:00 eastern and pacific. who wants to watch football playoffs when you can talk haiti? the prime minister we are speaking to two days after we sat there and spoke with him him of the initiatives and workings to really turn things around political unrest, he was forced to step down. >> that pretty much tells you everything you need to know about the place. >> they have a huge strategy to improve tourism, cruise lines there and manufacturers. if you are a manufacturer and willing to look past the fact that 90% of the country has no running water am a horrible roads power grid is terrible, now dealing with the fact that the government is not just corrupt, in complete disarray chaos. >> how much tourism is there a? >> 25 million people go to the caribbean, 500,000 total go to haiti. the beaches are exquisite. they want to make it the new saint barts, but how are you going to make it the new saint barts went before your trip you are taking malaria pills and getting shots. no state-run hospitals. i do not want to stub my toe in haiti. carnival cruise is investing $70 million and going to make haiti a stop. they think we will see 600,000 people once we create the port. again, it is beautiful. the problem they face is infrastructure. the saddest thing is the ngo money has basically run out. you will not see new money pumped into the country him is aware it is going to come from? when you speak to local haitians come and do you know what the dream is? to get out. >> really? that is depressing. >> a beautiful place with incredible people. low-cost labor force highly motivated. starting to see manufacturers there, but the problem is, it is just not enough. >> i am dying to hear what he has to say about this next hour. >> i am deathly going to be watching. have to take a break. when we come back going back to the detroit auto show. for just unveiled a new supercar. speaking with the ford ceo, mark fields. ♪ >> live from bloomberg headquarters in new york, this is "market makers." >> its new supercar. you will not use these wheels on your daily commute. 600 port -- horsepower and just under $1000. you will hear from the ford ceo in just a moment. >> the star analyst made her name warning for the financial crisis. she is finding the hedge fund world a little bit tougher. >> it says it is open for business, but business is not so open to the idea of katie. we will see what happened five years after the devastating earthquake. >> welcome back to the second hour of "market makers." i am stephanie ruhle. >> i am erik schatzker. -update on oil market. have you look at -- look at prices? down 5% this morning. we will set you out to the newsroom. scarlet fu has more. >> most like at least for now, we have come off our worst levels of the session. at the level of the day, the crew that trades dropped to a low of 4590. this marks the second time this year in 2015 that crude oil has dropped by at least 5%. dropping quite a bit, by as much as 5.9% in the day. couple of catalysts. mainly, investment they've have come out with new oil price targets in 2015. playing catch-up to the wrapup is futures. goldman sachs says it sees oil prices falling to $40 per barrel. that is in the first half of the year. socgen sees oil at $15 versus its previous forecast of $55. crude oil off by 4.2%, 4632. >> thank you. no end in sight. >> no. it makes some people happy. out in detroit, the american international auto show is taking based. the cheap oil is at least reshaping the conversation around the automobile in favor of the larger. truck on the one hand, more this placement and sports cars, like the one ford unveiled just this weekend. matt miller is standing by with the ceo of the ford motor company with more. >> i was in the arena to watch the unveiling of not only the new gt, but the 350 r, a hard -- a high-performance mustang and raptor. i have the old raptor. i'm here with the ceo. let's talk first about the incredible focus on performance dirty will put out 12 new performance vehicles? why the focus on the high-end or america's carmaker? >> we are showing how we're using innovation through performance. the things driving innovation allowing us to have rate performance vehicles are focused on lightweight materials, great aerodynamics, and we have implemented so many of those elements across our entire lineup, it is just a great extension of it. the gt, which we debuted today is a showcase for all the information technology. >> we are seeing the birth of the new f1 50 because of aluminum and lightweight construction. this new car, what are we talking about as far as, is it a supercar something nobody can afford? when will it come out? >> we pride ourselves on having a full line of vehicles him everything from small vehicles to our large trucks here at even this great new supercar. it is not a concept. it is a real production vehicle and will be available toward the back end of next year. it will get at least 600 was power. -- horsepower. it has great technology in terms of structure, the new ego boost 3.5 liter engine in it. all the great technology to be a showcase for what we're doing. >> and the carbon fire -- fiber, you are going into partnerships to build real scale carbon fiber. it does not seem like anyone has done that yet and that would lower the cost. >> this is a wonderful thing about how we are running the company around innovation. we are challenging our engineers and asked them to challenge, question tradition, do not take anything for granted, use technology where you can air it in a case of carbon fiber, we have been working with doubts since 2012 and looking at techniques to get to high manufacturing of carbon fire -- fiber. it is part of our strategy on moving the company and the business forward. >> i welcome that step. i also heard you mention in terms of innovation that you are considering or looking into fractional ownership of cars and what is that all about? lest we are really looking at mobility on a larger scale. a lot of it has to do with listening to customers. you have, for example, large megacities growing, cities that have 10 million people or more. if you going to any love the large cities, the traffic is tough to get to -- through. we want to be part of the solution for that. we are not only coming out with great products, but also challenging the folks in our organization to innovate the on that and look at major transportation and congestion and mobility challenges and come up with solutions. we are experimenting and we will learn in terms of what we can offer customers and what it can do for us as a business. >> i heard you at a conference in las vegas talking about autonomous cars that will be out there in maybe four or five years. you have no plans partaking in that sort of innovation? surely, if somebody will put little pots that travel around san francisco by themselves, for has to be in on that. >> of course. our approach as we have semiautonomous vehicles on the road today. they will help you parallel park and adjust your feed based on traffic flow. they will help you keep in your lane, those kinds of things. we have fully autonomous development vehicles on the road and will absolutely have fully autonomous vehicles. we have not talked about the time and because we want to make sure when it is right for the customer and accessible for millions of folks and not just luxury customers. >> your predecessor went over and is now at the board on -- at google. they're looking for partners. will for partner up with them? >> as we go about this, we are making ongoing decisions around what we want to go out and buy, and who we want to partner with. it is still a wide open field out there as we work our way through it am a but we are dedicated to providing these kinds of solutions, and doing it through innovation, which is part of what we are as a company. >> you work in japan, you work in europe. before coming up to run the whole company. when you look at a ¥120 to a dollar, or a euro getting closer and closer to parity, what do you think about that? that's obviously, currencies are part of our business. our approach is ready simple. we expect the markets will set currency rates, and not governments. we have seen, for example, with the japanese yen, that has an weekend based on some of the policies of the japanese government. that has given some of our competitors an advantage. we want the market to set those currency rates. at the same time, we will stay focused on building great cars and trucks like the ones we are introducing here at the show and let the customers decide. classes seems like this year, you have stolen the show with the new raptor, but a lot of manufacturers are focused back to the basics on cars. and just building engines that work for consumers. you still have to keep your eye on the miles per gallon, though as we approach standards. is that harder with two dollar gas? it is not really what drives consumer decisions. >> is interesting. all the performance we're in choosing at the show, what we're showing is you can get performance and not sacrifice fuel-efficient eight, again through a lot of ego boost energy applications we're putting in here. look at two dollar per gallon gas. it is good for customers. it puts more money in their pockets that we think that is good for the economy. we do not think that will necessarily juiced the industry higher. it may change the types of vehicles that customers want. in terms of mileage requirements, customers still want good fuel economy in a matter what vehicle they buy. they're smart enough now to know although gas prices are low, they could go higher again, and they want to have a vehicle with great fuel economy. as we look at the standards, we are working toward those. an important piece is seeing how customers are adopting the advanced technology and seeing value in it. we offer a full line up in the industry total still relatively low. we're really looking forward to the midterm review to talk about the feasibility of the timeframe of those requirements. >> you talk about the industry not necessarily higher, but everyone's forecast for a higher industry sales looking at 17.5 million almost this year. how far do you see the cycle going? could we go to 20 million vehicles? >> last year, we ended up at 16.8 million here in the u.s. our call this years between 16 eight and 17 five. that includes medium and heavy trucks. we do expect growth. when you look at the conditions, economic conditions here in the u.s. i think are still very favorable toward moderate roads each year. income level, consumer confidence, those types of things there it i think that will bode well for the next couple of years there it that is always subject to any kind of shock which could get us off the rails here it we do think over the next couple of years, the conditions here are quite conducive to the industry. >> that is a good note to an interview on. >> thank you so much. more coming from the detroit auto show all day long. 12:00 em, we will speak with the ceo of verizon and -- 3:30, matt will be talking to michael horn -- pardon me harold vester, the ceo of maserati. when we return here, oil takes another swan dive. goldman sachs says the situation needs to get worse before it gets better. plus, meredith whitney having a tough go of it. ♪ >> where is the floor for the price of oil? your guess is as good as mine. today, west tested -- west texas intermediate at one point touched $45 and $.90 per barrel. a new report for goldman sachs says wti can drop to $39. herewith moore morris isaac, and energy reporter here at bloomberg. you have got a lot to write about these days. >> it has then busy. looking good. >> how influential is a report like this for goldman sachs, calling for the benchmark contract here in the united states, west texas intermediate. >> the market listens. >> try again. a lot of the analysts were bearish before the price collapsed. they were not as bearish as this. we are not them and we have got more to go. >> what is the rationale behind them putting the number in? >> they are not ruling out even lowering the 30's, but basically goldman's point is that what is going on here is the market is being determined less by what is going on the physical market and more by the capital market. in order to in -- to prevent investment coming in and pushing supply back up, the futures price has to stay low for a long time. >> we spoke a couple of weeks ago with alan greenspan chairman of the federal reserve there and he said that everything has changed in the oil market. all of a sudden, with saudi arabia not out of the picture but declining to be the price setter, the market needs to find equal or the him there it how difficult is it for the oil market to find equilibrium? >> very difficult because no one knows what the equilibrium price is now. demand is very unclear. >> light is demand unclear? because there is so much supply? >> no. you have weakness in china and there is a lot of speculation about where that would go there it most forecasts for economic growth are better this year. the link between oil demand and economic growth is weaker it used to be and there are a lot of these negative -- >> it is really mystifying. capital markets have an easier time establishing capital markets main growth, demand, and copper, or iron and or. it is a movement struggling with it in the case of oil. >> the movement targeting right now, shifts are going on in energy efficiency, and more use of fuels besides oil. the link is just not as strong. >> the long-term trends in the background shift for example that they can away from heating oil and international gas. wind and solar. >> exactly. look at the u.s.. our consumption is flat and the economy is not flat. >> a very good point. let's talk about the relationship between the benchmark contract here, and the benchmark contract overseas him him -- overseas. this is the difference and the rising line means the difference is shrinking. a very skinny premium today. >> if you put the graph back further, for a long time, prices were higher in the u.s. and that slipped as the u.s. started producing so much more. it is now interesting. as long as you sort of have the structural reason why prices should be lower in the u.s., you see the spread tightening like that because of the volatility because of how steep the decline is -- >> here's what it looks like over five years. >> there you go. you can see how wide it used to be. >> when you see that tightening again, that suggests there are structural reasons for that to widen again. will it go widen because wti will go down more? that kind of seems more likely. >> one of the things goldman raises in its report is the prospect of a decline, which we have not really yet seen in the output of shale oil. >> they're calling for significant slowdown in growth. 400 barrels per day a year. >> you need to get to the price of $40 or below to see that happen. thank you very much. isaac covers energy and has got a lot to follow. >> this is also his debut on "market makers." when we return, the wall street star will sell flat. i will not say she fell flat on her face. she is having a hard time. why is meredith whitney falling apart? stay with us. ♪ >> meredith whitney's funds biggest investor wants its money back. how it ran -- went wrong. >> meredith whitney started this hedge fund. there are few. all -- few people who are bigger stars than her. she started a brand-new hedge fund in what i wrote about today is how things went wrong. they went rare iran. the source of most of her funds asked for his money back. she said no. they are suing. that leaves her without her biggest investor. >> can you tell us at this point if you made a mistake question mark -- mistake? >> it was not an easier for any hedge fund manager. >> her call does not seem wrong. >> let's talk about that. she wrote a book where she talked about the center of the country and the heartland really limiting. the coast, new york and california, struggling. she copies of -- people in the -- and businesses would move to the center of the state. >> this was her investment thesis. >> her equities. a long-term fund. bloomberg did an analysis headquartered in the heartland. it was not a bad idea. it was not a standout year but on the other hand, if you're running a hedge fund, you have to pick stocks and do it well. she struggled with that. we have examples. a texas electronics retailer where you can go buy a plasma tv on credit. she lost millions of dollars. we reported more than 2 million. in total, she only had about 250. fishes like that hurt. >> there is a big difference. i hesitate to call her an academic. there is a big difference between having academic ideas and putting them into practice. >> in her defense, it is hard to start a hedge fund with only $50 million and one investor in that time horizon in a difficult year. >> of course it is hard. most people would not do it as a result. you are exposing yourself to all kinds of risks. if you do not staff up with $50 million, you cannot keep the lights on. >> let's start with that. a really good point. what i try to answer in my story today is, how does such a small -- a smart person and big wall street star have such a tough time? -- >> unfortunately, we have to leave but luckily, you can read it on bloomberg.com. ♪ >> you're looking at a video of haiti's president at a ceremony today, marking the fifth anniversary of the earthquake that devastated the poor island nation. the government told me the country is moving forward and is ready for foreign investors to enter the country just a few days after i left. a political crisis led to the resignation of haiti's prime minister who helped lead the revitalization efforts. he joins us now over the phone. prime minister, today is obviously an emotional day for you. where you are five years ago and where you are today. when you and i spoke a month ago, you believe haiti was open for business. we talked about the heineken paris -- a brewery. is there hope for haiti? >> there is. good morning. i believe there is always hope for haiti, considering the context of where we were five years ago. we were under the rubble. it was armageddon. it was almost like the end of the world. today, when you look at the country and all the efforts that have been made, when you look at the economic progress of the country, weekend, we are a long way. if we came along way like we did five years ago to today, i believe we will overcome this greatest clinical crisis and put the country back only if the traditional politicians put the country's interests before their own interests. >> why'd you truly think haiti has come such a long way? i agree the rubble is gone, but all of it has for the most part been spent. what will turn it around? i just do not see manufacturers saying this is a good time to come to haiti, especially now that you, the man leading the business, is out of office. >> of course, it is a challenging moment. when you look at, for example the situation in which the country was five years ago, and you look at, for example, the situation in which we are today, we have an economy growing roads being built and assistance program security,, all of the indicators are green. -- are agreeing. we have a huge challenge, the put the situation. i remain hopeful that the political classical find the solution, along with the president, to put their countries forward. >> had conversations stopped? you devoted a huge amount of your time to cortical -- foreign investors who could potentially start manufacturing in haiti. what happened to the conversations? have they just stopped? >> we have a team of people. the discussions will remain. it was never about me a single person at the head of government. it was always about the interests of haiti, the interest of the country, of 10 million people. i will definitely remain available and hopeful that those discussions will come. what we need is not handouts. the ngo, money has dried up. what we need is foreign direct investment, local investment, investment to create jobs. we have seen, for example we have seen 4200 jobs created there. we have seen other jobs created throughout the country. there is hope for haiti. we, for too long, have seen that haiti was going backwards. there is a slight glimpse of hope and light for haiti today. however, it will take the help of all, the national community to stay the court and investors to remain confident. -- he has some very encouraging and inspiring words for all the investors. he said for the next few months, things will be more difficult. however, stay focused on the objective. stay the course and do not give up your that is the message we are carrying forward. >> what is going to inspire investors to put money into the country if they know $9 billion more or less has been spent since the earthquake, and there is not much to show for it other than bringing haiti back to the state it was in before the quake question mark -- the quake? i have heard the stories and seen other images from the country. it is certainly better off than it was during the quake, the question is whether it was better off than it was before after $9 billion. >> i believe there is no question. the changes occurred from the click today are undeniable. we have more kilometers of road today than we did before. we have more, in terms of foreign direct investment, that improved and today grew 6000%. undeniable there. we have the security situation a better police force. more police officers train them we did before. it is up 20%. even poverty numbers have been reduced. efforts are there. what we need, of course, we will go through, of course, a political situation, like i said. it will be challenging for the next 60 days or the next two months. but of course, when you look at the development of a country and the potential that haiti has to offer those opportunities will remain for the foreseeable years to come. we will get through the rough patch of the crashes we have today. we have to look at the medium run and all the country has suffered, we got back on our feet as quickly as everybody said we would. of course, we need to stay that course for the benefit of the weakest in society. some of always been by her side and want to see the country go forward. it is the duty of all to put our political differences aside and work together. >> i keep hearing you say the word "we." if i were you, i would be sitting and having a trick in miami saying, that is not my problem anymore, but clearly, you still sound great -- committed. does that mean you will be running for president? >> well, i am a haitian. i am a regular citizen and i love my country. i put everything on the line for 31 months as prime minister and foreign minister. i feel all i've had for the country, as a haitian, i do not need to be prime minister to love my country and want to see the country go forward. i consider that yes, it is we those who love haiti and want to see the country get better. this is how i approach it. >> clearly, haiti is in a better place today than it was exactly five years ago. thank you so much for joining us. do not miss the premiere tonight . haiti, open for business. that will be 9:00 p.m. eastern right here on bloomberg television. when we return, 80's unlikely benefactor. we will hear from the fashion icon. ♪ >> five years after the 17.0 magnitude earthquake devastated haiti, the country is still struggling but that the piece is. more than two thirds of the workforce are unemployed or underemployed. they live in less than two dollars a day. despite these challenges, donna karan sees a very different haiti. i caught up with the fashion icon to find out why. ♪ >> donna karan, the new york fashion designer credited with revolutionizing women's land 80's may be an unlikely spokesperson for the 80 -- but she has been since just after the devastating 2000 earthquake. >> i needed to get involved in showing haiti and away that is special. i worked with haitian designers, developed designs with them, and i showed them to the public, get ting them interested in it. >> this is made in haiti. >> by women and men? >> i am not discarding the men. giving a man a goal is just as important as women. >> karen has worked with 200 haitian craftsmen and women who made everything from brought island -- book brought iron chandeliers to next this. >> these are made from buses. >> these are? i thought they were shelves. >> and 2011, karen began working with paula. coles being -- traded handbags using scraps from factories at that capital. karen's urban zen cells bags and other artists works in shops around the world including this one in new york. the bags made from t-shirts retail for about $200. >> it will not mark down in stores. we know in the retail world, you can be in one season and out the next. that is not what will happen to haiti. if you do that we are over. >> how hard is it for you to get these great amazing products out of that island and onto our shores? >> not hard at all. that is not been a problem. scaling up the mass would be. >> doing business in haiti has its challenges. much of the workforce lacks education and electricity is not reliable and it is expensive. that is not discourage karen. >> the bombs in the road? we hit them. we are not giving up on haiti. >> not giving up on haiti. donna karan is interesting. she goes down, she runs the project, and does actual business. pretty cool. do not miss tonight. haiti open for business. 9:00 p.m. eastern. who wants to watch football when you can watch this right on bloomberg television. >> coming up, a real cash cow. we will take you to move, clock mu -- moo cluck, moo. >> would you believe a burger joint just outside of detroit is paying its workers $15 an hour? it is almost double the minimum wage in michigan. is offering nutritious, cheap food, while also paying workers a living wage, certainly in that state. olivia sterns visited to find out how the bismarck -- business model works. >> flipping burgers and frying fries. in most places, this is a job that pays little more than minimum wage. here at moo, cluck, moo, just outside of detroit michigan pays $15 an hour, or almost $31,000 per year. that is on par with starting salaries of policemen or firefighters in detroit. >> why are you paying your employees $50 an hour question mark in the short answer is we feel it is the right thing to do. >> he started moo, cluck, moo in 2014, in hopes to make nutritious food kids would actually want to eat. the all-natural patty to a portobello mushroom burger, it is gluten-free. plus cheap here you can get a moo murder -- how do they do it? cost we are tight with our labor and wiki cost down by limited turn over. getting our people to train other people. >> parker is finding skilled labor knocking down his door. this is their first employee. >> we're doing more than what other people in the industry are doing. it is an all-day process. everything is made from scratch. we do a lot for the money. we earn it. >> he ever feel there is not enough of you in the kitchen? >> no, we really have superstars. >> it also comes with a cost. many vendors are not willing. >> you are willing to take a smaller margin for the company. >> absolutely. our team is worth it. we have very low turnover. that is very important. when you grow those people will be the people relying to help us grow. if we support more, we pay more. >> happy to take a smaller slice of the pie, and even planning to give equity to early employees. he does not fit -- he does not face pressure from shareholders to pay less. as a franchise expands, will the business model the as sustainable? >> it is so cold and gross. >> was -- look who is here, olivia sterns. >> when i think of big mac mama i think of olivia sterns. >> i am a vegetarian. it is so interesting. 4 million americans work in the fast food industry. protests last year demanding a minimum wage. there has been a legitimate argument going on in academe about what it is and a lot of people say the never consequences is that food prices will go up that it will reduce the number of jobs. this story shows it does not have to mean food prices are going up, but it might prove you have less jobs. the thing you have to take away is that this kitchen is so thinly staffed, they have got about four people doing what mcdonald's has eight or nine people doing. they are paying twice as much but keep in mind mcdonald's has deskilled the jobs here they are paying people to use their brain. all you have to do it mcdonald's is flip a burger, shake a milkshake. >> i would draw a parallel to bloomberg media versus our competition. all brands. very cool. we will be back with more. stay with us on market makers. ♪ >> president obama is scheduled to speak in just a few minutes and washington, d.c.. he is at the federal trade commission to talk about ways companies can work with the government on cyber security. we will be taking you there live. for now "market will sign off. tomorrow, i will be sharing my exclusive with this year, how to empower women, and how to become a reality tv star. i have a feeling she will say, i am just a star but we will see. bloomberg tv has taken you on the markets. i will send you out to the newsroom where scarlet fu has more. >> a new plunge in oil prices pressuring stocks where bonds and the u.s. dollar gained. trigger -- triple digits, the doubt industrials opened with 150 five points, steadily paring its decline. as you can see, it has now cut that to a loss of 94 points. joining me for today's options insight is the derivatives strategist at mk him 00 mkm strategist. we have cut that in half. >> i would say moderately encouraging. in our view, moderate volatility around us. levitating your the 20 level over in europe, the euro stocks volatility index, their equivalent of vix has gotten through its december levels and is zeroing in on october. if you look across other asset classes, clearly crude continued to get beaten up. volatility sharply higher relative to recent history. the ruble, blowing out. a lot of volatility around us. today, a little bounce after the week opened, it might be moderately encouraging, but in the near term, -- >> which asset classes in which security are you looking at as the lead indicator here? >> it is really everything together. there are a number of flashpoint. we are looking at the heart events head, namely the ecb on january 22, the greek presidential vote on the 25th. unlike the last couple of years where the market has faded the events, and correctly so. every time the s&p 500 pullback come it basically made a v-shaped recovery. we think the environment has changed. lifted last october up above 30. it was confirmed by the magnitude of that volatility event. more recently, cross asset volatility, it really has to be considered and especially against what we see as being a fair amount of complacency out there. >> complacency out there. if you look at the vix right now, 19.5 two after averaging 14.17 last year. still below the historical average. you did not even mention the generate 28th meeting, which seems like an almost a no-brainer now after the greek elections in ecb meeting. what about earnings? how much of a factor will that be given all the volatility of the focus on crude oil? >> i'm not so sure it will do so much to impact earnings season. like i said, you get banks coming this week. jpmorgan, city, etc. the focus will be there. something we are talking to clients about is putting on hedges. we are looking at internet stocks, netflix, pandora, yelp, and twitter. as much as we think these are secular winters, the volatility we have talked about in the market makes us want to protect long stock provisions into earnings. >> netflix. >> very sadly, they report next week. -- very simply, they report next week. we want to turn around and buy spreads at 320 quickly, you put that on for just about 3.5% of the underlying, it sounds a a lot, but what we're trying to do here is manage significant downside risk. this is a clock -- a stock that declined 20% after reporting earnings. >> in a support on january 20 just over one week from now. when it comes to netflix though, do you have a longer-term call? >> it is very bullish. almost a high, very instructive over the longer-term. but this quarter will be about subscriber growth. they missed in the third quarter. that will be the focus. >> all right, jim. thank you so much. we are on the markets again in 30 minutes. ♪ . >> welcome to "money clip" for monday, january 12 to the best stories, news, and video in business news. i am pimm fox it we are waiting for president obama who is about to speak in washington d.c. he will speak about cyber security and how companies can better work with the government to combat cyber threats. here is the rundown -- in motors, detroit hosts the annual association on everything on four wheels. a new nissan is ready to drive. around the world
financial storm and one that comes around perhaps one every 50 or 100 years. this is the real thing. >> and much of what went wrong on wall street could be traced back to something called "credit default swaps." they were traded in a risky shadow market, and they were at the heart of the financial meltdown. [ticking] >> it has tentacles as wide as anything i've seen. i think, next to housing, this is the single most important issue in the united states and certainly the largest threat to the u.s. economy. >> meredith whitney was talking back in 2010 about a then- looming financial crisis involving state and local governments across the country. it was a debt crisis which some people believe could derail the recovery and require another big bailout package that no one in washington wants to talk about. >> the day of reckoning has arrived. that's it. and it's gonna arrive everywhere. time may vary a little bit depending upon which state you're in, but it's coming. [ticking] >> welcome to 60 minutes on cnbc. i'm steve kroft. in this edition, we look at three stories linked by the financial collapse of 2008. first, we examine a scam that's cost thousands of americans their homes. then we look into wall street's shadow market of credit default swaps. finally, a report on the perilous state of state finances. we begin with the foreclosure crisis. in the aftermath of the great recession, the huge number of foreclosed properties was a significant factor in weighing down the economy. many were stuck on the market for an unexpected reason: the banks couldn't find the ownership documents. as scott pelley first reported in april 2011, lenders wanting to evict people found that often, the legal documents behind the mortgages simply weren't there. caught in a jam of their own making, some companies appeared to have resorted to forgery to throw people down on their luck out of their homes. >> these folks on the street aren't homeless. they slept on the sidewalk because they want to keep their homes. facing foreclosure, they camped out to get in line to beg their bank for lower payments on their mortgage. so many in the country are desperate now that they have to meet in convention centers coast to coast. >> we understand people have been here for a day or two. >> two. >> two. >> for two days. >> two and a half. >> this was los angeles, where 37,000 homeowners gathered. and this was miami, where the worry was visible and shared by 12,000 more. the line went down the block and doubled back twice. dale defreitas lost her job. now she fears her home is next. >> it's very emotional, because i just think about, "i don't want to lose my home." i really don't. >> it's your american dream. >> it was. and it still is. [chuckles] >> welcome to naca, "save the dream." welcome, everybody. >> these convention center events are put on by the nonprofit neighborhood assistance corporation of america, which helps people figure out what they can afford and then walks them across the hall to bank representatives to ask for lower payments. more than half will get their mortgages adjusted, but the rest discover that they just can't keep their home. and for many, that's when the real surprise comes in. turns out, these banks, which demand borrowers have all of their paperwork just right, these same banks have fouled up their own paperwork to a historic degree. >> in my mind, this is an absolute intentional fraud. >> lynn szymoniak is fighting foreclosure, and while trying to save her house, she discovered something we did not know. back when wall street was using algorithms and computers to engineer those disastrous mortgage-backed securities, it appears they didn't want old-fashioned paperwork slowing down the profits. this was back when it was a white-hot fever pitch to move as many of these as possible. >> when you could make a whole lot of money through securitization and every other aspect of it could be done electronically, you know, keystrokes, this was the only piece where somebody was supposed to actually go get documents, transfer the documents from one entity to the other. and it looks very much like they just eliminated that step altogether. >> szymoniak's mortgage had been bundled with thousands of others into one of those wall street securities traded from investor to investor. when the bank took szymoniak to court, it first said that it had lost her documents, including the critical assignment of mortgage, which transfers ownership. but then there was a courthouse surprise. they found all of your paperwork more than a year after they initially said that they had lost it? >> yes. >> did that seem suspicious to you? >> yes, absolutely. you know, and what do you imagine, it fell behind the file cabinet? where was all of this? we had it. we own it. we lost it. and then, more recently, everyone is coming in saying, "hey, we found it. isn't that wonderful?" >> but what the bank may not have known is, lynn szymoniak is a lawyer and fraud investigator with a specialty in forged documents. she has trained fbi agents. did you ask for copies of those documents? >> yes. >> and what did you find? >> when i looked at the assignment of mortgage, and this is the assignment, a copy from my case, i looked at even the date they put in, which was 10/17/2008, was several months after they sued me for foreclosure. so what they were saying to the court was, "we sued her in july of 2008, and we acquired this mortgage in october of 2008." it made absolutely no sense. >> curious, she used her legal training to go online and researched 10,000 mortgages. >> then i began to find the strange signatures. >> one of the strangest signatures belonged to the bank vice president who'd signed szymoniak's newly discovered mortgage documents. the name is linda green, but on thousands of other mortgages, the style of green's signature changed a lot, and even more remarkable, szymoniak found that linda green was vice president of 20 banks all at the same time. >> all within the same week. i mean, this is a very, very active person. >> where did all those documents come from? we went searching for the linda green, and we found her in rural georgia. she told us she's never been a bank vice president. in 2003, she was a shipping clerk for auto parts when her grandson told her about a job at a company called docx, d-o-c-x. docx, once housed here in alpharetta, georgia, was a sweatshop for forged mortgage documents. >> they were sitting in a room signing their name as fast as they possibly could to any kind of nonsense document that was put in front of them. [ticking] >> coming up, more linda greens. >> so you're linda green? >> yes. can't you tell? [laughs] >> it's easy being green, when 60 minutes on cnbc returns. uh, and i know my iq. okay. uh, and i know-uh-i know what blood type i have. oh, wow! uh huh, yeah. i don't know my credit score. you don't know your credit score? --i don't know my credit score. that's really important. i mean -- i don't know my credit score. don't you want to buy a house...like, ever? you should probably check out credit karma, it's free. credit? karma? free?...so, that's... how much? that's how much it's free. credit karma really free credit scores. no credit card needed. [ radio chatter ] ♪ [ male announcer ] andrew. rita. sandy. ♪ meet chris jackie joe. minor damage, or major disaster, when you need us most, we're there. state farm. we're a force of nature, too. ♪ [ticking] >> in the aftermath of the 2008 housing collapse, the number of properties going into foreclosure soared across america. but in a shocking number of cases, many of the mortgage documents needed for the banks to foreclose on delinquent homeowners were missing. as scott pelley reported in april of 2011, this led some companies to set up forgery mills to re-create the missing paperwork. >> docx and companies like it were re-creating missing mortgage assignments for the banks and providing the legally required signatures of bank vice presidents and notaries. linda green says she was named a bank vice president by docx because her name was short and easy to spell. as demand exploded, docx needed more linda greens. so you're linda green? >> yes. can't you tell? [laughs] >> chris pendley worked at docx at the same time and signed as linda green. when you came in to docx on your first day, what did they tell you your job was gonna be? >> that i was gonna be signing documents using someone else's name. >> did you think there was something strange about that in the beginning? >> yeah, it seemed a little strange, but they told us and they repeatedly told us that everything was aboveboard and it was legal. >> and your previous experience in banking? >> none. >> in legal documents? >> none. >> there really were no requirements for the job. >> correct. >> you had to be able to hold a pen. >> hold a pen. >> but you were signing these documents as if you were an officer of the bank. >> correct. >> how many banks were you vice president of in a given day? >> i would guess somewhere around five to six. >> what were you getting paid for this? >> [chuckles] i'm embarrassed to say. $10 an hour. >> $10 an hour, that's not much for a guy who's vice president of five banks. >> yeah, i was very underpaid for my status in the companies. >> pendley showed us how he signed mortgage documents as linda green. he told us that docx employees had to sign at least 350 an hour. pendley estimates that he alone did 4,000 a day. >> [laughs] >> this is also linda green. shawanna crite worked at docx and says that she both signed and notarized the mortgage documents. what was the role of the notary? >> we were to make sure that everyone on the document was who they said they were and notarize the documents. >> but the people who were signing the documents weren't who they said they were. >> right. >> so if chris pendley was signing for linda green, you'd notarize that document? >> yes. >> and you were told that was okay? >> yes. >> the real linda green didn't want to be interviewed, but she said that some of the bank vice presidents at docx were high school kids. their signatures were entered into evidence in untold thousands of foreclose suits that sent families packing. >> so it was a common practice in the last few years to flood the courts with these documents. >> and look at some of the junk the courts were flooded with. sometimes, the document mill didn't even bother to fill in the name of the supposed owners. to them, it seemed like a joke. >> instead of the name of the bank here that was acquiring the loan, this one says, "bogus assignee for intervening assignments." that's who acquired this loan. >> this was an actual document that was in litigation? >> yes. and what corporation assigned this loan? a corporate identified as "a bad bene." excuse me? when i saw that, i was just absolutely amazed. >> what does that mean, a bad bene? >> it could possibly mean "a bad beneficiary." i have no idea what they meant. so here's the same woman, linda green, and this time, instead of being a vice president of american home mortgage servicing, she's vice president of a bad bene. >> szymoniak says that the banks whose paperwork was handled by the docx forgery mill included wells fargo, hsbc, deutsche bank, citibank, u.s. bank, and bank of america. we contacted all of them, and each said that it farmed out its mortgage servicing work to other companies, and it was those mortgage servicing firms that hired docx. docx was owned by a company called lps, a $2 billion firm that calls itself the nation's leading provider of mortgage processing services. lps told us that when it found out about the phony signatures in 2009, it shut docx down. >> it's astonishing to me that this became as pervasive as a problem that it is. >> it got sloppy. >> it got very sloppy. >> until july 2011, sheila bair was one of the government's top banking regulators as chairman of the federal deposit insurance corporation. you just described it as pervasive. >> yeah. it is pervasive. it absolutely is pervasive. and it was just a matter of cutting corners, not spending enough money, not have any quality controls. >> although banks say the courts have been accepting their paperwork, that's changing as desperate homeowners countersue the banks over the document fiasco. this leaves houses unsold indefinitely, undermining the recovery. >> i'm very worried about, if this starts getting out of hand, the kind of impact it will have. >> these are lawsuits by homeowners... >> yes. >> who are being foreclosed upon saying-- >> or are in the process or have already been foreclosed on. >> saying, "prove it." >> yes, exactly. >> "prove that you own this." >> exactly. >> chairman bair thinks rotten mortgage documents are so threatening to the economy that the government should force banks to pay into a massive fund. but you think there needs to be a cleanup fund... >> i do. a cleanup fund's a good word for it. >> just like you would have for a natural disaster. >> yes, somewhat like that. yes, this is one of human making, but yes. [chuckles] >> you don't want to give an exact dollar amount for this cleanup fund, but what are we talking about? is it billions? >> it would be. yes, i would assume it would be billions, yes. >> billions of dollars. >> yes, absolutely. >> chairman bair's proposed cleanup fund would pay homeowners to accept a bank's ownership claim without a lawsuit. she says that this could be cheaper for the banks than trying to re-create the missing documents legitimately and not through the document mills. >> i think eventually, the bank could prove who owned it, but it would take a lot of time and expense. >> you know, none of the major banks were willing to sit down with us and talk to us about this, not even the american bankers association. >> oh, i'm sorry to hear that. >> why do you think that is? >> they're feeling very defensive now, and so, like, i can only assume that that is the reason why they declined. >> the banks are defensive because all 50 state attorneys general want to punish them. the states are seeking about $20 billion in damages for what they say is the irresponsible, perhaps criminal way that some mortgage companies handled what is, for most folks, the most important investment of their lives. >> in march 2012, the us government, 49 state attorneys general, and the nation's five largest mortgage lenders announced a $25 billion agreement over alleged foreclosure abuses and asked a federal judge to approve the plan. as part of that settlement, lynn szymoniak, who filed a whistle-blower lawsuit on behalf of the federal government, will receive $18 million. [ticking] coming up, the complex financial instrument that helped down the u.s. economy. >> the idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right? however, it seemed to fly with people who were making $10 million a year. >> wall street's shadow market when 60 minutes on cnbc returns. the holiday season is here, which means it's time for the volkswagen sign-then-drive event. for practically just your signature, you could drive home for the holidays in a german-engineered volkswagen. like the sporty, advanced new jetta... and the 2015 motor trend car of the year all-new golf. if you're wishing for a new volkswagen this season... just about all you need is a finely tuned... pen. hurry into the sign-then- drive event and get a five-hundred- dollar black friday bonus on select new volkswagen models. black friday bonus offer ends december 1st. mhere's our new trainer! ensure active heart health. heart: i'm going to focus on the heart. i minimize my sodium and fat... gotta keep it lean and mean. pear: uh-oh. heart: i maximize good stuff like my potassium... and phytosterols, which may help lower cholesterol. major: i'm feeling energized already. avo: new delicious ensure active heart health supports your heart and body, so you stay active and strong. ensure. take life in. [ticking] >> in october 2008, with the financial system on the verge of collapse, president george w. bush signed into law a rescue package in which american taxpayers bought up wall street's bad investments. the numbers were staggering, but they didn't begin to explain the greed and the incompetence that created the mess. as we first reported that same week, it all began with a terrible bet, one that was magnified by reckless borrowing, complex securities, and a vast unregulated shadow market worth nearly $60 trillion that had hid the risks until it was too late to do anything about them. it started out as a mortgage crisis. then it slowly evolved into a credit crisis. now it's something entirely different and much more serious. what kind of a crisis is it today? >> this is a full-blown financial storm and one that comes around perhaps one every 50 or 100 years. this is the real thing. >> jim grant is the editor of grant's interest rate observer and one of the country's foremost experts on credit markets. he says it didn't have to happen... [bell ringing] that this disaster was created entirely by wall street itself during a time of relative prosperity. and they did it by placing a $1 trillion bet with mostly borrowed money that the riskiest mortgages in the country could be turned into gold-plated investments. if you look at how this started, with the subprime crisis, it doesn't seem to be a good bet to put your money behind the idea that people with the lowest income and the poorest credit ratings are gonna be able to pay off their mortgages. >> the idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right? however, it seemed to fly with people who were making $10 million a year. >> with clients clamoring for safe investments with above- average return, the big wall street investment houses bought up millions of the least dependable mortgages, chopped them up into tiny bits and pieces, and repackaged them as exotic investment securities that hardly anyone could understand. this is actually the security. >> this is the selling document for the security. >> we looked at one of them with frank partnoy, a former derivatives broker and corporate securities attorney who now teaches law at the university of san diego. >> it's hundreds and hundreds of pages of very small print with a lot of detail here. >> think anybody ever read this stuff? >> i doubt very many people read it. >> these complex financial instruments were actually designed by mathematicians and physicists who used algorithms and computer models to reconstitute the unreliable loans in ways that were supposed to eliminate most of the risk. >> obviously, they turned out to be wrong. >> why? >> because you can't model human behavior with math. >> how much of this catastrophe had to do with the instruments that wall street created and chose to buy and sell? >> the instruments themselves are at the heart of this mess. they are complex, in effect, mortgage science projects devised by these nobel-track physicists who came to work on wall street for the very purpose of creating complex instruments with all manner of detailed protocols on who gets paid when and how much. and the complexity of these structures is at the very center of the crisis of credit today. >> people don't know what they're made up of, how they're gonna behave. >> right. >> but it didn't stop the rating agencies like standard & poor's and moody's from certifying the dodgy securities' investment grade, and it didn't stop wall street from making billions selling them to banks, pension funds, and other institutional investors all over the world. but that was just the beginning of the crisis. what most people outside of wall street and washington don't know is that a lot of the people who bought these risky mortgage securities also went out and bought even more arcane investments that wall street was peddling called credit default swaps, and they've turned out to be a much bigger problem. they are private and largely undisclosed contracts that mortgage investors entered into to protect themselves in case their investments went bad, part of a huge unregulated market that's multiplied the losses. they've already helped bring down three of the biggest firms on wall street and threatened the ones that are left. but before your eyes glaze over, michael greenberger, a law professor at the university of maryland and a former director of trading and markets for the commodities futures trading commission, says they're much simpler than they sound. what is a credit default swap? >> a credit default swap is a contract between two people, one of whom is giving insurance to the other that he will be paid in the event that a financial institution or a financial instrument fails. >> so it's an insurance contract? >> it is an insurance contract, but they've been very careful not to call it that, because if it were insurance, it would be regulated. so they use a magic substitute word called a "swap," which, by virtue of federal law, is deregulated. >> so anybody who was nervous about buying these mortgage-backed securities, these cdos, they would be sold a credit default swap as sort of an insurance policy? >> a credit default swap was available to them, marketed to them as a risk-saving device for buying a risky financial instrument. >> but there was a problem. >> oh, there was a big problem. >> what was the problem? >> well, the problem was that if it were insurance or called what it really is, the person who sold the policy would have to have capital reserves to be able to pay in the case the insurance was called upon or triggered. but because it was a "swap" and not insurance, there was no requirement that adequate capital reserves be put to the side. >> now, who was selling these credit default swaps? >> bear stearns was selling them. lehman brothers was selling them. aig was selling them. you know, the names we hear that are in trouble--citigroup was selling them. >> these investment banks were not only selling the securities that turned out to be terrible investments; they were selling insurance on them? >> well, it made it easier to sell the terrible investments if you could convince the buyer that not only were they gonna get the investment but insurance. [ticking] >> coming up, defending credit default swaps. >> these people understand the nature of these products. they understand-- >> well, obviously, they didn't, or they wouldn't have bought them. they wouldn't have used them. that's ahead when 60 minutes on cnbc returns. ♪ ah, push it. ♪ ♪ push it. ♪ p...push it real good! ♪ ♪ ow! ♪ oooh baby baby...baby baby. if you're salt-n-pepa, you tell people to push it. ♪ push it real good. it's what you do. ♪ ah. push it. if you want to save fifteen percent or more on car insurance, you switch to geico. it's what you do. ♪ ah. push it. i'm pushing. i'm pushing it real good! oral-b toothbrushes aree engineered al, with end rounded bristles so brushing doesn't scratch gums and angled perfectly, to remove 90% of plaque for a healthier smile. trust the brand more dentists and hygienists use. oral-b. [ticking] >> credit default swaps are private unregulated contracts that mortgage investors entered into to insure themselves against losses in the event their investments went bad. but as we reported in october 2008, when homeowners began defaulting on their mortgages, wall street's high-risk mortgage-backed securities also began to fail, and the big investment houses and insurance companies who sold the credit default swaps hadn't set aside enough money to insure all of those losses. bear stearns was the first to go under, selling itself to j.p. morgan for pennies on the dollar. then lehman brothers declared bankruptcy. and when aig, the nation's largest insurer, couldn't cover its bad debts, the government stepped in with an $85 billion rescue. what role did the credit default swaps play in this financial disaster? >> they were the centerpiece, really. that's why the banks lost all the money. they lost all the money based on those side bets based on mortgages. >> and the market's totally unregulated. >> and this market is almost entirely unregulated. >> the result is a huge shadow market that may control our financial destiny, and yet the details of these private insurance contracts are hidden from the public, from stockholders, and from federal regulators. no one knows what they cover, who owns them, or whether or not they have the money to pay them off. one of the few sources of information is the international swaps and derivatives association, a trade organization made up of the largest financial institutions in the world. many of them are the very same companies that created the vast shadow market, lobbied to keep it unregulated, and are now drowning there because of unanticipated risks. the ceo, robert pickel, says there's nothing wrong with credit default swaps. the problem was the underlying mortgage securities. well, there's clearly something wrong wrong with the system if all of these leveraged bets, hidden leveraged bets, caused a collapse in the financial system. >> it is something that we all need to look at and learn lessons from, and we all need to work together to understand that and design a structure in the future that works more effectively. >> my point is, the people that made these mistakes are the people you represent in your organization, and many of them sit on the board. >> mm-hmm. >> i mean, if they didn't get it right, who would? >> these people understand the nature of these products. they understand-- >> well, obviously, they didn't, or they wouldn't have bought them. they wouldn't have used them. >> these are very useful transactions, and people do understand the nature of the risk that they're entering into. but i'm not sure that-- >> if they're so useful, how come they brought down the financial system? >> because perhaps they didn't understand the underlying risk in-- nobody really saw the effects that were going to flow through from the subprime lending situation. >> we wouldn't be in any of this trouble right now if we had just had underlying investments in mortgages. we wouldn't be in any trouble right now. >> it's all the side bets. >> it's the side bets. >> you've got all these big wall street firms, bear stearns, lehman brothers. you got insurance companies like aig. merrill lost a ton of money on this. everybody's lost a ton of money. they're supposed to be the smartest investors in the world, and they did it themselves. >> they did it all on their own. that's the most incredible thing about this crisis, is that they pushed the button themselves. they blew themselves up. >> now, how much of this was just incompetence on the part of wall street, the people who ran it? >> the truth is that on wall street, a lot of people just weren't very good at their jobs. it's as simple as that. >> these people were being paid $50 million to $100 million a year, some of them, the guys that were running the places. >> there is no defending-- a trainee making $45,000 a year would have had the common sense not to bet the firm on mortgage contraptions that no one in the firm actually understood. that is not a deep point to comprehend. somehow, through, i will call it a criminal neglect and incompetence, the people at the top of these firms chose to look away, to take more risk, to enrich themselves, and to put the shareholders and, indeed, the country itself, ultimately, the country's economy at risk, and it is truly not only a shame; it's a crime. >> since our report first aired, congress has passed the dodd-frank act. that legislation passed in 2010 aimed to overhaul many of the wall street practices that caused the financial collapse. as part of the dodd-frank bill, the s.e.c. and the commodities futures trading commission imposed new regulations on companies that deal extensively in derivative products. as a result of that action, credit default swaps now clear through exchanges or clearing houses, but they're still exempt from insurance regulatory oversight. [ticking] coming up, the harsh reality of state finances. the state's a deadbeat. >> yeah, i mean, the state of illinois is known as a deadbeat state. you know, this is a reputation that has taken us years to earn, and we've reached, you know, the heights of, i think, becoming the worst in the country. >> it's the day of reckoning when 60 minutes on cnbc returns. people with type 2 diabetes come from all walks of life. if you have high blood sugar, ask your doctor about farxiga. it's a different kind of medicine that works by removing some sugar from your body. along with diet and exercise, farxiga helps lower blood sugar in adults with type 2 diabetes. with one pill a day, farxiga helps lower your a1c. and, although it's not a weight-loss or ood-pressure drug, farxiga may help you lose weight and may even lower blood pressure when used with certain diabetes medicines. do not take if allergic to farxiga or its ingredients. symptoms of a serious allergic reaction include rash, swelling or difficulty breathing or swallowing. if you have any of these symptoms, stop taking farxiga and seek medical help right away. do not take farxiga if you have severe kidney problems, are on dialysis, or have bladder cancer. tell your doctor right away if you have blood or red color in your urine or pain while you urinate. farxiga can cause serious side effects, including dehydration, genital yeast infections in women and men, low blood sugar,kidney problems, and increased bad cholesterol. common side effects include urinary tract infections, changes in urination, and runny nose. ♪do the walk of life ♪yeah, you do the walk of life need to lower your blood sugar? ask your doctor about farxiga and visit our website to learn how you may be able to get every month free. [ticking] >> in the wake of the 2008 financial crisis, the size of the federal budget deficit has received a lot of attention. but state and local governments are also dealing with massive deficits. each state has a slightly different story, but across the country, there is a common theme. in many state houses, expenditures are outpacing income, and public pension obligations are drastically underfunded. as we reported in december 2010, some believe a day of reckoning is at hand for many states that could require another big bailout package. >> the most alarming thing about the state issue is the level of complacency. >> meredith whitney is one of the most respected financial analysts on wall street. she made her reputation by warning that the big banks were in big trouble long before the 2008 collapse. now she's warning about a financial meltdown in state and local governments. >> it has tentacles as wide as anything i've seen. i think, next to housing, this is the single most important issue in the united states and certainly the largest threat to the u.s. economy. >> why aren't people paying attention? >> 'cause they don't pay attention until they have to. >> whitney says it's time to start. california has a credit rating approaching junk status. it spends more money on public employee pensions than it does on the state university system. arizona is so desperate, it sold off the state capitol, supreme court building, and legislative chambers to a group of investors and now leases the buildings from their new owner. then there's new jersey. it had the highest taxes in the country, a $10 billion deficit, and a depressed economy when first-year governor chris christie took office. but after looking at the books, he decided to walk away from a long-planned and much-needed project with new york and the federal government to build a rail tunnel into manhattan. it would have helped the economy and given employment to 6,000 construction workers. lots of jobs. >> yeah. i canceled it. i mean, listen, the bottom line is, i don't have the money. and you know what? i can't pay people for those jobs if i don't have the money to pay them. where am i getting the money? i don't have it. i literally don't have it. >> this is going on all over the country. >> yes. of course it is. it's not like you can avoid it forever, 'cause it's here now, and we all know it's here, and the federal government doesn't have the money to paper over it anymore either for the states. the day of reckoning has arrived. that's it. and it's gonna arrive everywhere. time may vary a little bit depending upon which state you're in, but it's coming. >> and nowhere has the reckoning been as bad as it is in illinois, the state that spends twice as much as it collects in taxes and is unable to pay its bills. >> this is the state of affairs in illinois. it's not pretty. >> dan hynes is the comptroller of the state of illinois, its paymaster. he currently has about $5 billion in outstanding bills in his office and not enough money in the state's coffers to pay them. he says they're six months behind. how many people do you have clamoring for money? >> it's fair to say that there are, you know, tens of thousands if not hundreds of thousands of people waiting to be paid by the state. >> so how are these people getting by if they're not getting paid by the state? >> well, that's the tragedy. people borrow money. they borrow in order to, you know, get by until the state pays them. >> they're subsidizing the state. they're giving the state a float. >> exactly. >> and who do you owe that money to? >> pretty much anybody who has any interaction with state government, we owe money to. >> that would include everyone from the university of illinois, which is owed $400 million, to small businessmen like mayur shah, who owns a pharmacy in chicago and has been waiting months for $200,000 in medicaid payments. then there are the 2,000 not-for-profit organizations that are owed $1 billion by the state. lutheran services has been around since 1867 and provides critical services to 70,000 people, mostly the elderly, the disabled, and the mentally ill. the state owed them $9 million, and they nearly had to close up shop. how long can you go on like this? >> well, we wonder that too, because we really don't know. >> reverend denver bitner is the president of lutheran services. he says they were forced to tap their entire line of credit and all their cash reserves before the state would finally pay them as a hardship case. >> it has to be that you've sold off all of your assets, you have borrowed from everybody you can borrow from, and then we'll think about it. >> even though they owe you the money. >> even though they owe us the money. >> the first words out of my mouth are usually an apology, because they have been, you know, put in this situation that, you know, really is unacceptable, and, you know, there's very little i can do or say other than apologize. >> it's not just the social safety net that comptroller dan hynes has to worry about. there have been illinois legislators evicted from their offices because the state didn't pay their rent and stories about state troopers being turned away from gas stations because the owners refuse to take their state credit cards. the state's a deadbeat. >> yeah, i mean, the state of illinois is known as a deadbeat state. you know, this is a reputation that has taken us years to earn, and we've reached, you know, the heights of, i think, becoming the worst in the country. [ticking] >> coming up, state finances hit the third rail of politics. this is different, isn't it? >> it is very different. and the reason it's different is because the only choices left are choices that people previously have said were politically impossible. >> governor christie pulls no punches when 60 minutes on cnbc returns. by 1914 the dodge brothers and set out on their own.pany they believed in more, than the assembly line. they believed driving was a holy endeavor. the dodge brothers spirit lives on. a hundred years later you think it smells fine, but your passengers smell this... eliminate odors you've gone noseblind to for up to 30 days with the febreze car vent clip. female passenger: wow. smells good in here. vo: so you and your passengers can breathe happy. i'm all about "free" travel, babe. that's what i do. 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[ticking] >> not all of the problems that illinois and other states are facing can be traced to the great recession, but the precipitous drop in tax revenues did expose decades of financial irresponsibility, reckless spending, unrealistic benefit packages for public employees, and the use of political gimmicks to cover up hidden deficits. it's forcing state governors and the public to confront some harsh realities. this is different, isn't it? >> it is very different. and the reason it's different is because the only choices left are choices that people previously have said were politically impossible, that you couldn't do. you couldn't cut k-12 education funding. you couldn't do those things. you couldn't talk about pension and benefit reform for the public sector unions, that these were third rails of politics. we are now left with no alternatives. >> just the third rail. >> yeah, that's it. i'm just gonna grab it and go and let the chips fall where they may. this money's got to come from someplace. >> in some ways, governor chris christie is the political canary in the coal mine of the state fiscal crisis. he slashed new jersey's budget by 26%, including $1 billion in cuts to education, forcing the layoffs of thousands of teachers. he got rid of 1,300 state workers and drastically reduced funding to new jersey's cities, counties, and villages, which have their own financial problems. long-term, the situation is much, much worse. okay, let's talk about the pension obligations. >> sure. >> $46 billion unfunded liability for pensions, $66 billion unfunded for health care liability? >> yes, sir. >> that's a lot of money. >> yeah. >> that's a lot of money even for the federal government. >> that's a lot of money. >> and there are people who think it's worse. >> yeah, i think that's an optimistic view. listen, at this point, if it's worse, what's the difference? i mean, it's bad enough as it is, so what's the difference? i mean, now we're talking about money that none of us can really get our arms around. >> i mean, this is unsustainable, right? >> totally unsustainable. we have a benefit problem. it's not an income problem from the state. it's a benefit problem, and so we got to change those benefits. >> and what's the reaction been to that? >> [laughs] well, depends on where you sit. i mean, i think the general public thinks, "i can't believe anybody gets a pension anymore. i've got a 401(k). it got killed in the stock market. i don't know what i'm gonna do for my retirement. i can't believe people get a pension anymore." so i think amongst the broad general public, they've said, "amen." and i think, among the public sector unions, they're yelling and screaming. >> and christie is yelling back. he provoked a very public fight with the teachers union, which is one of the most powerful political forces in the state of new jersey. >> and you're not compensating me for my education, and you're not compensating me for my experience. that's all. >> well, you know what? then you don't have to do it. >> it's a scene that is starting to play out all over the country. >> cuts, cuts, cuts, and more cuts. >> governors of cash-strapped states are beginning to cajole or bully public employee unions into making concessions on what are considered to be gold-plated retirement and health care packages, which are now collectively underfunded to the tune of $1 trillion. some union leaders have suggested that you're running the state like tony soprano. >> [laughs] well, as an italian american, i take great offense to that. listen, you know what it is? i'm the first person to expose them for what they've been doing to the public. >> you want the public employee unions to share the pain? >> you bet. i want them to share in the sacrifice. and this is what i say to public sector unions. listen, you can boo me now, but i'm the first governor who's walked into this room in ten years and told you the truth, and here's the truth. if you don't partner with me to get this done, in ten years, you won't have a pension. and that's the truth. >> but it's also the truth that some of the responsibility for new jersey's pension woes lie at the doorstep of the governor's mansion. christie and his predecessors have failed to contribute the state's share of its pension obligations in 13 of the last 17 years, one of the reasons the fund is going broke. christie says it's ancient history. >> we spent too much on everything. we spent too much. we spent money we didn't have. we borrowed money just crazily. the credit card's maxed out, and it's over. it's over. we now have to get to the business of climbing out of the hole. we've been digging it for a decade or more. we got to climb now, and climbing's harder. we got to do it. >> the problem with that, according to wall street analyst meredith whitney, is that no one really knows how deep the holes are. she and her staff spent two years and thousands of man-hours trying to analyze the financial condition of the 15 largest states. she wanted to find out if they would be able to pay back the money they've borrowed and what kind of a risk they pose to the $3 trillion municipal bond market where state and local governments go to finance their schools, highways, and other projects. how accurate is the financial information that's public on the states and municipalities? >> the lack of transparency with the state disclosure is the worst i have ever seen. ultimately, we have to use what's publicly available data, and a lot of it is as old as june 2008. so that's before the financial crisis hit in the fall of 2008. >> whitney believes the states will find a way to honor their debts, but she's afraid that some local governments, which depend on their state for 1/3 of their revenues, will get squeezed as the states are forced to tighten their belts. she's convinced that some cities and counties will be unable to meet their obligations to municipal bondholders who finance their debt. the state of pennsylvania had to rescue the city of harrisburg, its capitol, from defaulting on hundreds of millions of dollars in debt for an incinerator project. >> there's not a doubt in my mind that you will see a spate of municipal bond defaults. >> how many is a spate? >> you could see 50 sizable defaults, 50 to 100 sizeable defaults--more. this will amount to hundreds of billions of dollars worth of defaults. >> municipal bonds have long been considered to be among the safest investments, bought by small investors saving for retirement and held in huge numbers by big banks. even a few defaults could affect the entire market. right now, the big bond rating agencies like standard & poor's and moody's, who got everything wrong in the housing collapse, say there's no cause for concern, but meredith whitney doesn't believe it. >> when individual investors look to people that are supposed to know better, they're patted on the head and told, "it's not something you need to worry about," when it'll be something to worry about within the next 12 months. >> 12 months. >> 12 months. >> since our report first aired, dan hynes has left the illinois comptroller's office. in new jersey, governor chris christie saw moody's downgrade his state's bond rating in 2011. and meredith whitney's dire prediction of widespread municipal defaults has not come to pass. she's been widely criticized for making that prediction, but she remains unrepentant, saying in an interview in march of 2012 that, "if people want to tell me i'm wrong, well, stay tuned." well, that's our edition of 60 minutes on cnbc. i'm steve kroft. thanks for joining us. [ticking] [ticking] >> in a year's time, oil, a commodity that was traditionally priced according to supply and demand, doubled to nearly $150 a barrel, and then crashed along with the stock market. so what happened? well, it turns out the price of oil may have as much to do with traders and speculators on wall street as oil company executives or sheikhs in saudi arabia. >> i tease people sometimes that--you know, people say, "well, who's the largest oil company in america?" and they'll always say, "well, exxon mobil or chevron or b.p." but i'll say, "no, morgan stanley." [ticking] >> this is shaybah, a desert wilderness where temperatures can reach de
stocks, 25 of the 30 are positive so far today and we're keeping an eye on energy again, as well. >> exactly. down here, one of the indexes that will often list up here on the boards is energy index. look at that one off 122 points. again, just reiterating the pressure seen, renewed on crude oil today and down another 3% settling around 55 bucks and change. natural gas by the way. it's had a 10% move lower in 2 sessions. >> i was going to say. see how nimble they are in the booth? we know they are but let's see if they can show us natural gas because it is down sharply and for good reasons if you like warm weather. >> yes. correct. >> the so-called i-95 corridor on the east coast expected warmer than expected temperatures over next ten days or so and that's taken the wind out of the sails, plus that inventory report of last week. >> right. flip side, not so good stuff with the energy complex is a move on the rating side you heard on the european oil majors and again some talk of whether we are seeing a bottom or not on these prices amid renewed if you will indications of the middle east, saudi arabia, they're not cutting back production any time soon. >> all right. let's talk about it for this monday as we get thinged started on. david kudlow. beth ann bovino. joe durant. quincy crosby. and rick santelli is in chicago, as well. beth ann, we have had the debate of the decline in oil and net-net is a positive or a negative for the u.s. economy. you're siding on the positive side. why? >> absolutely. well, first of all, i want to put it in perspective. the u.s. economy has been doing rather well and without this oil boom, it's actually a positive. but one of the reasons why we see this as a positive, think about if now gallon of gas is dropped about a dollar since june or july, that means that for every person who the average person spends about or buys about 500 gallons of gas a year, that means 500 extra bucks in the pocketbook and they need that for this -- as they go into the holiday season for some of those presents. that's a win-win. other nonenergy businesses will boom from basically cheaper costs in terms of transportation and electricity. so a positive. >> you know, rick, i don't mean to spring this on you but i was reading earlier today on a write-up and a point to be made of coming to the federal reserve and what it should do, if we had some kind of, say, gdp target that took all of this into account with maximizing growth, for example, instead of a target that was pulling together unemployment and inflation and these things, don't you think that would be a simpler message that everybody could follow and understand here? >> i wish i could say yes but i think gdp is a bad metric in that regard. i don't think there is an easy metric, i could mold statistics than than clay and make them say anything you want. you know? the president pointed to how great the metrics are and most of the things he quoted are correct but what we can't tell is exactly, you know, which jobs created, how many were part time. we get close. industries that don't pay as well may created the most jobs. we have heard a couple of pieces on that, actually, today. so there isn't one easy metric. i think the easiest metric of all is a metric we don't like to hear an answer. americans asked how they feel about the economy, many americans still think we near a recession and i think that speaks volumes. i do think the monthly jobs number, if you just take it at face value, they have improved and i think it is about jobs, jobs, jobs. >> all right. >> i think that the downside is as we need to create more jobs that pay a little bit better but then again those that don't have skills, there's really no place to hide and we need to grow the economy from an education standpoint, as well. >> with those, you know, i guess you would say with that kind of skepticism about the growth of the economy and, you know, rick's quite right. there are plenty of people out there still not convinced that this economy is on firm -- terra firma right now. the stock market is knocken on all-time doors right now. you're convinced we have room to go. why? >> take the gdp numbers averaging around 4% growth. and with the fourth quarter coming in, we think we'll still be around 4% growth for the three quarters but on main street, there are many people, i'm here in michigan. many people don't feel that, they don't feel like we have ever really come out of a recession because the growth despite a couple of quarters has been more anemic. >> how do you reconcile that difference, that gap that exists between wall street and main street? this is in the the first time. how do you reconcile those two, the vastly different outlooks of both? >> i think because the growth has been except for more recently more anemic and until that follows to the broader public and they feel that and jobs numbers continue to come through, housing continues to improve which we saw a little bit of setback today, general public just -- the anemic growth fe feels like a recession. that's why the market continues to do well. >> i'd add one thing to that. what you are seeing as balance sheet improvement for five years so people with wealth feel better about the economy than people who live paycheck to paycheck. you have a big appreciation of home prices. >> sure. >> and the stock market and those that have savings in the 401(k) have done very well and you haven't seen is if you are paycheck to paycheck, you have not participated because there's not been income recovery. >> right. that's why, joe, the interesting question of 2015 starting to see this out there, i think bank of america-merrill lynch saying 2015 the year to buy main street and wall street and thinking about that with meredith whitney over the weekend and made bets on the sort of middle american public if you will that don't appear to be working out. where do you think here the trade lies? is it time with the drop of oil prices and bet ore main street if you will for 2015? >> i think for 2015, make three bets. one, there will be more volatility. second, interest rates will be going up. they've told us that. you want larger company that is have the ability to withstand higher interest rates and third you want to know that you're participating in a global middle market that is are happening everywhere. so i really like still the mega caps because they participate in all three in dollar denominated terms. and they have flexibility. if we see higher volatility you want to be in larger names and so i think you're going to see again the russell which is not done very well this year continue to underperform and i think we might see a multi-year period where you are way better off being in larger companies, well-known brands that the middle class consumer wants to own. middle class consumers like to buy brands and aspirational, large brands are very, very interesting. >> i would add -- >> i would be very careful about the global growth story, though. we have strong growth here in the u.s., europe is hurting. japan we think abe-nomics is flawed and a technical recession now. we have the slowdown in china so these big mega cap companies as much as they're exporting, we have a stronger dollar, i would look the other way and look towards small caps to be in 2015. >> okay. we have a trade here now. all right. joe's got some small caps to sell you. quincy, if rates are to begin rising and they have started at this point, not in a concerted way but a rise since last week's fed meeting, is that good or bad for stocks down the road? >> i think that the first actual rate hike and maybe second may give the markets some difficulties or let me put it this way. the anticipation of it i think will give the market difficult it is you but as long as we have growth underneath it, at some point the market will absorb it and move on the way they did after the termination of qe. getting rid of considerable time and now patient. patient will go away and you're going to get the beginning of the rates but the point is, that as long as there is growth underpinning it, i think the market could do very well. we did with 4% in the interest rates and i remember 5% interest rates as long as there is growth. >> yeah. >> i was going to ask whether you would bet on the traditional rising rate names and the insurance space, for example. look at the two-year or the 10-year moving higher and the longer end isn't moving and do you think it's moving? does that mean we shouldn't just assume that those longer dated plays work next year? >> you know, the fact of the matter is if we could get europe out of the picture for a little bit and have a little bit of calm in the markets, we'll get a steep in the yield curve and good for financials and see some of the big big banks begin to sweeten their dividends and some actually introduce dividends. so, they're attractively priced and with the new congress coming in, we may have easing of the pressure of regulators. >> all right. last word to beth ann. you have been very patient economist there. as our conversation steered toward this wall street versus main street, does the lagging main street make wall street the stock market more vulnerable going into 2015? >> what i was going to comment on with joe mentioned was that what haven't seen throughout most of this recovery is wages. paychecks have been pretty much flat, real wages pretty much flat throughout this recovery. i think 2015 to start to see a net gain. we are expecting to see with basically the quit rate now at a six-year high, the short-term unemployment rate now 7-year low, those are indicators that suggest to start to see wage gains pick up next year and expecting. main main win it is day. >> we'll leave it on that hopeful note. thank you, everybody, this afternoon. >> see you later. all right. 49 minutes left. is this the high of the day? >> yes, it is. >> i think it is. up 122. moving back to the high of the day. it has been the perform of the majors. s&p and nasdaq also higher but not by as much. >> spitting distance of the 18,000 level. stocks may be surging but oil and natural gas prices keep plunging. how low can prices go? is it bad for the markets and the economy? that's next. retail index is outperforming the broader markets over the last month or so but history suggests you may want to sell the retail stocks before grossing out the year. that's still to come on closing bell. stay tuned. ♪ i love my meta health bars. because when nutritious tastes this delicious, i don't miss the other stuff. new meta health bars help promote heart health. experience the meta effect with our new multi-health wellness line. ♪ tdd# 1-800-345-2550 even on the go. tdd# 1-800-345-2550 open a schwab account, and you could earn tdd# 1-800-345-2550 300 commission-free online trades. tdd# 1-800-345-2550 so when a market move affects one of your positions, tdd# 1-800-345-2550 schwab can help you decide what to do. tdd# 1-800-345-2550 with tools like free live-streaming cnbc tv tdd# 1-800-345-2550 that give you the latest financial news and trends. tdd# 1-800-345-2550 and bubble charts and price charts that let you see exactly tdd# 1-800-345-2550 how market activity is affecting your positions. tdd# 1-800-345-2550 so when the time comes to decide whether to scale in tdd# 1-800-345-2550 or scale out you can make your move, tdd# 1-800-345-2550 wherever you are. tdd# 1-800-345-2550 and start working on your next big idea. tdd# 1-800-345-2550 ♪ open a schwab account and you could earn tdd# 1-800-345-2550 300 commission-free online trades. tdd# 1-800-345-2550 tdd# 1-800-345-2550 call 1-877-729-2379. tdd# 1-800-345-2550 or visit schwab.com/trading. tdd# 1-800-345-2550 schwab trading services. tdd# 1-800-345-2550 your go-to for trading know-how. tdd# 1-800-345-2550 ♪ tdd# 1-800-345-2550 your go-to for trading know-how. female announcer: during sleep train's hugeom foyear end clearance sale,s! get beautyrest, posturepedic, even tempur-pedic mattress sets at low clearance prices. save even more on floor samples, demonstrators, and closeout inventory. plus, free same-day delivery, set-up, and removal of your old set. why wait for the new models? sleep train's year end clearance sale is on now! ...guaranteed! ♪ your ticket to a better night's sleep ♪ welcome back. rally day again after last week's fed meeting. the dow up 117 right now. just off the highs of the session. the s&p up 5.25 and nasdaq up. energy sharply lower. nat gas is killed. >> this sea of green is as energy commodities are crushed again. >> jackie deangelis breaking down the big losses and including for natural gas, as well, as the nymex. >> good afternoon to you guys. we did see selling pressure in oil at the close. we did see wti down $1.83 closing at $55.26 but i would say that we have seen a lot steeper selling pressure than this. the fact we're over 55 on wti and over 60 on brent right now means that the market is still kind of treading water and feel things out at this point. of course, more comments out of saudi arabia saying this it's not going to cut production a. lot of people saying saudi's trying to sell the market, not scare it, reassuring and don't see a need to panic. still, gas prices on the other hand still declining, guys. $2.39 according to aaa. down 85 cents from last year. consumers saving $420 million a day on gas since the highs. nat gas crushed here. 9% on the day. $3.14. when it came below $4 and $3.50, no one was expecting this but talking about $3 nat gas if mother nature doesn't send wild weather our way. put this altogether in context for consumers, it's really good news throughout with the holiday shopping, paying less to fuel the automobiles. paying less to heat their homes and they like that, guys. back to you. >> they do, jackie. especially the one next to me. thank you so much. just what impact will such low energy prices have on our economy, sfwhil. >> we have expert halima kroft. i can remember a few years ago we were saying what in the world -- why is oil going as high as it is and staying there? this premium built in. now going the other direction asking the same question. why is it going as low as it is right now? >> i think the comments over the weekend of the saudi oil minister said we won't do anything to help it recover and prices to $20 a barrel and not going to step in so the saudis, other gulf states, not providing reassurance to remove barrels. so that's why we're treading water at this point. >> they're not the agitator, are they? they're on the back foot, aren't they? aren't we in a situation of much of the supply coming on in the u.s. is supply that's productive, at least for now, profitable, anyway, that's putting a lot of these traditional producers in a tough spot. ironically, the more it declines the more they have to keep pumping in order to maintain their coffers, don't they? >> this is what's fascinating. the staudis said we may have to borrow and playing for the medium term. if we can keep prices down, we can price out the most expensive, non-opec marginal barrel and might be scorched earth. see how much you can take out and live to fight the next day. >> for how long? venezuela can't afford this at all. russia, outside opec can't afford this at this point. and now here in the united states. the shale oil producers. >> right. even, frankly, with saudi arabia it is a bit of a gamble and some people in the media, private sector essentially saying, come on. you know? how long are we going to keep this strategy up? can you give us a sense of duration? it's a pain threshold and venezuela's the first one to watch. debt payment in march. the saudis can hold out. >> what about the russians, especially as congress or is it congress or the president just approved new sanctions? >> haven't been signed but it's amazing, new congressional sanctions essentially penalize any foreign company willing to invest in arctic, shale, deepwater. potentially slows further the growth of russian production over the medium term and the pain is worse for putin in terms of sanctions and low oil price. >> that's why it goes back to saudi arabia. even if they -- what would they have to say to put a floor under oil here? >> yeah. >> i understand the numbers and how big, what would be their bazooka, the equivalent, what would they have to say or do for oil to find a bottom here? >> some of the physical market is tightening and libya production is m coing off and seeing russian decline rate is high this year but will the saudis come out with russia and say, okay, collectively, 2 million is coming off the market. it would have to be a pretty big cut to comfort the market. >> is this a time or a price to cry uncle at? >> i think it is more time. the question is venezuela could hit an immediate wall with the debt payment and they're powerless. what can they do? not much. it's question of duration for the gulf states. >> how about the shale producers and who are already feeling some pain because of the debt levels and so forth? >> absolutely. i think the saudis are watching that. how many rigs are coming off? >> i think watching closely how much non-opec supply to get shut in? >> following the rig count closely? >> absolutely. i think basically watching to see, just also arctic, brazil. watching the whole non-opec complex. >> we're now seeing the increased amount of headlines about wall street firms getting out of the commodities business. >> that didn't take listening. >> players emerging to indicate just how involved they were. in other words, other people involved in commodities during the if you will run-up, the bubble almost, now getting out. does that reiterate that it's going to be order for prices to rebound from here? >> i still remain an optimist. i look at 2016 and say, wait a second. rig counts taken down and we still have a lot of fragile producers and demand should pick up and it could be setting the stage for 2016 for a rebound in prices. >> 2016? >> maybe the back half of 2015 but 2016 i expect prices to recover. >> she lied. this is the last question. how low could we go? >> that's the big question. could you touch 50? i think we could. when you have that 40 number thrown out there -- >> what was that? 33 and change at the low? >> that's right. there's no floor for opec right now. >> will i pay $1 something for gasoline again? they are in oklahoma and texas. i'm hearing from them. i'm waiting for the northeast here. that would be something. good to see you. >> thank you, thank you. >> she's chief commodities strategist at rbc markets. >> you mr. $1, in connecticut, $3.99 to fill up. >> still? >> yes, still. >> wow. >> hard out there. >> blame your energy taxes. >> no, absolutely. i know. about 40 minutes to go here into the close. we're keeping an eye despite everything, exxon is barely down today. the dow having a strong session, up 123. >> we'll send you home with a gallon of gas just to -- >> i'm going to start an interstate gasoline arbitrage. i think it's called driving. >> the rush is on for a last-minute holiday shopping. when we come back, we're going to hear from somebody who says that investors should not be caught up in all the hype about retail. why he says stay away from retail stocks as we go into the new year. that's still ahead here. also, what does bruce willis have to do the bank russia bailed off with the plunging ruble? this unbelievable story is later. stay tuned. you total your brand new car. nobody's hurt,but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? now if you had a liberty mutual new car replacement, you'd get your whole car back. i guess they don't want you driving around on three wheels. smart. new car replacement is just one of the features that come standard with a base liberty mutual policy. and for drivers with accident forgivness,rates won't go up due to your first accident. learn more by calling switch to liberty mutual and you can save up to $423. for a free quote today,call liberty mutual insurance at see car insurance in a whole new light. liberty mutual insurance. welcome back. here's what's happening out there. dow up 135. we're only 20 points off the record high and exxon fractionally lower. tough day for oil as people think it can avord some of the outcomes of the smaller, weaker, heavily indebted rivals. >> black friday gets the fair share of attention for officially kicking off the holiday shopping season and may be super saturday. did you know it was super saturday last week? that may matter more. >> i didn't know. the last weekend before christmas is the race to the finish line for shoppers and retailers. let's check in with kate rogers. >> this weekend on super saturday shoppers were getting it done the old-school way. they were going to stores rather than shopping online as the clock ticks awe at the final opportunities to complete the shopping list. analysts saw increased foot traffic as consumers feeling the sting of last year's delivery debac debacle. saturday was the number one sales day of the year for retailers raking in as much as $10 billion in sales alone. now, today and tomorrow, they're also expected to be heavy shopping days which are ranked number four and number ten in terms of sales for the year f. that forecast is right, it's the first time in a decade that super saturday outpaces black friday's estimated $9.1 billion in sales. analysts say black friday is less of a one-day sale and thanksgiving bringing in $3.2 billion and if you're wondering who's shopping in the last few days to fill the stockings, we are hearing that it's the men who are the procrastinators. they're apparently just getting started on the list, making this the time for cosmetics, perfume and those will be the most popular in the days leading up to christmas. back to you. >> i was just about to say i'm done and then mentioned stocking stuffers. whoops. forgot those. >> we know where you're going after the show. >> thank you, kate. >> cnbc.com senior editor says investors shouldn't buy into the hype. >> i mean, you're saying maybe it's too late to get into the stocks. >> like we just heard, so there's so much late shopping, individual days don't matter as much as they used to. the earlier staseason starts ea. it ends later. they buy 60% of the goods and that $800 on average and not enough to make a difference. xrt, it's one of the worst possible trades you can make from now until the end of the year. truly one of the worst. you want to stay away from it. >> doesn't participate in the santa claus rally? >> no. it's better off earlier. at this point it's too late. >> it would have to be new information this time of year, in other words, an unusually large amount of dollars spent unusually late in the season. priced in, right? >> yeah. hearing billions and billions of dollars, it's priced in. look at gold miners, banks, especially regional banks and even real estate. these are almost guaranteed to make you money. >> gold miners? >> yeah. gold miners. that etf by far the best one. >> santa claus rally? >> from now until the end of the year. >> do you know why? >> i think because if you look at overall effect of that january effect, and then people start looking into the calendar in december and start getting ready for it. >> to put new money to work. >> yeah. gold is one of the thing that is's not a real stock. they don't trade like gold per se. >> every year you hear from the people saying this is the year that gold breaks out and every year lately the hopes are dashed. >> people move away from retailer and go into gold. retail is worst and gold is the best trade starting right now. >> focusing on energy right now. how does it play snout. >> energy is actually one of the best trades to make. energy is really good. >> a bounce here? >> yeah. that's a bounce of metals, mining, stay away retailer and utility. >> you're talking about averages? >> averages and the frequency of positive trades. so these good trades are up 75% of the year is going back and 3 to 1 you make money on them. >> i don't know. i still feel like the reason why these segments make me uncomfortable i feel like so much changes, like, for example, you have an oil price collapse, how relevant 3 out of 4 times it would have rallied? >> you just retail's always a bad choice. >> all right. good to see you. if you want to read more, cnbc.com. breaking news on comcast and time warner. julia boorstin has that for us. >> that's right. fcc delaying the merger again. this time, it's because of some document production issues. meaning they have not produced the proper documents for the fcc in a timely manner. comcast with statement saying they will be making additional production today, tomorrow and confident any outstanding documents will be produced in an expedited manner. this allows staff to review the new materials and remain on track for the transaction review concluded in early 2015. we are pleased that the fcc did not delay the deadline so that work on the transaction will continue and we'll be filing the final comments tomorrow and should not delay the total approval but the delay within the process. back over to you. >> the wheels of government slowly turning. >> may explain why this wasn't more reaction in the share prices for now. thank you. heading toward the close here. i haven't seen art cashin walking around here. buy or sell pressure to the close and it's buy pressure so far. we were up 137 a moment ago. >> i was trying to talk about $3 a gallon for a fill-up. it was $2.99. not $3.99. then the joke would be on me if anybody fills up at that price. >> $2.99 sounds about right. >> existing home sales sclumping to a 6-month low in november. why is housing cooling off as stocks have been heating up? that's next. and forget about china, india, brazil. coming up, we'll tell you why africa may be the hottest and biggest growth investment and a great opportunity to play old toto song, as well. you won't believe how companies trying to get in the door early in africa. stay tuned. boy, the rally continues. the dow up another ten points in the last few minutes and now a gain of 142 points and, boy, we are a sand wedge away from 18,000 on the industrial average. >> 11 points shy of the prior closing high from december 5 wthd the super strong jobs number and closing 17,958 and change and now 17,946. >> good gains there. >> today existing home sales taking a little bit of a dive. down 6.1% to just under 5 million. could be another case of bad news is good news, though, because this report unlikely to push the fed toward an early hike in interest ratd interest make s the market happy. >> we have to guests. fred, i mean, you -- i was just looking at the notes here. you say 2015 could be one of the greatest years of real i state if and only if oil prices stay low. low interest rates haven't done it all these years and takes low oil prices to make better real estate. >> nope. as i have been saying for years, bill, it is all about jobs and confidence. so now what you have is a situation where we're going to keep these low interest rate farce long time. price of oil has come down. people have a few more bucks in their pocket they're starting to spend, happy about spending it. so now they get a little more confident. now a few more people get employed. this is all going to turn around to a happiness and i call it the axis of housing happiness in that you have jobs, you have low oil prices and you have low interest rates so people are now happy to sit around and let me stay here. this is great. i love it here. happiness. it's all it is. >> sherry, when's your outlook for housing in 2015? >> 2015 is going to be a great year for housing, kelly. part of the reason is slow start in '14. ending not so great and what happened in between is pushing us in the right direction. we're going to see the same thing in 2015 and end up in 2016 with 5.5 million in home sales versus 5 million this year. a biggy is the fact of folks struggling with foreclose yurls and negative equity to get past that this year and the first year that the nation recovered and it's going to be driven by a bunch of people on that happy axis. we'll have first-time buyer who is i think exceed their 40% historic average in terms of participation. boomers with the sheer numbers a big impact on housing, especially in the regions to retire to and of course we will have the boomerang buyers who sat out the mandatory waiting period and get back into housing. housing's going to be -- really nice things in 2015. >> everybody loves the real estate market for 2015 and here comes the federal reserve. fred, they're going to raise interest rates. maybe as early as april if we believe the tea leaves that janet yellen was spreading out last wednesday. that takes away one of your triangle there. >> no. no way. and even if they do for a second, people ignore it. >> they won't raise rates? >> no. >> bill, people need a place to live. >> yeah. >> alternative is to rent and rents are going up faster than interest rates. >> exactly. >> rates are not a big obstacle. >> it is easier for first-time buyers to get in. 100% gifts allowed on 5% down conventional loans. i don't ever remember that in the history of fannie mae. that's going to open up so many more people to get in and get mortgages now. >> fred, how did you feel about housing in 2006? >> hah! 2006 was the -- >> do you remember? >> yeah. i remember. i always said that the people -- i asked people, what was your house worth in 2005? i said that's basically what it's worth after the 2008 crash. 2006 was the beginning. it was the beginning of the end. it was just like, here's all these stupid loans and like -- ugh. doesn't make any sense. >> we're not going to see a repeat of that, kelly -- >> no that's done. >> the real issue is they haven't figured out the new market. we have new products. we have the safe hay boar qm loans, rebuttal presumption qm loans and non-qm loans and the origination costs are still high. the products are limited, the products to offer and the costs to charge customers are limited and they haven't come close to pricing the risk and we don't have to worry about another subprime bubble until investors and originators make as much money as they did in 2004 and 2005. that's years off. >> sure, nobody's not going to take a mortgage because they don't make money. there are -- mortgage banking side it's a might their with the cfpb but it will be better. >> we may see rates impacting builders but this is the year of the homebuilder. >> thank you both. >> happy holidays. >> i sense we're both skeptical. a pleasant surprise if housing picks up as they suggest in 2015. meanwhile, the dow -- >> now you leave me hanging out there. >> 17,950. no. i'm just thinking it through. a lot of themes in there. we should take a look at the builders, in fact, at that etf and note that the s&p 500 is trading at 2078 about right now and should be a record high. >> why is the music louder? they want us to stop? will the momentum deliver a year-ended santa claus rally for investors? we'll talk about that coming up. how can sony prevent itself from another cyber-attack streaming "the interview" online? will you watch it if it's released that way? your chance to weigh in coming up. if every u.s. household with a computer used sleep mode when they weren't using it, how much could we save on electricity each year? up to $1 billion? $3 billion? $4.5 billion? the answer is... up to $4.5 billion. using your computer's built-in energy-saving features can generate real household savings. take the energy quiz -- round 2. energy lives here. ♪ there's confidence... then there's trusting your vehicle maintenance to ford service confidence. our expertise, technology, and high quality parts means your peace of mind. it's no wonder last year we sold over three million tires. and during the big tire event, get up to $140 in mail-in rebates on four select tires. ♪ welcome back. dow within points of closing here at an all-time high. dominic chu with the big movers. dom? >> handful of points. see if they help. defense sector, lockheed martin, raytheon and northrop grumman, surging. facebook hitting an all-time high today in part of mobile advertising growth and up more than 200% since going public back in may of 2013. different story for gilead sciences. x scripts dropped their drug for a cheaper version to be on the plans. they moved higher on the ground. and natural gas stocks took a hit as prices plum meted. ultra petroleum, chesapeake energy, range resources to the downside and the very volatile energy trade still continues into the year end, guys. back over to you. >> thanks. >> with our bob pisani, when's the mood? >> energy. again. what happens when you have high dividends and real livety high capital expend yours, credit issues. s&p came out, waiting for them to say something about the oil names, european oil names. all talking about, listen, debts, high, dividends, high, oil main asset dropping, you could have credit problems a s essentially what they were talking about. isn't this the time to buy energy? in theory. the problem is the earnings expectations are still very high. anadarko nearly 30 times 2013 earnings. exxon 19 times 2015 earnings. these are not cheap right now. they're still going to have to come down more here. dominic mentioning chesapeake. some of the shale plays are starting to look very cheap. probably 13 times forward earnings. a lot of names i could put up a bunch of them, now, guys, you are starting to interest me. back the you. >> all right. bob, thank you for now. that's bob pisani on the flor. >> the dow up 113 points right now. the rally continues from last week. ever since the fed meeting. >> yes. like a spring. we have jonathan and david murray, there they are. >> can you tell them apart? >> by the way, on that you are outlo outlook, a bull/bear twin showdown when we come right back. thank you for being my hero and my dad. military families are uniquely thankful for many things, the legacy of usaa auto insurance could be one of them. if you're a current or former military member or their family, get an auto insurance quote and see why 92% of our members plan to stay for life. all right. ten minutes to go. we were up 155. record territory. art said we have about $450 million to sell into the close but that's not a big number but might be just enough to take the edge off this rally we have been seeing here. >> hey, you are not seeing double here. we have a couple of guys that look alike with different views on the market. joining us now are jonathan murray and david murray. welcome to you both. >> who's the bull and the bear. >> i'm da bull. perennial bull. >> were you bullish before? >> i was bullish 200% ago before it went up and 49, new highs this year. just -- i think it is time -- >> david, you have turned cautious now. why? >> prudent. saz i said, the market's up 200% since its low. that's a heck of a run. valuations aren't screaming by -- >> not bad. >> they're not bad. they're in check. 16 times earnings. something like that. where will you put your money? bond? commodities? >> good time to take chips off the table. be smart. don't be greedy. >> where will you put them? >> not having a whole lot of cash isn't a terrible thing at all. 15%, 20% cash, depends on you as an investor. >> earning a whopping 0.01%. >> where are you putting your money? >> dividend-paying companies. international markets. >> i do like that. the emerging markets are looking really attractive. >> even with the dollar strengthening the way it is? >> we are contrarians. i love to take a broader look at stuff out of favor for two or three years and to carefully deploy capital that way. it's kind of basic and what our parents taught us of averaging in, don't be greeding. >> your parents did? >> our dad did. >> and you listened? >> more mom than dad. >> is there a prudent side to your portfolio? are you edging in any way here? >> yeah. i think one of the thing investors don't do is add alternatives enough. >> like? >> i think whether you're looking at credit or looking at long/short, commodities. maybe oil. i think on this weakness, look at adding alternatives. >> talk to your advisers of what does well when interest rates go up. the treasury from 6 to 2. >> right. >> since, you know, last five or -- >> stocks. >> falling interest rates. what does well when interest rates go up? they will. >> what is your answer to that? >> stocks! >> non-core lated assets. and stock that is have good dividend downside. >> innovation in the country is awesome. cancer therapeutic or water technology, just awesome. and to be an investor, that's what you're investing in. own blue chip -- >> look at high-yield bonds and bond funds. haven't fared terribly when interest rates go up. >> all i know is people told us how to position every year for interest rates going up. i hope you have to figure that out. >> they've been wrong for three years. >> do you do this around the table? >> no. we get together in pittsburgh with dad and very boring. >> they love it. price earnings ratios. >> we have your mom on the line. >> no. >> c-span had a similar. i don't know if you saw this. they had a similar lineup not long ago on the political realm. they had a conservative and a liberal and the mom called in. >> they were twins? wow. >> i did see that. mom calling in a minute. we'll be back with the guys here in a moment with the closing countdown. >> after the bell, consumers are loving impact of oil prices on the trips to the gas stations. that's coming up. you're watching cnbc, first in business worldwide. take a closer look at your fidelity green line and you'll see just how much it has to offer, especially if you're thinking of moving an old 401(k) to a fidelity ira. it gives you a wide range of investment options... and the free help you need to make sure your investments fit your goals -- and what you're really investing for. tap into the full power of your fidelity green line. call today and we'll make it easy to move that old 401(k) to a fidelity rollover ira. oh and could you turn on air conditioning i'm starting to sweat. i'll just do it myself. useless. that's nice. set's the mood. have your entire house within reach, even when your devices aren't. introducing relay by wink it's like a robot butler, but not as awkward. open port twenty-two-oh-one-seven on the firewall for customer db access. install version two-point-three of db connector and ensure verbose flag is set in case of problems. (clapping sound) isn't the cloud supposed to make business easier? get the one that can connect to the systems that you already have. today there's a new way to work. and it's made with ibm. three minutes left in the trading day. this is what the dow did today. a bit of a rally on the open this morning and moved higher into the close. we are just off the highs here with a gain of 147 points. we are very close to an all-time high and see if we can do that. what went lower? oil again. do you know that price of gasoline in this country national average gone down 88 consecutive days. that's a record, by the way. let me show you oil price. wti crude, $55 a barrel. has been the price today. any moment now wti crude. or maybe not. and natural gas also got hit big time today with a decline of 9% on this expectation that the weather is warmer than had been earlier forecast and one one other thing to tell you about, facebook hit an all-time today. the market cap for facebook $270 billion. >> isn't this amazing? >> unbelievable. david and jonathan murray. switched places. didn't think i would notice. >> testing you. >> nothing is lost on you. >> would you buy a facebook at these levels here? >> it is a great example of how you don't know what the next facebook is going to be or google will be. the best way to own those kinds of companies in my opinion is through a mutual fund where you have a person at the helm to pick them. >> yeah. these guys are industry analysts, experts. they know ahead of time what the big institutions are thinking and doing. too much of a dice roll for most people. >> best investment idea for 2015 from the murray brothers? >> have a plan. have a plan. we don't plan enough and now's a perfect time, bill, at the end of the year, get together with your loved ones. put a plan in writing. whether it's saving more money, spending less, who are you going to leave your money to. >> i didn't expect something so practical. i thought maybe you would say tesla or -- >> that's the sexy things. >> too micro. >> but in reality, a perfect -- >> what's the average 401(k) balance today? >> like $27. >> there's a crisis facing this country and that is that americans are woefully underprepared for their retirement and started with a plan. >> you're 20% cash. so something's got to be in the market here. >> i like jonathan. i think that big multi-cap companies with strong dividend yields and those to benefit of a strong dollar. you know, non-u.s. manufacturing, for example. but again, mutual fund expert that is know the companies. >> while we talk, the market going higher. >> of course. >> what do you know? . great to see the murray brothers. >> markets go down but they never stay down. >> words of wisdom. happy holidays. thank you for being with us today. a gain of 155. i think just about there. we'll talk about that coming up now on the second hour of "the closing bell" with kelly evans and company. see you tomorrow, kelly. thank you, bill. welcome to "the closing bell," everybody. i'm kelly evans. it appears we're going out on record highs. adding 157 points, i believe at 17,962, if we stayed right here, that's good enough for a record high and same goes for s&p 500 at 2078. up 8. the nasdaq up and laggard on the day only up about a third of 1%. let's talk about it with michael black, with sharon epperson and john nejarian and guy adami. welcome, everybody. michael, first one here, record highs, still an affect of janet yellen? been a straight vertical line up since the fed zwigs last week. >> yeah. i don't give janet yellen credit for it. i'm still getting over the fed statement. there's hawkish parts, dovish parts and yet that's the impetus. we got it out of the way. >> a question and answer for everyone. sharon, is this janet yellen or others? >> retail investors realizing to max out the 401(k) contributions and put as much into the accounts before the end of the year as they can and doing some book squaring with their own personal accounts and doing that with the financial advisers before they go away for the holiday. >> john? >> lower for longer, rates and energy prices. both are great for the economy going forward, kelly. into 2015. and i think people once we stopped going down as hard as we were going down in energy every day seemingly finding some footing around the low 50s for crude oil, u.s. wti, i think that's when the market really found its base. >> guy, to you, what do you think here? accounted for this sharp snap. >> a question, kelly, blind faith belief that the fed has our back. that's all. you can't -- there's no real other explanation for it given the comments and the move. it's all fed all the time. great while it lasts. blind faith as i said was a great band, great first album and only great album. >> what about sharon said about investors getting into the market and dr. j's point about oil prices? what about the other factors? >> i get the oil prices. you don't think i like the gas station? i have a smile on my face. the next won the nba championship but it can't be dismissed. we are in a six-year low in commodities and the biggest of history of mankind is cut in half in four months and something going on. commodities a six-year low, i'm in the lower rates camp, as well. i think the reasons we believe that they're going lower are different. that's the only difference between me and dr. j at this time. >> michael? >> i'm in the lower for longer camp for quite a while. i think the fed is trapped and can't raise rates and saying that for a while. i'm trying to reconcile this with this whole lang wage and janet yellen saying april for liftoff or lower for longer wlchlt's going on here? something doesn't compute here and sharon pointed out and some other things going on here. year end, you name it. >> what do you think, dr. j? >> i'm looking at the very real possibility in my mind, kelly, buy april, michael, we could be seeing the euro/dollar 3% lower or more because i think draghi will have made the move by then, the ecb. >> 3% lower? a lot of it is priced in now or -- >> i think a lot of it will play out. who knows? do we see 115 handle which would be more than a 3% move? we could. if we do, again, why would you possibly give your money to spain or italy or france in their bunds or their equivalent thereof when you think that the currencies will make a dramatic move which is what i think. money flows and puts a cap on rates lower for longer. >> sharon? >> isn't there historical data saying after december now we see the markets start to slide back up and happen through the beginning of the year and historically, we have seen the market come off at this time of year. >> are we reading too much into this -- >> exactly. >> observing a santa claus rally. >> seasonality is on the bull side here. not just a santa claus rally but where we are in the presidential cycle and jeremy granthum known as a bearish, cautious guy talking about how this november to april period is the best part of the presidential cycle and a lot of that going on, as well. >> that's why, guy, i'm wondering, too, we have to turn towards first quarter, second quarter of next year and traditionally and sounds like you're saying the presidential cycle stuff, this is a strong period for stocks? do we pop through 18k? >> people confuse my comments with what i think is going on in the world is extraordinarily destructive but that doesn't mean the markets can't go higher. i get why the market continues to rally and why it will continue to rally. i just think the reasons why we have got on the where we are is very dangerous. it doesn't matter. regardless the market's gone up. so, you know, you have made money either way. the structure behind it, the foundation of the market scares me. with that said, some of these single stock stories are tremendous. we have talked about facebook since last quarter and everybody scared by the comments of how much money to spend going forward. facebook made an all-time high today. i think that stock moves higher. defense stocks a theme for us for quite sometime. look at defense stocks today. outside of gilead the bio tech sector is on fire, as well. there's things that make sense. but again, the structure, the foundation of the market to me is built in sand. >> understood. so what are -- sticking with this theme for a second, what are names you like here, individual names i mean or sectors if you're more comfortable that way going into 2015? >> yeah, i mean, i don't like a whole lot right here. that's been wrong but by tactical you can be okay with it. very short term, i look at retail. everyone's catching on to the gas price story. afraid of it in october. slowly came around and now i think reaches a fever pitch with christmas and everything else going on. the thing i'm watching out for there as a blow off top is a conference on january 12th, the icr exchange and can be the height of the euphoria short term. i'm not a buyer of u.s. stocks right here. >> it's funny. we had eric just last hour saying retail is the last place to be this time of year, never performs well and maybe this is different. dr. j? >> planes, trains, automobiles, late, great john hughes with that movie with john candy. fab louse movie. i would replace trains. unit trains are, of course, hauling crude oil. not as much demand and replace trains with use lines. planes, cruise lines and automobiles. those are all going to benefit big-time, kelly, from this. that's going to carry well into 2015. so watch those. >> sharon? >> i want to bet on the consumer. not a specific name or sector but thinking about living in the northeast like me, heating oil, like me, how much less you pay to heat your home this winter and now with the big drop we saw today in that gas price, more than half of the country heating that way. we see a significant drop in expenditures there. consumers to heat the homes paying a lot less and hopefully good news for them. >> agree. a couple of costs are going up and i wonder if we have evidence of where people are spending the money. you like to think discretionary, health care premiums as they transition in this obamacare premium time and data anymore and whether it's their mobile phone, whether it's their tablet and then, again, just rent that is we have heard about, as well, here. continue to go up. these three areas siphoning off that dollar that might have otherwise gone to a retailer? >> looking at surveys like iff l fidelity and it's to save more as a resolution and not spend and the savings is coming after they are spending more on those necessary items you were mentioning whether it's a phone or whether it's other expenses they have to take care of for their home. >> it should be asset managers? >> maybe. >> perhaps, guy, what do you like here? last word as we look -- >> people want to save more and lose weight. >> are you buying weight watchers? >> i think you hit the nail on the head, kelly. the money we're saving in gasoline we're paying in health care and rent and paying in other spots. u.s. consumer is resilient as can be. we all know that. we get it. to help -- let's not confuse the spending of the u.s. consumer with the health of the u.s. consumer. i think that's an important distinction. >> i like that. we'll leave it there. >> later! >> guy's coming up with the rest of the "fast money" crew at 5:00 asking dennis gartman of the huge drop of natural gas. coming up here, you won't find too many people lamenting the oil and gas prices but we have a market watcher warning it could be a bad omen for the global economy and why. also ahead, after president obama said sony made a mistake not releasing "the interview" on the heels of north korea's hack attack, now talk it may be released soon and not in theaters. more details ahead. keep it here. here's a question for you: when electricity is generated with natural gas instead of today's most used source, how much are co2 emissions reduced? up to 30%? 45%? 60%? the answer is... up to 60% less. and that's a big reason why the u.s. is a world leader in reducing co2 emissions. take the energy quiz -- round 2. energy lives here. well, consumers feeling the weight in the wallet as gas prices post 88 straight days of declines and longest on record. according to my next guest, it's not all it's cracked up to be and it's a symptom of something else larger in the global economy and not pretty. bill smead joins us. explain to us how it does more harm than good long term. >> well, it is very good for the united states domestic economy but for investors in s&p 500 and other places, you've had a 10-year move from 2000, 2010 where everyone organized investments around the globally synchronized trade. the well-known fact that 400 million middle class citizens want the same thing that people in the united states wanted. they just left out a few important facts, like somebody that makes $8,000 a year that's considered middle class in a developing country isn't going to buy the same things that somebody making $50,000 in the united states. >> so, bill, if you're right and everyone's on the wrong side of a trade or set of assumptions, what happens now? what does look attractive? who are the winners and losers here? why is this such a bad sign as you're kind of putting it for the global economy here? >> well, you know, if we didn't have 86 million people in the united states between 19 and 37, which is 6 million more than the baby boomers my age group, there would be reason to be depressed but you can be very positive. they're going to emerge. the most exciting emerging market in the world millennials that did everything later in life and get around to doing it and as the baton gets passed from the boomers to the eco-boomers to lead the economy, you will begin to see the multiplier effects we have in an economic recovery. for example, everybody's down in the dumps on the housing number. they're just getting married and having a child and until the baby is screaming, you don't want that standalone house but when they do and the numbers explode two or three years, everybody scrambles trying to find out what companies to own to make money from there. >> bill, it's very interesting report that you've put out about this and also about the eco-boomers and where their investments will be. you say housing. are there specific names or locations? because the housing industry will be more approachable and better for millennials in certain areas. >> we own the fifth largest homebuilder, nvr, ryan homes out of the mid-atlantic region and 80% is first-time home buyer oriented market. we own a lot of what i call the second tier things. berkshire hathaway is a conglomerate of companies and weighted to mortgage activity for eco-boomers through bank america and wells fargo, carpet, paint, second largest real estate broken and. warren buffett has his sign on communities across the country. so that's the kind of ways that we're going about getting at this. now, i might add that since most large institutions and high net worth individuals are way overweighted in private equity and widely diversified investments, it is going to be the same kind of phase at 2000 and 2010 and large money groups trying to get at the trade. >> out of which trade? at or out of this trade? all of these institutions with a ton of money to work will mimic what warren buffett is investing in, u.s. economy and the millennials driving it? >> yeah. just think of the frustration as things slow in the emerging world, the consumer staple companies that made a ton of money off the growth in the emerging markets, the earnings are very difficult because the dollar's getting stronger and the brazil and russia and -- they're not going to be the discuss merles that the folks thought they were going to be and in the united states millennials don't need more q-tips or ketchup. they don't need more toilet paper. so or tooth paste. what will happen is earnings are going to be difficult for international streams of revenue which, by the way, also might include technology in that list of company that is are getting a lot of revenue outside the united states and slows down and what will accelerate is domestic revenue streams and the s&p is not set up well for that. >> hey, bill, you know, again, great points. i see you on the demographics and energy and strong dollar. a number to throw at you. $1.3 trillion, student loans outstanding and i think seen as a bit of a damper on some of the housing recovery here accelerating. do you have any thoughts on that? what can be done s. that a problem? something we're thinking about here. >> thank you for bringing that up. first of all, it's been made -- turned into a contentious subject. average balance is around $24,000 a student. the millennials who are average age about 28 when i was 28 i had a $100,000 mortgage. or larger. and i didn't have student loan debt. what would you rather have right now, single with $24,000 in student loan debt or be married with $100,000 in mortgage debt? the balance sheet of the average 28-year-old is the best 28-year-olds have ever been because everybody was married by then in 50 years. >> bill, it's interesting, though, because the argument isn't just about the way the balance sheet looks today we evolve over time and ultimately at least if you're carrying a house do you think that's going to generate appreciation and contribute to all the kinds of statistics we hear about, earn more, married, kids, contribute more long-term to the long-term economy. is there a danger that the generation doesn't fall into that or do you think it's just going to come later? >> i love you for asking that question and it's one of the funnest things we do in the work right now. the answer to it is since people wait so much later to get married they don't -- young males don't do anything about the student loan debt until they have somebody else to worry about besides themselves and the jeff that lives at home phenomenon so the reality is most of that debt is attached to people that went to prestigious colleges, became doctors, became lawyers, became highly educated professionals or graduate students at the best colleges. the average 35-year-old that went to college and got a four-year degree makes $25,000 a year! in their lifetime than a non-college educated person. you think an average of $24,000 in debt is a good idea to make $25,000 more a year between 35 and 65? i think so. that has all been blown out of proportion. you get the young men in the late 20s, a wife, a screaming baby, the honey-do list kicks in and like warren buffett says, hormones and don't like the in-laws that much takes over. >> we have to let you go. i love this. circling back saying that you were striking a cautious note about the global economy. is there anything to be cautioned about, warned about here? >> yeah. the chinese stock market is doing a lot better. primarily because the things that the chinese used to invest in like gold and six or seven additional apartments are doing lousy. but people should not construe that to think that's connected to their economy doing better. the price of oil is telling you where things are doing in china. >> all right. bill, thank you. refreshing perspective this afternoon. have a wonderful holiday. as we march along here. president obama called sony's pulling of "the interview" a mistake. shortly after the president made that comment, democratic congressman brad sherman on this program said sony should show the film to congress. >> i think that sony should make it available to congress and i think we would want to screen it right there in the rayburn building across the street from the capitol. >> with washington beating the drums for sony to stand up to north korean hack attack, sword the movie may way it to the public. what would that mean for sony and companies that help distribute it? that's next. you can go to cnbc.com/vote if you would watch it. and cialis for daily useor you. helps you be ready anytime the moment is right. cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain, as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision, or any allergic reactions like rash, hives, swelling of the lips, tongue or throat, or difficulty breathing or swallowing, stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. you don't need to think about the energy that makes our lives possible. because we do. we're exxonmobil and powering the world responsibly is our job. because boiling an egg... isn't as simple as just boiling an egg. life takes energy. energy lives here. welcome back. we kick off with dominic chu. >> we're watching shares of chesapeake oil, natural gas prices weakened throughout the course of the session. the stock moving higher in the after hours on news of a $1 billion share repurchase program that chesapeake's putting in place. those shares lost 7% in the regular trade and up by 2.5% in the after market now. >> all right. thank you. ever since sony pictures computer systems hacked on november 24th over the release of "the interview," the talk of the country and the world and the e-mails replaced by what they should do now that the cia stated it was the worth of north korea. tracking the chatter inside and outside the beltway. >> reporter: there does appear to be an outage or disruption at this hour of north korean internet access. they don't have a lot on the internet as you would imagine in north korea but they have ip addresses and showing signs of disruption. i asked national security council whether the united states was behind that and what i was told by an official is they don't have any new announcements to make about north korea today. so the white house not confirming or denying they have anything to do with what's going on in north korean internet infrastructure right now. over at the state department today, a suggestion of north korea to do to redeem itself here, a state department spokesperson saying north korea might owe sony some money. take a listen. >> we are confident the north korean government is responsible for this destructive attack. we stand by this conclusion. the government of north korea has a long history of denying responsibility for destructive and provocative actions. they could compensate sony for the damages that they caused. >> reporter: she didn't say how much north korea ought to pesony for the damages and she didn't say how sony gets against sanctions. only suggesting that some sort of a work-around might be able to be put in place there. an interesting suggestion there from the state department now, kelly. probably not one we're going to see the north koreans take up too soon. >> all right. thank you for now. if sony shifts to streaming "the interview" online? does it put companies at risk? we'll ask an expert in a moment. will you be watching it if it is streamed online? you can go to cnbc.com/vote and let us know and bring in mike potts here. mike, it's great to have you here. what risk are these companies at should any of them take on the potential vulnerability of being hammed by the north koreans here if they were to stream this movie? >> good afternoon, kelly. the question isn't of a nation-based attack or a cyber-attack but inevitable. every company is under sewaiege. we will be attacked but good thing is there's a way to get ahead of these attackers and that is doing what a lot of customers do and that's getting visibility turning it into an online sensor to detect behavior patterns aenl in the case of sony, allegedly with these attackers coming in back in february, companies are using products like ours would have been able to detect the unusual state of this activity. and now that is really in demand that we guard our network from the inside out much like what we have done over the past decade from the outside in using printer based defense systems. >> dr. j, a question if i may put you on the spot. how do you feel about -- let's share you're a shareholder of google, would you support them streaming this movie? >> sure, i would, i would. i know that each company's going to have to decide for itself, netflix, google, amazon. itunes for that matter. whether or not they'd be willing to take the risk of the hack that would inevitably be attempted. but yeah. i would support it. although from all of the reviews that we were seeing ahead of the movie i don't think it's going to have the big pull that the studio wished in the first place for this movie. >> would you, by the way, support michael block, the companies? >> yeah. this is a fact of life. the way things go. face it. i'm sure that our guest could speak to this, as well. everyone does this. we're reading about iran with the -- who was responsible for that? if it wasn't for us, someone we're friends for. whoops. did i say that out loud? >> it's a clear invitation. if it didn't happen, it is a surprise taking on the north koreans as a company. >> where does that end? you mentioned google. do they alter the search results and because what shows up in priority offends somebody? >> they do that in chi in. >> stopped going to china. >> they pulled out. this is something that the guest can speak of. streaming video, are some of those companies much better prepared than sony was from the out set? 90% of the viewers say they'd watch it. why wouldn't you say yes i'm going to do that? >> mike? >> well, i would hope that the companies that are entertaining, distributing the product much better prepared than sony was. i mean, the end of the day without having the disclosure of everything that transpired, there were 100 te ra bytes of data distrinted. put it in perspective. the library of congress with every paper edition published into a medium would be 10 terabytes. it is a massive amount of data somebody at sony if they had visibility what was happening on the network would have seen that. so my belief is that some of the other companies have better operational procedures in place to protect themselves. we all know it is a matter of time. no longer a question of if. and it's much like a cold. better prepared you are to fight a cold, the better off you will be to actually fight it off when you catch it and then in this case returning a network to a normal state. >> mike, are you going to watch this movie if it's streamed online? >> there's enough curiosity i probably have to. >> we have to go. by the way, could your firm given that you're in the security arena show it? >> we're not set up to stream media like that. in the entertainment business. but thanks for asking me. >> maybe partner with somebody who can. understood. mike potts, thank you. we'll close our poll now. clearly, 92%, 93% of people saying they will watch this movie if it is streamed online. good movie, generally critically speaking, or not. markets are another all-time high. new records have users flocking to cnbc.com. and the other market stories that have been generating heat today. hi. pete and jon najarian here in new york city outside of the nasdaq, where we bring you live daily market updates. and today, we have a very special free gift for you. so many viewers e-mail us wanting to know our secrets on how we trade options. so we put our secrets into a new book. and if you're one of the first 250 people to call in right now and just cover shipping and handling, we'll send you a copy for free. look at the rate of return we've made on some of our recent options trades, versus what we would have made had we just bought the stock. there's no comparison. to make the best returns in today's market, you have to learn how to trade options. and our book will show you how to do it for free. jon has been trading options for more than 30 years. pete is one of the top 100 traders in the country. and our book will teach you how to trade options for free. so call now. 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(see the number on your screen) call now. new market highs. new oil and gas lows. two stories dominating the hot list. allen joins us with what users are diving into. good to see you. online. >> the market coverage today as usual with a big move like today, people diving into the market coverage. one story really catching attention right now is the -- our look at what's happening on natural gas prices. kind of bottomed out there. $3.12 per btu and not long ago up around $6 per btu. traders say they see panic selling with the spade of warm weather nobody was expecting and betting on gas prices going up. that's a point. we have a wrap-up of a survey of wall street analysts and what they see going on for next year. 15 of them surveyed and they actually had a median gain for the dow of about 7%. not too bad. we're up about 12% this year. and then finally, another story that's been pulling all day long, the saudi oil minister coming out and saying we don't care if oil is 20 bucks a barrel, we will produce the same level. people love that and we think they're reading that story and diving into the market coverage of the markets going up so there you go. all that stuff. >> mapping it out for us. thank you very much. we're counting down to 2015. just nine days away. up next, dominic chu's sports predictions for the new year and how you can cash in and whether it's the nhl, mlb or nba, chances are the jersey is made by 47 brand. coming up, the chief executive of the sports apparel retailer and how the holiday shopping season is going and what he is predicting for the new year. 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(announcer) at scottrade, we share your passion for trading. that's why we've built powerful technology to alert you to your next opportunity. because at scottrade, our passion is to power yours. all right. this week looking ahead to the new year, giving investors a playbook how to cash in for 2015. we'll begin with dominic chu and how he fared. bold last year saying the monster mlb deals with ar thing of the past. strike one. okay. he also predicted the nfl would embrace next gen media technologies. well, right there with the league producing nfl now this year, he gets a check mark. finally, dom said 2014 would be a tipping point for major league soccer. he is half right. television rates up. so that's 1 1/2, i guess. 50%. we'll take it. what's dom predicting for 2015? here's a look. >> from a-rod to donald sterling to ray rice, scandals plagued the sports world in 2014. here are three bold predictions for 2015. the nfl crosses the pond. after sellout crowds for three games at wimbley stadium in 2014,the national football league will announce an international franchise in london. we're not talking about nfl europe part 2. with more than 8 million casual nfl fans in the uk, there is demand and passion. student athletes cash in. as ncaa revenues grow, so will the bank accounts of student athletes. the ncaa will continue to loosen rules to allow the opportunity to get paid. and not just scholarships but also a cut of the money they help bring into each school. this could be a game changer. two words -- triple crown. the year, 1978. the horse, affirm. the last one to win the most coveted distinction in horse racing. 12 horses since then have had a shot and all fell short at the belmont stakes and its torturous mile and a half track. in 2015, the triple crown drought ends. >> oh. >> hmm. >> what? dominic chu joins us now. a predictions or wish list? >> they said to be bold. i'm as bold as possible. we know that the nfl has not even put on the table an l.a. franchise for right now so the uk might be a bit of a stretch. you know, it is an intriguing thought. >> listen. i went to those games in london. it was a pretty big draw. >> they're selling out and that's a big revenue so i think some point you will see it's not the world league of american football and could be big. ncaa athletes thing is interestinging if they get paid or talk about whether or not there's some kind of a revenue sharing agreement. triple crown thing is interesting because it's been a while and we have thought it would happen. maybe this time it happens. i can just tell you that the most robust discussion on the news desk of 2015 predictions is where jim harbaugh will coach next year. will it be at michigan? will it be somewhere else in the nfl? there's guys up here with a lot of thoughts. one of the guys including mark fisherman says almost a shoe-in to go to michigan. >> what say you, dr. j? >> michigan or the oakland raiders. >> those are the two front-runners. i think people say across the bay. >> can you imagine? >> i don't know. niners fan. i can't imagine it. >> michael, we were talking here about the premier league going back to dom's prediction of major league soccer making more gains. it has a little bit but so, too, has soccer, football, if you will, across the pond. here people watching. look at today even. >> quite a phenomenal. we were talking about the chelsea-stoke match. i'm an arsenal fan myself. any thoughts of epl and the mls getting further penetration this year? are there any new thoughts here? mls half right on the way. when's next for soccer? >> that whole epl, english premier league soccer thesis is why i thought it would take off big and the world cup and you can see it on nbc sports network, of course. a lot of people have an affinity towards english soccer and you wonder whether it's the beginning and start transmitting and broadcasting all kinds of european matches and that really starts to get people involved. soccer is a sport that's starting to get more traction with kids across the country so it may be a few years off but soccer is a demographic trend to be here to stay. >> i like that you stuck your neck out there. thank you. we have a major play in the sports apparel business with us and the only brand exclusive rights across all leagues, that includes major league baseball, national football league and national basketball association and national hockey league. 47 brand ceo steven deanglo joins me exclusively. are you seeing a pick-up on oil price declines? talk to us about the trends. how's the business? >> hey, kelly. how are you? our business is really strong. the license business continues to grow and be a strong growth area at retail. >> well, sharon epperson here might have questions of your pricing power in 2015. >> with a 12-year-old basketball player that wants every jersey out there it seems like, i want the know how does the nba get paid based on the licensing or when's the arrangement and why are t-shirts with little logos so much less than the custom jersey special varsity whatever he's asking for. >> well, the introductions a little off. we don't have exclusive rights. we are the only company that has headwear and apparel in the professional sports leagues and colleges. so we're not in the jersey business but usually the way -- >> how about the hat instead. >> that's probably a good answer. but it's typically based on a royalty rate and that's how the leagues get paid. when you sell it to a retailer, each league has a different sort of set-up and based on a price point, you pay them on your wholesale price to a retailer. that's the royalty rate to the league so jerseys tend to be more expensive than t-shirts and it's at a higher price. >> depends also on the size of the logo, does it not? years ago in the sports retailing business and we actually had like 17 different locations where we sold pa paraphrenalia and the larger the lo logo, the more you bad to pay. is that still the case? >> what that tends to be is based on embroidery costs or applique cost and typically the more embroidery stitches or larger applique, the more expensive it is to manufacture. and it raises the price of the wholesale which raises the price of the retail. >> okay. on a last-minute -- >> in terms of royal rate. i'm sorry. >> no. i was going to say as a last-minute shopper, what is your best sell rear right now? what should people be getting? >> we specialize in t-shirts and headwear and we have beautiful, beautiful quality t-shirts and the best headwear in the business so it's still not too late so come to 47 brand.com and pick up some unbelievable beautiful stuff. >> any stuff from the english premier league, steven? >> it's funny. we're -- we are in the process of doing a deal domestically with the premiership but that's not going to be until fall of 2015. listening in, we an i gree completely with the demographic changing and the soccer world sort of changing and it's going to become big here in the united states. >> we'll watch for it. always next holiday season. steven, thank you so much for being here this afternoon. ceo over at 47 brand. stocks are closing at record highs in the u.s. today. to find the next opportunity, you veal to look overseas and may be surprised where that is when we come back. oman] can it t appointment when my teeth are ready? 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[ male announcer ] get a 4 week trial plus $100 in extras including postage and a digital scale. go to stamps.com/tv and never go to the post office again. including postage and a digital scale. because it helps me skip the bad stuff. i'm good. that's what i like to call, the meta effect. 4-in-1 multi-health metamucil now clinically proven to help you feel less hungry between meals. experience the meta effect with our new multi-health wellness line. welcome back. for the 50th time this year the s&p 500 has closed at a record high. the dow jones industrial average today also going out on a record high at that last minute gain of 154 points. the prior record was 17958. today we did 17959. turning to the panel here, guys, is it justified, dr. j? >> it is justified. like i say, companies are financing debts, lowest prices in history, refinancing debt, issuing debt, that's going forward. it's not just consumers, planes, cruise lines and automobiles and retailers and a whole host of others. i don't think it's overdone but amazing that we're just doing it by inches each time. we're not leaping over there, even though it's 154 point gain we beat the old record by a point. >> funny to see how this stacks up compared to past years when the market was trading higher. in 2007 for the s&p with a hat tip to our data team we only had nine record closes. in the year 2000 we had four. you have to go all the way back to 1995 when we had 77 record closes. i'm not sure what that means, what that tells us. >> if you look at other trends in the santa claus rally we were talking about, the last trading days of the year, the s&p 500 being higher, we've seen that happen in the last six years and 17 in the last 20 years. so while we've had these bull markets, it's not unusual for this to happen, whether or not it's 150 points or 1 point ahead of the last record, that may be how we do it, but unlikely to see the same trend again. >> this has been hard to fight, but i'm going to fight it. bill sneed was on the show earlier. he made an interesting turn of phrase where he said investors have organized themselves. that's a really key word. some of the reading work i've been doing in the finance world has kind of related back to the science of earthquakes and seismology and talks about how investors self-organize. where everyone goes the same way and everything moves around. we're seeing a lot of that here, where energy moves get exacerbated, we saw what happened to the biotech names today. energy weekness is good for consumer stocks. we talked about that quite a bit today. but all this volatility leads to little cracks in the earth. and when everything's kind of working against each other, everything's fine. but everything goes the same way. >> interesting that you brought this up as well because we've had more coverage lately about the etf world and to what extent the creation of the etf products themselves contributing to this behavior, some of the risks in the market. are there risks with regard to being in etfs and trading in these products that investors need to know about? >> i've been talking about this for a while. liquidity was not what it was when these things were invented in 2007 or even 2009 and '10. there's a chance for these all to go at once. markets do well when there's disorder. guys saying one thing and everyone's opposing them and buyers and sellers. where we run into a problem, ironically is when the chaos ends and there's order, everyone goes the same way. i don't know if we want to see that. i fear there's a chance we can see that in all the recent behavior and volatility tells me we're more likely to see that than six months ago. >> that's why you see people more cautious lately, but you're saying don't worry? >> i'm always worried about what we don't know. that's why when we're seeing the blowup in energy and so forth, what i was worried about was who has an s&p put linked to a crude oil delivery that, you know, they're on the wrong side of both bets. and then all of a sudden they have to unwind that all at once. that's what i worry about. those kind of things that we don't know are out there because they're off the balance sheet. >> there's a lot that you don't know. be prepared for even if we have another santa claus rally be prepared for more volatility in 2015. that doesn't mean get out, just be prepared so you can handle it. >> good to see you. "fast money" coming up in a few moments with melissa lee. what's on tap? >> big move in gil add today, down 15%. big moves in biotech off of the scripps news. one would say this is your buying opportunity because the stock is cheap. get the reason behind this call. >> got to hear this one. over to you guys. >> "fast money" starts right now live from the nasdaq marketplace in new york city's times square. tim seymour, brian kelly, karen finerman, gil add having their worst day in 14 years. we've got somebody who says this is not the time to ditch the stock. but the technology sector sending the s&p to its 50th five-zero record close of the year. the tech sector hitting highest levels since 2000 with names like intel, cisco, apple, qualcomm leading the charge. every five trading days. every week. >> it's getting a little
first time in 15 years. it is not just the tech heavyweight and the dow and russell hit new highs as well. s&p also inching towards another record close. with me charlie gasparino jack hough of "barron's," dan hen men gear of "wall street journal." what do you make of markets today? >> the nasdaq, it is interesting, it was thinly traded. there is a little bit of action in deals. not as though they're going nuts over there at nasdaq. melissa: we're back after 15 years, come on! that is the best you can do dan? i'm moving past you. jack, what do you think? >> nowhere near the inflation adjusted peak first of all. second of all, you look at companies that dominate the nasdaq you have got your apple and intel and microsoft, nothing really stands out to me as shockingly expensive but a couple -- melissa: do you need to take the call, charlie? is that important? is it okay if you do television and ignore that. >> it is veronica vain. melissa: we'll get to veronica vain in a moment. >> i wrote a whole book about the nasdaq crash way back in my early days at "the wall street journal." that was the, the bubble of the nasdaq was fueled by you know, pets.com, same valuations of companies that didn't make any money. melissa: but now? >> i feel better the nasdaq is back to 5000 fueled by apple, and intel and i think that is a good story. these are real companies. melissa: okay. >> with profits. >> earnings and cash. >> with earnings and cash. that is a good thing. melissa: there you go. days of 2-dollar gas is behind us. no signs of stopping the climb, the today's average is $2.43. that is up 13 cents per gallon during the last week. which is largest one-week jump since july of 2013. another way to look at it. the uptick on the right side of this chart shows four straight weeks of rising prices. the first big move higher after more than half a year of declines. it is a bottom in that trend which is bad for consumers. probably not great for the economy, jack. >> don't start crying about gas prices yet. melissa: no? >> they turn over refineries to begin producing summer mix of gasoline. happens every year, get a bump in fuel prices. there was a big refinery shutdown in california that might have impacted it. i expect prices to move back toward two bucks later in the year. california is significantly higher, three bucks. they use a special blend. melissa: they use a ridiculous blend. >> you were saying lower gas price maybe was you maybe -- melissa: another blonde. dime a dozen around here. you've been in the elevator, they're everywhere. >> one of the good things working here. they're all extremely intelligent too. melissa: there you go. >> but they are. just for the record. melissa: oh, my goodness. >> you were saying or that other blonde was saying that lower gas prices was a function of economy not doing as well. now we have higher gas prices -- melissa: oil prices. >> or oil prices not function of the economy. melissa: oil prices. this bump up refineries. >> nothing to do with the economy getting better? melissa: not this particular bump. it is refineries. >> gas prices are a lot like credit card rates rise a lot faster than they fall. jump to high -- melissa: go higher like a rocket fall like a feather. >> like the stock market. anytime something happens like a fall in gas prices, or stock market goes up, the question is the economy real or is this when everything is going to burst and get into a big correction? melissa: okay. >> we saw positive economic numbers. >> hiring -- melissa: gdp number on friday was terrible. downgraded to 2.2. is that your porn star calling you? >> maybe the blondes. melissa: knocked out from under it as shares plunge over 20%. "60 minutes" investigation revealing chinese-made laminate flooring contains unsafe levels of a chemical linked to cancer, but, there is a pretty important detail "60 minutes" missed or conveniently left out. our own research finds that lumber liquidators does one approximately dollars sales a year, ram gnats from china represent 10%. the way they talk about every piece of wood, they were also, inspired to dot story by the shorts in the stock. i'm not, i don't understand that either. >> i don't have a problem that they're inspired by shorts. shorts give out great information. but i will say this, "60 minutes" history on economic issue it has been horrible. they went out there promoted meredith whitney's theory of muni bond, massive defaults in the muni bond market. they went out. market crashed. it never happened. >> could not have been further off the mark. >> way off the mark. melissa: did they ever come back dot correction? we were way off on that? >> i watch i think scott pelley is good broadcastter. melissa: their financial stuff is terrible. >> i watched them do something on robocalls, if you are delinquent on robo calls, they missed whole part, people targeted, they were delinquent on their loans. >> why are their stories so dramatic? you say this is incredibly compelling, generally getting one side of the story. melissa: right. >> if you put the other side in there like in normal journalism, comes out interesting, but not that dramatic. melissa: big sob story about the highway trust fund, running out of money, they didn't ask where the money going that is currently being spent? >> stsck relative to cheapest to earnings estimates since 2009. >> positive thing here, we should point out "60 minutes" has economic impact on the markets, there is no doubt about that. melissa: not very positive for lumber liquidators who feels like they were -- >> but they do move markets. melissa: feels like they're unfairly targeted. if you own the stock is that fair? they didn't tell the whole story? >> i know that they went out there did ridiculous interview with michael lewis about his stupid book the markets being rigged. melissa: how did you feel about the book? >> i thought it was stupid book. melissa: keep going. isis supporters taking to twitter declaring war and jack dorsey for blocking their accounts. this screen shot of threatening shots shows his face in cross-hairs of a gun. warns twitter in arabic your virtual war on us will cause a real war on you. what do you guys think about this. >> i think twitter has been slow to crack down here. i understand it's a difficult job, but there is a lot of technical aspects but i think they have been slow to close these accounts and really go after these people. this saddens me to see the news. >> but now they have done it, express a lot of support for twitter because, look, the web has become the primary tool of brainwashing and recruitment for these jihad i did hes -- jihadis like europe and united states like the three girls in london. if we shut them off there will be less of it. >> i think twitter is too soft on the whole issue what they allow on twitter. i'm all for free speech. i just need to be called names and attacked. melissa: you don't want to be attacked by other people, is that what you're saying? >> i never throw the first punch. this is like a medium that is built for people that want to just say anything they want. i think they're a little too i think they should, i think a little censorship on twitter might be good on twitter. >> draw line at barbarism like isis this is the world we live in. >> i understand that. "wall street journal" doesn't run expletives and on their page one. there is a degree of vetting that goes on, right? >> there is degree of editing. if you get that deeply involved, in twitter facebook you know what you're getting into. melissa: tens of thousands taking the streets of moscow as they mourn the death of opposition leader boris nemtsov. to protest russia's policies of ukraine turned into mourning when the opposition leader was gunned outside the kremlin. this happened on friday. i mean, wow. where do you seen start on this story dan? >> we can't say for sure putin did it but the fact vladmir putin has been prop gaped sizing the people of moscow in st. petersburg in anti-western propaganda in ways not even seen during the cold war. basically what you have to say the rule of law being replaced in russia by the law of the jungle. it is no surprise you see nemtsov getting gunned down there, the same way people are, you know gunning people down in mass killings in the middle east. >> that is reflected in putin es approval ratings. 85, 86%. only way you get a number that high, when you poll people they answer the phone, do you approve of vladmir putin they fear for their life. you have no such thing as credible independent poll. >> i wonder there is economic impact here. this is going to cost them western investment. which they're going to need at some point. and i wonder what, i just, i'm not schooled enough to answer this question but what is putin's endgame here? total control without western investment? melissa: rebuilding the soviet bloc. >> how can you do that in this economy. melissa: with falling price of oil it will be a real challenge. he had oil going in his favor. that is real challenge. >> he may never get it back in his favor a long time. melissa: bill gates topping "forbes" billionaire list for second year in a row. carlos slim and warren buffett nipping at his heals. real shocker, record 290 newcomers this year to the billionaire list. most famous rookie, michael jordan. most of his cash is nike payouts on his iconic brand netting him $2.25 billion. isn't that amazing? >> that is amazing. derek jeter as we've been reporting a lot. he has a chunk of change. he wants to convert $200 million and use that as springboard, follow in the career footsteps of michael jordan. melissa: melissa: 200 million is not enough. he has a shot. these guys are experts marketings themselves. in this culture he has a shot if he does it right. melissa: he is pretty smart. done a lot of smart didn't get married. >> never got married. never had kids. melissa: i don't know -- okay. >> 1500 billionaire on that list. and beneath all those billions is basically the economy, right? there is a huge amount of economic activity below all of that jobs, people making decent living. >> absolutely. melissa: i like that point. i like that point. let's end on that. thanks, guys. striking at the heart of isis iraqi forces launch a huge counter attack north of baghdad. the only power ranking that really matters. listen who is leading the pack into 2016 not to mention who is falling way behind. we have charlie's porn star coming up. more "money." ♪ the real question that needs to be asked is "what is it that we can do that is impactful?" what the cloud enables is computing to empower cancer researchers. it used to take two weeks to sequence and analyze a genome; with the microsoft cloud we can analyze 100 per day. whatever i can do to help compute a cure for cancer, that's what i'd like to do. you can call me shallow... but, i have a wandering eye. i mean, come on. national gives me the control to choose any car in the aisle i want. i could choose you... or i could choose her if i like her more. and i do. oh, the silent treatment. real mature. so you wanna get out of here? go national. go like a pro. you, my friend are a master of diversification. who would have thought three cheese lasagna would go with chocolate cake and ceviche? the same guy who thought that small caps and bond funds would go with a merging markets. it's a masterpiece. thanks. clearly you are type e. you made it phil. welcome home. now what's our strategy with the fondue? diversifying your portfolio? e*trade gives you the tools and resources to get it right. are you type e*? melissa: ache at that look. crude oil futures negative selling pressure before the close. it is down on the session 489.62. the fight against aisles sis -- 49.62. launching an attack to retake the city of tikrit. the town is best known as former home of saddam hussein. here is van hipp. chairman of american defense international. author of new terrorism. dan henninger is back as well. can they take back tikrit? >> i think they can, melissa. this is a test run for bigger battle with mosul. this is to get better intelligence feel for the actual size of isis force and composition of the force we will need when we go to mosul. melissa: what do you think about that? >> i kind of agree with that. they just put off the attack on mosul from spring to fall. everyone was asking why they thought it would pull it off in the spring. iraqi army is not near being ready. john boehner said over the weekend we'll probably need boots on the ground. you have to talk a little bit of specificity what you mean by that. people think we're sending in a division. no we're talking about putting more intel, special-ops in there, help say when they're taking tikrit and get an idea just as van was suggesting, how many islamic state fighters are there. melissa: play what john boehner said. i will get your reaction on the other side. let's listen. >> the president shouldn't tell our earn my what is we're not going to do. whether iraqi military personnel. whether we bring jordanians or other allies, their boots in there. we'll have to have people in there providing advice. those are boots on the ground. melissa: why would you announce we're pushing back, you know the attack on mosul and saying we're not going to put people in there? does that make any sense? >> i don't know where some of these folks learned military tactics. you don't telegraph to the enemy what you're going to do. obvious as you point it out they're not ready. this will be a urban terrain scenario. there are things from a training standpoint to get them better prepared. the speaker is right. we'll have to have some ground forces. i believe we can do it in limited fashion. if we had listened to our ground commander general austin back in 2010 we would not be in this situation. melissa: there are those who say, make no mistake we have boots on ground. we're already there. do you buy that argument? >> we have some boots on the ground but i think president obama decided he does not want to go past the level of engagement he is in right now. you have got people, folks john boehner are talking to, we can not limit it to simply air sorties. they brag about taking back kobani. you saw photographs. it looked like bombing of dresden. mosul a city of million people will not be recaptured by bombing raids. you will relevel the city. melissa: real quick. >> history teaches us we have to troops on ground. i trust general austin. we have the right commander on the ground. the president needs to listen to him. melissa: down to the wire. imagine going a whole month without listening to wireless service. some folks are trying it. carriers have ever reason to be worried. former wall street intern finds a big deal out of finance. our exclusive with adult film star veronica vain, charlie gasparino's interview. do you ever have too much money? ♪ when the moment's spontaneous, why pause to take a pill? or stop to find a bathroom? cialis for daily use is approved to treat both erectile dysfunction and the urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. ask your doctor about cialis for daily use and a free 30-tablet trial. ♪ at mfs, we believe in the power of active management. every day, our teams collaborate around the world to actively uncover, discuss and debate investment opportunities. which leads to better decisions for our clients. it's a uniquely collaborative approach you won't find anywhere else. put our global active management expertise to work for you. mfs. there is no expertise without collaboration. melissa: from the u.s. to every corner of the globe money is flying around the world today, starting in venezuela. where officials have detained american citizens for allegedly spying on the government. president maduro says the u.s. continues to plot against him. this comes as venezuela put strict travel restrictions on all u.s. citizens, even banning former president george w. bush and dick cheney. over to north korea where leader kim jong-un fired missiles and toll his solders to prepare for war. two short-range ballistic missiles were launched into the see over retaliation over military drills carried out by south korea and the u.s. landing in vienna, where they're building largest wooden skyscraper? is that wise? 20 floors high. the local fire department is understandably a little bit nervous. they sate idea is crazy. the architects need to work with them to make it fireproof. what are they thinking? from wall street to, from the wall street fast track to the porn industry, veronica vain made jump from intern at lazard asset management to lucrative career in ad dull films. charlie and i spoke to her in ex-plows sieve. shockingly charlie was all over that one. >> i covered wall street 25 years. is there cultural connection between wall street? is it easy to make that jump? >> between wall street and adult industry? >> in terms of the cultures in terms of the cultures. >> that is a funny question. no it was not particularly seamless to jump from exotic dancing to wall street. it was hard. i was at a big disadvantage not only because of my background i didn't come from ivy league school. >> you went to fordham. good school. >> fordham. >> did lazard know you were a dancer in the past? >> of course not. that is not something you say in interviews. >> hard for people like to you make a buck in this world where so much is pirated. you would have made, probably if stayed with wall street a lot more money. this is a tough business. how do you, how do you plan to make ends meet in this business? >> so, at the business right now, as it is today it is tough. before i got into the business i did a ton of research. was actually wondering why certain things weren't being done or at least i didn't see them being done. >> right. >> one of those is product placement. what porn has, what its biggest asset has is viewership. >> i'm a libertarian. i, more power to you but there is a feminist critique of porn it is exploitive of women. i can understand why they say that. i don't necessarily agree with it but how do you answer that question? i'm sure you've been hit with that since you have come, since you have taken your new line of your new career path? >> i think it is kind of funny, considering the analytics coming out of the some of the top porn sites, are showing us womens are ones searching for exploitive porn? >> really? >> yes. seems like women have more of interest in rougher kinds of activities. melissa: where do you see that? is there data to back that up? >> mind geek has the data. they're driving quantitative analytic approach in pornography right now. we're learning a lot of interesting things. that is another reason why product placement advertising angle will be very interesting porn is doing something it hasn't done before. using analytics. melissa: what does that mean? how would you change the business to appeal to more women and monetize women's interests? >> this business is already appealing to women you know. really depends on who the woman is and what her feelings are regarding it. i think you know, there is a generation gap, certainly. women my age don't seem to have as much of issues with it. >> how about the piracy of it? >> so the answer to that is, product placement. actually two answers with porn, right? either one, an expensive consumer education campaign to teach people why should buy their porn, why it is better. >> right. >> nobody wants to invest in consumer education. >> consumer education buying porn? >> everybody thinks it is free. people don't want to pay for something free. educate them why you buy it or take advantage of viewership. melissa: this is very strategic on your part. you had a plan when you were working at lazard. you knew you were going into this business. tell us about that plan. did you just decide that banking wasn't for you, and you thought of doing this? was it always your plan to go into porn from lazard? >> i always wanted to do something more entrepreneurial with my career. i knew i wasn't fit for conservative environment. i wanted to start on the street to learn how i would go about running a business. when i started investigate industry i really wanted to work in adult was one of them. i saw an industry undergoing a new wave of innovation. i wanted to be part of that. >> you're a smart gal. >> company sponsoring me, very first product placement for pornography. we had 426% increase in membership sign ups. >> we're getting a wrap. one question. guys in porn, guys in wall street, who are cooler? >> oh, god. probably wall street guys. >> really? melissa: on that note. >> why? >> i hear they're animals those guys. >> porn guys are very serious. all business. very professional. wall street guys play around a little bit. >> did you do any insider trading at lazard? >> oh i can not talk about that. >> everybody wants to know. >> no no. melissa: veronica, charlie, thanks to both of you. okey-dokey then. all hands on deck. the long national nightmare is over. return of "house of cards." everyone is trying to cash in. plus read his lips. jeb bush is not making any promises for 2016. 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[ male announcer ] there's a better way with creditcards.com. compare hundreds of cards from all the major banks to find the one that's right for you. it's simple. search, compare, and apply at creditcards.com. first round's on me. melissa: over 25% of the vote beating out 2016 hopefuls like scott walker and jeb bush. 2016 gop power index. thank you so much for joining us again this week. walker passed positioned as chair of alternatives. >> rand paul was supposed to win seatback. the previous segment was you and charlie. people who are product minded about issues. those folks are at seatback. that is not enough to get you the nomination. as we said before, they have one since world war ii. the whole rest of the party which is the majority of the party, if the rest of the party afterwards together and get behind it. all of the product based republicans ranging from libertarian -ish national security -- and others saying this is an acceptable choice for us. michael rubio is the guy that could be a radically deepen nominees. marco rubio is more tolerable. quite fondly viewed by the republican establishment. melissa: as long as he has water. i want to get your take on this. jeb bush will not sign pledges. i want to bring in kde. the news editor for townhall.com and a fox news contributor. what do you think about that? is that a good idea? >> it is a good idea for him long-term. i am not so sure it sends a good message to primary voters. certainly something that the grass roots activists have been campaigning on saying no new taxes. taxed enough already. long-term, it is a good thing. it saves in the and. in the primary process i am not sure it looks so great politically. melissa: he told palm beach that he is the best governor in america. >> the concern is for the anti-tax activists. the world has changed a lot since jeb bush was in office. the person he had on display was a very kind negative guy. nicknamed for vetoing so many bills. if he does not if he's not willing to make peace with the republican base that is very skeptical of him he is not ready to bury the hatchet with these folks and let them know that he can be their guide. >> meanwhile hillary clinton could formally announce her candidacy. this is according to reports out of the "wall street journal." there is danger in that. >> well, there is. it seems like it is early because she is the only one running. she would be the first one to jump in on the democratic ticket. fundraisers on her side are saying we will not cut a check until things are okay show. yes, it poses a danger. it allows republicans to turn their attention away. coming up with a land to defeat hillary clinton. a lot of people think that her ideas are old and they want to move towards the future. we will not write to multimillion dollar checks. >> , hel or high water the clintons never have any trouble coming up with money. thank you to both of you. appreciate your time. the nasdaq hitting levels we have not seen in 15 years. new highs for the dow and the rustle as well. what is inspiring it? nicole: we know we had a great february. that momentum continues. a record-setting day. take a look at some of the movers here. a lot of consumer stocks doing well today. visa at an all-time high. overall, the consumer's discretionary group doing very well. melissa: thank you so much. call it the grain drain. now with the snow on the ground and less money in their pocket, farmers are gearing up for 2016. >> farmers just doing too good, melissa. that is corn coming out of a massive and that a just built to handle these record harvests. that is 1 million bushels in that then. i tell you look at what it has done to core prices. farmers are looking at, this year for every acre that a plant, losing money. that will be troubled to the farmers, but all the companies that support them. >> producers just will not be making a profit. they will not be spending money on new equipment and other things. >> take a look at what he said. the largest single year sales decline in the company's 178 year history. the income barely half of the 2013 peak. it will not be pretty on the farm this year, alyssa did the shore to watch strange inheritance tonight at 9:00 p.m. to never before seen episodes. jamie colby will be featuring a family that inherit a 134-foot thermometer. a woman perceives a foyer prevent tree stump dating back to the civil war. also a dream coming true. spring may be just around the corner. more snow could be in sight. famous for being famous. just what we all need. at the end of the day it is all about that car -- in cash. ♪ ♪ melissa: i am melissa francis with your fox business brief. passengers on united will not be able to use those tickets. that is according to the federal government. they will not force the airline to honor them. american suing the hospital where she contracted ebola. she still suffers from nightmares. the hospital failed to provide the right training. you do not want to miss this. bill gross joining gerri willis at 9:00 p.m. eastern. do not miss the comments on the fed. that is the latest from the fox business network. giving you the power to prosper. ♪ melissa: marches here. spring has not quite strong. freezing temperatures. turning the solid body of water into the only faa approved ice runway. can you believe that? boston 3.5-inch is away from breaking the record from the snowiest winter. 107.6 inches of snow. not pleasant. janice dean is in the weather center with the report. >> does this make you feel a little bit better? >> kind of. you do not want to be number two. the number one. look at the windchill. certainly still cold of cost the upper midwest. the west is getting in on some of this cold air. and the next storm system. and towards the southwest we will see beneficial snow in that region. this storm system is what will make its way across the u.s. in the next couple of days. we have blizzard advisories for parts of south dakota and minnesota. this is tuesday. chicago, a wintry mix. look at what happens tuesday into wednesday. moving into the northeast. boston this could be the one that brings you to number one. >> i love your spring sweater. thank you so much. one "wall street journal" reporter canceling his plans for a whole month. the results were more than surprising. listen to what a reporter told my colleague earlier on opening bell. >> the big take away is that there is the potential for an enormous threat to the wireless industry to calm from the bottom up. there are already companies out there proving this. >> joining me now is jolting kent. we did this recently in our house. we turned off everyone's wireless carrier. we only did wi-fi. you can do it. it is hard, though, you could be out of wi-fi range when somebody tries to reach you. >> i think that this is a really good experience. seattle and the palo alto area, of course. we could do much more. >> a huge disruptor for the wireless carrier. >> it is. companies like sprint are already doing it. you have a private label provider. you can get it for like $10 a month. these guys are already spending heaps of money. i think they have these high dividends. they need to earn a lot of money. melissa: how do they make up for that revenue then? you could see there are so many kids out of college now that do not have cable god forbid, they find a way to save money by using tech knowledge ease. >> they provide your basic stuff at home. you can get wireless hotspots in different parts of where you live. they invented ties you to stay with them. >> i think it will be very tough. verizon has been slower than the rest. no kidding. this is a pretty big threat to them. >> the content may be one of the solutions. think about snap chat. melissa: that is a good idea. thanks guys. robert downey junior's new contest to give you a day in the life of a superhero. you will not believe what people are paying to see this. you can never have too much money. ♪ the real question that needs to be asked is "what is it that we can do that is impactful?" what the cloud enables is computing to empower cancer researchers. it used to take two weeks to sequence and analyze a genome; with the microsoft cloud we can analyze 100 per day. whatever i can do to help compute a cure for cancer, that's what i'd like to do. hi, melissa: whether it is on wall street or main street, here is who is making money today. $15,000. fans desperate to attend. the first and last time the band will play without front and. fans of ironman tony stark is getting one lucky winner the chance to fly to l.a. and live just like his billionaire dirk. there is the new avengers preminger right afterwards. approaching the last hour of trading. nasdaq 5000. we have already done it a couple of times today. overall, so long. as you all know, benjamin netanyahu, the israeli prime minister on that eve of and major thing a fox business exclusive. how passionate is he about this? is he just focusing simply on working his way through 3d printing. what are we looking at? a potential dream trip from new york to l.a. already has 100 people working for him to create the hyperlink. he is joining us as he follows the word of the pied piper. if it is safe, i am getting in one and going to l.a. melissa: if you spent all weekend binge watching house of cards, you are not alone i friend. at the end of the day it is all about money and frank underwood. ♪ ? not being on this phone call sounds good. it's not muted. was that you jason? it was geoffrey! it was jason. it could've been brenda. at ally bank no branches equals great rates. it's a fact. kind of like shopping hungry equals overshopping. melissa: making way for the next generation of kardashian, reports out that kylie and kendall generaller could be getting their own spin off series, thank goodness. all right. brands going all in for the house of cards, companies using any excuse to tweet about the series return over the weekend. bruce trickel, ceo of trick el brands jack howe back as well. red bull is one of my favorites. they said, to be frank, you're going to need us this weekend, house of cards. they got in the red bull product that made so much sense because it was the flag from house of regards upside down. but also the product itself. you need red bull to stay up and binge watch the whole thing. >> i didn't need it. i binge watched the whole s&p. melissa: did you? >> i did. i love house of cards. i think red bull nailed it. they turned the flag upside down. it's not so easy to do. if you look at what char min did they ran a cute ad, but they didn't turn the flag upside down. what that says to house of cards fanatics is you're not one of us. melissa: yeah. >> so it put them backwards because people realized it was just a stunt. melissa: yeah, that one was silly, house of p clean. arby's, where is everyone? thanks, house of cards. they're kind of poking fun at themselves. they were, like bruce -- >> i tried not to watch every one, but as soon as they ended -- melissa: jack, what do you think? >> binge watching, you want to hit delivery pizza, wine in a box and then probably weight watchers for when it's all over. melissa: yes yes! no. >> energy drinks, maybe tied for the clean-up afterwards. melissa: or chowbt chili's -- how how about chili's? we're feeling hungry, house of cards, they showed ribs, which is one of the main things -- >> going out the door to a restaurant shows ambition. melissa: bruce, real quick. >> they could have figured out a way to deliver. melissa: there you go. that's all we have for now. i hope you are making money today. liz claman and countdown starts right now. liz: if you're in the nasdaq you are. thankthank you melissa. nasdaq 5,000, the last time we saw that number, we were talking about mad cow disease in europe, rolling blackouts on the west coast, and tom hanks was trying to survive in that movie "castaway." the nasdaq chock full of tech names hit 5,008. >> years ago. right now we are at 4 995 so we're watching that. halted and then slashed, the stock of lumber liquidators after that brutal "60 minutes" report which revealed
cap off the best quarter since 2004. we have a labor market improving. gasoline prices which remain low. the number coming in at 93. this is university of michigan's confidence reading. 95.4 is where it was in february. the average from january through march was the highest we have seen ends the third quarter of 2004. if you look at the various components within confidence you want to look at the inflation expectations in particular. it looks like inflation expectations over the next year remaining at 3%, which is what economists had predicted. we will continue to look through these numbers. overall, not seeing as much of a drop in the confidence number as had been anticipated. matt: thanks very much. breaking the march news, the consumer confidence number they are at 93. -- number there at 93. the top business stories of the morning. big news out of washington. the most powerful democrat in washington will retire. harry reid will not seek reelection. he has been the democratic leader for 10 years. he says his promotion to minority -- the motion to minority leader was not the reason, nor was the eye injury he sustained in january. harry reid: we have to make sure the democrats take control of the senate again. i feel it is inappropriate for me to soak up all those resources on me when i could be devoting those resources to the caucus, and that's what i intend to do. matt: is most like we successors are senator richard durbin of illinois and senator chuck schumer of new york. the u.s. economy grew at a 2.2% pace in the fourth quarter. consumer spending rising at the fastest pace in eight years. the report showed corporate profits falling in the last three months of the year capping the worst annual performance since the recession. the federal reserve's vice chairman says more work is needed to protect the financial system. speaking in germany during a conference on financial stability, stanley fischer pointed to risk pcs in short-term wholesale funding markets. -- risk pcshe sees in short-term wholesale funding markets. >> you do something and the other guys aren't going to sit still. they will figure out what they are still allowed to do and do more of that. matt: he says things are looking up for the non-bank financial industry. he thinks it looks less vulnerable since the financial crisis. we are learning more about the pilot who apparently deliberately crashed a jet into the french alps, killing 150 people. investigators say they found torn up medical documents from his doctor declaring him unfit to work, along with a torn up sick note. he apparently held -- hit his illness from his employer. -- hid his illness from his employer. >> investigators searched the apartment for clues and other indications as to why the pilot would have done the deed. matt: yesterday, the lufthansa ceo said the pilot had recently been found 100% fit to fly. egyptian officials are saying an invasion of yemen is in the planning stages. planes from saudi arabia and regional allies are bombing rebels in yemen backed by iran. they want to form a strikeforce -- their plan to form a strikeforce is expected to get the ok of the arab league tomorrow. it is turning into a proxy fight between iran and saudi arabia. the undefeated wildcats go wild. kentucky trounced west virginia by 39 points to advance to the ncaa tournament finals. kentucky is unbeaten in 37 games this season. they will be joined in the round of eight by notre dame wisconsin, and arizona, all winners last night. four more games are on tap. i expected this. i predicted this. kentucky will go to the final four and then on to the final game and win the entire tournament. you heard it here. lisa: honestly, i don't know anything about college basketball. full disclosure, the only thing i know is that kentucky is expected to win by about 45-0. matt: because i told you, right? lisa: you and my husband. matt: i actually was the number one player in our celebrity bracket contest, as much of a celebrity as i am, on the first day, and then dropped to almost last place on the second day of the tournament. that shows you how little i know about basketball as well. lisa: one thing that i'm really watching this week, there was a great story on bloomberg today about how unpredictable it is getting, when you look at the wall street forecasters and what their oil predictions are, they are all over the map. they are diverging the most since 2007. it highlights to me just how confident it is to determine what the dynamics are under the oil markets. matt: i called the bottom in oil as well. so, i feel like i'm doing something right here. i didn't think oil would go below $40 per barrel. i've had this conversation with alix steel a number of times. she thinks we could still go lower. a number of analysts think we could go all the way down to $20 per barrel. lisa: others say we will go up to $90 per barrel by the end of the year. this is what is keeping the longer end of the treasury curve really influx right now, a little bit. matt: i'm just looking up a barrel of oil, trading for $49, $.85 -- $49.85. an incredible rise over the past week or two in oil, almost double market. -- almost a bull market. lisa: more on the surprise retirement of senate minority leader harry reid. we turn to our chief washington correspondent, peter cook. thanks so much for joining us. what are you hearing is the real reason behind why senator harry reid is truly stepping down from his post? peter: first of all, anyone who has been on capitol hill and seen harry reid up close and seen the injuries he suffered on january 1 when he had that accident at his home in nevada knows that those were very serious injuries. he is 75 years old. he has set up to this point that he was planning on running for reelection. he has been on capitol hill for three decades. this decision is not a total surprise. given the injury, given the age given the fact that he was facing a serious reelection fight in nevada. he insists he would have won that fight. i know a lot of democrats here in washington think he could have won that fight, but this decision paves the way not only for new leadership in the senate side for democrats, but also the possibility for a new senator from nevada. most likely potentially not a democrat. they could lose this seat now that harry reid is not running. lisa: who is the frontrunner to take his spot? peter: i've been talking to a lot of folks. the since i'm getting is there a two people in waiting for this position. -- there are two people in waiting for this position. senator chuck schumer and senator dick durbin. durbin outranks schumer right now as the number two democrat. the sources i'm talking to suggest it is schumer's job more likely because of his close ties to the younger generation of senate democrats he helped elect in 2006 and 2008. he has been in waiting for this job right now, it looks like he has the edge over dick durbin. dick durbin has been underestimated before. this could turn into a public fight, or it could end up being something much less than that. matt: peter, how old is too old to work in washington? i mean, 75 76 sounds like a pretty good age to demand retirement. i know that john mccain will be 80 by the time he gets a chance to run or not in 2016. but we had senators who are much older than that -- but we have had senators who were much older than that. peter: if you walked the halls of congress and you saw who is spry with it, on top of things, age is not always the best indication of that. there are veterans of the senate who in their 70's and 80's, can still handle the day-to-day details of the job. harry reid was a very active guy. he has suffered some health issues, but no one has really suggested that his mind had been hurt in any way. just ask republicans the kind of fight he has been giving them the last couple of weeks. age is really not the factor here. for a lot of these people it is effectiveness and whether or not they are enjoying it. this is not a great job to have these days. lisa: you think this is going to change the way that senator reid will run things in the next couple of years? peter: he's got more than 20 months left as majority leader. certainly, he loses a little bit of juice now that he's not running for reelection, but it does allow him to focus exclusively on what's happening in the senate and to do what he can to try and get other democrats to set the stage, if you will, or democrats to try and take back the senate in 2016. he gets to focus on helping other democrats as to -- as opposed to focusing on his own race:. -- race back home. lisa: who is the next surprise retirement? anyone you are watching? peter: there are a couple of folks who have been removed. pat leahy of vermont has been there a long time. we just got dan coats announcing he is leaving the senate for the second time. he retired previously, then ran again, won one term, but says he is not coming back again. we will see. this is clearly the biggest retirement we will see, with the greatest impact on the body itself and on congress, the departure of harry reid. lisa: thanks so much, chief washington correspondent peter cook. matt: coming up, a financial policy advocate who took on bank of america in 2009 is back. he is taking on thanks again. and citigroup -- on bacnnks again, and citigroup. lisa: is it time to unload your puerto rico debt? ♪ lisa: time now to bring you up-to-date on the top stories of the morning. the world's largest cruise company reported earnings for the first quarter beating estimates. the cruise liner also cut the top end of its fiscal 2015 profit forecast. the report comes after carnival announced lands to boost its fleet. it will add nine new ships in 2019, part of an effort to lower fuel costs and enhance onboard amenities. a surprise beat for blackberry. the smartphone maker reported profits of numeral four cents per share. analysts had expected a lot. they can think cost cuts, and price hikes -- cost cuts and price hikes. sales fell 32%. the ceo is trying to transition the company away from phones. shares are rising 1%. two people are still unaccounted for after the collapse of three buildings in new york's east village. 19 people were injured, four critically after a powerful blast sent flames pouring into the -- soaring into the air. the luminary evidence suggests a gas leak. utility company inspectors -- the preliminary evidence suggests a gas leak. firefighters worked throughout the night without pockets of fire. we will go live to switch when for latest on the nuclear talks with iran. -- to switzerland for the latest on the nuclear talks with iran. does puerto rico have any hopes of a recovery? in the next hour, dreamworks animation's last stand. it released its only movie this year this weekend. what happens if it bonds? -- bomb? -- bombs? matt: i had not even heard of it. had you? maybe it will do well. we will discuss that. right now, i want to talk about banks. the health strip can -- he helped strip can lewis -- ken lewis of his position at the other day. he is a financial policy advocate. he is pushing for shareholder votes that each company. -- votes at each company. at citi to change rules on executive pay. he joins us now from washington. thanks so much for your time. let's talk first about the proposal. then i want to ask about how you get them in there. you are not proposing to break up citi just to consider the idea, which you hope they would have done as good managers. guest: at its core, this is a modest proposal that asks for something that management and the board should always be insisting on and providing for shareholders. i do believe that bank of america would be worth more in parts. my view is shared by others including a leading bank analyst who recommended just yesterday in favor of our resolution. lisa: bartlett is there a model for your proposal? is there a bank that is doing it right? bartlett: i think there are some banks that are slimmer and more focused wells fargo is somewhat smaller than bank of america and citi. but it is focused on what i would call more traditional banking. it does not have the swap spoke -- swaps book that bank of america and citi do, which i think is the area of danger. these banks and the economy would be better off with more of a separation between what the banks can do with the tax-subsidized deposits that they should be doing, in my opinion, socially-constructive things, such as commercial lending. in the end, i think that is more profitable and sustainable. matt: i want to hone in on how difficult it is for shareholders to put proposals forward for a vote. it seems that bank of america works against this kind of thing, even spending money hiring outside lawyers to try to get the sec to block them. bartlett: to the extent that shareholder, shared ownership is supposed to represent ownership of anything, such as your own home, that's not really the case. there are so many barriers in between a shareholder and his or her ability to express their ownership prerogatives. for example, jp morgan engaged in massive fraud. one might want to call up the board of directors except that one finds the chair of the board of directors is the very person who is the ceo. then you say, well, i would like to have those two jobs split. in the company spends millions of dollars fighting that proposal. at bank of america, there is a 51-page legal opinion, that i'm sure cost more than i'm sure at least my hourly salary to produce, to try to prevent this resolution from appearing on the ballot, and it was authored by people who not too long ago, worked at the sec, in the same division that then ruled on this proposal. matt: the sec blocked this proposal last year. this year, you got it through. whose side are they on? the side of owners or management boards? barnett: too often, the sec under chair white misunderstands their mandate to be on the side of shareholders, in my view. it was expressed by mike capuano . lisa: a lot of people would agree with you, especially after the 2008 financial crisis. some banks clearly seemed like they were too big or at least engaging in some of the riskier practices you are talking about, but there are some efficiencies of scale with big firms that make it cheaper for the end-user. do you think that bank depositors and other clients of the bank are willing to pay more to have smaller banks? barnett: well, let me address your premise and that is the economy of scale. in this case, there may be a sweet spot but i think we are a couple of trillion dollars above that sweet spot when we are talking about 42 -- $2 trillion at bank of america and even more with j.p. morgan and cit i. -- citi. something closer to $100 billion is where i think that economy of scale may peak. be on that, you have dis -- b eyond that, you have diseconomies of scale. with bank of america, for example, over $10 million for a mortgage fund, it falls under the category of mismanagement. they are too big to even keep themselves honest. matt: at the very least, management boards share a duty to consider all options for maximizing shareholder value. let me ask about the proposal at citi. you proposed that management cost haywood -- management should propose a long-term view over short-term gains? barnett: it is an idea embraced by the new york fed president and the fed governor. in this case, senior bank management, for example at city -- seeciti a sizable part of that would be deferred for a number of years. i propose 10 years. out of that hot would come -- that pot would come money that, if the bank engaged in violations of the law and had to pay a fine, that pot would be used. the citigroup fine of $7 billion was paid by shareholders. shareholders were certainly not culpable. management is. the only issue is my proposal says, whether or not the government or the company concluded was that manager that was culpable, he or she would never less -- would nevertheless have their pay used. in my opinion it would harness the collective interests of all of management to keep the company honest if they see so many in the cubicle or the corner office down the hall engaging in some questionable activity, it would be in their interest to stop that, because their pay would eventually be docked as well. matt: the concern is that that would disadvantage that company in attracting the best talent, which would rather go somewhere else and get the cash payout. barnett: it would be different challenge. matt: thank you so much. bartlett naylor from public citizen, appreciate your time. we look forward to seeing what the companies do on these proposals. lisa: we'll be back with more after the break. ♪ matt: secretary of state john kerry is in switzerland for last-minute talks with iran. is there enough time to reach a landmark deal on that country's nuclear program? >> live from bloomberg headquarters in new york, this is "market makers" with erik schatzker and stephanie ruhle. matt: welcome. i'm matt miller. lisa: i'm lisa abramowicz. matt: the top business stories we are following on this friday morning, it appears that the pilot of the doomed german wings -- germanwings flight hid an illness from his employers. andreas lubitz apparently intentionally crashed the plane into the french alps. investigators found other documents showing he was unfit to fly. here is the police spokesman. >> we have secured personal belongings, documents, etc. altogether, two boxes and a bag. these items are being scrutinized on their relevance regarding this case. we are hoping for clues regarding this man's. modems. -- man's motives. matt: there has been no evidence of political or religious motivation. senator harry reid will not seek reelection. he sustained a major eye injury in the next accident earlier this year, but says that is not what he is stepping down. here he is in a video statement explaining his decision. senator harry reid: the decision i've made has absolutely nothing to do with my injury, nothing to do with my being minority leader, and certainly nothing to do with my ability to be reelected, because the path to reelection is probably easier than anytime i've run for reelection. matt: is most likely successor -- his most likely successor as minority leader is dick durbin or chuck schumer. overall, the first quarter was the best for consumer sentiment since 2004. 11 years ago, by the way. american -- an american astronaut is planning to leave earth today, writing a russian rocket -- riding a russian rocket to the international space station. he is scheduled to stay in space twice as long as any u.s. astronaut has ever stayed on the space station. he will be joined by two russians, one of whom also plans to stay in space for about a year. why not make it a full year? diet coke seems to be falling flat. according to new data from beverage digest, pepsi took over as the number two soda brand in the u.s. last year. regular coca-cola is still the big leader. americans continue to flee diet soft drinks. diet sodas shrank faster than their sugary counterparts. indiana governor mike pence signing into law a religious ejections law -- religious objections law. the measure would prohibit state and local laws that "substantially burden the ability of people to follow their religious beliefs." there is some backlash already. salesforce canceling workers' plans to travel to indiana. mark benioff -- marc benioff tweeted, "pay attention to what is happening in indiana and how it will impact your employees and customers. we are canceling all programs that require our customers and employees to travel to indiana to face his termination." lisa: the u.s. -- face discrimination." lisa: u.s. wants iran to prove it is not developing a nuclear weapon. iran wants an end to crippling sanctions. let's bring in indira. what are the odds of something being announced this weekend? indira: just moments ago, we heard the british foreign secretary, philip hammond, say that he believes they are more than halfway to a deal. that seems to point in the direction of both the iranians and americans who have said they are making significant progress. the problem is, more than halfway there does not mean you are there. both john kerry and his iranian counterpart have pointed out it is almost like a rubric skew -- a rubik's cube. the iranians want sanctions relief. many business people and oil markets are waiting -- watching to see what that might be. nothing is happening until major gaps are bridged, and we don't know yet if that's going to happen. lisa: how much is this deal really between the u.s. and iran? how much support does the u.s. have from, for example, european leaders that are, right now kind of struggling with the sanctions and are losing money? the sanctions have already done their work. there is no more that they can do. how much are they really defined whatever the u.s. is going -- really behind whatever the u.s. is going to agree to? indira: you make a really good point. the europeans are maybe tired of sanctions. at the same time, everyone, including the europeans, the russians, the chinese, have said they are strongly behind this that the international community sees nuclear safety and heating the world safe from iran having a covert bomb as more important than the economic peace. if there is an iran deal and iranian oil starts flowing again, it will depress prices. russia is already suffering. even so, they have not interfered in any negative way with the negotiations and they are pushing very much towards a deal. if there are going to be any sanctions we are talking about the summer and beyond. a final deal would not be negotiated until the end of june. matt: how much of a problem is it that our allies from saudi arabia are currently bombing iranian allies, as far as rebel forces are concerned, in yemen? there is essentially a proxy war that we are one degree of separation away from. indira: excellent question. it is an excellent question, and it seems the iranians have brought it up at the talks and they are not happy. at the same time, the iranians have managed to keep all the other issues, like syria, like yemen, saudi arabia, out of the talks, we are being told by officials involved in those talks. while it has been raised, it is not actually interfering with the nuclear question. i think they are trend to look at the broader picture. both iran and the united states are under real pressure. if they don't get the deal by march 31, certainly in washington, you will see pressure on capitol hill to put new sanctions on tehran and to pass legislation that will give -- on iran and to pass legislation that will give congress and upper down vote on anything the white house agrees to. my own feeling is they will probably get agreement. matt: how much of a problem our opposition forces in congress to the president's -- p[rroblem are opposition forces in congress to the president's negotiations? indira: ultimately the president believes he has veto ability to overturn sanctions. he has said and the europeans have agreed that if they were to powder sanctions on iran now before a final deal is reached, it could cause negotiations to collapse, and they don't want that. i think the president still has the ability to veto any new sanctions, but it is not something he wants to have to do. he would rather be able to show up and say, here is our tentative deal, give us three more months to negotiate. that's what they are hoping to bring back to washington next week. lisa: thanks so much, indira lakshmanan. matt: coming up, if you own any of these -- lisa: muni mutual funds. matt: chances are, you own the reagan that -- own puerto rican debt. ♪ matt: time to bring you up-to-date on the top stories of the morning. the u.s. economy expanded at a 2.2% pace in the first quarter, led by the biggest gain in consumer spending in eight years, yet the rate of growth is expected to slow this quarter. blame the winter weather and the strong dollar. . blackberry reporting a surprise quarterly profit. it can thank cost cuts and price hikes but sales fell sharply from a year ago. the market share has fallen to less than 1% worldwide. it is trying to transition into a software and services company. shares today are rising. and lufthansa is changing its cockpit rules after the apparent deliberate crash of a jet into the french alps. it will start requiring two people in the cockpit at all times. that might have prevented a tragedy in france. the copilot apparently locked the commander out before beginning the descent into the mountains. those were your top stories. coming up, an update on the bloomberg charity bracket. which business titan leads the pack? you could probably guess if you have been following. and the dreamworks animation release, the only one of the year coming up this weekend. ceo jeff katzenberg is facing an uphill battle to turn his studio around. ruth porat may be leaving morgan stanley for google. 70 million reasons ruth porat may be leaving morgan stanley for google. you get paid a lot more on the west coast, it seems. lisa: paradise lost in puerto rico. legislators want to hold a referendum which would allow the islands to default. our next guest has a piece of advice for puerto rico bond investors, get out now. she is the ceo of envision capital management. how are you? thanks for joining us. why do you want people to get out now? guest: well, i think this is a feeder complete -- a fair accompli. -- a fait accompli. i care about the little guy who has debt. puerto rico has been mismanaged for decades. projections of revenue have never met their goals. you have 13.7% unemployment. all they have done for years is paper over their problems. now the rubber is meeting the road. i want the little guy to say, ok, i have to take my lyrics and take my lumps -- my licks and my lumps. this is going to be the biggest default we had ever seen in muni land. matt: what can puerto rico refinance this debt like a normal government? why not continue to borrow into the future until our grandchildren's grandchildren have to pay for it? lisa: if you've got a 13.7% unemployment rate, that could be a problem. marilyn, it is a good question. marilyn: this is what they've been doing for decades. they have been papering over and issuing more and more bonds in order to make the payments that they needed to pay. now a direct answer is you know, puerto rico yields are around 10%. if they were to issue 10% bonds and they cannot pay what they have now, you have an implosion on your hands. this is an area with $70 billion of debt. how bad will the collateral damage be when they do default? that is the big question. let's look a little bit back in history at detroit. detroit's bankruptcy was $18 billion. the analysts said there won't be much collateral damage. well, there was a little. some of the citizens -- cities around michigan had to pull their municipal bond offerings but they eventually came to market. $70 billion is a whole different animal. i think there will be some collateral damage. will it be everybody runs like lemmings out of their municipal bond funds? i don't know the answer, but this is going to be a seminal event. matt: let's put this in perspective for viewers who aren't aware, though i figure almost all retail investors are aware of the fact that these are triple tax-free bonds. when i first got out of college and started my very first investment account and called up my buddy who just got out of college and started his first job inviting -- advising investors, his first piece of advice was buy triple tax-free debt in puerto rico. it's a no-brainer. marilyn: that was then. everything has changed. the retail investor needs to look under the hood. etf's, municipal bonds -- they need to look in and see, do these funds hold a lot of puerto rico bonds, because what they have already seen is the net asset value go down on those particular bonds. if the income goes down because of a default, then they are going to be really unhappy. matt: i want to try to put it in perspective to tell people why. obviously, not everyone owns detroit debt. everyone seems to own puerto rico debt or did back then. why don't professional investors know all this? why aren't they already out? why hasn't everyone institutional already run for an exit? marilyn: the institutions have a lot of availability that the retail investors don't. they could probably go to the credit default swap market. march of 2014, puerto rico came out with a $3.5 billion deal 8% due in 2035, and that was mostly in institutional. the institutions are fine. it is the retail investors, even though they know that something is coming down the road, i don't think they know the magnitude. lisa: marilyn, given how dire the situation is, why are yields only 10%? somebody still buying, no? marilyn: you are right. it seems like it is a misplaced yield. it should be significant and higher. the reason being, the muni market is so sought after. there is a voracious appetite for all munis no matter what the pedigree is, ingress and grade -- investment grade, medium junk. that has a lot to do with it. i have been in the muni market and the bond market for decades, and i really would have thought the yields of prices would be even worse. i think people should not be swayed that it is only 10%. i think they need to know how dire. that is -- how dire that is. matt: you mentioned meredith whitney. who is the next puerto rico in the u.s. -- u.s.? marilyn: i am very negative on chicago. chicago's finances rms -- finances are a mess. talk about unfunded liabilities which puerto rico has. talk about plugging their revenues with bonds. and the unions have a jackboot on the net of the politicians -- on the neck of the politicians in chicago. lisa: so marilyn, what would it take for you to recommend that investors go back to puerto rico? marilyn: nothing at this point. lisa: well, then. marilyn: i have had clients that commie and say what do you think about buying 50 puerto rico -- that call me and say, what do you think about buying 50 puerto rico bonds? i would not step in front of this. that's for the hedge funds, the distress guys. and bloomberg has quoted a lot of these people very frequently saying they think there is going to be terrific opportunity. there may be but i think it is not for the retail investor. even if they extinguish all their debt, when you've got a welfare island, in which less than 700,000 people are working in private industry and the rest are on some kind of welfare or eight or working for the government, those numbers are unsustainable -- of welfare or aid or working for the government, those numbers are unsustainable. lisa: some pretty gloomy words from marilyn cohen, ceo of envision capital management. matt: we are going to take a quick break. we will be right back with a lot more, including the winner of our ncaa -- the leader, i should say. it is definitely not me. i'm going to check it out. stay with us. ♪ matt: last night, the undefeated wildcats went wild. they trounced west virginia to advance to the ncaa final eight. the wildcats will be joined in the round of eight by notre dame, wisconsin, and arizona, all winners last night. let's look at the standings in our charity bracket. 36 of the big names in business agreed to pitch in $10,000 apiece. ebay's ceo john donahoe is holding onto the top spot, just edging out jimmy dunne. tie for third, dwight anderson and tilman fertitta. if donahoe holds onto the lead his chosen charity is second harvest food bank. three of his final four remain in the hunt, so he is looking pretty good here. i just checked. i am number 43 out of 47. lisa: it could be worse. you could be 47. matt: 35 men and women in the celebrity bracket. then we at bloomberg added ourselves to this celebrity competition. betty liu is actually doing the best of all of the bloomberg talent, so to speak. she is number seven. lisa: what was your charity? matt: what is betty posterity -- betty's charity? we don't put in $10,000. the top six of the whole group, including anchors and reporters, are investment professionals or ceo's. they are going to probably win, and unless betty comes up and john donahoe and jimmy dunne fall down -- i'm not sure what she has for her final four. kentucky versus arizona and virginia versus duke. if it is duke-kentucky, she stands a good chance. i'm rooting for her. i am rooting for betty liu. jim chanos is celebrating. he sent us this photo of him watching the wisconsin game. he is from the badger state but did not put them in his final four. he is tied for 10th place. he has kentucky winning it all. as lisa pointed out, everyone has kentucky winning it all. take a look at the standings, bloomberg.com/charitybracket. lisa: coming up in the next hour, we are talking dreamworks. ♪ .. madgood morning. it is friday. we are excited about that. a let's kick off the second hour with top business stories of the morning. a limited liability payments after the jet crashed this week. investigators think the german wings copilot intentionally flew into that mountain. a specialist means -- especially says that would mean on rewards to the victims families didn't medical documents found he was unfit to fly. he hid that from his lawyer. shoppers are getting credit for the economy's fourth-quarter expansion. the biggest gain in consumer spending many years led the way. capping off the best quarter in 11 years. a big pay raise for ford ceo. his 2014 compensation was boosted to $18.6 million. losses overseas increase. he was cheap operating officer. he took over for alan mullally who was at $22 million last year. blackberries fourth-quarter results surprised wall street pleasantly. analysts surveyed expect increased prices for smartphones but sales were down from a year earlier by nearly one third. and a manhattan building exploded yesterday injuring 19 people. the blast brought down three buildings. a utility company inspector decided plumbing and gas work done earlier in the day was deficient. we are about 90 minutes in the trading day. the scarlet fu is in the newsroom with some of the morning movers. you have energy, tech, and financials. these are the most heavily weighted groups in the s&p 500. the index can't make much headway. a gain of 1% for the dow industrial. oil is consolidating after a five-day rally that added 13%. a supply disruption appears to be easing. goldman sachs put out a note saying the unrest is unlikely to have much effect on the supplies in the near term. that theme of oversupply is still in tact. a the final read of fourth-quarter gdp came in as consumer spending was stronger than anticipated and it drove growth. the headline number was growing at a slower than expected rate. the dollar also stabilizing. down 1/10 of 1%. matt: thank you for that update. lisa: investigators have seized materials from the copilot's apartment, including medical documents that showed he was unfit to fly. they join us now from frankfurt with more. richard, can you tell us about the search of his home. richard: we have to be a bit careful in separating what we know and what other people claim to know. the prosecutors have told us they have raided his home, his apartment, his parents house did they found something that apparently covered the day. they tore it up and threw it into the bin. he may not have been fit to fly. we don't know at this point. there have been reports suggesting there have been treatment against mental conditions. there is a hospital saying that is not the case. we have to be careful not to jump into any conclusions here. it is safe to assume that the guide delivered to lead did this. something is probably wrong with it. lisa: the company said they were not aware of anything that made him unfit to fly. some of the stuff suggests otherwise. should the company have been aware to the medical issues that have been problematic? richard: the question is can they be aware? they have strict laws that protect the privacy. a we don't know to what extent the company could have known about any of those challenges the guy may have had. the law does not demand that the airline sent the guy to -- presenting them with checks to say the guys fit to fly. from what i understand germany is stored by some agency somewhere. could they have known or do they have no access at all? matt: german confidentiality laws are so strict that they couldn't even say why the copilot had gone on medical leave after the copilot was dead. there are going to be a lot of changes to rules regarding how many people need to be in the cockpit. do you think german confidentiality laws may have loosened a little bit if they are so tight that they could possibly be to problems like this? richard: if you ask me personally i doubt it. how many people need to be in the cockpit at any given point in time or could we have a scenario where it wants to water down the privacy laws that is something that will be discussed for sure. that is widely the spread in the u.s.. it is basically a consequence of foreign person having to steer the plane all the time. the other guy needs to check who is outside. he has to get up and luck. at the same time he can't steer the plane. it is not so much of a matter of different law, it is a matter of safety and infrastructure is installed on the plane. a lot of differences we need to look -- to look at if we are to make broader statements. lisa: a big weekend for true marks animation. the struggling studios only movie this year is coming up yet what will audiences decide? matt: it is time to play -- it is time to play the yearbook game. this is all our producers is telling us. do you have a gas? -- a guess? i feel like the pool should be a little bit smaller. there are a lot of women in tact for you and i could think of one who runs hp. but i do not know who this is. you can tweak me or lease -- you can tweet me or lisa. lisa bank we will be right back. -- lisa: we will be right back. ♪ lisa: time to bring you up-to-date. major political news out of washington. senator harry reid will not seek reelection next year. he has led the senate democrats since 2005. exercising in his nevada home. he says that is not why he is retiring. dick durbin is his most likely successor as democratic leader. shares of carnival jumped on strong earnings. the company lowered its epf forecast slightly for fiscal 2015. it expects net revenue to rise by 2%. americans are falling out of love with soda. diet sodas shrinking faster than their sugary -- sugary counterpart's. both brands saw sales decline. matt: it is do or die for jim works animation. it is the studios only movie of the year. wall street analysts are worried about what will happen if it bombs. jeffrey katzenberg has been slashing jobs and shares are down 15% over the past year. we are going to bring in paul sweeney, bloomberg intelligence. it is clearly important for this movie to do well. paul: they scaled down their productions because they have been having more misses than hits. this is it. expectations aren't high for this movie simply because dreamworks is on a losing streak. they had to take write-downs on these movies. seven or eight years. they are on the losing streak. they would like this one to break that. they had a kung fu panda, how to train your dragon, a lot of great movies. they were hits. who said my new strategy is everything on one horse? like any other studio it is a hit or miss business. multiple businesses to shield you from some bad box office. they are at the mercy of the box office. they haven't build up the merchandise is like disney has. they are dependent. i am helping out jeffrey katzenberg this weekend, trying to help his box office. the movies are very good. they remain to be good. a much more competitive marketplace. every body is into animation. they are doing it well. dreamworks had computer generation to itself along with pixar. matt: this is a distress asset. is it in play? paul: the company has not put itself up for sale but they have engaged in conversations with a number of people in interests of selling this company. the expectation is the marketplaces are for sale. this could happen but nothing has happened to date. lisa: why would anyone want to buy them if other companies are providing the same kinds of services. matt: they have started this whole animation. paul: if you don't want to go to pixar or to dreamworks who do you take? matt: they have a great library worth a lot. they have tremendous talent in terms of the artist and the writers. jeffrey katzenberg, one of the leaders in the film in -- film business and animation business. a lot of value for the company. it is a question of what the role jeffrey katzenberg will take. who is eating their lunch? who is winning right now? paramount is in the business universal is in the business. frozen is everything. lisa: are plenty of them. matt: i only listen to the grateful dead and the frozen deluxe edition print those are the two cds in my car. lisa: absolutely blown. matt: lisa was asking me this morning, what do we do to make something that is awesome? how do you make everything awesome? paul: it is all about the quality of the film. everything has to come together. they can kind of hedge their bets. if you are dreamworks you are stuck with three films. that is why there aren't many standalone studios that are public. they are part of the big media conglomerates. it is not a business that is great for public shareholders. mapping a fully for your sake. thank you very much. paul sweeney of bloomberg intelligence. lisa: more "market makers" after the break. ♪ matt: researchers whose job it is to pump washington insiders with jobs and regulations that could move markets, then sell that information to investors before it comes really public. josh green wrote about the topic in the latest issue of the magazine and is in d.c. right now. give us a few examples of how this would work. josh: if you have a big bill moving or a big defense contractor, that can have big effect on markets and companies that can give you an advantage as an investor. there are other cases that are in a gray legal area. found out about the internal workings in 2012. unfortunately that is not legal. there is an investigation into that leak. lisa: have these companies get there in case -- get their information? josh: when i was doing reporting for this, calling around to different people a lot of them were pumping me for information. they will call a reporter after a story and say can you tell me more about this. you get the information from anywhere you can and try to find something that is actionable and tradable that you don't have that can provide an investing advantage. this is a gray area. they are in the habit of providing information to reporters and lobbyists spree of the they are trying to find out about these briefings. it is tough because the lines aren't clearly as delineated as one might expect. there has been pushed back from major members of congress to regulate this industry. most recently through the 2012 stock act. most people have been able to prevent the intelligence industry from being regulated. there's no idea how far-reaching it is. matt: is arguably public information. if reporters can find out then anyone can find out. no offense to us. josh: that is what i try to do. the issue is are they getting material nonpublic information even beyond reporters. there are examples of cases where they are. there's a famous case part of the x -- part of the security exchange where news of a medicare hike leaked the day before the announcement. it bunch of the big insurers moved higher. a bunch of hedge funds have been tipped off and made a lot of money. it just shows you there is information the press can't get. lisa: are they getting kickbacks with political intelligence by way of campaign contributions? josh: they certainly get a contributions and one of the messages they used -- they called it for a kickback of information. by virtue of being a donor often they are able to get a center on the phone be able to have a private briefing. they could potentially help some of the firms they are invested in. i keep going back to this term. it is a very great area and profitable one. matt: josh green from bloomberg businessweek. indeed he is getting information that no one else can get. you should read his story about political intelligence. thank you very much for joining us. lisa: if you thought wall street executives were high paid, check out silicon valley. ♪ just because i'm away from my desk doesn't mean i'm not working. comcast business understands that. their wifi isn't just fast near the router. it's fast in the break room. fast in the conference room. fast in tom's office. fast in other tom's office. fast in the foyer [pronounced foy-yer] or is it foyer [pronounced foy-yay]? fast in the hallway. i feel like i've been here before. switch now and get the fastest wifi everywhere. comcast business. built for business. matt: welcome to market makers bang goes good -- to "market makers" on this friday. lisa: scarlet fu is taking a look at some of the notable movers of the session. scarlet: let's start with a company involved in mna. dow chemical rallying for the first time in two months. the dow ceo has set a target of selling as much as $8.5 billion of less profitable businesses so he can focus on higher-margin assets. and genetically modified corn seeds to capture the best shareholder returns. let's move on to carnival. best day in 3.5 years. the lower fuel costs we have seen have helped a cruise line operator beat analyst estimates. fuel prices fell 38%. i want to bring in tesla. registration in china fell 45% in february according to jail lauren capital. bringing in just 10 in january. i guess that was a bit of an improvement there. that was down from last year's fourth quarter. matt: the chinese just don't want to buy teslas. scarlet: weren't there at its of overheating? matt: there were reports of elon musk -- no dealers want to take them did they have had a real issues. that has been a big weight on the stock. the sky's the limit for a stock that is already in the sky. scarlet: this is the enigma for every ceo out there. how do i sell to the chinese it -- chinese consumer. that bank the big problem in china is the pollution. it is a big car. it handles like a dream. i don't understand why the chinese are not buying tesla's. scarlet: it is from power plants, from factories, from buses. matt: passenger car licenses are limited in major chinese cities because whether or not they cause pollution, that is what the public thinks did -- but thanks. lisa: if you thought street competition was rich. google is paying its new cfo more than $70 million in restricted stock and bonuses over the next two years. that makes her one of the highest-paid cfos in the country. this is more than double what she was making at morgan stanley. cory johnson has been crunching the numbers for us. how big is this? is this considered excessive even by silicon valley? cory: it is so big. we have seen a couple of cfos come to silicon valley and command -- the annual basis a 650,000. that is what all the top executives make as base salary. this is big money even by silicon valley standards. it is stocks so we don't know what the ultimate value is going to be. lisa: when people on wall street make a lot of money they are villain eyes. they are viewed as the promised land, the place of innovation. there doesn't seem to be this feeling about these big pay packages. do you see that changing. cory: there is a sense that that is the best practice to align with shareholders. unlike the case of meg whitman in ebay based on non-cap earnings after restructuring cost is creating an incentive to keep the restructuring from going on forever. these are pure stock option grants. in the case of others, a big pay package. you have to be in it to win it. you have to get the stock overtime and deliver longer-term results. at least if they are aligned with the interests of the shareholder without funkiness getting involved and unaligned benefits. i think when you take a look at these pay packages it is at the very top level. google is one of the biggest companies in the world. facing one of the biggest challenges in growing. let's look at what he got to go for twitter. we haven't seen what the actual valuation on the stock is. i think we have a full screen to that effect. a lot of that was in stock. a lot of that was granted to him on the day he joined. matt: how is it so hard for google? what is troubling them? being dominant on the computer. they are trying to make that change happen. they have created a germanic business where they are giving the software away. hoping to grow on other business. maybe they are doing that illegally to build new businesses. impair that to the challenges of yahoo!. chief financial officer at yahoo! has paid significantly less. this is a guy who has to figure out how to save this business. a long-term comp. this is a guy who had to figure out how to sell alibaba asset and figure out how to keep the partnership with the government where he figures out how to monetize the softbank yahoo! relationship in yahoo! japan who has to revise the business from the dead. i'm sure he was looking at the pay package from google. >> i thought they only had to stay for nine months. matt: we are playing the friday name game. no boiler. i just want to throw it out there because i bet you are going to know. this is a woman in tech. class of 1975 in illinois. is that utah? cory: it is also not -- believe hall cogan. matt: thank you very much. talking about the $70 million google cfo pay package. lisa: and what it means for the senate and democrats efforts to win it back. lisa: french police say dna will be needed to identify the remains of things. officials say no bodies of the 150 people killed were found in tact. the copilot's mental health is the focus of investigators trying to pin down the cause of crash. police have searched his home finding documents indicating he could have possibly had a mental illness. indiana governor signing into law a rigid -- a religious objections law. it will let physicists discriminate against a people. they could substantially burden the people -- the ability of people to follow their religious belief you salesforce canceling travel plans to indiana. the ceo says, pay attention to what is happening in indiana and how it will impact your employees and customers. and wildcats run wild for the ncaa tournament. kentucky trounced west virginia by 39 points. they are unbeaten in 37 games this season. kentucky moves on to the round of eight. for more games are on tap tonight. those are the latest headlines. matt: surprise retirement of one of the most powerful democrats on capitol hill. harry reid announcing he will not seek reelection in 2016. harry reid is a fighter. time and time again he stood up to special interests and made sure every one of his constituents had a voice in the nation's capital. let's take a look at the implications with phil mattingly. the question is how much does this matter. is it possible it will be overtaken by a republican? let me take it off with you. >> harry reid is not popular in his home state. he has to figure out a way to win in 2010 when his favors were over 50%. his ability to get out of this race gives him a real chance for potential democrats to ramp up and get control of his team. this will not be in easy race for democrats the matter who is running for the seat. one wildcard is it will be during a presidential year. if hillary clinton is on the top of the ticket, the ability to turn out the hispanic population will be huge. it should have an impact on who the democrat is that replaces harry reid. lisa: it looks like dick durbin from illinois are the frontrunners of this point. are they start to jockey for this position? phil: the jockeying has been going on behind the scenes for some time now. with the injury -- from washington this is pretty fascinating stuff. they were roommates for years here in washington. everybody has been waiting for them to vie for this crown. it is a very powerful position. the early money is on schumer. such a loyal following in the senate democratic caucus. don't under estimate dick durbin. it may play out behind the scenes. to be sure both of these gentlemen would like to be in this position, it is going to be a contest. matt: and insight as to why harry reid is stepping down? age doesn't seem to be a factor here. he has got a lot accomplished even at 75. is it the injury that is taking him out? phil: he is as sharp as he has ever been. it is not mental acuity right to now. it gave him and his wife some time to talk. the injury was a lot. there is recognition getting out on the campaign trail. his disapproval is very high. that is no short issue there. stepping down today is more than a surprise. today he decided to pull the trigger. matt: peter cook and phil mattingly, thank you so much for joining us. we are playing the yearbook game. we are showing you a picture of a woman who graduated from high school in 1975. she is a very powerful woman in tech. you can tweet us at market makers. i've gotten about 20 guesses. big powerful women in tech on each coast. think new york. stay with us. matt: she graduated from high school in illinois in 1975. we don't know who she is. we each have a guess here. you think it is -- i am guessing ginny of ibm. it is ginny ibm ceo. i got a lot of feeds on this. a little less. meg whitman was pulling ahead. i look at pictures of both women now. from that i couldn't tell as much. it was a shockingly long time ago. lisa: don't all seniors have"? matt: that may have caught on in the late 70's. i think that is a 70's generation kind of invention. thank you so much for joining us. i can't believe two hours have gone by. thank you for joining me on market makers. continue watching bloomberg television for interesting news. it is time for bloomberg television to go on the markets. u.s. stocks are attempting to recover from four straight days of losses. even with today's bounceback the s&p 500 paid for its worst week since early january. investors are assessing the latest data on economic growth. fourth-quarter gdp was greater than expected. joining me now for today's options inside his scott bauer senior market strategist at trading advantage. it seems like we are waiting for janet yellen to comment this afternoon. what a she going to say that could be any different from what we heard last week? scott: traders don't want to take a position on this, especially with geopolitical risks. the last thing they want to do is positioned themselves going into yellen speaking. she is not going to say whether we are raising rates in june or september, whether we are raising them at all this year. we will see a real study market going into that. i wouldn't be surprised if we see a selloff before she speaks and going into the close. scarlet: a bit of positioning before she speaks. does it still work? : scott -- scott: janet had to say earnings over the next couple of weeks are going to trump everything. some of those earning estimates have been low here. they will continue this slow trend upwards. scarlet: it is not scheduled to report earnings until april 15 but a preannounced this week. the stock tumbled the most in six years. sandy x -- sandisk cutting its sales forecast. >> unreal how this got hit. it is a real major support. the april 10 expiration i'm going to buy the 63 strike put against it. i love that. i get to collect the credit. if the stock continues to drop that is ok. rather than outright buying it i'm going to have this two week option play on. i don't want to go further than that. i don't want to have that position going into earnings. it is a short-term play. scarlet bank do you expect yemen to be a factor in today's trading? scott: i think all of the geopolitical risks we have seen pop up, i think that may factor in to the selling going into the weekend. i want to give a real quick shout out to my son at indiana university. he is in portugal watching the show now with his buddies. guys, have a great time. scarlet: thank you for joining us. "welcome to money could become aware we bring the best stories and video all in business news. imp pimm fox. more conflict in yemen and why it matters to investors. entry marks animation wants "home to be a hit. and in politics this is top democrat says he is out. harry reid will not seek reelection to the senate. who will fill the leadership role? how to make
won reelection. the labour party not. they likely will have to form some sort of coalition government with the scottish national party. there he is. arriving at 10 downing street as i mentioned, with his wife. he will be making further remarks on the future of the u.k. we will be hearing you any of his comments -- bring you any of his comments as soon as they cross. in the meantime mcdonald's april sales numbers back in the u.s., just crossing. i want to get straight to the breaking desk with julie hyman for details. julie: these number are not as bad as analysts estimated, but the beat is coming from outside the united states. the company has not yet seen progress here in the u.s. overall, the global same-store sales number was down half what analysts estimated. a drop of zero point 6%. in the u.s., the decline was deeper down 2.3%, exactly in line with what analysts predicted. looking at the beach, it is coming from outside -- beat it is coming outside. exley rising 1%. the estimate was 2.3%. in asia, sales fell 3.8%. the estimate was for super drop of 5.8%. -- steeper drop of 5.8%. steve easterbrook saying in a statement -- as you know, he does some revamping recently. his turnaround plans he announced were not quite 80 what investors were hoping for. more sort of a restructuring than a revolution. nonetheless, some analysts are optimistic that some of his efforts will start to bear fruit in the united states. it is not happening yet. betty: reflective of a premarket, not as bad as we expected here with mcdonald's. thank you so much, julie hyman. let's get to other top headlines. the prime minister of greece expressing confidence his country will avoid default. he told the greek parliament a deal with international creditors is near. his finance minister says hicks said -- expects the bailout deal with it two weeks. verify says greece will go down to the wire. it will -- >> it was a frank and from the meeting. we basically discussed about process and i encouraged the greek government to come out quickly with a consistent reform package that can be shared with the eurogroup and therefore can be approved and therefore solve this problem and allow greece to go on toward a longer-term issues and programs. betty: european finance ministers are will discuss again on monday. on a role in the iran nuclear issue, a bill that would give congas a stay in his such deal passed in a 98-1 vote. talks aimed at stopping iran from building atomic weapons are in the final stages. the foreign relations committee chairman calls it a milestone. >> it is a first time in eight years that i've served in the senate than i can remember congress asserting itself and taking power back that had already been granted to the president. betty: the only dissenting vote was by tom cotton of arkansas. the bill goes to the house. president obama says he will sign it. uber reportedly was a better way to find its way around. "the new york times" says the writer company bid $3 billion for mapping business. three german automakers are also bidding. u.s. look to the skies to mark the 70th anniversary of victory day. you can watch the flight streaming live i going to uv svets.tv. and those are your top headlines this morning. another top story, a top headline, the april jobs report due out in just half an hour. according to economists surveyed, likely adding 230,000 jobs are workers to payrolls last month following an increase of just 126,000 at the end in march. that was a -- the smallest in more than a year. joining us with a preview. as you have written with your colleagues so well, this is sort of -- i will don't want to say do or die because it is not, but it is whether we are going up or down. >> it is a moment of truth for the labor market. a lot of was for customers got a shot across the bow -- forecasters got a shot across the bow. i think they may be missing the bigger picture that the factory sector is indeed slowing strong dollar part of the story. we saw a big regulation of inventories in the first quarter. when inventories build and in factories tend to pull back further. that tells us that we're off to a slow start in the early month of the current quarter. jobs data, i believe, are likely to confirm that. and we will see march was not an anomaly. betty: you believe it will not be an anomaly. >> right. we will be stronger than march, but i don't think a strong is the consensus is expecting. if we look back, and this was a big mess by the consensus in march, in the past, when we have seen the big misses the consensus doesn't learn a lesson right away and you tend to have another miss in the same direction the next month. i think the risk is here that we will fall shy of the 230000 the consensus anticipates. betty: you point out we may hear the fed thinking pre-much after the numbers, because at 9:40 5 -- >> dudley speaks. he is speaking on community banking. he can reflect on the jobs data. we won't have long to wonder what the fed's interpretation of labor force participation, unemployment rate, and the headline jobs -- betty: if the numbers come in and there is a death or big does another big miss what do you think the fed's thinking? >> wondering if even moving in september or later this year is still in the courts. the fed's china sell the notion of a one and done or two and done approach to rate hikes this year, but if we see more evidence the economy is really struggling against the headwinds, then another primary issue for the labor market, then they may have to start even talking down september. betty: maybe forget september and just look out to 2016. karl, thank you so much, carl riccadonna chief economist for bloomberg intelligence. her top story david cameron arriving at 10 downing street. his conservative party winning a stunning majority, claimed the path for cameron to remain prime minister. joining us with the latest is caroline hyde in london. a pretty big result. the labour party not going as big as we thought, not winning the day so what happened here? caroline: you said the word stunning. the poles got it wrong. instead, we see before david cameron. he will be taking to that lectern soon showing the campaign bringing the economy back to strength was vindicated. he is the winner. he is saying it is the sweetest victory of all. the markets are re-fork -- euphoric as well. this is the center right party. this is a party that promises lower corporate tax that also helps with other tax rates, and heard it's tax laura, less regulation -- inheritance tax lower, less regulation. clearly, a majority, just makes it that much easier to govern. while they will be raising their price of beer in the pubs, labor supporters will be drowning their sorrows. three resignations. the resignation of the opposition leader party, also the resignation of nick clegg and of course, nigel for rush did not win his seat either. he also has stepped down as the leader of his party. meanwhile, massive victory in scotland. the s&p, nationalist party, winning that. betty: might they join together? >> no. but david cameron has got to play to the snp and talk to them in a speech we're about to hear. he has the outright majority. he doesn't need the snp undecided govern, but they've won all but three seats in scotland. they have 56 out of 59 seats. we've only just a month ago managed to keep scotland as part of the u.k. what does this mean for the united kingdom? will it remain united? will they insist on a referendum of making scotland independent? in the big question for the markets going forward, we've already heard from the rating agency moodys saying this, their word about the eu referendum david cameron has promised. this is how he came in with a campaign, how he fought off the united kingdom independence party, by promising referendum by 2017. that now is the key uncertainty that businesses face. could the u.s. -- could be u.k. exit the eu? he really has to woo the electorate and say, i will make changes with our relationship and make it better for the united kingdom, but we will remain part of it. many businesses are going to be looking at this. today, euphoria and a majority. laura corporate tax rates. stocks are up. and so is the british pound. betty: the markets do seem to like this victory. caroline, thank you so much will stop -- thank you so much. we are waiting for david cameron to speak at any moment. he arrived at 10 downing street just moments ago. still ahead, we're getting closer to the monthly jobs report. we will hear from someone who has been optimistic about the state of the u.s. economy and about jobs. roger altman, the founder and chairman of ever gore. ♪ plus, nike is a message for congress. when it comes to the trade deal just do it. ♪ betty: prime minister david cameron speaking in london. >> have seen that service cut short. ed miliband wished me luck this morning with the new government. it was a typically generous gesture from someone who is clearly an public service for all the right reasons. the government i lead did important work. it laid foundations for a better future. and now we must build on them. i truly believe we are on the brink of something special in our country. we can make britain a place where a good life is in reach for everyone who is willing to work and do the right thing. our manifesto is a manifesto for working people. and as a majority government, we will be able to deliver. indeed it is the reason why the majority government is more accountable. 3 million apprenticeships, more help with childcare, helping 30 million people cope with the cost of living by cutting their taxes, building homes that people are able to buy and own creating millions more jobs that give people the chance of a better future. and, yes, we will deliver that in a referendum on our future in europe. as we conduct this vital work, we must ensure that we bring our country together. as i said in the small hours of this morning, we will govern as a party of one nation one united kingdom. that means ensuring this recovery reaches all parts of our country from north to south, from east to west. indeed, it means rebalancing our economy, building that northern powerhouse. it means giving everyone in our country the chance so no matter where you are from, yet be opportunity to make the most of your life. it means that for children who don't get the best start in life, there must be the nursery education and good schooling that can transform their life chances. and of course, it means bringing together the different nations of our united kingdom. i have always believed in governing with respect. that is why the last parliament we just all power to scotland and wales and give the people of scotland a referendum on whether to stay inside the united kingdom. in this parliament, i will stay true to my word and implement as fast as i can the devolution that all parties agreed for wales, scotland, and northern ireland. governing with respect means recognizing that the different nations of our united kingdom have their own governments as well as the united kingdom government. both are important. and indeed, with our plans, the governments of these nations will become more powerful with wider responsibilities. in scotland, our plans are to create the strongest of all government anywhere in the world with important powers through taxation. and no constitutional settlement will be complete if it did not offer also fairness to england. when i stood here five years ago, our country was in the grip of an economic crisis. five years on, britain is so much longer. but the real opportunities lie ahead. everything i've seen over the last five years, and indeed during this election campaign, has proved once again that this is a country with unrivaled skills and creativeness. a country with such good humor at such great compassion. i'm convinced if we draw on all of this then we can take these islands with our proud history and build and even prouder future. together, we can make great britain greater still. thank you. [applause] betty: as you were just listening to, that was u.k. prime minister david cameron talking about creating a better improved u.k. it is euphoria with the conservative party victory. the markets have been reacting pop -- quite positively to the news. those were his remarks. let's take a look at some other top stories we have been following. baltimore police facing a justice department investigation. the mayor asks federal officials to find out if the police department is committing civil rights violations. an announcement expected as soon as today. rioting last week after the funeral of a black man who died in police custody. nike is a message for congress when it comes to the big asian trading, just do it. president obama will push for the deal today when he visits nike headquarters in oregon. nike says it will make more products in the u.s. of congress oks the deal. the company says that would create up to 10,000 jobs directly and tens of thousands more for construction and supply companies. much more on nike and the trade of coming up at 10:00 eastern time with nike president and ceo mark parker. we are than 15 minutes away from the april's jobs report. expected to show 230,000 payroll added for the month. someone who has been more optimistic about the health of the us economy than its counterparts, roger altman, founder and chairman of evercore and the deputy treasury secretary under president bill clinton. roger joins me now. how are you? we were just speaking with carl riccadonna who says he feels it is going to come in a little bit worse than the estimates. maybe much worse than estimates. if that happens, are you going to reassess your outlook? >> i think it is an unusually important number for markets because of two things. one this big important debate about whether the slowdown was on the first quarter is "transitory" or signaling a wider and longer slowdown. markets seem divided on that. if the number comes in as expected, 230,000 or so, that would seem to confirm it was transitory. if it is weaker -- betty: the all clear. >> we're seeing so much volatility in fixed income markets, currency markets, and oil markets. remarkable volatility. a huge selloff in bonds until the last few days. stronger prolonged dollar strength. in the dollar has retreated. -- then the dollar has retreated in the last few days. oil prices has risen further and faster than expectations. it will be more important than usual in terms of market reactions. i don't know with the number is going to be. i'm hoping it is in line with expectations. especially that we see continuation of the wage growth that has finally manifested itself. betty: for you just to optimistic gekko >> one always has to be willing to reassess. what the factors underlying we're in slowdown. or whether they suggest verizon aspects -- various aspects. we have to wait and see. not just a number, but the reasons. is the weakness concentrated in the manufacturing sector? back to pertain to the stronger dollar we've seen for most of the year. betty: stay with me because we are much more to talk about. not just jobs, but trade. >> david cameron. betty: roger altman from evercore staying with me. we have much i had as we count down, less than 10 minutes away from the jobs report. what do wages really tells about america's implement a picture? alan krueger will join the conversation with roger and me. wasn't that the name of a film? we will be back. ♪ betty: you are watching "in the loop." good morning, i'm betty liu. i want to welcome our global viewers joining for jobs day coverage here in the u.s. it is that important. we're less than five minutes away from these job numbers as president obama takes his trade policy push on the road to nike's headquarters. many critics are calling trade a jobs killer, including for my senator bernie sanders who wrote a letter to the president -- still with us is roger allman, the founder and chairman of evercore who is in favor of the trade pact. in joining us now is alan krueger, professor of economics at princeton and the former chief economist at the department of labor and also the what else council economic advisers. -- white house counsel economic and visors. i know you aren't friends so i will stay out of the conversation. you're also working on infrastructure. let's talk trade. bernie sanders is echoing much of the manufacturing sector in the u.s. where they say free trade is going to kill jobs will stop what do you say to that? >> i think our manufacturers can compete with anyone. i think what will help them as a level playing field. i also think that trade agreements help by making our manufacturers more productive. we need fair trade. acting manufacturing -- i think manufacturing would hurt competition with china, but this is a different type of agreement being discussed now. the transpacific trade agreement. you don't see too many fort in tokyo. i think there is more opportunity to export to japan. betty: do you feel the same way? >> yes. the politics of traitor complicated, but they include the deep misunderstanding to the difference between the effects of globalized trade itself versus the effects of trade agreements. so you hear elected official after elected officials say look at the jobs we have lost to china. i was looking at an analysis the other day m.i.t. dead -- did which includes 21% of the manufacturing jobs we lost for reasons of trade, effectively displaced by china. but we don't have a trade agreement with china. so that doesn't -- that is not about a trade agreement. trade agreements have made trade more controlled and more fair. betty: if we had a trade agreement with china, because tpp does not include china do you think our balance would be much more in our favor if we had a free-trade agreement? >> i think that is a long way off. the deal being discussed now, i think would surly be in our favor. i think if we back away, china will have much more influence in asia, which is not necessarily in our interest. >> also the passage of trade promotion authority and the signing of the actual tpp and if that came into effect him a it will be very close and our congress, would put pressure on china. we will see how much, but pressure on china to ultimately join this agreement. betty: are you surprised by how many democrats have turned against the president on this? >> no. historically democrats have typically been more opposed to trade agreements that favor them. for example, nafta passed with strong republican support and few democrat votes. i think democratic support for this agreement appears to be lower, even than some of the other agreements. historically, in the modern era, democrats have not liked trade agreements. betty: so it is status quo. >> organized labor has opposed them. and that is just the reality of the world we have. if this passes, it will be with a strong majority of republican votes. betty: what about the argument by senator warren that any trade agreement will water down wall street regulations,. frank? >> of we've seen the administration take as firm a stent is possible. i don't consider that much of a threat. >> i don't, either. i don't think the tw are related. obetty: scaremongering? >> i don't know what her precise thinking is, but her point is we should not water down dodd -frank. i don't because agreement has that effect. betty: we are about to get the april jobs report. moments away from a senior markets correspondent julie hyman will be monitoring the immediate market reaction to these numbers. and our chief washington correspondent peter cook is right outside the labor department. peter: 223,000, dropping to 5.4 percent. this is a report pretty much in line with expectations. we did have march turning out to be even worse than we first have reported. wages moving higher, but not at the pace many would like to see. to wonder 23,000 jobs, right in line with expectations -- 223,000 jobs, right in line with expectations. 39,000 jobs from the previous month, only added 85,000 in march. something clearly happened in that month. the three-month average is 191,000. six month average, 200 55,000 jobs per month. the on a planet rate, 5.4%, the lowest we have seen in seven years -- unemployment rate 5.4%, the lowest we've seen in seven years. the number of employed in the household survey, of 192,000. unemployed dropping by 26,000. this is a good improvement in the unemployment rate. 10.8%, the lowest number we have seen since august 2008 as well. who is hiring? professional and business services, up 62,000. construction, a big pop, up 45,000. a lot in the specialty trade, a lot of rehab worked at john's, perhaps. health care up 45,000. on the negative side, the energy sector. mining down 15,000. we have now lost 49,000 in the mining sector alone that includes oil and gas extraction. we saw last month in terms of some negative numbers, manufacturing pretty much flat, gain of just one. wage front up 0.1% hourly. there was a next rotation of 0.2%. -- there was the expectation of 0.2%. march was revised down to 0.2%. not the kind of wage pressures some people are hoping for. this report overall right in them with expectations. back above 200,000. is still enough question marks for the fed to wonder whether we are completely surging ahead. betty: i think there is reaction that, oh, it is not as bad as we thought it was going to be. and now there are weston marks about what some of the details mean -- question marks about what some of the details mean. julie: we're seeing dramatic reaction in some of the asset classes. but you do see futures which came up and are now coming back around the level they were before. this reflects the line of thinking you were talking about. the initial euphoria, if you will looking at the headline number because even though, yes the average estimate by economists was that a certain level, there were a lot of folks estimating below that level. the fact is eminent above was reassuring to some investors. within the revision downward as well as the wage growth concerning to some investors. that is probably reflected. if you look at what is happening with yields and what we're seeing at this point in time whether you're seeing that reflected in the treasury market, whether you are single reflected in the dollar, there we are seeing a little more dramatic reaction. yields bumping up a little bit. if you see a very little bit. if you look it currencies, the euro, we saw picks bike in the euro and a big spike down in the dollar. i guess you would not call it a spike post-a drop off in the dollar. we're seeing outside of stocks, dramatic reaction. one more to point out would be in gold prices, which goes hand-in-hand with what we saw in the currency market. but that may be tempered as people take a step back and start to dig through this report and try to figure out exactly what it does mean for the fed. initial read, ok, the fed can go ahead and raise rates and that his people to go step back, maybe that is not exactly what it means. betty: hang on, i want to bring in alan. >> i think this is a solid report. the topline jobs number is reassuring. i think that is the main take away from the report. underneath, professional business services, strong throughout the recovery. bounceback and construction suggest march was an anomaly partly because of the weather. labor force participation ticking up, unemployment ticking down. that a solid news. the wage data are disappointing. i put more of my weight on the employment cost index when it comes to wages, but i still like to see this measure rise. i think we can breathe a sigh of relief that march was mainly an anomaly. betty: and in your mind, this means the fed to raise rates in september? >> i think that is probably the most likely scenario. i think that will have a lot of data between now and then. they will look to make sure they are confident that inflation is headed to its 2% target. i think this doesn't delay the actions they were likely to take. betty: roger, you're off the hook. you don't need to reassess. >> what a relief. i agree with alan. it is more reassuring than not, but will ultimately need stronger results than this. we need to do better than give or take 230,000 jobs a month. when you see the number at 10.8 tells you the labor market is relatively slack. they're getting less slack and alan has a view, which i think it's fascinating that ultimately, we will run out of workers. i rather agree with him. it is more reassuring than not, but isn't really strong. betty: it is in. the wage part is puzzling. if we are continuing to see improvement, why are wages sort of stuck at these levels, right? >> i think the main driver of why it is been so weak inflation is been so weak. if you look at real wages after subtracting inflation, there actually growing at about the level you would expect given the unemployment rate of 5.5% or so. nonetheless, the raises the question, why is inflation so weak? betty: whitey put more into the eci? >> it is designed to him -- to design -- go back to the same from every quarter. you ask about the same set of jobs. it is very much like cpi except wages. it is a more accurate measure. betty: peter, yet more data on how oil prices affected jobs. peter: this is a wildcard. we've seen some improvement. we have lost 49,000 jobs. so far this year, wiping out all of the gains we saw from 2014. they're shedding jobs. i expect that will put downward pressure on investment in the sector. betty: julie has information. while we were talking, asset prices are back to where they were right before the numbers. julie: they're back to where they were or in the case of yields, we're actually seeing them lower, which is an interesting reaction. take a look at the 10 year. we saw the yields spike a little bit. right after we got the jobs report. then we saw them start to come back down. they have now gone even lower. we are now seeing the yields on the 10 year right around 2.14%. that does represent a drop in yields, at least from yesterday. interesting reaction. take a look at what is going on in the dollar. at first blush, people thought, well, maybe this means rates are going up, but then coming back down. if you look at what happen in the stock futures, similar trajectory. a little bit of a pop up, but then came right back down again. this sort of round-trip as people try to assess these numbers and what they mean. betty: roger, what you take away from this? >> that is exactly what you would expect. the number came in right on top of expectations. erratically, markets should be unchanged. betty: so we saw a knee-jerk reaction of the moment and then everybody is realizing, -- >> well, the number only came out five or six minutes ago. markets should be relatively unchanged. by the way, in terms of energy, the thing to look at from the jobs point of view in the energy sector is the rig count, not the oil price. it has been falling every single week for many, many, many weeks. rigs deployed, the fewer people devolved -- if you are rigs deployed, the fewer people involved working on them. betty: thank you so much. roger, thank you for joining us on this jobs report. roger allman, chairman of evercore and alan krueger, thank you as well, princeton university economist and former white house council of economic advisors chairman. thank you to peter cook at the labor department was going to stay on top of this jobs report as well as julie hyman on the market reaction. much more to come because we are going to get the republican reaction to the jobs report. commerce kevin brady will be joining us live from texas in a moment. what does the obama administration have to say about the jobs report? we will get the president's chief economist on as well. jason furman is joining in the next hour. all over these pretty much in line jobs numbers. we will be back. ♪ betty: as we were just talking about the labor report for april, we're all digesting the numbers. the headline figure 223,000 jobs created last month. that was pretty much in line with estimates. you heard alan krueger say this is a solid report. we will be getting reaction from the white house and the next hour. first, i want to you from the republican side. we're joined by congressman kevin brady from texas. you have been so critical of the white house and the democrats for not creating as many jobs as we should. alan krueger says, look, this is a solid report, not much to criticize. do you agree? >> well, i think we have dumbed down our expectations. i love any month we are adding jobs. that is good news. unfortunately, the economy is still stuck very much in second gear. we are much more capable of a healthier economy than this. labor force participation is still at a 30 year low. the number of adults in the workforce in perspective isn't even back to where the recovery began. we have lost ground in that area. the recovery overall is barely half of what an average recovery should be. so my point is if your car is running for 60 months in a row the what else will say they're adding jobs 60 months, they can only go 20 miles per hour, is that satisfactory? my point is, we can do better than this. betty: you are in oil country in texas. we've seen oil jobs get decimated with the fall in oil prices. what are you saying to your constituents to try to get those jobs back? >> we know oil cyclical in nature. i don't think energy got the credit it deserves for the economic recovery. i think it is having an impact clearly, on the economy. but it is growing strong. -- going strong. reducing strategically. they know there's going to be a bounce and rebound from this. but if you look at your overall numbers, it is capital investment around the country that is the biggest rack on the economy. businesses are not investing in new building equipment and software. that usually drives jobs on main street. i think that is one of the most troubling parts, frankly, of the whole obama recovery. betty: speaking of obama, i understand you are in favor of the tpp. how do you sell that to your voters that the trade agreement is not a jobs killer and not going to cost people their wages? >> well, i tell you what. you want a solution to this slow recovery, it would be more trade, less red tape to encourage investment in a new tax code built for growth. we could start in the next few weeks by getting back on the trade feel this field. can't test countries we need to be doing more of this, not less. i want to tear down the american need not apply signs around the world. let our companies and workers and farmers compete. we know it creates jobs here in the united states. betty: how do you sway those who are skeptical, including members of your own party and the democrats to get this through the house? >> i will tell you, the president will have to step up. i think he's done a good job, frankly, the senate tried to draw support, despite the obstruction of harry reid. he is a lot more work to do in the house. at the end of the day, we are to pass these new rules on trade. if america doesn't lead, we will grow weaker. our competitors will grow stronger. and we are going to lose jobs here at home. at the end of the day, i'm confident while it will be close, we will lead on trade again. betty: thank you so much congressman kevin brady from texas with the republican reaction to the labor report. staying on jobs, i want to bring in our bloomberg radio colleague speaking with bill gross. there's begin right now about fed chair janet yellen. >> the tantrum affect. >> i've suggested that all asset prices are bubbled. it is just a question of whether they continue to be inflated by central bank check writing. it is a little surprising from janet yellen. maybe she got frustrated from ben bernanke blocking every other day and taking the spotlight, i don't know. our bonds and stocks overvalued? certainly. how overvalued depends on the fed's ability to generate in my opinion, 4% to 5% nominal gdp growth. and what the new new 4 -- neutral policy will be. i think it is 2%. if i'm right, treasuries can return your coupon without a bear market. if the fed is right, watch out. her comments in terms of risk were echoed two or three years ago by the fed. i wondered why after two years of trying to tamp and down for agility that all of a sudden, just volatility, she said come along bonds are too low, stock prices are too high, risk spreads -- tom: this is critical. mike mckee, on the same check. no gross, have you ever seen fed governors, president's chairs can equity and bond markets like we are seeing now? are they supposed to be in a prediction or valuation business stocks? >> well, they weren't supposed to be, but they have been for at least six or seven years since -- i do believe they believe not just the fed, but the doj and the ecb, the asset prices primarily equity prices are a reflection of potential growth. wealth trickles down in their opinion and pretty slowly, in my opinion. it in their opinion, asset prices, and that includes stocks and high-yield bonds are important to the real economy. quickly, the real economy is not taken the bait, has it? investment in the economy has not been the recipient of the trickle-down as a prices or the financial market, so there is the conundrum and the problem as they have to somehow get the two together or else the potential bubble making will have a real effect. mike: let's talk about this. you've seen the volatility driven by what is going on in europe, driven by supply questions. should investors be demanding more compensation for taking duration risk now that you have these lopsided supply demand and balances and yields are rising anyway -- imbalances and yields are rising anyway? >> the quiddity is not what it was. the spread you pay as much wider now than the spread you pay several years ago because regulation is not necessarily -- that is the way it is. it is the same thing in terms of duration. i suppose. although, i just talked in the past five or 10 minutes, i think duration of the moment is fairly well priced. there is no doubt the liquidity is going to be a problem for all markets going forward. tom: you are way out front on that. the mask is the money question. your pro-duration hedges fancy derivatives strategy -- betty: tom keene and mike mckee speaking with bill gross on the reaction to the labor report what it means for the fed. gross reiterating his view on the fed. here's a look at our top stories. while beating first-quarter estimates, having to post another website got a boost from increase global advertising. profits came in ahead of projections. revenue up more than 7%. aol expanding its digital advertising business. almost half the online display ads at its website are sold through automation. tim armstrong will be joining us in the next hour on "in the loop." the world's largest maker of agrochemicals is projected to $45 billion takeover offer from monsanto. syngenta says it undervalues and would carry risk. and we will have much more ahead . barack obama crossing a big item off his bucket list to become the fourth president to visit every state while in office. that story much more coming up. ♪ betty: much more ahead. uber wants to branch out, willing to spend billions to buy one of the world's biggest digital mapping services. that trini thing, fitzpatrick, plans to go public. we will be back. ♪ futures indicate stocks will open higher. wall street is studying the jobs report out about half an hour ago showing a rebound in payroll growth last month. last month was also worse than what was reported. david cameron is planning major steps for the u.k. he is outlining his agenda today after scoring a surprise election victory. he says he will cut taxes, defer powers to scotland and wales. >> 3 million apprenticeships more help with childcare, helping 30 million people cope with the cost of living by cutting their taxes building homes that people are able to buy and own. creating millions more jobs that give people the chance of a better future. and yes, we will deliver that referendum on our future in europe. betty: his conservative party won a clear majority in parliament and easily defeated his opponent of the labour party. he can drop his coalition and the scottish national party won all but three seats in scotland almost shutting out the two major parties. the primus tro greece today is expressing competencies country will avoid default. he told the greek element there are no more technical reasons for europe to withhold aid from greece. his finance minister says he expects a bailout deal within two weeks. he says greece will go down to the wire to settle the standoff. the italian finance minister sees progress in the talks. >> it was a very frank and friendly meeting. we basically discussed the process. i encouraged the great government to come up quickly with a consistent reform package that can be shared with the euro group and can therefore be approved and therefore solve this problem and allow greece to go on towards a longer-term issues and programs. betty: the european finance ministers will discuss the crisis again on monday. america will look to the sky today to mark the 70th anniversary. world war ii planes will fly over washington, d.c. and you can watch it live streaming live. the german surrender to the allies was on this date in 1945 and those are your top stories. i want to return to david cameron on returning -- retaining his grip on the prime minister in the u.k. after the stunning election win. carolyn hyde joins us from london. stocks here continue to rise on this jobs report and the markets there applauded what happened overnight in the polls. caroline: it is euphoria in the market when it comes to british bonds and british stock particularly the banks rising. it was a stunning result, the polls got it wrong, a conservative majority. the conservatives are the center right party and pro-business. business leaders like this result because it means no regulation and no newer corporate taxes. the market is rallying because david cameron has a second term and wins it out and out with a majority in the houses of parliament. he can now drive forward and that's with the entire campaign was based upon, keeping the growth in the united kingdom economy. many people are raising their pints of reddish l but you will probably -- of british l but you'll probably have some drowning their son -- their sorrow spris. betty: now there is some uncertainty? there is a question about britain's membership in the eu. you heard david cameron say he is going to gauge how the voters feel about this. caroline: exactly right, we will be questioning how long this rally will last. uncertainty is bound to creep in. moody's is highlighting this. the question of the in/out referendum. david cameron promised the u.k. in the you -- in the eu by the end of 2017. what does that mean for business? the other areas scotland, the other big winner. we have seen 56 out of 59 sees one by the nationalist party and they could question the scotland's membership in the united kingdom. betty: thank you so much. we are under 30 minutes away from the start of trade so let's can't you're down to the open with the top eight headlines before the bell. matt miller and bob emery are joining me. matt: it's a random number? betty: we like to keep the viewers guessing. number eight is uber who have submitted a bid for an app that is a mavs business with a price tag as much as $3 billion. matt: it seems like a waste of money for me. bob: google has a great mapping service. i am conjecturing that they want to get the best possible mapping system. matt: someday when we are this could happen. betty: i am not that impressed right now with uber's mapping technology because sometimes my car will say it's here and one second later, it will be over there. bob: i love the little graphics for the cars moving down the road which is cool. matt: sometimes they take the wrong route to get you and they are late. betty: number seven is fit bit it has filed for an ipo and plans to list on the new york stock exchange. sales of multiple blaster on the company posted a profit. i think they just want to get in the market before apple watch takes off. bob: it is a sucker ipo. betty: that is a really good conjecture. matt: i was stunned by the numbers that came out in a filing last night. cory johnson looked over them and i was looking over his shoulder. he was quizzing us -- what would you guess is their annual revenue? i thought maybe $200 million. $750 million they made. bob: that's a huge margin. matt: how many did they sell? they sold more than 10 million last year. people are buying jawbones and all of the other things but they sold 10 million of them? bob: 40% of the users drop out within six months. betty: because they get fat and lazy. matt: they start out fat and lazy. betty: i mean they get fat and lazy. bob: i want to know what they will do next as an investor. are they going to be able to tell me when to genuflect to our robot overlords? betty: i love that. numbers six is spotify. the online streaming music service plans to enter the web video business to take on youtube and facebook. it has approached multichannel networks that specialize in creating an disturbing video. when is kmart going to start creating original videos? matt: i think kmart and jcpenney are definitely going to. these big retailers are creating their own original video. betty: it's for a purpose. matt: this is probably good news for record labels and creators of content that would normally want to get paid. they are shutting down the free services on the internet. groomshark was shut down last week and i have not shut down youtube and probably never will and that's the best place to get free music. you can get any song or album. when spotify comes into this, maybe they will being the -- they will bring the pay for content model. bob: my conjecture is that spotify can charge more for video ads then it can for banner ads and that's why they are doing it. betty: all right. speaking about video ads earnings are out for aol and momentum is gaining in its advertising business. we will hear from the chairman and ceo of aol tim armstrong, next. betty: we are counting down to the opening bell. it's time for our deep dive at number five. shares of aol are rising more than 5% in premarket trade after the company reported a first-quarter beat. they are benefiting from an increasing global advertising sales. tim armstrong managed this after or reorganizing his sales staff in the first quarter. tim: q1 was great because we had accelerated revenue growth and we did a great job and growing consumer traffic and we were able to update the structure of the company while we did those other things. it was a quarter where we improve the business while we performed in the business and that was a solid quarter. betty: i know you restructured the sales force. is that done? is there more to do? tim: throu q2 is what we are making sure is that that is put through the whole process of the changes have been made but we are making sure that goes all the way through our customers. there is to more work to be done but from q1 we have done a good job of making that change and connecting with the customers in the process. betty: you have said this so money times that you have put so much investment behind programmatic advertising. why do you think that is such a big growth driver for aol? tim: programmatic advertising is focused on the same thing as what you do as a consumer. as the power of consumers with phones and automated systems which has improved everything from mapping to travel to commerce. that same ability in automation is now coming to advertising. we have been a big investor because it allows you as an ad agency or a client is to really have your people spend the time on the creative side of things and not so much on the manual side. it helps automate advertising and brings more data to the advertising part which makes the ads better and more effective and consumers like them better. it has been a flywheel for us. betty: how come more advertisers are not embracing it? tim: they are if you talk to the top 100 advertisers, about 58% of the customers are running cross screen campaigns and many of those are programmatically run. we launched a really large system which is the most up to date programmatic system in the world for advertising. we have some of the biggest advertisers and ad agencies using it. i think it's a process of them migrating their old practices into the new practices. it will take time but we grew 80% in our programmatic space this past quarter so it is tremendous growth. betty:1 i know video content is huge. we had a conversation with the ceo of vimio who says they are going into original content but it is paid premium content which is the right business model, not advertising. he noted that advertising is not growing. you are advertising heavy so what do you say to that? tim: vimio is doing a great job but mainly in the paid version of video. that's like asking an eskimo if they like to go to florida. betty: is it? tim: we are in the business of advertising. the market is growing strongly and its projected by 2020 that about $40 billion from the tv advertising business will go to online advertising. betty: hang on, you don't see any potential in paid premium content? tim: that's not what you asked me. you asked me if the ad business was growing. i am a really big believer -- i say something different than the vimio ceo. i think the dual revenue streams of having great advertising and great a video content is where the future is. i'm a big lever in paid video services and a big believer in appetizing. i think the combination of those two things will be really powerful. i am bullish on both. betty: before we go, i know you are big on live streaming. do you wish you had put money in periscope? tim: i have used periscope around the office. i think it's a really disruptive idea. it's not even spring training in that area. you will see us do more and more live video programming and that is a personal passion for us at aol. betty: that was tim armstrong, chairman and ceo of aol earlier. ever had problems with an outdated credit report? two big banks are taking steps to help more than one million americans. we will be back. betty: let's bring you the most important stories -- matt miller and bob every are joining me. number four is bank of america's is looking to put to rest debt bills that are alive and credit reports. the move could provide relief to more than one million americans who have had to deal with marks on their credit report. bob: the reputation of the big ad banks -- we had them crash the system in 2008 and now the support from sylvia jessica greenberg. they have been accused of a debt collection tactic effectively holding credit reports hostage and refusing to fix the mistakes unless people pay money for debts they don't know. matt: because they've gone bankrupt? bob: the debts have been swept aside legally in the banks want to make them pay. matt: what you are saying is that people who went bankrupt in the past will have better credit scores now question mark bob: the banks will not be allowed to charge people for money they don't know. -- owe. matt: they are not charging them for that. betty: i think the credit scoring thing is outdated. bob: i agree. it's more about them not being able to get jobs. betty: number three is a hedge fund facing $2.7 billion in redemptions from its $5 billion fund. they lost 3.5% this year through april. more than half of your money being redeemed by angry investors. bob: this was the hedge fund blue crest who are backing meredith whitney's venture. they were pulling the money out of their and we said this is bad news for her. we did not really think about blue crest. maybe they needed that cash back. matt: or maybe they thought meredith is not doing very well and we need to cut our losses. even though she made the right call and citibank. bob: before we were born. before noah and the flood. betty: come on. matt: it was a great call and well documented. bob: as much as lou crest is having problems, i bet they are thinking champagne because david cameron is still the prime minister. betty: whole foods is looking for a younger crowd. they are gearing up for a chain of smaller scale stores to bring lower prices. the new format will be unveiled this summer. they said it would be hip and cool and high-tech. matt: i learned a lot from julie hyman yesterday. i thought the problem was that whole foods -- it's such an upper east side or soccer mom kind of store. apparently, they have them in williamsburg and on the lower east side and grungy kids with tears and tight jeans will not shop there. bob: they can't afford it. matt: it's all about the price. betty: i feel like young people, younger people, are willing to pay more money. matt: for their kale. betty: exactly i think it's the middle class that's not going. matt: you don't have any more money. it's expensive to shop there regardless of how organic and cruelty free the food is. bob: i'm picturing whole foods and their evil spawn going everywhere. betty: we are near the opening bell and futures are up. we will be back. bob: welcome back to in the loop. get back to bringing you the most important stories you need to know before the bell. joining us is mike. we were sick of matt miller. we want to bring in mike. matt, go away. our number one story, of course is jobs. jobs report came out earlier today. 223,000 jobs. the lowest rate in seven years. who is excited about this? mike: futures are going crazy. it's threading that needle between being not weak enough to make people worry and not strong enough to make people worry about the fed moving up the interest rate hike. >> usually up is down on the stock market. oh, no. they are going to raise rates. the market is down. mike: probably the global advisors really interesting work he does. he looked at it yesterday and said basically the bigger the miss in the jobs report, the better it's been for the stock market. you kind of intuitively know. he put numbers to it. it's funny how it matches up almost identical. the bigger misses equal better stock returns over the next month. bob: we'll have -- we'll have to see. so the markets are just about to open in a few moments. we'll see how they react l they carry on this rally? in the meantime i want to bring in someone who is huber bullish on stock. the chief investment officer of equities at federated. steven, after the jobs report, where do you get your optimism from? steven: the whole week has been -- last two or three days has been -- we have seen counter in everything. u.s. dollar, oil. u.s. g.d.p. number which came off in the first, jobs reports establishes that. we are not falling off a cliff there, either. those were what was giving the stock market cause at this 2100 level. turns out it's not as bad as people thought. bob: after today you think it's clear? steven: now you have a period of stability on the dollar. the dollar grows higher from here. more stable. u.s. interest rates have peaked in the near term. in the two 220 range now. the oil has established, i think, a nice range between 40 and 60. that might be the sweet spot foreoil. good enough to keep growing, low enough for the gasoline tax dividend. i think we are in a kind of a really nice period for equities between here and the end of the year. mike: why do you think the analysts were so pessimistic about the earning season. i have remembered a lot of people said energy companies all cut their forecasts. analysts are some degree beholden enslaved to what the company forecastses are. the first of lower oil hasn't done the opposite as much. is that as simple as that? stephen: that and the dollar. the dollar, the analysts always have trouble with the dollar. people really overestimated the impact the dollar would have on the u.s. exporters. they were bringing down numbers altering the first quarter. december of the first quarter, we were projecting plus 12% consensus for earnings in the s&p. by the time we got to the end of march, we were i think minus three. it was a big downgrade. we are coming out better than that. in fact, x energy, the earnings were up 11% in the first quarter. people really, i think overestimated. they overreacted. that gave stocks a plus along with everything else. but now we are looking through the end of the year. we think earnings probably end of the year 125 on the s&p. more importantly, 135 next year. and on that basis, stocks at 17 18 times earnings, we think are pretty cheap. if you look at a lot of the large cap stocks, there is still a lot of value in this market. people think there's no value. especially relative to bonds. mike: where do you see it? stephen: consumer discretionary macy's, amazon. the health care names which had a nice bullback here, as have the discretionary news. the health care news have all pulled back. gill yad trading at 10 times earnings. the tech stocks look good to us. and the financials. j.p. morgan trading 10 times. big beneficiary of higher rates and improving economy. i think -- i think people are pessimistic. 2008 2009 was a crisis. everyone thinks we can't keep lasting. bob: you think we are haunted by what happened. stephen: i think we are haunted. bob: i'm haunted. i see -- you say clear sailing. i want to know what's the one rock up ahead that you are a little concerned about. i don't want to rain on your parade, but what's that one thing -- mike: the iceberg. stephen: there are plenty rocks out there. one is china. a crash in china would be bad. slow growth is fine. we are not big investors in china right now. other than some of the smaller caps stocks. generally speaking china is not a great destination for equities. but we do have a giant amount of money out there to engineer a soft landing. but a blowup in china would be a problem. we don't see it happening. europe could blow itself up with greece. bob: you don't see that happening? stephen: i don't see that happening. i think the emerging markets have come through a rough time now. we are not overly bullish on emerging, i think we have kind of made through the worst there. i think we are ok. bob: what's amazing to mee, every time you're selling, somebody else is buying. i'm the guy who is selling and you're buying. stephen: you have been doing that all the way up. you went all the way equities back in 2009. good for you. bob: no. betty: go grab a pier. stephen, thanks so much. investment officers equities at federated. thank you to mike regan as well as bob ivry going to the bell on this friday. staying on jobs, jason furman, the chairman of the council of economic advisors, will join us to share his take on the april jobs report. why wages have not moved up enough. betty: markets are rallying on this jobs report. the dow is up over 200 points right now. the jobs report coming out this morning. just to reiterate again, 223,000 jobs created in april. the unemployment rate dropping to 5.4%, the lowest level since may of 2008. i want to dig deeper into these numbers, get the white house reaction. i want to bring in jason furman, chairman of the white house council of economic advisors. north lawn of the white house. jason, great to see you. we had the republican take about an houring a. congressman kevin brady, one of several republicans in the house, who is reiterating the g.o.p. position, which is, look, jobs are being added. grateful for that. but wages continue to stay stuck. how do we get wages going? jason: first of all definitely agree on the jobs. this is 62 straight months of job growth in the last year we have seen three million jobs added to the economy. the unemployment rate, you said at the top there, is nearly the lowest it's been in seven years. that is just really substantial progress in our economic recovery. that's a recovery that's continuing. we should all be excited about that. when it comes to wages we have seen wage growth over the last 2 1/2 years in excess of inflation. consumers are able to spend more, so you have seen a general pickup over the last year in consumer spending. but there's no debate whatsoever that we can and should do even better on wages. what's important though, is to figure out what we can do. jobs in exporting pay higher than average. we are trying to have more of those jobs, the president's talking about that today. infrastructure is a great source of jobs. raising the minimum wage. there's a lot of steps we can take to raise wages. betty: i want to talk about the trade agreement in a moment. speaker john a. boehner to reiterate this point about wages, he says wages -- stagnant wages combined with rising costs means the middle class continue to lose ground and the wage gap jason, in the united states is getting worse and worse. jason: let's put it in perspective. wages grew faster than inflation in 2013. they grew faster than inflation in 2014. and so far in 2015 they have grown faster than inflation. take those three periods collectively, and you're rising at about twice the pace of the real-wage growth we saw in this economy from 2001 through 2007. so we are seeing faster wage growth now than the last recovery. but i agree it's not fast enough. and that is part of several decade long problem we had with wages. we are making some progress on that several decades long challenge. but definitely agree we need to make more. betty: on the transpacific partnership, the trade agreement i know the president will be speaking on today, you have several members of both the republican and particularly the democratic party who are opposed to this. say it's going to be a jobs killer. bernie sanders, the vermont senator, writing a letter to the president saying this is going to decimate manufacturing jobs. how do you sell this to congress? and the voters? jason: the president is out today on the west coast at nike. what he's pointing out there is that when you tear down the barriers to american exports that we face overseas, you're going to get more of those exports. nike's committed to adding jobs if the transpacific partnership goes through. the types of jobs in manufacturing in the united states tend to be better paid. and so we'll have more better paid jobs if we have this trade agreement. that's the argument the president is making today that he has been making and will continue to make. betty: how are you going to sway the democrats in particular to support the president? jason: the president tells them we understand. as he he said in the state of the union. the past trade agreements haven't always lived up to the hype. that's why we are trying to do a new type of trade agreement. one with higher labor standards hire environmental standards. the other point we make is that the american economy is already very open. our tariffs on average are only 1.5%. 70% of the goods come into our country tariff free already. what these trade agreements are about are overcoming the barriers that our businesses and thus the workers they employ face when they try to sell overseas. we are really pleased that the past got vollingts from democrats -- votes from democrats and republicans from both the senate finance committee, the house ways and means committee is moving to the floor in both chambers. betty: can you guarantee that a new trade agreement is not going to depress wages though, here in the united states? jason: what i can tell you, and the council of economic advisors put out a report on trade a week ago, it showed a lot of the benefits in terms of better quality jobs making more opportunities for consumers, helping the labor and the environment. but here's what i'll tell you. you know what? when we are done with the transpacific partnership, it will be out for 60 days. people will have 60 days to review it before the president signs it. that's an unprecedented degree of transparency. and they can look and judge for themselves. we are going to be making the case. we are only negotiating an agreement that meets this test. people will have 60 days to look at it. betty: jason thank you so much for joining. great to see you this morning. jason furman chairman of the down civil economic advisors. trading now, the markets are really liking what they have seen with the jobs report. senior markets correspondentent julie hyman is looking at early action. we are up a third -- mcdonald's is up a third straight day. stocks overall are up again today as well because even though as you were talking the jobs report looks relatively strong, but people are taking it away as strong report, strong enough to get that to rise once again. if you look at what's going on at mcdonald's in particular, that company is op the rise as well and that's after the companies' sales last month on a comparable basis fell but fell about half of what analysts estimated. julie: even though there was a drop in the u.s. in match estimates, it did show slowing declines. so not quite so bad. in europe it saw a gain. in the asia pacific region it saw declines that were not as bad as stumented. take a look at invida -- as well. large maker of chips for computer graphics cards. gave a forecast for second quarter sales that fell short of analyst estimates. it's been hurt by the persistent slump in p.c. demand. monster beverage earnings and sales falling short of estimates. the company had to pay some termination cost to some of its partners ahead of its bigger partnership with coca-cola. betty: thank you so much, julie. the breaking newsdesk. staying with consumers nike's president and c.e.o. ahead of his conversation with the president on trade. he's going to join us. much more in a moment. betty: president obama will be heading to nike's oregon headquarters on this friday, jobs day. he'll meet with the company's c.e.o. to discuss how proposed trade agreements will benefit u.s. workers. stephanie on the road. a lot lately. she's sitting down with mike's chief partner. she join us now. self: good morning, betty. it is a big morning here in beaverton, oregon. as you said president obama is here. he's sort of making the rounds. really working on this t.p.p. trade agreement. and nike really has come out in support. people well know that nike produces millions and millions of their shoes and their athletic apparel overseas. vietnam is one of the countries that would be affected by this agreement. they produce 43% of their shoes there. nike has come out and said they support this agreement and it would really help innovate and bring more jobs to the united states. many labor activists are saying no way jose. there are already protestors when president obama made his way to portland last night. we heard from presidential candidate, independent bernie sappeders who is out there saying ridiculous. what we need to do is create jobs in the united states. if nike can sell lebron james shoes for $320, they should be able to make those shoes here in the united states without having these changes to trade agreements and tariffs. one could say that sounds great betty. people love to make the argument, these shoes are being paid overseas for pennies and sold here for hundreds of dollars. a lot more goes into making that suit. i'm going to find out from mark parker all that's involved. if this trade agreement does go through what it will mean for nike's "bottom line" and innovating in the united states and creating jobs which we need so much of. betty: do they give any ipped cases how many you jobs this might -- how many jobs this might create? stev: we don't know yet. it's been a race to the bottom in terms of retail. consumers want to buy the cheapest products they can in the world of wal-mart and amazon. they are asking for minimum wage to be waged. if you're mark parker you are walking that line and you have to figure that out. betty: stephanie in oregon. "market makers." be sure to catch her full interview with nike's president, mark parker coming up on bloomberg television. that does it for today on in the loop. to all our loyal viewers these last eight years, there will be amazing changes on this net work we can't wait to show you. part of the changes include my moving to noon to give your daily lunch time mark reports. instead of breakfast, you'll have lunch with me. get your salad in front of the tv or mobile phone or ipad, whatever you do to watch in the loop. starting monday hosting at noon. bringing the latest market action news analysis, new time, new sleep schedule for me. it will be a great show. join me. have a fantastic weekend. see you back here on monday. goodbye. >> we are coming up on 56 minutes past the hour. that means bloomberg television son the markets. i'm julie hyman. jobs day. let's look at where stocks are trading and reaction to that jobs report. julie: we are seeing a rally across the board. the dow up nearly 250 points. the s&p and nasdaq both better than 1%. now, we did have the march job less rate at its lowest in quite some time 5.%. the addition to -- a little lighter than estimated by economists. there was relief it was not a worse number. it's the end of the week as well. as we mentioned that means one thing. only means that -- doesn't mean it's the weekend. bond t.f. -- dtf got hit hard. etfs built to profit when bonds decline. they are getting hit again today. here to explain is eric. bloomberg's e.t. analyst and resident expert on e.t.f. it's been really interesting in the bond market, right? there has been call after call after call for rates to go higher and that's when these kinds of e.t.f.'s would benefit if i'm reading it right. eric: that's right. there are about two dozen e.t.f.'s ready and waiting for rates to rise. we have seen this movie before right? treasury gets sold off a little. follows the overly dramatic headlines, selloff in the bond market, they get bought up again because of a bad economic number. if you look at the one i think is a great example, the proshares ultrashore 20-year treshry. two times the opposite of t.l.t., the treasury bond everyone uses. when you look at this, it jetted up 9% earlier this wreak. -- week. it's given it all back. in about 2007, this e.t.f. has burnt through more money than any e.t.f. tout there. it's taken in $9 billion since its inception, but only has $3 billion to show for it because it's lost 83% over that time period. what's interesting about that is because you have seen these little like the paper tan rum and variety of other minor versions of that, people have gone into this endlessly as insures to hedge their portfolio. julie: it's not just insurance. it's insurance and then some. eric: hedge funds like to play tactically. the volume tillity of the bond market makes this an attractive e.t.f. but the insurance angle does come in if people put this in your portfolio, boom, it's duration of negative 20 years. it immediately pushes all of your bonds and average duration down. it's almost like a bit of duration killer. it has been used. $3.2 billion now. the trace has not been working. i imagine if the trace starts working, this could be far and away the largest e.t.f. ever to exist. could grow to $10 billion. julie: there are a lot of them. so one of the others on your list the barkleys, we don't have time this early to go through all of them. another proshare. wisdom. what other distinguishing characteristics? eric: tapr, it shortens the entire curve, a lot of people have been calling for the flattening of the curve that will stet up the short-term rates. this is one that shorts the two year all the way to the 30 year. it's a small product and e.t.n. but it's the only one that does. the high yield bond market. there is e.t.f. for that. julie: thank you so much. really appreciate it. good stuff on this job friday. don't go anywhere, market managers is next on bloomberg television. ♪ >> live from bloomberg headquarters in new york, this is market makers" with erik schatzker and stephanie ruhle. erik: payrolls rebound after a disappointing number in march. stephanie: british prime minister david cameron gets a second term as he wins a surprise majority. erik: president obama once the asian trade deal on the fast track. he now has the right ally, ceo mark parker. good morning, everybody
six more arrests on u.s. soil all young men determined to join isis overseas. two in minnesota, four in san diego, each somali-americans, 21 years old and under. their contact was not a master recruiter but a friend who successfully left minnesota to fight along isis in syria. >> they were not confused young men. they were not easily influenced. these are focused men who are intent on joining a terrorist organization by any means possible. whoo that case shows is that the person radicalizing your son, your brother your friend, may not be a stringer -- stranger. is may be their best friend right here in town. melissa: here with me now, our very own charlie gasparino todd lonski and todd starnes. i talk with people in the tech industry they say they're eager to cooperate with authorities to monitor this type of thing. the government is so disjointed where you go, and could be working closer together. that is really the thing that unifies all the different groups and all the people we're looking for is the internet. >> that is the thing going back to 9/11, this idea you didn't have government agencies working together. that has been the big problem. look that press conference today i had a chance to watch it, was very sobering. we heard the u.s. attorney, that minnesota has a islamic radical problem. that is a very scary thing. when you think about what is happening overseas, with the latest round of killings the idea that that could very well happen here in this country, and that there are many soft targets, churches, for example, and you've got who knows how many islamic radicals that, living here in the united states, very sobering words today from the u.s. attorney. >> you know i just wonder were these homegrown terrorists from somalia, coming here? did they slip through the immigration cracks? i've always been an advocate of immigration, more open borders the better, but i think at some point here we really have to relook at our policies. we're letting people from countries into this country with where there is -- melissa: fbi said they were somali-americans, that statement in of itself doesn't mean anything. they could be from somali yaw. >> one of the interesting things in the france and netherlands you have huge immigration from these countries. never a simulating into the main into the common core so to speak. and you have a problem. melissa: yeah. >> sounds like that is what we're getting. melissa: john, i want to ask you about markets reversing course after friday's steep drop and china incents growth with earnings coming out ahead. looking back at the growing threat after greek default. the friday bailout time to get cash is becoming unrealistic. the finance minister is talking tough. that would lead to inevitable contagion across the eurozone. is it perillous as that. >> no, not so far. widening corporate bond spreads in europe. european stocks are higher today. reality right now, if you want to mature so thousand of greek government debt you have to pay $4400 for a premium. that is incredible. whereas that premium for spanish or italian government debt is just over $100. 170 bucks from portugal. >> right. >> i don't think that a collapse of greece necessarily dooms the euro or has this very powerful contagion effect. >> i agree, i tend to agree with that. reminds me of detroit going belly-up last year or whenever it was. everybody, everybody was saying this just proves that meredith whitney the bank analyst said there were millions of dollars municipal bonds default. would come in. melissa: a lost countries are not working out. greece get out of the it don't pay the bills. >> we've been talking about greece for how many years? i think it is isolated. >> right now the spread on the investment grade bonds is -- melissa: economy is slow for a reason. has to do with those with these countries no question. >> i think greece is a special basket case. melissa: we have to move on. half a billion dollars on the table as morgan stanley seeks to settle claims stemming from the financial crisis. "wall street journal" reports that the bank is in discussions with new york attorney general eric schneiderman to pay up to $500 million. it would settle allegations misled comments with bonds tied to subprime mortgages. talk about something we can't believe there is something we're talking about. more hanging over morgan stanley at this point? >> jpmorgan was the first one targeted, mainly because it took over bear stearns and bear stearns was the guilty party what they did. i'm sure there is good civil case here. the question at some point, you know, when is it going to be not be fashionable to go back in time constantly and attack these banks for what happened in the past? at some point you got to say, you know, enough's enough. we beat the hell out of them for all this time. melissa: john? >> you don't want to forget also the reality years ago when the federal government pushed banks into making these high-risk loans. >> right. >> to these impoverished areas. it went on and never stopped. mistake on parts of banks and other. >> morgan stanley didn't make the loan. what they did was package them and sell them to investors. but that was part of the process. that was -- melissa: there is plenty of guilt to go around. todd starnes, it's a political thing. very much about -- >> that is why charlie, i don't think it will go away. they will still be the whipping boys on the campaign trail especially with the democrats. so we'll have to see how that he plays out. >> wall street is saying hillary will talk a tough game. if she ever gets in there, like back to 1990s. melissa: 14 months after the big announcement and finally some face time. comcast and time warner cable are set to sit down with doj officials for the first time this week to try to salvage the $45 billion merger. will it be salvaged savaged, either one of those two? >> i would say this, my first reaction this is a dance they do with the government. there is so much riding on this brian roberts comcast, today zillion dollars in lobbying money and cam contributions to the obama administration. i tweeted that out. i got calls from banking source very good guys involved in these types of deals. you don't understand the animal known as obama justice department antitrust division. they believe, the betting on wall street this deal will not happen. if that is the case, i will say this, it will stop a lot of other m&a action this year. it will prevent a lost telecom m&a but could definitely stop others any sort thing close to transformational, which this is insane. what would stop it? i think big thing would stop it too many conditions, comcasts that to jump through, we have problems at nbc universal. we have lousiest customer service in the world. we'll fix that and we can't deal with the this right now. >> from a layperson's perspective, and a customer of one of those cable things i think great fear is you have a merged company that is twice as bad as far as cable. melissa: john? >> let's not forget about the power of technological change to render this entire matter moot over time. melissa: great point. >> we had ibm, couple of decades ago, justice department chasing ibm. ibm is a shadow of its former self because of changes in technology. melissa: right. >> prior to that, believe it or not, justice used to chase general motors. >> right. >> before general motors lost market share and went bankrupt. melissa: back seat to bmw latest invention. bmw is dustings off driving goggles from century ago and showing off smarter version of mini augmented vision. that is sexy. the goggles can project speed warners and directions all while you keep your eyes on the road. he looks pretty cool. todd starnes, would you put those on and get behind the wheel? >> i can't even wear skinny jeans like all the other people in the studio much less those. melissa: john. >> baby boomers losing eyesight. this is great idea. melissa: wear glasses and look cool. charlie gasparino? >> i pass. melissa: not even interested? >> not interested. melissa: every party has a pooper. this time hbo. the network drawing a legal sword i love this one, against a brooklyn bar, forcing it to end weekly viewings of the hit show, "game of thrones," that cost assume fans have been watching there for two years. costume fans. they sent the bar a letter, cease and desist. can't do this any longer. this is pay service and essentially broadcasting it. how long have bars made their bread and butter, we're showing fight on pay tv. come in, buy a beer, buy a drink spend the night. now hbo? they're so petty they will go over to brooklyn, give them a letter? >> i think what this gets into, the bigger story here is the technological change you talked about that is affecting all these sort of companies. think of it this way. comcast has to worry about people cutting the cord, no longer worrying about cable, doing stuff like buying hbo direct. hbo has to worry about if we don't have relationship with comcast anymore, how do we get more subs more people to watch our show? that is what you got here. that is the bigger story. they are acting like jerks, i agree but the underlying competitive story is really what is going on here. >> this is my neighborhood that makes sense. i didn't realize that was going on. i saw odd people walking down the street. melissa: you thought they were just your neighbors. there you go. thanks guys. show them the money. 2016 race is just beginning. one gop contender is already bringing in big, big money. which of these guys do you think it is? tim tebow might receive brotherly love. the quarterback is set to return to the game. more "money" coming up. ♪ when a moment spontaneously turns romantic why pause to take a pill? and why stop what you're doing to find a bathroom? with cialis for daily use, you don't have to plan around either. it's the only daily tablet approved to treat erectile dysfunction so you can be ready anytime the moment is right. plus cialis treats the frustrating urinary symptoms of bph, like needing to go frequently, day or night. tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. do not take cialis if you take nitrates for chest pain as it may cause an unsafe drop in blood pressure. do not drink alcohol in excess. side effects may include headache, upset stomach, delayed backache or muscle ache. to avoid long-term injury, get medical help right away for an erection lasting more than four hours. if you have any sudden decrease or loss in hearing or vision or any symptoms of an allergic reaction stop taking cialis and get medical help right away. why pause the moment? ask your doctor about cialis for daily use. for a free 30-tablet trial go to cialis.com melissa: highly anticipated book alleges that the foreign governments received favors in turn of funding clinton machine. clinton cash is not due out until may fifth. has team clinton scrambling for answers. here brad blakeman, former senior advisor to president george w. bush. todd starnes is back as well. brad, let me start with you because there has always been so many questions surrounding the clintons and money. whether the taking of money has been ethical on their part. what other people expected or gotten in return, it feels like it never gets any traction. is this different? >> oh, it is much different. now that hillary clinton committed herself to running for president. she sunday scrutiny. he she is only one in the race. all eggs are in one basket. whether there is impropriety i don't know but there is enough in book by well-researched writer dealing chapter and verse. impropriety of appearance of giving money to the clintons on quid pro quo when she was secretary of state, i think this is very damaging. i also believe this could also end her run. melissa: when it came to the foundation there was always the scent of something going on there but speeches, what needed to happen reporter spent all of their time digging into the details had to connect the dots and come up with on this date they received this money and went to the clintons and decision was made late they are way seems to be in the interest of this foreign government or foreign entity, rather than in the best interests of the united states citizens. todd starnes, they seem to get done on some things. talking about some things around haiti colombia keystone xl pipeline. bill clinton getting a million dollars from somebody who was on the board there as the decision was going through the state department. do you think it is enough, todd. >> absolutely. agree wholeheartedly with brad here, this could be a very, very damaging book. here is one of the reasons why. early bellwether "the new york times" article yesterday. "new york times" said this is very well-researched book. entire year they spent, collecting the information, the data. but beyond that they're saying that major news outlets are going to start covering some of the issues in this book. that seems to dismiss this argument from the clinton camp that this is some sort after conservative attack by some sort after conservative author. melissa: that is the way they battle back right brad? can they be successful doing that. they try to make connections between the author and the right? >> mrs. clinton tried the vast right-wing conspiracy before and it didn't work. there is no vast right-wing conspiracy. the fact is this book was not funded by the right. it is an independent book by a well-respected researcher and author. the book has legs. why? because he spent a year connecting the dots. whether there is actual impropriety or not i don't know but certainly there is appearance and appearance could be enough. melissa: thanks to both of you. 2016 just not about clinton scandals. we have stiff competition at the top of the republican field. here with the 2016 power index, chris stirewalt. he is fox news digital politics editor. so has moved up, who has moved down? tell us about this week's list? >> how about a little chris christie for you, tri-state resident. chris christie who had underperformed all expectations for as long, almost as he had been running for president, his mode felt like it was 2012, remember chris christie made early and large investment in new hampshire. he has developed deep ties with politicians there. he was there a lot as rga chairman. that gives him two spot bump in the power index. he moves up because new hampshire could be enough to keep him in this game. he could stay at table if only new hampshire will decide do for him what they did for john mccain in 2000, get him a seat at big boy's table. melissa: he moves up but still way down on the list. >> oh, yeah. melissa: marco rubio is somebody that people are watching. reuters reporting that marco rubio has $40 million in commitments from major donors. >> uh-huh. melissa: that is a lot of money. >> that is a lot of money but not really. remember what you need jeb bush needs to report that he has raised in hard cash, not just in commitments, that he raised actual cash for his pac $75 million in the first quarter of the year. what this commitment for rubio does, much like what we heard from ted cruz's super pacs immediately after his launch or week after his launch, they were in for 31 had in the first week. this is volume of money that you need to get in the game and stay in the game. this is money that says about marco rubio, that he has the deep pocketed backers who are willing to, to put it in business terms, they're willing to be venture capitalists. they're willing to help him out at beginning get him where he needs to be to shine in the magic moment when he hits the debate stage in august. melissa: chris stirewalt, always good stuff. thank you so much. >> you bet. melissa: another shocking video out of video. even more christians suffering at the hands of isis. plus a man-made drought? whole communities are suffering has california flushes water out to sea. all to help this guy. that es him. just one of him, that guy. have environmentalists gone too far this time? more "money" and some answers coming up. ♪ the real question that needs to be asked is "what is it that we can do that is impactful?" what the cloud enables is computing to empower cancer researchers. it used to take two weeks to sequence and analyze a genome; with the microsoft cloud we can analyze 100 per day. whatever i can do to help compute a cure for cancer, that's what i'd like to do. shopping online... ...is as easy as it gets. wouldn't it be great if hiring plumbers carpenters and even piano tuners... were just as simple? thanks to angie's list now it is. start shopping online... ...from a list of top rated providers. visit angieslist.com today. melissa: from the u.s. to every corner of the globe, money is flying around the world. governor cuomo is visiting with a new york trade delegation. of course he is. he is the first sitting governor to head there since diplomatic relations were restored. he need ad vacation. it is quick one-day visit. the group is meeting with cuban leaders and business owners. maybe having a cocktail. hopes maybe they can expand the reach to cuba's 11 million residents. to north korea, kim jong-un scaled his country's highest mountain in dress shoes, despite the problem with swollen ankles. the dictator climbed more than nine thousand feet right to the summit. that picture looks real, doesn't it? he told troops he felt more invigorated than ever. that the climb gave him mental energy and more power than a nuclear bomb! look at that there he is. no mat. hat. you don't need a hat. landing in the u.k., they bought a beanie-baby at flee market only to find out it was worth 100,000 bucks. are you kidding me. a rare purple bear. it was inspired by princess diana. only 100 of them were ever made. wow. when it comes to water, california values fish over people. that is the message from a report by the national center for public policy research, which claims that california's crippling drought is actually man made, caused as much by bad policy as dry weather. here to discuss that the senior fellow at the national center for public policy research. i have heard this before, but you put out a report on it. it is getting a lot of attention. i think a lot of people out there think that this historic drought is just a completely natural phenomenon. it actually has a lot to do with the way the rain water from northern california is being rerouted out into the delta. rather than going to the san joaquin valley which used to be the most fertile area in california. why was that decision made to flush the water out through the delta? >> the decision was made to flush the water out to the delta in order to try to keep a fish called the delta smelt, and other related fish, alive. in other words, what you have here is an attempt and a diversion of water from where it should have gone, namely to the people of california. instead it has gone to the purpose of flushing water to provide habitat for a fish on the verge of extinction anyway. melissa: this is amazing to me because we're looking at 37 million people have been affected by the drought. 66% of california's experiencing drought conditions. so far called the, cost the agricultural industry, that is you and i we're buying food $1.5 billion, all for this guy. can we show his picture? the delta smelt. this is the guy, where everybody is paying higher food prices no one in california can take a shower. lawns everywhere are dying. animals, everything. it is all for this guy this delta smelt. by the way, this is latest news state officials found only one delta smelt during a survey earlier this month in the delta. after all this, they went through and inspected, there was only, probably just this one guy we have picture of. that is probably him the one delta smelt saved by all this water. bonner is that right? this is insane. >> i'm afraid it is. it is absolutely insane. what you have, the drought comes to us courtesy of mother nature but the response on the part of the political class in california, to a drought which was perfectly predictable, when you look at climate, logical record of california will tell you that droughts are going to happen. what does any responsible government do? it adopts policy that enables the citizenry to be prepared for what they know is many coming. precisely that hasn't happened in california. you have seen water diverted away from agriculture. away from drinking water. away from water to bathe in for the sake of saving a fish so far gone they can't even provide breeding pairs for it. you have seen policies well impossible to build desalination plants across california. melissa: amazing. >> desalination plants are energy intensive. but what has california done? it has adopted policies that require that a certain percentage of all the electricity in california come from renewable sources. what does that do? that drives up the cost of energy. making operation of a desalination plant well new impossible. melissa: melissa: amazing story. turning southern california into a desert by choice. everyone is paying the price if they decide to stay down this path. you thanks so much for joining us. we appreciate your time. >> thank you very much. melissa: espn just got verizon's breakup note. not taking it very well. why verizon's plan to untangle the bundle has one of the best rated networks calling foul. you may have have to fight over the arm rest, but at least your wallet will have elbow room. as air fares dip we'll tell you where to fly, to get the most bang for your buck. more "money," piles of it coming right up. ♪ it's more than a network and the cloud. it's reliable uptime. and multi-layered security. it's how you stay connected to each other and to your customers. with centurylink you get advanced technology solutions, including an industry leading broadband network, and cloud and hosting services - all with dedicated responsive support. with centurylink as your trusted technology partner you're free to focus on growing your business. centurylink. your link to what's next. ♪ melissa: giving black friday a run for its money, the lilly pulitzer collection igniting a shopping frenzy at target. items selling out within hours. overloading the website. bruce along with hitha herzog. a fox business news contributor. retail expert. i have one how jealous are you? look at that, isn't it adorable? it's not mine. it's charles payne's. i borrowed it from him. he was able to snap it up. bruce, marketing genius or marketing disaster? >> three words sense of emergency. i give target the benefit of the doubt. they knew exactly what they were doing. maybe not the crash. but everything else. sense of urgency. they want you to believe that if you don't buy it now, you'll never get it. melissa: they're right about that. they do this before. they're high-flying designers that are too expensive normally for most people that shop at target. they create designs that are more affordable. now all these things are for resell on ebay. a bag that was 50 bucks, 330. a bracelet is on ebay for 250 bucks. you can buy normal lily for much cheaper than that. i'm confused. >> i don't mine they're selling this on ebay. this is economics 101. less supply more demand. i had no idea that in 2015, women my age would want to look like mrs. roper. if that were the case, i would move sold my mom's muumuus a long time ago. melissa: it's huge. i had people texting me saying i'm here, do you want anything? i don't think this will fit me. but thank you so much for thinking of me. they created a total frenzy. you're too cool for lily. >> it was a money making thing. we wouldn't have known. melissa: it was genius. they take -- they make target very stylish. even though you don't think this is style, a lot of people think it's stylish. >> my mother's muumuu is the best thing i've ever heard. you just nailed it right there. >> espn is not ready for the next frontier. both espn and espn two are not included in the cable company's new core package. bruce, this is a crazy thing. when i looked at the different packages. (?) they had a bunch of channels that maybe watched one of them as the base. every individual channel was part of a different bucket. so if you bought it a la carte, you spent more money anyway. why are you using us to bait-and-switch on people, it will make people angry. areare they right. >> i have the perfect business strategy. we'll upset our customers and our biggest supplier. what's the strategy? pissing people off. of course they're not right. nobody cares about distribution. i don't care where i get my espn. i want my content. this is a huge mistake. verizon will pay the price for this one. >> i don't watch espn. i always battle with the cable companies what i should be watching. i think verizon is in the right house here. they should be able to say whether or not espn is on the lower price package or not. melissa: we all have 1,000 channels and we each watch about seven. you pay for 1,000 unless you only get one of the ones you want. >> it's a complete racket. >> tom brady used help with photoshop. wishing good luck to the celtics. with this picture. it's coming, a young tommy in basketball uniform a superimposed under armour sleeve. you have to make the endorsement money somehow. they did lose against the cleveland cavaliers. he's in his little uniform, he has a white brace on his arm. there's an under armour thing superimposed on him. what do you think of it? there it is. >> nobody realizes that when tom brady was eight or ten years old, under armour didn't exist. so, of course, it's photoshop. it's funny. it's cute. it's clever. there's no crisis. there no controversy. it's a clever idea. that's it. hitha: it's a bad photoshop. he should tattoo under armour on his arm. wouldn't it look better? melissa: i think the white stands out. although, everything tom brady does is wonderful. i take that back. thanks to both of you. tune in tonight for back-to-back episodes of "strange inheritance." jamie colby travels to pennsylvania where a man leaves behind a struggling theater. the story of a man who inherits rare letters written to their grandmother by a young jfk. that one was really cool. don't miss it. breaking news the us is sending warships to yemen to intercept iranian vessels carrying weapons to the houthi rebels. the us' theodore roosevelt is en route to beef up residents in the gulf of aden. an armada of seven to nine ships to yemen, iran is doing. us is worried that iran can spark a confrontation with saudi arabia. so much for cheap gas this summer. why those savings at the pump may be about to dry up. the last man to shoot a us president is living the simple life. you won't believe where he's staying and what he's up to. more "money" coming up. >> i'm melissa francis with your fox business brief. china taking extra steps to stimulate its economy. that is lifting stocks here at home. the country's central bank is reducing the amount of cash that banks need in reserve. freeing up money to lend to small and medium sized by. businesses. a grim forecast. earnings came in better than expected. but the cruise operator is worried that higher fuel costs and a stronger dollar will cut into its profit for the year. mcdonald's is rolling out its all-day breakfast. you know where i'm going after work. the trial run starts today in san diego. i have to fly to san diego. with nine items offered all day long. mcgridles aren't included. biscuits at dinnertime, you'll be out of luck. that's the latest news from fox business network giving you the power to prosper. ♪ melissa: breaking news right now. the us not backing down as the conflict in yemen escalates. fox news confirming that the uss theodore roosevelt is en route to block iran warships trying to resupply houthi rebels. seven to nine ships toward yemen. us military officials are concerned that iran's support for the insurgence -- mass murder of christians. the brutal execution this time of ethiopian captives. middle east journalist fox news contributor brad is back. lisa this really widens the circle of who it is that isis is threatening. christians around the world. this time they have targeted specifically from another country. what does that tell you? >> this video is showing a few different things. isis's influence is growing. not just in syria or iraq. this is two different parts of libya. they've expanded in libya. taking advantage of the warring factions over there. it's a clear message to anyone coming across isis is saying, either you live under isis or you can die under isis. for those who want to live if you're christian, you can pay a tax. increase their revenue. or you can convert to islam. or we will behead you or shoot you the way they did to these 30 ethiopiaians. melissa: brad, what is the appropriate response to this right now? >> the appropriate response would be perhaps boots on the ground. not necessarily us alone. but we have to eradicate this. this is a -- a war on the west. it's a war by radical islam. the president has to call it for what it is. hitler in the '20s wrote a book called mime mein kampf. in radical islam, they're telling us exactly what they want to do. we're letting them become so powerful and so pervasive within the middle east that we could stop them. but we're unwilling to stop them. and sooner or later we're going to have to stop them. melissa: it seems like we're trying to straddle middle ground where we're kind of doing something about it, but not. it seems we either have to go all in and really go in with an attack plan to eradicate this group, or anything less than that, you might as well do nothing. >> right. there's something to be said about an isolationist policy. we haven't been practicing that either. either have a multi pronged approach to combat isis wherever they're advancing on social media, their on oil cells in the pocket whether stopping them militarily as well. they have a multi pronged approach. we are reactive instead of proactive. again, this video is showing us they're so well coordinated. not only in their military attacks and killing and beheadings. but in their ability to send these videos from libya then back to syria and iraq to be produced on such a high level and then to be sent out in their propaganda machine. this is much more advanced than we're acknowledging. >> i want to ask you about this breaking story about the us moving in ships to block this shipment from iran to yemen. brad it seems like an aggressive move. where do you think it goes from here? >> well this shows you the bad faith on the part of the iranians. on one breath they say they're negotiating with the united states. the united states is announcing a deal that has yet to come to fruition. and all the while, while they're doing this, they're arming rebels and sending ships into the gulf. they're doing aggressive acts. what they're doing is they're biding time and they're using their influence against the united states. so this is a play by iran. at the end of the deal there won't be a deal. if there was, it would be honored in the breach. melissa: all right. so much to talk about. thanks to both of you. appreciate it. huge gains for stocks. average up 1%. let's go to nicole petallides on the floor of the new york stock exchange. a lot of energy, nicole. in terms of stocks moving higher. nicole: that's right. and halliburton has been a real leader. halliburton came out with their quarterly numbers. came out with better than expected profit in the latest quarter. revenue did fall 4%. but it beat the analyst estimates. you can see today. it's a winner. up over 2%. this as they've been battling over lower activity. they had to battle with the lower prices. customers who wanted better prices. they're in the midst of moving forward with their deal with baker hughes. less layoffs than schlumberger. melissa: thank you so much. furious 7 racing into the record books by making a billion dollars in seven days. how is that possible? that's according to the latest worldwide box office receipts. only 20 movies have made it past a billion dollars. topping that list is avatar. $3 billion across the world. john is planning to start his own hedge fund despite all of its previous troubles at mf global. he'll be using his own personal cash and funds from half a dozen investors. commodity brokerage that would bust into 2011, years for customers to get their money back. trying to get cozy in his new digs. john hinckley jr. the last man to shoot a president is living a normal life. he is staying in williamsburg home next to a golf course. he drives around freely. he plays the guitar. even eats out at wendy's. a court hearing may decide whether he can live there permanently. does that make sense to you? the -- the dow is up more than 200 points. a lot at stake. big week for earnings. the piece for movie history up for grabs. sarah zero har a's dress hit the auction block. you can never have too much money. ♪ ♪ melissa: whether it's on wall street or main street, here's who is making money today including tim tivo. getting another shot at being a quarterback. a one-year contract as soon as today. he hasn't played a game since leaving the patriots in 2013. (?) and making money from a piece of movie history. the owners of this gone with the wind dress. it was worn by vivien leigh. she played scarlett o'hara it was sold at auction for nearly 140,000 bucks. that is a healthy profit fort ownersfor the owners who bought it for 20 bucks. fabulous. live pictures from new hampshire where hillary clinton is speaking at a furniture plant. her campaign officials telling fox news that clinton is not planning to address the allegations in that clinton cashback. that is surprising. i thought for sure she would sit down and clear the whole thing up there. let's check with lori rothman. how are you? >> i'm fantastic. thrilled to be here. here's what we have coming up. deal or no deal with comcast and timewarner cable. charlie gasparino will have insider info for us. he'll be along shortly. forget everything you know about beef jerky. we speak with two men tapping into the $1.5 billion jerky market. a lot of jerky. right? they're trying to convince us. they have healthy jerky. you want to stick around for that as well. >> i can see you eating the jerky, lori. >> a lot of it. pounds of it. >> we look forward to the show. the market is going for green. a pug tears up fresh powder. oh, yeah. much better than your flower bed. at the end of the day it's all about money. ♪ ♪ melissa: a live look at the white house going scarlet and gray right now. president obama welcoming the ohio state buckeyes. they are winners of this year's college football national championship. ohio state's first visit to the white house since 2003. head coach right at home in the west wing. there twice as coach of the florida gators. he knows the drill. we can't let your monday go on any longer without seeing this one: brandy the pug carving it out on the slopes. a little help from her owner. she may not be ready for the bliek black diamond yet, but my money is brandy for the 2018 olympic team. good stuff. relief at the pump might be short-lived. we crews into summer driving season gas is up 7 cents. that is according to aaa. jeff flock has that story from indiana. oh jeff. driving and chatting on tv at the same time. is that safe? jeff: hey not a problem. not a problem. i've been doing this all my life. i'm usually texting -- no, i'm not. melissa: no, no. jeff: we're looking for the cheapest gas prices out there. turn on the windshield wipers. rainy out here. indiana has lower gas prices. if you look at the numbers, we've seen a steady uptick. this time last week it was -- it's closer to 2.45. so much lower than this time last year. still, arrows pointing up. here's why. there was a report this morning before inventories. oil inventories which gen scape reported this morning they think have essentially peaked from oklahoma. look at the numbers from the eia last week. (?) supposed to be $3.6 million of inventory u.s. it was actually 1.3 million barrels. gasoline, also much less in terms of inventory than had been first thought. i think i found actually the exact average out here. look at this. the flying jay. 2.45. yeah 2.45 cash at the flying jay. that's where we'll pull off and get gas. melissa: get gas for us as well. across the nation 7 cents in the past week. that's a lot. jeff flock, thank you so much. that is all we have for now. i hope you're making money today. the market is on fire right now. up 216 points. no one better to take you through that last hour than lori rothman. "countdown" starts right now. lori: it is a super hot trading days. can the comcast timewarner deal be saved? both sides will sit down with the government this week. what will it take to get the deal done and what will it mean for future m&a? meanwhile former goldman sachs chairman jon corzine who presided over mf global is apparently considering launching a hedge fund. and with unfinished business with regulators which want to bar corzine from trading commodities. will corzine be shut down before he can even file paperwork? the man whose name was synonymous with a key piece of
50 or 100 years. this is the real thing. >> and much of what went wrong on wall street could be traced back to something called "credit default swaps." they were traded in a risky shadow market, and they were at the heart of the financial meltdown. [ticking] >> it has tentacles as wide as anything i've seen. i think, next to housing, this is the single most important issue in the united states and certainly the largest threat to the u.s. economy. >> meredith whitney was talking back in 2010 about a then- looming financial crisis involving state and local governments across the country. it was a debt crisis which some people believe could derail the recovery and require another big bailout package that no one in washington wants to talk about. >> the day of reckoning has arrived. that's it. and it's gonna arrive everywhere. time may vary a little bit depending upon which state you're in, but it's coming. [ticking] >> welcome to 60 minutes on cnbc. i'm steve kroft. in this edition, we look at three stories linked by the financial collapse of 2008. first, we examine a scam that's cost thousands of americans their homes. then we look into wall street's shadow market of credit default swaps. finally, a report on the perilous state of state finances. we begin with the foreclosure crisis. in the aftermath of the great recession, the huge number of foreclosed properties was a significant factor in weighing down the economy. many were stuck on the market for an unexpected reason: the banks couldn't find the ownership documents. as scott pelley first reported in april 2011, lenders wanting to evict people found that often, the legal documents behind the mortgages simply weren't there. caught in a jam of their own making, some companies appeared to have resorted to forgery to throw people down on their luck out of their homes. >> these folks on the street aren't homeless. they slept on the sidewalk because they want to keep their homes. facing foreclosure, they camped out to get in line to beg their bank for lower payments on their mortgage. so many in the country are desperate now that they have to meet in convention centers coast to coast. >> we understand people have been here for a day or two. >> two. >> two. >> for two days. >> two and a half. >> this was los angeles, where 37,000 homeowners gathered. and this was miami, where the worry was visible and shared by 12,000 more. the line went down the block and doubled back twice. dale defreitas lost her job. now she fears her home is next. >> it's very emotional, because i just think about, "i don't want to lose my home." i really don't. >> it's your american dream. >> it was. and it still is. [chuckles] >> welcome to naca, "save the dream." welcome, everybody. >> these convention center events are put on by the nonprofit neighborhood assistance corporation of america, which helps people figure out what they can afford and then walks them across the hall to bank representatives to ask for lower payments. more than half will get their mortgages adjusted, but the rest discover that they just can't keep their home. and for many, that's when the real surprise comes in. turns out, these banks, which demand borrowers have all of their paperwork just right, these same banks have fouled up their own paperwork to a historic degree. >> in my mind, this is an absolute intentional fraud. >> lynn szymoniak is fighting foreclosure, and while trying to save her house, she discovered something we did not know. back when wall street was using algorithms and computers to engineer those disastrous mortgage-backed securities, it appears they didn't want old-fashioned paperwork slowing down the profits. this was back when it was a white-hot fever pitch to move as many of these as possible. >> when you could make a whole lot of money through securitization and every other aspect of it could be done electronically, you know, keystrokes, this was the only piece where somebody was supposed to actually go get documents, transfer the documents from one entity to the other. and it looks very much like they just eliminated that step altogether. >> szymoniak's mortgage had been bundled with thousands of others into one of those wall street securities traded from investor to investor. when the bank took szymoniak to court, it first said that it had lost her documents, including the critical assignment of mortgage, which transfers ownership. but then there was a courthouse surprise. they found all of your paperwork more than a year after they initially said that they had lost it? >> yes. >> did that seem suspicious to you? >> yes, absolutely. you know, and what do you imagine, it fell behind the file cabinet? where was all of this? we had it. we own it. we lost it. and then, more recently, everyone is coming in saying, "hey, we found it. isn't that wonderful?" >> but what the bank may not have known is, lynn szymoniak is a lawyer and fraud investigator with a specialty in forged documents. she has trained fbi agents. did you ask for copies of those documents? >> yes. >> and what did you find? >> when i looked at the assignment of mortgage, and this is the assignment, a copy from my case, i looked at even the date they put in, which was 10/17/2008, was several months after they sued me for foreclosure. so what they were saying to the court was, "we sued her in july of 2008, and we acquired this mortgage in october of 2008." it made absolutely no sense. >> curious, she used her legal training to go online and researched 10,000 mortgages. >> then i began to find the strange signatures. >> one of the strangest signatures belonged to the bank vice president who'd signed szymoniak's newly discovered mortgage documents. the name is linda green, but on thousands of other mortgages, the style of green's signature changed a lot, and even more remarkable, szymoniak found that linda green was vice president of 20 banks all at the same time. >> all within the same week. i mean, this is a very, very active person. >> where did all those documents come from? we went searching for the linda green, and we found her in rural georgia. she told us she's never been a bank vice president. in 2003, she was a shipping clerk for auto parts when her grandson told her about a job at a company called docx, d-o-c-x. docx, once housed here in alpharetta, georgia, was a sweatshop for forged mortgage documents. >> they were sitting in a room signing their name as fast as they possibly could to any kind of nonsense document that was put in front of them. [ticking] >> coming up, more linda greens. >> so you're linda green? >> yes. can't you tell? 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[laughs] >> chris pendley worked at docx at the same time and signed as linda green. when you came in to docx on your first day, what did they tell you your job was gonna be? >> that i was gonna be signing documents using someone else's name. >> did you think there was something strange about that in the beginning? >> yeah, it seemed a little strange, but they told us and they repeatedly told us that everything was aboveboard and it was legal. >> and your previous experience in banking? >> none. >> in legal documents? >> none. >> there really were no requirements for the job. >> correct. >> you had to be able to hold a pen. >> hold a pen. >> but you were signing these documents as if you were an officer of the bank. >> correct. >> how many banks were you vice president of in a given day? >> i would guess somewhere around five to six. >> what were you getting paid for this? >> [chuckles] i'm embarrassed to say. $10 an hour. >> $10 an hour, that's not much for a guy who's vice president of five banks. >> yeah, i was very underpaid for my status in the companies. >> pendley showed us how he signed mortgage documents as linda green. he told us that docx employees had to sign at least 350 an hour. pendley estimates that he alone did 4,000 a day. >> [laughs] >> this is also linda green. shawanna crite worked at docx and says that she both signed and notarized the mortgage documents. what was the role of the notary? >> we were to make sure that everyone on the document was who they said they were and notarize the documents. >> but the people who were signing the documents weren't who they said they were. >> right. >> so if chris pendley was signing for linda green, you'd notarize that document? >> yes. >> and you were told that was okay? >> yes. >> the real linda green didn't want to be interviewed, but she said that some of the bank vice presidents at docx were high school kids. their signatures were entered into evidence in untold thousands of foreclose suits that sent families packing. >> so it was a common practice in the last few years to flood the courts with these documents. >> and look at some of the junk the courts were flooded with. sometimes, the document mill didn't even bother to fill in the name of the supposed owners. to them, it seemed like a joke. >> instead of the name of the bank here that was acquiring the loan, this one says, "bogus assignee for intervening assignments." that's who acquired this loan. >> this was an actual document that was in litigation? >> yes. and what corporation assigned this loan? a corporate identified as "a bad bene." excuse me? when i saw that, i was just absolutely amazed. >> what does that mean, a bad bene? >> it could possibly mean "a bad beneficiary." i have no idea what they meant. so here's the same woman, linda green, and this time, instead of being a vice president of american home mortgage servicing, she's vice president of a bad bene. >> szymoniak says that the banks whose paperwork was handled by the docx forgery mill included wells fargo, hsbc, deutsche bank, citibank, u.s. bank, and bank of america. we contacted all of them, and each said that it farmed out its mortgage servicing work to other companies, and it was those mortgage servicing firms that hired docx. docx was owned by a company called lps, a $2 billion firm that calls itself the nation's leading provider of mortgage processing services. lps told us that when it found out about the phony signatures in 2009, it shut docx down. >> it's astonishing to me that this became as pervasive as a problem that it is. >> it got sloppy. >> it got very sloppy. >> until july 2011, sheila bair was one of the government's top banking regulators as chairman of the federal deposit insurance corporation. you just described it as pervasive. >> yeah. it is pervasive. it absolutely is pervasive. and it was just a matter of cutting corners, not spending enough money, not have any quality controls. >> although banks say the courts have been accepting their paperwork, that's changing as desperate homeowners countersue the banks over the document fiasco. this leaves houses unsold indefinitely, undermining the recovery. >> i'm very worried about, if this starts getting out of hand, the kind of impact it will have. >> these are lawsuits by homeowners... >> yes. >> who are being foreclosed upon saying-- >> or are in the process or have already been foreclosed on. >> saying, "prove it." >> yes, exactly. >> "prove that you own this." >> exactly. >> chairman bair thinks rotten mortgage documents are so threatening to the economy that the government should force banks to pay into a massive fund. but you think there needs to be a cleanup fund... >> i do. a cleanup fund's a good word for it. >> just like you would have for a natural disaster. >> yes, somewhat like that. yes, this is one of human making, but yes. [chuckles] >> you don't want to give an exact dollar amount for this cleanup fund, but what are we talking about? is it billions? >> it would be. yes, i would assume it would be billions, yes. >> billions of dollars. >> yes, absolutely. >> chairman bair's proposed cleanup fund would pay homeowners to accept a bank's ownership claim without a lawsuit. she says that this could be cheaper for the banks than trying to re-create the missing documents legitimately and not through the document mills. >> i think eventually, the bank could prove who owned it, but it would take a lot of time and expense. >> you know, none of the major banks were willing to sit down with us and talk to us about this, not even the american bankers association. >> oh, i'm sorry to hear that. >> why do you think that is? >> they're feeling very defensive now, and so, like, i can only assume that that is the reason why they declined. >> the banks are defensive because all 50 state attorneys general want to punish them. the states are seeking about $20 billion in damages for what they say is the irresponsible, perhaps criminal way that some mortgage companies handled what is, for most folks, the most important investment of their lives. >> in march 2012, the us government, 49 state attorneys general, and the nation's five largest mortgage lenders announced a $25 billion agreement over alleged foreclosure abuses and asked a federal judge to approve the plan. as part of that settlement, lynn szymoniak, who filed a whistle-blower lawsuit on behalf of the federal government, will receive $18 million. [ticking] coming up, the complex financial instrument that helped down the u.s. economy. >> the idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right? however, it seemed to fly with people who were making $10 million a year. >> wall street's shadow market when 60 minutes on cnbc returns. restore revive rejuvenate rebuild rebuild rebuild so uh this is my friend frank and his, uh, retirement plan. one golden crown. come on frank how long have we known each other? go to e-trade. they got killer tools man. they'll help you nail a retirement plan that's fierce. two golden crowns. you realize the odds of winning are the same as being mauled by a polar bear and a regular bear in the same day? frank! oh wow, you didn't win? i wanna show you something... it's my shocked face. [ gasps ] ♪ [ male announcer ] get a retirement plan that works at e-trade. 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[ticking] >> in october 2008, with the financial system on the verge of collapse, president george w. bush signed into law a rescue package in which american taxpayers bought up wall street's bad investments. the numbers were staggering, but they didn't begin to explain the greed and the incompetence that created the mess. as we first reported that same week, it all began with a terrible bet, one that was magnified by reckless borrowing, complex securities, and a vast unregulated shadow market worth nearly $60 trillion that had hid the risks until it was too late to do anything about them. it started out as a mortgage crisis. then it slowly evolved into a credit crisis. now it's something entirely different and much more serious. what kind of a crisis is it today? >> this is a full-blown financial storm and one that comes around perhaps one every 50 or 100 years. this is the real thing. >> jim grant is the editor of grant's interest rate observer and one of the country's foremost experts on credit markets. he says it didn't have to happen... [bell ringing] that this disaster was created entirely by wall street itself during a time of relative prosperity. and they did it by placing a $1 trillion bet with mostly borrowed money that the riskiest mortgages in the country could be turned into gold-plated investments. if you look at how this started, with the subprime crisis, it doesn't seem to be a good bet to put your money behind the idea that people with the lowest income and the poorest credit ratings are gonna be able to pay off their mortgages. >> the idea that you could lend money to someone who couldn't pay it back is not an inherently attractive idea to the layman, right? however, it seemed to fly with people who were making $10 million a year. >> with clients clamoring for safe investments with above- average return, the big wall street investment houses bought up millions of the least dependable mortgages, chopped them up into tiny bits and pieces, and repackaged them as exotic investment securities that hardly anyone could understand. this is actually the security. >> this is the selling document for the security. >> we looked at one of them with frank partnoy, a former derivatives broker and corporate securities attorney who now teaches law at the university of san diego. >> it's hundreds and hundreds of pages of very small print with a lot of detail here. >> think anybody ever read this stuff? >> i doubt very many people read it. >> these complex financial instruments were actually designed by mathematicians and physicists who used algorithms and computer models to reconstitute the unreliable loans in ways that were supposed to eliminate most of the risk. >> obviously, they turned out to be wrong. >> why? >> because you can't model human behavior with math. >> how much of this catastrophe had to do with the instruments that wall street created and chose to buy and sell? >> the instruments themselves are at the heart of this mess. they are complex, in effect, mortgage science projects devised by these nobel-track physicists who came to work on wall street for the very purpose of creating complex instruments with all manner of detailed protocols on who gets paid when and how much. and the complexity of these structures is at the very center of the crisis of credit today. >> people don't know what they're made up of, how they're gonna behave. >> right. >> but it didn't stop the rating agencies like standard & poor's and moody's from certifying the dodgy securities' investment grade, and it didn't stop wall street from making billions selling them to banks, pension funds, and other institutional investors all over the world. but that was just the beginning of the crisis. what most people outside of wall street and washington don't know is that a lot of the people who bought these risky mortgage securities also went out and bought even more arcane investments that wall street was peddling called credit default swaps, and they've turned out to be a much bigger problem. they are private and largely undisclosed contracts that mortgage investors entered into to protect themselves in case their investments went bad, part of a huge unregulated market that's multiplied the losses. they've already helped bring down three of the biggest firms on wall street and threatened the ones that are left. but before your eyes glaze over, michael greenberger, a law professor at the university of maryland and a former director of trading and markets for the commodities futures trading commission, says they're much simpler than they sound. what is a credit default swap? >> a credit default swap is a contract between two people, one of whom is giving insurance to the other that he will be paid in the event that a financial institution or a financial instrument fails. >> so it's an insurance contract? >> it is an insurance contract, but they've been very careful not to call it that, because if it were insurance, it would be regulated. so they use a magic substitute word called a "swap," which, by virtue of federal law, is deregulated. >> so anybody who was nervous about buying these mortgage-backed securities, these cdos, they would be sold a credit default swap as sort of an insurance policy? >> a credit default swap was available to them, marketed to them as a risk-saving device for buying a risky financial instrument. >> but there was a problem. >> oh, there was a big problem. >> what was the problem? >> well, the problem was that if it were insurance or called what it really is, the person who sold the policy would have to have capital reserves to be able to pay in the case the insurance was called upon or triggered. but because it was a "swap" and not insurance, there was no requirement that adequate capital reserves be put to the side. >> now, who was selling these credit default swaps? >> bear stearns was selling them. lehman brothers was selling them. aig was selling them. you know, the names we hear that are in trouble--citigroup was selling them. >> these investment banks were not only selling the securities that turned out to be terrible investments; they were selling insurance on them? >> well, it made it easier to sell the terrible investments if you could convince the buyer that not only were they gonna get the investment but insurance. [ticking] >> coming up, defending credit default swaps. >> these people understand the nature of these products. they understand-- >> well, obviously, they didn't, or they wouldn't have bought them. they wouldn't have used them. that's ahead when 60 minutes on cnbc returns. [ abdul-rashid ] i've been working since i was about 16. you know, one job or the other. the moment i could access the retirement plan, i just became firm about it -- "i'm done. i'm out of here." you know, it's like it just hits you fast. you know, you start thinking about what's really important here. ♪ ♪ governor of getting it done. you know how to dance... with a deadline. and you...rent from national. because only national lets you choose any car in the aisle... and go. you can even take a full-size or above, and still pay the mid-size price. this is awesome. [ male announcer ] yes, it is, business pro. yes, it is. go national. go like a pro. 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[ male announcer ] lease a 2013 c250 for $349 a month at your local mercedes-benz dealer. >> credit default swaps are private unregulated contracts that mortgage investors entered into to insure themselves against losses in the event their investments went bad. but as we reported in october 2008, when homeowners began defaulting on their mortgages, wall street's high-risk mortgage-backed securities also began to fail, and the big investment houses and insurance companies who sold the credit default swaps hadn't set aside enough money to insure all of those losses. bear stearns was the first to go under, selling itself to j.p. morgan for pennies on the dollar. then lehman brothers declared bankruptcy. and when aig, the nation's largest insurer, couldn't cover its bad debts, the government stepped in with an $85 billion rescue. what role did the credit default swaps play in this financial disaster? >> they were the centerpiece, really. that's why the banks lost all the money. they lost all the money based on those side bets based on mortgages. >> and the market's totally unregulated. >> and this market is almost entirely unregulated. >> the result is a huge shadow market that may control our financial destiny, and yet the details of these private insurance contracts are hidden from the public, from stockholders, and from federal regulators. no one knows what they cover, who owns them, or whether or not they have the money to pay them off. one of the few sources of information is the international swaps and derivatives association, a trade organization made up of the largest financial institutions in the world. many of them are the very same companies that created the vast shadow market, lobbied to keep it unregulated, and are now drowning there because of unanticipated risks. the ceo, robert pickel, says there's nothing wrong with credit default swaps. the problem was the underlying mortgage securities. well, there's clearly something wrong wrong with the system if all of these leveraged bets, hidden leveraged bets, caused a collapse in the financial system. >> it is something that we all need to look at and learn lessons from, and we all need to work together to understand that and design a structure in the future that works more effectively. >> my point is, the people that made these mistakes are the people you represent in your organization, and many of them sit on the board. >> mm-hmm. >> i mean, if they didn't get it right, who would? >> these people understand the nature of these products. they understand-- >> well, obviously, they didn't, or they wouldn't have bought them. they wouldn't have used them. >> these are very useful transactions, and people do understand the nature of the risk that they're entering into. but i'm not sure that-- >> if they're so useful, how come they brought down the financial system? >> because perhaps they didn't understand the underlying risk in-- nobody really saw the effects that were going to flow through from the subprime lending situation. >> we wouldn't be in any of this trouble right now if we had just had underlying investments in mortgages. we wouldn't be in any trouble right now. >> it's all the side bets. >> it's the side bets. >> you've got all these big wall street firms, bear stearns, lehman brothers. you got insurance companies like aig. merrill lost a ton of money on this. everybody's lost a ton of money. they're supposed to be the smartest investors in the world, and they did it themselves. >> they did it all on their own. that's the most incredible thing about this crisis, is that they pushed the button themselves. they blew themselves up. >> now, how much of this was just incompetence on the part of wall street, the people who ran it? >> the truth is that on wall street, a lot of people just weren't very good at their jobs. it's as simple as that. >> these people were being paid $50 million to $100 million a year, some of them, the guys that were running the places. >> there is no defending-- a trainee making $45,000 a year would have had the common sense not to bet the firm on mortgage contraptions that no one in the firm actually understood. that is not a deep point to comprehend. somehow, through, i will call it a criminal neglect and incompetence, the people at the top of these firms chose to look away, to take more risk, to enrich themselves, and to put the shareholders and, indeed, the country itself, ultimately, the country's economy at risk, and it is truly not only a shame; it's a crime. >> since our report first aired, congress has passed the dodd-frank act. that legislation passed in 2010 aimed to overhaul many of the wall street practices that caused the financial collapse. as part of the dodd-frank bill, the s.e.c. and the commodities futures trading commission imposed new regulations on companies that deal extensively in derivative products. as a result of that action, credit default swaps now clear through exchanges or clearing houses, but they're still exempt from insurance regulatory oversight. [ticking] coming up, the harsh reality of state finances. the state's a deadbeat. >> yeah, i mean, the state of illinois is known as a deadbeat state. you know, this is a reputation that has taken us years to earn, and we've reached, you know, the heights of, i think, becoming the worst in the country. >> it's the day of reckoning when 60 minutes on cnbc returns. americans believe they should be in charge of their own future. how they'll live tomorrow. for more than 116 years, ameriprise financial has worked for their clients' futures. helping millions of americans retire on their terms. when they want. where they want. doing what they want. ameriprise. the strength of a leader in retirement planning. the heart of 10,000 advisors working with you one-to-one. together for your future. ♪ together for your future. try running four.ning a restaurant is hard, fortunately we've got ink. it gives us 5x the rewards on our internet, phone charges and cable, plus at office supply stores. rewards we put right back into our business. this is the only thing we've ever wanted to do and ink helps us do it. make your mark with ink from chase. >> in the wake of the 2008 financial crisis, the size of the federal budget deficit has received a lot of attention. but state and local governments are also dealing with massive deficits. each state has a slightly different story, but across the country, there is a common theme. in many state houses, expenditures are outpacing income, and public pension obligations are drastically underfunded. as we reported in december 2010, some believe a day of reckoning is at hand for many states that could require another big bailout package. >> the most alarming thing about the state issue is the level of complacency. >> meredith whitney is one of the most respected financial analysts on wall street. she made her reputation by warning that the big banks were in big trouble long before the 2008 collapse. now she's warning about a financial meltdown in state and local governments. >> it has tentacles as wide as anything i've seen. i think, next to housing, this is the single most important issue in the united states and certainly the largest threat to the u.s. economy. >> why aren't people paying attention? >> 'cause they don't pay attention until they have to. >> whitney says it's time to start. california has a credit rating approaching junk status. it spends more money on public employee pensions than it does on the state university system. arizona is so desperate, it sold off the state capitol, supreme court building, and legislative chambers to a group of investors and now leases the buildings from their new owner. then there's new jersey. it had the highest taxes in the country, a $10 billion deficit, and a depressed economy when first-year governor chris christie took office. but after looking at the books, he decided to walk away from a long-planned and much-needed project with new york and the federal government to build a rail tunnel into manhattan. it would have helped the economy and given employment to 6,000 construction workers. lots of jobs. >> yeah. i canceled it. i mean, listen, the bottom line is, i don't have the money. and you know what? i can't pay people for those jobs if i don't have the money to pay them. where am i getting the money? i don't have it. i literally don't have it. >> this is going on all over the country. >> yes. of course it is. it's not like you can avoid it forever, 'cause it's here now, and we all know it's here, and the federal government doesn't have the money to paper over it anymore either for the states. the day of reckoning has arrived. that's it. and it's gonna arrive everywhere. time may vary a little bit depending upon which state you're in, but it's coming. >> and nowhere has the reckoning been as bad as it is in illinois, the state that spends twice as much as it collects in taxes and is unable to pay its bills. >> this is the state of affairs in illinois. it's not pretty. >> dan hynes is the comptroller of the state of illinois, its paymaster. he currently has about $5 billion in outstanding bills in his office and not enough money in the state's coffers to pay them. he says they're six months behind. how many people do you have clamoring for money? >> it's fair to say that there are, you know, tens of thousands if not hundreds of thousands of people waiting to be paid by the state. >> so how are these people getting by if they're not getting paid by the state? >> well, that's the tragedy. people borrow money. they borrow in order to, you know, get by until the state pays them. >> they're subsidizing the state. they're giving the state a float. >> exactly. >> and who do you owe that money to? >> pretty much anybody who has any interaction with state government, we owe money to. >> that would include everyone from the university of illinois, which is owed $400 million, to small businessmen like mayur shah, who owns a pharmacy in chicago and has been waiting months for $200,000 in medicaid payments. then there are the 2,000 not-for-profit organizations that are owed $1 billion by the state. lutheran services has been around since 1867 and provides critical services to 70,000 people, mostly the elderly, the disabled, and the mentally ill. the state owed them $9 million, and they nearly had to close up shop. how long can you go on like this? >> well, we wonder that too, because we really don't know. >> reverend denver bitner is the president of lutheran services. he says they were forced to tap their entire line of credit and all their cash reserves before the state would finally pay them as a hardship case. >> it has to be that you've sold off all of your assets, you have borrowed from everybody you can borrow from, and then we'll think about it. >> even though they owe you the money. >> even though they owe us the money. >> the first words out of my mouth are usually an apology, because they have been, you know, put in this situation that, you know, really is unacceptable, and, you know, there's very little i can do or say other than apologize. >> it's not just the social safety net that comptroller dan hynes has to worry about. there have been illinois legislators evicted from their offices because the state didn't pay their rent and stories about state troopers being turned away from gas stations because the owners refuse to take their state credit cards. the state's a deadbeat. >> yeah, i mean, the state of illinois is known as a deadbeat state. you know, this is a reputation that has taken us years to earn, and we've reached, you know, the heights of, i think, becoming the worst in the country. [ticking] >> coming up, state finances hit the third rail of politics. this is different, isn't it? >> it is very different. and the reason it's different is because the only choices left are choices that people previously have said were politically impossible. >> governor christie pulls no punches when 60 minutes on cnbc returns. ♪ [ female announcer ] today, it's not just about who lives in the white house, it's about who lives in the yellow house, the green, and the apartment house, too. today we not only honor the oval office, but we honor the cubicle, and the home office as well. because today it's about all of us. and no matter who you are, you're the commander-in-chief of your own life. ♪ you can stay in and share something... or you can get out there and actually share something. ♪ the lexus december to remember sales event is on. this is the pursuit of perfection. can i help you? i heard you guys can ship ground for less than the ups store. that's right. i've learned the only way to get a holiday deal is to camp out. you know we've been open all night. is this a trick to get my spot? 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[ticking] >> not all of the problems that illinois and other states are facing can be traced to the great recession, but the precipitous drop in tax revenues did expose decades of financial irresponsibility, reckless spending, unrealistic benefit packages for public employees, and the use of political gimmicks to cover up hidden deficits. it's forcing state governors and the public to confront some harsh realities. this is different, isn't it? >> it is very different. and the reason it's different is because the only choices left are choices that people previously have said were politically impossible, that you couldn't do. you couldn't cut k-12 education funding. you couldn't do those things. you couldn't talk about pension and benefit reform for the public sector unions, that these were third rails of politics. we are now left with no alternatives. >> just the third rail. >> yeah, that's it. i'm just gonna grab it and go and let the chips fall where they may. this money's got to come from someplace. >> in some ways, governor chris christie is the political canary in the coal mine of the state fiscal crisis. he slashed new jersey's budget by 26%, including $1 billion in cuts to education, forcing the layoffs of thousands of teachers. he got rid of 1,300 state workers and drastically reduced funding to new jersey's cities, counties, and villages, which have their own financial problems. long-term, the situation is much, much worse. okay, let's talk about the pension obligations. >> sure. >> $46 billion unfunded liability for pensions, $66 billion unfunded for health care liability? >> yes, sir. >> that's a lot of money. >> yeah. >> that's a lot of money even for the federal government. >> that's a lot of money. >> and there are people who think it's worse. >> yeah, i think that's an optimistic view. listen, at this point, if it's worse, what's the difference? i mean, it's bad enough as it is, so what's the difference? i mean, now we're talking about money that none of us can really get our arms around. >> i mean, this is unsustainable, right? >> totally unsustainable. we have a benefit problem. it's not an income problem from the state. it's a benefit problem, and so we got to change those benefits. >> and what's the reaction been to that? >> [laughs] well, depends on where you sit. i mean, i think the general public thinks, "i can't believe anybody gets a pension anymore. i've got a 401(k). it got killed in the stock market. i don't know what i'm gonna do for my retirement. i can't believe people get a pension anymore." so i think amongst the broad general public, they've said, "amen." and i think, among the public sector unions, they're yelling and screaming. >> and christie is yelling back. he provoked a very public fight with the teachers union, which is one of the most powerful political forces in the state of new jersey. >> and you're not compensating me for my education, and you're not compensating me for my experience. that's all. >> well, you know what? then you don't have to do it. >> it's a scene that is starting to play out all over the country. >> cuts, cuts, cuts, and more cuts. >> governors of cash-strapped states are beginning to cajole or bully public employee unions into making concessions on what are considered to be gold-plated retirement and health care packages, which are now collectively underfunded to the tune of $1 trillion. some union leaders have suggested that you're running the state like tony soprano. >> [laughs] well, as an italian american, i take great offense to that. listen, you know what it is? i'm the first person to expose them for what they've been doing to the public. >> you want the public employee unions to share the pain? >> you bet. i want them to share in the sacrifice. and this is what i say to public sector unions. listen, you can boo me now, but i'm the first governor who's walked into this room in ten years and told you the truth, and here's the truth. if you don't partner with me to get this done, in ten years, you won't have a pension. and that's the truth. >> but it's also the truth that some of the responsibility for new jersey's pension woes lie at the doorstep of the governor's mansion. christie and his predecessors have failed to contribute the state's share of its pension obligations in 13 of the last 17 years, one of the reasons the fund is going broke. christie says it's ancient history. >> we spent too much on everything. we spent too much. we spent money we didn't have. we borrowed money just crazily. the credit card's maxed out, and it's over. it's over. we now have to get to the business of climbing out of the hole. we've been digging it for a decade or more. we got to climb now, and climbing's harder. we got to do it. >> the problem with that, according to wall street analyst meredith whitney, is that no one really knows how deep the holes are. she and her staff spent two years and thousands of man-hours trying to analyze the financial condition of the 15 largest states. she wanted to find out if they would be able to pay back the money they've borrowed and what kind of a risk they pose to the $3 trillion municipal bond market where state and local governments go to finance their schools, highways, and other projects. how accurate is the financial information that's public on the states and municipalities? >> the lack of transparency with the state disclosure is the worst i have ever seen. ultimately, we have to use what's publicly available data, and a lot of it is as old as june 2008. so that's before the financial crisis hit in the fall of 2008. >> whitney believes the states will find a way to honor their debts, but she's afraid that some local governments, which depend on their state for 1/3 of their revenues, will get squeezed as the states are forced to tighten their belts. she's convinced that some cities and counties will be unable to meet their obligations to municipal bondholders who finance their debt. the state of pennsylvania had to rescue the city of harrisburg, its capitol, from defaulting on hundreds of millions of dollars in debt for an incinerator project. >> there's not a doubt in my mind that you will see a spate of municipal bond defaults. >> how many is a spate? >> you could see 50 sizable defaults, 50 to 100 sizeable defaults--more. this will amount to hundreds of billions of dollars worth of defaults. >> municipal bonds have long been considered to be among the safest investments, bought by small investors saving for retirement and held in huge numbers by big banks. even a few defaults could affect the entire market. right now, the big bond rating agencies like standard & poor's and moody's, who got everything wrong in the housing collapse, say there's no cause for concern, but meredith whitney doesn't believe it. >> when individual investors look to people that are supposed to know better, they're patted on the head and told, "it's not something you need to worry about," when it'll be something to worry about within the next 12 months. >> 12 months. >> 12 months. >> since our report first aired, dan hynes has left the illinois comptroller's office. in new jersey, governor chris christie saw moody's downgrade his state's bond rating in 2011. and meredith whitney's dire prediction of widespread municipal defaults has not come to pass. she's been widely criticized for making that prediction, but she remains unrepentant, saying in an interview in march of 2012 that, "if people want to tell me i'm wrong, well, stay tuned." well, that's our edition
japanese gaming unit now forecasts an annual operating loss. and intel's fourth quarter figures missed forecast. the company giving fourth quarter guidance raising fresh concerns about global i.t. spending. hello. warm welcome to the presume. plenty to get through and lots of news. also coming up on today's show, as taper takes its toll, goldman sachs speaks income trading, we'll speak to the ceo of the international giant about the impact of markets. he'll join us at 11:20 cet. china mobile is now selling the iphone 5 after six years of negotiations. we'll have the latest from beijing with all the action. that's at 10:45 cet. is nintendo losing the game? japanese gaming giant has delivered a profit warning on weak, weak console sales. we'll get the full story from tokyo in around 30 minutes. intel has posted a slight miss in its profits. investor sentiment will have a closer look in the second hour of the program. and just a little south in sunny l.a., we're going to roll out the red carpet for the oscar nominations. find out why one animated picture is reaping big rewards for disney pictures. that's coming up at 11:40. if you've got any thoughts, comments, please e-mail us. worldwide@cnbc.com. royal dutch shell is stunned of a warning of a significant profit miss. the stock is down 2.6%. higher capacity and global refining conditions and current oil and gas prices will sorely dent fourth quarter figures. new chief executive ben van beurden says the 2014 performance is not what i expect from shell. mr. van beurden says he now expects profits to be $16.8 billion for all of 2014. coming up, hsbc could be facing a capital hold of more than $ 00 billion. this is according to analysts at forensic based research asia. the banking giant may have overstated assets by up to $92 billion. the report also says that h is sbc hasn't made the necessary adjustments during quantitative easing. it's allowed legacy problems to linger while new ones put emerging markets together. cnbc contacted hsbc. the bank declined to comment on the report. the hedge fund credited with spotting the u.s. subprime bubble. and we'll be joined exclusively by thomas monaco in just under an hour's time. we'll get through why he thinks what he thinks. meanwhile, simon is on the phone. thanks for joining us. what do you make of this report by thomas monaco and hsbc? does it stack up for you or not? >> well, let's worry first about what the market thinks of this. you can see the share price reaction today. there is more negative sentiment around the uk. domestic banks and millibands, comments about potential fourth bronze closures than there is in hsbc. more importantly than that, if we look at the credit market, the implied volatility on hsbc shares, it's significantly less than the european bank average. whether it's equity, credit or option markets, they're not concerned about this story. >> yeah. he said -- thomas monaco said, look, eye just gone out and used all the figures that are publicly available. what he's particularly talking about is no one is really looking at the impact of incoming basul 3 capital rules. they say they could be required at a minimum to educate the 60 million. that's not required by 2019. >> it would be a remarkable thing, given the huge amounts of publicity and vast amount that's been written, if it was true, that the world was not looking at hsbc through basul 3 and any other bank. i would think specifically about what tom is saying. of course, he can defend himself on your show a little later. first of all, he's saying that hsbc has surplus capital, but under his stress test environment that disappears. well, that's kind of what surplus capital is there for in the first place. secondly, he's saying that they haven't used the period of qe to dispose of legacy assets. it is precisely because of hsbc's capital strength that they took the decision to hold on to those legacy assets and get a better price for them when they matured. thirdly, this is reminiscent of 2007, taking a stake in hsbc and acknowledge stating for disposals in the u.s. because they said hsbc is about to collapse under unmarked crisis from the subprime market. hsbc is still here. it outperformed the sector in 2008 and 2009. and that campaign really came to nothing. >> i know you don't want to speak first. it's certainly got a time of publicity for them. is there a little bit of mis-chief in here? >> you've just started a new research boutique in hong kong. there's a lot of people out there wanting to make a lot of noise. they have had great success pulling out the occasional chinese county for bad accounting and hugely boosted their business. hats off to forensic asia for getting tremendous media coverage. but i don't think it is something that major shareholders, certainly none of the ones we speak, are concerned about today. >> what are they concerned about with hsbc? >> well, what has been happening, if i look at those credit markets and those option markets, there's been a gradual increase in bc's ratio of credit costs to the european bank average and an increase in its implied volatility relative. and that's because of the concerns about slowdown in china. and what impact the tapering may have on capital flows to emerging markets. that is a beginin issue and it might cause some problems that cause people to say, we told you so. but it is really a macro concern, not a concern about hsbc's particular position or indeed their accounting that is hanging over the shares. >> simon, always good to talk to you. simon mention d mentioned mr. m. ed milliband is expected to say he will force the country's five significant banks give up a significant number of branches. it would likely lead to the break-up of lloyd's and rbs. not even super mario can help with this one. nintendo slashing profits for the year warning it will now post an operating loss. they expect to sell fewer wii consoles in the face of new offerings from sony and microsoft. executives will face pay cuts. for more, we're joined from tokyo by our viewer chief there, kaori enjoji. kaori, did anybody see this coming? >> the writing has been on the wall in terms of the problems at nintendo for many, many years. for the last two years, they have posted operating loss. so this latest estimate means for the third year running, this is a company facing another operating loss. so for about two or three years, the company seems to have been going through an identity crisis, so to speak. but i think today's announcement moves one set beyond that. it's the crisis, period. when you're saying that your mainstay product, which is as you mentioned the wiiu, if they're now saying that sales are only going to be 2.8 million, that's 70% below their forecast. and the reason why i mentioned this in particular is because nintendo's business model is they don't make money on the game console. actually, they lose money on the game console. the whole beauty of nintendo was people really want to buy their games, for example, mario, and in order to buy those games, you have to have the hard ward. the software is where the margins are. this is potentially a huge problem for nintendo. but i think the writing has been on the wall for a long, long time. take a look at the casual gamer. their real enemy isn't really microsoft, xbox or sony play station. i think it's more something like the iphone. the casual gamer that's being offered free games. and many, many analysts have said over a long period of time, why don't they open their -- why don't they license their games to -- or offer their services on a mobile phone and that would be the answer. but at today's press conference, they do not suggest that they're going to take that step. and i think this seems to be short-term and i doubt it is going to put a floor under a reaction in the share prices, which is undoubtedly going to be very negative. >> yeah. and you're talking there about potentially structural issues facing the industry. how do you compare, you know, what nintendo is saying with what sony is attempting to do? >> well, it's a completely different product. nintendo built their band on they are a gamemaker and they're going to stick to that. because of this huge success that they've had in the past, they've been very brash, so to speak, and they've stuck to that model. but sony shifted gears, and sony, more in line with microso microsoft, is offering a computer. like device that can play games. it's a very, very different approach. at a certain point a couple years back, the whole paradigm in gaming shifted. not many people want a gaming console that only plays games. the ps3, which in gaming is an ancient machine, is selling as well as the wiiu. that's house weak sales are. there have been a number of wake-up calls over the last couple of years, and certainly this is probably the biggest one that they have in recent months. >> kaori, great to speak to you, as ever. thanks for that. shares in intel are down. the world's largest chipmaker says it expects no revenue these year. he told cnbc he still sees a recovery story despite another tough year for the pc market. >> we saw a contraction of the pc segment during 2013. but this contraction slowed down in the fourth quarter, which was positive. and, again, if we look at all the devices that were shipped to the marketplace in the fourth quarter, they did grow year on year. and if we look at how the year unfolded, the first part of the year, we saw some significant contraction. and then this did improve going to the second half of the year and got a little more steady at the end of the year. >> speaking to "squawk box" a little bit, it's time to bring you up to speed with where we're trading on the final section of the week. we'll kick off with li sixuan in singapore. >> thank you, ross. asian markets wrapped up the week on the low note as the sluggish u.s. earnings chilled investors risk appetite. the japanese government raised its assessment on overall economy. but on a separate note, a cabinet office survey showed japanese consumer confidence were sending december to 411.3. that's well below the key 50 level. not to forget, the new tax theme kicks it in april. as far as markets are concerned, the nikkei 225 shrank early losses and they're lower by just a tad but still lost nearly 1% for the week with liquidity concerns weighing on sentiment. the shanghai composite dipped to a 2 1/2 year low. but the bright spot comes from the ipo market. industrial golfmaker new wave valve jumped 43%. in south korea, shares ended lowerdy 0.7%. the s&p/asx 200 ended basically flat. super retail group david over 14% today in today's trade. ross, that's a look at the asian markets. back to you. >> catch you later, sixuan. just over an hour into the trading session in europe, advancers outpacing decliners. right now, the stoxx europe 600 is up just a point. xetra dax is up 0.2%. the cac 40 is up 0.2%, as well. break the sectors down for you. oil and gas is the lowest sector dragged down by shell. financial services, travel and leisure, banks weaker. we've had this report. it's dragged uk banks down. chemicals, utilities, basic resources up 1.3%. take a look at where we stand with bond rates. ten-year treasury yields, do2.8. mixed u.s. data. we did see jobless claims yesterday falling. and we suggest maybe that nonfarm payrolls data was something of an aberration. we'll keep our eyes on gilt yields, as well, coming up in just a few minutes time. retail sales suggesting it hasn't been the best christmas, of course, in the uk, particularly for the growth. pound is weaker at 1.6329. the dollar taking a bit of a pause after recovering from the nonfarm payroll. dollar/yen, back down to 104.34. the aussie dollar just above 3 1/2 year lows which we hit yesterday. still to come, now, he resigned in the wake of a devastating roof market collapse, but led his country into the euro scope. the outcoming latvia prime minister joins us on the phone right after this. d save you fifteen percent or more on car insurance. yeah. everybody knows that. did you know there is an oldest trick in the book? what? trick number one. look-est over there. ha ha. made-est thou look. so end-eth the trick. hey.... yes.... geico. fifteen minutes could save you... well, you know. female announcer: during sleep train's female announcer: huge year end clearance sale, get beautyrest, posturepedic, even tempur-pedic mattress sets, at low clearance prices. plus, get free same-day delivery, set up and removal of your old set. and through monday, get three years interest-free financing on selected models. but hurry, this special financing offer ends martin luther king jr. day. don't miss the year end clearance sale at sleep train. superior service, best selection, lowest price, guaranteed! ♪ your ticket to a better night's sleep ♪ roich dutch shell has stunned investors saying ben van beurden says the performance was not what he expected from shell. mr. van beurden says he expects profits for the year as a whole to be $16.8 billion. chris is with us. chris, good to see you. the upstream hit by higher volume costs, downstream hit by weaker retyping. what's your reaction? >> well, i think the concern that we've had, we've had a sale recommendation out on royal dutch slightly controversial with some of on our clients since the start of the year, really. because the stock rallied very strongly in december, didn't seem like the fundamentals were underpinning that price move. we were warning that the stock was looking exposed and liable to correct. it's in and out because of a major problem that's suddenly been unearthed here, but i think the ongoing reality of the difficulty the oilmakers have been having is revealed in this. >> and we've known about lower production volumes. that's a challenge for them to find oil they want to drill and refining margins. so is the read through from shell to bp to the sector? >> i think the read through to the sector is a broader message, which is at the end of last year, people got very carried away broadly with money going into internationally exposed equities within those flows continuing in the first few weeks of on this year, as well. and i think there was a momentum trade that is not the information is new. it's just that the stock price that's exposed here against that back drop which hasn't really changed. and i think you can put the fundamentals to one side as a bit of a momentum rally in december. and then i was just coming back down. a follow through of southern relations and difference. i think it's just a reality -- >> what maybe is a shock is the magnitude of the miss. we understand the problems, maybe we didn't quite understand they were going to come out with this size of a profit warning. they're now talking about full year results around 16.8 billion earnings for 201. dm 2012, there was 27 billion. that's a massive difference. >> what we've noticed is that the valuation outlook has been deteriorating for some time. and the markets seem to be ignoring those fundamentals. i think the danger we have here is people say it's not important. we're just starting the results season here. we're getting a lot of up to date information as we reasonably can from all the major corporate around the world coming off the back of very strong momentum movement in the market in the second half of last year. anything that misses is going to get quite dealt with severely by markets. people are saying, i'm taking my money off the table here, thanks. our recommendation is -- >> no profit? >> no. >> what you're seeing is it's been recycled in international equities. there's a lot of good companies and a lot of good businesses out there that are perhaps no longer giving you the returns that you anticipated for 2014. a lot of these companies are saying, analysts time after time this company is down 25%. we can't see the up side. people are looking to say who is going to jump next? flow is going into all international equities and bonds and all liquid asset are out there. savings is being deployed into capital markets. but we don't have to stick with a company that disapoints. there's a lot of options that people can find. latvia is the 18th state to join the eurozone at the beginning of the year. payments could be made in both euros and lat came to an end on tuesday. the ecb lead held latvia's trrchlz as the single attractiveness. latvia's session is the highlighting of its career. the prime minister's replacement is expected to take up her post next week. joining us on the phone now is the acting prime minister of latvia valdis dombrovskis. thank you for joining us. >> good morning. >> i want to talk about the euro entry. why was it the right thing for latvia to do, bearing in mind all the problems that the eurozone has had during the post financial crisis? >> well, we believe that it will facilitate economic growth in latvia through a number of ways. we expect to have lower interest rates because whatever currency exchange risk which was there between lots and euro has disappeared. and also crediting agencies have indicated they see latvia's skegz autos position about economic stability. we are very small, very open economy. we do around 70% 06 our foreign trade in euros. which means we were spending lots of money converting currencies from lats to euros. this cost is removed from economy. also, for foreign investors, we expect it's going to facilitate foreign investment in latvia. for investors, it's easier and safer to work with euros than with different, small national currencies. and besides latvia, lots was anyway picked to euro. so anyway, whatever was happening to euro was happening to lats. so from that point of view, there were many reasons not to join. >> a lot of economies have studied latvia and tried to understand what's happened there. you've had heavy austerity policies. harsh budget cuts, tax increases, tough structural reform. tied to the euro, which you haven't had the ability to sort of offset that with a weaker currency, yet somehow it worked. why? >> well, first of all, we didn't see the relation being a realistic option. because with this being very small, very open economy, whatever competitiveness gains we would get, it would disappear very quickly through inflation. important that prices would increase immediately, important compliance prices would increase immediately, and very soon we would be back to the situation where we hoped to still face real problems in our economy and to do with the real structural adjustment. so we then rather opted to deal with structural problem in our economy straightforward to address our competitive prices. this has worked and helped latvia return to the economic growth and already for three years to be among very fastest growing eu economies. >> and just finally, you thought it right to resign after the maxima super market collapse last thursday which killed 54 people. what happens now? because the elections aren't scheduled until next year, but it's essentially the collapse of your government. how does this now take things forward? >> well, in fact, the new leadership is under a prime minister appointed by the president of the state. things seem to be on track. we're working to form a broad, center right coalition and we expect the government to interoffice next week. >> thank you so much for joining us. >> thank you. still to come, the uk high street was a sea of red over christmas. how bad was the period? we'll have uk retail sales right after this. shock research claims hsbc overstated estimates. but other analysts told cnbc take a more cautious views. >> hats off to forensic asia for getting tremendous media coverage. but i don't think it is something that major shareholders, certainly none of the ones we speak to are concerned about today. is it game over for nintendo? could be for this year after weak console sales. the japanese gaming consolemaker now estimates an annual operating loss. sterling is bounced, gilt futures have erased gains after uk retail sales came in quite a bit stronger than expected. up 276% on the month, 5.3% on the year. they were forecast up 0.2% on the month and 2.5% on the year. so today's retail sales match the record month on month write that we saw back in fed 2010. the sales value growth was fueled by small scores, according to the ons. december department storts ported the strongest on year sales since january 2000. and the december retail sales posted the strongest rise on the year since october 2004. we'll get some more comments out, but let's get some immediate reaction. still with us is chris tinka. that is a surprise. the onus has gone out of its way to talk about small stores. >> i think absolutely. and i think this was evident over the christmas trading statements that we've had whereby most of the nonfood retailers have actually done very well. all the way from john lewis next argot to smaller retailers, as well. jigsaw, ted baker and the likes of that. the only people that have done badly are the grocers and that's the largest retail we have in this country. and there's specific issues going on there and a select few likes marks & is expenser had difficulties. >> the smaller stores, revenue grew more than three times faster than the bigger stores. what's going on high street? we no longer go to the big place where we want to drive any more. >> i think there's a big difference between what's happening with the big grocers particularly and the smallest of convenient stores. i think as we're getting older, people think the bigger stores are harder to navigate. they've let prices increase quite a bit over the past few years and it's pushed people into the likes of aldi and needle. on the other hand, they get quality and go to retros. so you're getting stuck in between them. i can where a lot of the convenient stores and discount stores are doing better. >> are the supermarkets going to rethink their model? >> very much. i think what you already see, i think you've another got margin reset brooming. at a time when high street generally is doing well, that's pretty shocking. >> i think the warning flag, the problems with government, for example, before christmas when they identified they were going to their suppliers and going to try and apply this tesco model as saying you've got to reduce your prices to us so we can generate more capital to invest in new stores and benefit in the long run, i think the rest of the world had a bit of a head fake and said no, that's not what we want to do. we want to sell to people who can keep their margins who have the context of the market. it does seem to me that the headlines and the growth over-shadowed the fact that we've come off the back of a sharp rise in economic performance in the uk, falling unemployment, the headlines are there. you know, everybody has been distracted by this concept of the cost of living crisis, but the politicians have been pushing. the reality is that these numbers have demonstrated the fact that people aren't getting back out and buying and it puts in stark contrast where the likes of morrison have been and where they haven't been. six months ago, we were talking about so where is your delivery strategy outside of your stores? where is your online sales and -- >> but, you know, and do you want to be an investors in a company that's only woken up and the reality is what's happening in the distribution chain in 2014? >> we all know the super market is under pressure. there are two questions. is there an investment opportunity in there if they start changing things around? aside from that, which is the company that is getting it right? >> the two answers to that, we've looked for the opportunities. buys on -- after the price correction. the market will send a strong and sharp message about the performance at the back end of last year. they've got issues, but there's value there now. so those are the two companies that you will definitely look at. if you're looking at a company that's continuing to perform, you've got to look at the necks of this world. you've got to look at the performance and the next end of the retail market who really are responding much more quickly now to the fashion environment. and marks & expenser is a dinosaur. >> i would largely agree with that. if you look at this christmas, the exceptions were people that had goods and products that people wanted but also that they were able to deliver conveniently in the way people wanted. tloifr can as possible. the likes of neck responded. the likes of john lewis did exceptionally well on that score. it's because the exclusive product there that you want to reach out to. the reason why some struggled was the product was boring and there was little exposure on the interpret, as well. european equities have been trying to edge higher today, but it's pretty hard going. we're flat for the ftse, really, but about 115 points away from the all-time high. the xetra dax up 0.3%. the cac up 0.25%. the ftse mib up 0.1%. 2.83% is the gilt. treasury, 2.84%. sterling nunl nudging up, as well. 10 1.6432. euro/dollar, just below 1.36. hsbc could be facing a capital hold of more than $100 billion. the research firm says the global banking giant may have overstated assets at the major subsidiary level up to $92 billion. it says hsbc has not made the necessary adjustments during quantitative easing reprieve. rather it has allowed legacy problems to linger. now, cnbc has contacted hbc. the bank has declined to comment. the report is led by two analysts. one, thomas monaco, a former senior bank examiner at the new york federal reserve who has previously worked the front point at partners, the hedge fund credited with spotting the justify what we sort of discounted last year? >> well, the interesting thing about the banking sector in general is -- >> well, i'm going to broaden this out, you know, if you want. >> to start with the banks, the interesting thing about the banks is the real recovery in the banks has not been because we think earnings are growth. it's because we think the risk is growing. >> my question more broadly is about the markets overall. >> absolutely. so the reason i mentioned the banks initially is because that was where the stress of risk was being seen the most in markets. across the market in general, risks in terms of capitalization, that has been sustainablely coming down because of qe. and so we're now in an environment in 2014 where it's top line that's going to be much more important. growing top line is much harder. if you look at what's happened in the states last year, the bottom line wasn't that im impressive across the board. half the people were still rationalizing, having write backs, benefits coming through from the hard work that companies were growing in. growing top line was the focus for 2014, 15. this is where the market is getting quite carried away. you have visibility of growth at top line. you think the country is now organized enough and is sfushtly deleveraged that that can throw through to the bottom line. the difficulty about growing earnings is you need to be able to grow top line sales. so that's your focus, whether it's in the retail sector or the technology area of the market, investors need to be looking through the soap much more about sustainable and increasing performance of the top line now. that is where disappoint is going to be responding to the sharp price responses through downside through this earnings season. >> chris, always good to see you. thanks so much for joining us. staying with the banks, citi and goldman sachs posted disappointing earnings yesterday largely due to a drop in fixed income. citigroup nearly doubled net income in the fourth quarter, but missed analyst estimates. at the same time, goldman sachs reported a 21% drop in its net earnings for the quarter while the bank's bond trading revenue was down 1 1%. this was read by investors as a sign of things to come as they adjust to higher interest rates. and nintendo warned today it's expecting to post a net loss. hi, fushiko. >> hi, ross. nintendo has seen weaker game consoles. it has been trying to cut prices to counter sony's play station4 and xbox 1. nintendo cut its global eu sales forecast today to 2.8 million units from 9 the million. ref knew is expected to fall 7% on the year to $5 billion for this fiscal year. the company flashed a dividend to 100 yen from 260 yen. at a press conference this evening, the nintendo president said he won't step down, but will see pay cuts for executives. ross, back to you. >> have a good weekend there in tokyo. thanks for joining us. india's top ip explorer rose in the third quarter beating estimates. they expect sales growth to accelerate in fiscal 2014. investors have punished the stock sending it down 5%. it has risen 75% over the last year. and the ceo of tcs told cnbc investors are likely taking some of that off the top. >> the electoral commission has said the 2nd of february elections cannot be free and fair, but they step back, advise all sides, open up political space for some kind of compromise so we can move to elections that can be accepted by all sides. that's what we're proposing. the protesters are demanding different things. you have to recognize the differences. move on to thailand, the anti- -- panel will be probing the prime minister's role in a scheme that has depleted government coughers. they're using subsidy toes issues royal votes and issuing new bonds to pay for them. that's one of the reasons many are boycotting the february 2nd election. earlier today, the leader of that party said western media is wrong to be critical. maria is joining us from maybank. that i think so much for joining us. this is not relevant to the stock market in a way, but why should it concern us? >> our issue here is that these are from -- or it could affect the gdp growth going forward. we have already seen some institutions and agencies saying that on the baseline it could be -- the growth could be around 2.5%, 2.8%. and that's not a small amount. therefore, our earnings forecast for this year looks very optimistic. >> yeah. the -- i suppose we have to understand how the rice trade works. the rice exporters are not the same as the rice farmers. >> they are not the same entity, yes. >> who is making the profits and the money? >> one estimate is that this is done by who estimated the benefit to the nonfarmer is 2.8 million. >> who is going to initiate this investigation? >> oh, the nacc said that we could complete the investigation in two weeks. so probably it will be another case that will be filed against them. there are a number of cases pending at the nacc, is the constitutional court, so just one of the main. >> maria, thank you so much for joining us from thighland. head of institution research at maybank. still to come, apple i sales are on sales at china mobile. finally. are they going like hot cakes? we'll have the latest from beijing. china mobile, the country's biggest mobile network has started selling am iphones to its customers today. the ceo tim cook of apple says it's a long awaited move. >> this is fantastic for apple to be launching with china mobile today. we had long wanted and wasted for this day to come and i'm so happy that it's come today. today we're bringing the best smartphone to the fastest network and the largest network in the world. >> right. eunice yoon joins us from beijing. i wasn't kidding when he said it's taken us a while. >> i know. six years. >> that's not on long. >> yeah, well, people have been ordering them. the company said that they had over a million preorders so far. so i mean, it's difficult to gauge from, say, the store itself. it was a little bit crowded. there's some lines. but it really was difficult. so i think it's probably going to be safetory really gauge everything and really make a judgment once the official sales come out. a lot of people have been talking about this story, waiting for it to happen. finally, it has. we've seen apple is probably now going to get a boost and a lot of people are excited about it because of the fact that the company has been saving competition, especially from rivals. china mobile, they really have been trying to push this new 4g network, a fast speed network that they're hoping will help generate a lot of data profitability for them. but at this stage, ross, one of the big questions that people have here is still unanswered. the subsidies, there's been a lot of discussion about whether or not there could be a subsidy war which could hurt china mobile's profitability at the end of the day if it doesn't, indeed, look at those. some analysts have been talking about how maybe it's going to have a slash actually, you know, boost some of the subsidies in order to get more people to buy those phones. >> yeah. how important is it that they're taking the lead in 4g commercializations? how quickly are you going to roll that out? and how does that feedback into the iphone deal? >> well, it's already rolled out. and it is very important because one of the key issues that the two companies had was the fact that the technology wasn't really seen at china mobile as up to snuff when it came to apple's iphones. one of the problems -- that was a key issue. so the fact that the 4g network is now out, it's seen as one that's really right now the fastest in the country, and, you know, in that way, iphone users will be able to suffer the interpret, browse, helping china mobile generate a lot of money, but at the same time, also helping apple sell more phones because people will enjoy the experience more on an iphone. at least that's according to apple. >> what is, eunice, the best selling phone, the high end smartphone at the moment? >> well, the iphone actually is -- i don't know if it's absolutely the best, but it is definitely a phone that a lot of people see as an aspirational product. it's not -- you know, so a lot of the other phones out there don't quite have that same status. you know, the iphone is seen as one that you really work up to and one of the reasons why people who you wouldn't think would be able to afford an $870 phone will actually save up and go out and purchase them. >> eunice, good to see you. catch you a little bit later. let's get more with tucker grinnan. tucker, good to see you. we know this deal will certainly improve the revenue of china mobile. what's it going to do for the profits? >> it's going to hurt profit. we estimate profits are going to fall 7% or 8% this year. largely due to the subsidies issue and the depreciation on the 4g network. just to put it in context, china mobile spent about $28 billion for hand set subsidies. we think the number for fy14 is more like 50 billion. so the first year of the iphone deal is going to take a big hit. they've deployed a big network on balance sheet. the key issues for investors is do they look at the revenue acceleration or earnings. what is the focus? >> so what is the focus for you? >> the fof for me is revenue growth. china mobile has been growing revenue at about half the industry rate. let's say 6%, 7% versus the competitors. they have not lost a lot of share in the high end. the main reason is the iphone experience so far, the 40 million or so iphone customers they have can't really use the main data network. they're using wi-fi. so china mobile has quite good data traffic, but they're selling wi-fi at a 90% discount to cellular traffic and wi-fi represents the highest of my major operator globally. our view is they should be able to monetize the existing customer base with these better hand sets. >> how much do you think they have to subsidize the iphone by? >> ballpark, on let's say the numbers you showed on a 5800 or 6 of,000 renminbi device, probably around 2,000 renminbi. the subsidy is usually equivalent to 8 to 10 months of service revenue. it is a hit. china mobile still has the bulk of high end customers. this is a very strong brand. we think the top 100 million or so china mobile customers can afford to pay 5,000 renminbi for a hand set. >> thanks for that. still to come, we'll sxeek exclusively to one of the authors of the explosive hsbc report. second hour of "worldwide exchange," coming up. other analyst ves told cnbc to take a more cautious view. >> hats off to forensic asia for getting tremendous media coverage. but i don't think that it is -- it is something that major shareholders, certainly none of the ones that we speak to are concerned about today. >> game over for nintendo. at least for this year after issuing a profit warning on weak console sales. the japanese gaming firl now forecast an annual operating lot loss. plus, intel's fourth quarter profits missed analyst forecasts, the company giving disappointing guidance which has raised fresh concerns about global i.t. spending. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. hello. warm welcome to you on the second hour of "worldwide exchange." if you've just joined us in north america, welcome to the start of your global trading day. u.s. futures after we snapped a two-day gain yesterday for the dow and the s&p 500 suggesting fairly muted start. the s&p is called down at the moment by 0.3 of a point. the dow jones flat and nasdaq down by 2 points. plenty can change between now and then. first off this morning, we're going to talk about hsbc. it could be facing a capital hold of up to $1 billion. this according to analysts at the hong kong basis forensic asia. the global banking giant may have overstated assets at the major subsidiary level by up to $92 billion. the report says hsbc has not made the necessary adjustments during quantitative easing reprieve. rather, it's allowed legacy problems to linger while new ones in emerging markets gather. joining us now is one of the authors of that report, thomas monaco. also with me on the set are helia. welcome to you both. thomas, you talk about lots of things in this report. how -- but you seem to say that the biggest impact is coming from basul 3 capital walls. they could be required to set close to 60 billion in new capital by 2019. what is your major concern? >> well, there are a number of concerns. we can start with the asset, what we believe to be asset overstatement. there are issues of loan loss provisioning. and restructured assets that seem to go without any provisioning against them. issues of deferred tax, underfunded pension plans, etcete etcetera, intangibles associated with previous acquisitions that are questionable. so we'll start with that. and so that, to us, is somewhat problematic. then what we have done st we've looked at the company on a -- on a regulatory reform guideline under basul 3, potential pra guidelines. what we have found as we stress the balance sheet as well as take a look at it to be compliant under 2019 guidelines, we find that the organization looks to need some capital. and that number is upwards of $100 billion, but that's going to depend on, i would say, the final rules with respect to basul 3 within the uk. >> i mean, you've done a forensic analysis. i'm just assuming i could take pretty much any bank and come up with a whole list of things that i should be very worried about. it doesn't mean they're going to come to pass, though, does it? >> sometimes they do, sometimes they don't. it really depends on what's going on with asset values. it all depends on the regulatory authorities in each specific market. it's all going to be dependent upon that. but at the end of the day, what we are seeing is the legacy problems have lingered. new ones in emerging markets are forming. and the fact of the matter is, earnings are under a significant amount of pressure. and whether you believe the idea of asset overstatements, which in our view amount to six to seven years worth of earnings, they still have to be compliant with basul 3 by 2019. our feeling is that these capital requirements are pretty enormous. earnings are under significant pressure. and as a result, more lickly than not, the dividend likely will be cut or suspended. and, you happen, our feeling is the company is even contemplating some of these rules. what we have seen over time is the organization peel off assets in china. we've seen it for basul 3 which is a negative impact earnings. we have also seen that the organization is contemplating potentially listing the hsbc uk retail subsidiary. >> i know there's -- there's a number of issues i want to bring helia in. i was just on the legacy stuff. one could argue that they actually want to keep the legacy, they have a balance sheet to do it until such time as they could get a better price for those assets. >> i think it's interesting. there are some concerns around, i guess, asia and if there's a hard landing in china, what does that mean for the hong kong balance sheet? does that mean bigger loss reserves? does that mean less revenues? what about the stakes that hsbc reduced in those banks? tom, you obviously have a great reputation and people like meredith whitney have made their careers out of calling things like citigroup back in 2007. we've seen bernstein come out and talk about standard chartered. have you applied the same stress tests to standard chartered? >> we have not. we do not cover standard chartered at this point. we have taken a look at h -- we've applied the same standards to quite a number of the american banks under the regulatory reports and we find that the level of capital charges under the same assumptions, hsbc versus bank of america and the more traditional banks and hsbc, by far, has the worst balance sheet of the traditional banks within the united states, in our opinion. even worse than that of industry leaders. tom, can i just ask you, obviously, your forensic if your look, but your note is quite short. can we see some of the work? when you talk about questionable balance sheet, you mention six different things from loan loss reserves to the defined pension plan. where can we say how you've applied this stress test? because i guess to get to these big numbers you're talking about the bank needing to raise. it would be interesting to see where you -- >> sure. we have done -- well, what we have done over the past year, we have written a series of about six or seven notes on the various entities of hsbc. outlining, highlighting where we think the problems are via asset class on balance sheet, off balance sheet. and applied that many that versus their stated equity as well as versus their regulatory capital and we've come up with a substantial level of questionable assets on their bat balance sheet. >> thomas, good to talk to you. thanks for joining us. congratulations on one issue. you've got a lot of people talking about your firm. i don't know if that was part of the plan, but, you know, you've done well on that. >> it's a slow news day, slow news day. >> thank you. thomas monaco, managing director at forensic analysis. >> thank you. royal dutch shell has stunned the market with warningings of a significant market miss. high capacity and global refining conditions and current oil and gas prices will sorely dent fourth quarter figures. the new chief executive says the 2013 performance is not what i expect. mr. van beurden now says he expects profits for 2013 as a whole to be $16.8 billion. and not even super mario can help with this one. nintendo has warned it will now post an operating loss. nintendo president says he won't resign, but executives will face pay cuts. and considering the theme intel's fourth quarter profit rose 6%, but missed analyst forecast by a penny. revenues slightly beat estimates. results were hurt by weak spending on service. intel has a fairly luke warm outlook. the first quarter revenue says it overestimated the extent of the recovery and spending among enterprise customers, citing the impact of the u.s. government shutdown. intel down 5% in after hours. it's currently off nearly 4% in frankfurt. let's start off with housing. we start off with this snapshot of u.s. futures. pretty flat is where we're indicated at the moment. we snapped a two-day winning streak yesterday. the dow down 64 points. the s&p down 2.5. pretty much on fair value for the dow as is the nasdaq as is the s&p. so new england strong indicated at the moment. european equities, pretty much reflect that, as well. the ftse 100 just up 8 points. it was down yesterday. means it's about 105 points away from the all-time high. the xetra dax is up 0.5%. cac 40 up 0.4% and the ftse mib is currently up 0.2%. ten-year treasury yields, 2.84%. it's been an interesting week for yields. lower today. gilt yields are higher. we had a much stronger than expected retail sales number ow of the uk for december. uk sales up on the month, 5.3% on the year. that's the fastest annual growth since october 2004. smaller stores selling three times the pace of the bigger stores. and it was groceriers that were the super markets were the big losers in the uk. on the currency markets, sterling has resulted in stronger cable against 1.6445, up nearly 1 cent today against the dollar. dollar/yen, 104.44. dollar taking a breather after recovering from its nonfarm payroll sell-off. and euro/dollar just below this 1.36 mark where we were this time yesterday. that's european assets in trading right now. sixuan will wrap up the week for us in asia out of singapore. sixuan. >> thank you, ross. it's largely negative session in asia as sluggish u.s. earnings tamed investors risk appetite. the nikkei 225 trimmed warning losses ending a tad weaker, but loss nearly 1% for the week. as ross just mentioned, after the market close, nintendo expected full year operating loss and slashed the outlook or its wii console sales. and ahead of announcement, shares dropped nearly 3% today. elsewhere, what's lingering liquidity concerns weighing on sentiment. the shanghai composite dipped to a 5 1/2 month low ending down by almost 1%. this yeah of key economic data including gdp numbers next week. but the priet spot comes from the ipo market. new wave jumped 43% in its $240 million market debut, which is the first ipo in 14 months on the mainland markets. elsewhere in south korea, shares ended lower by 0.7% in australia's asx 200 managed to end just a tad weaker. all the miners extended a strong rebound today, but australian retailers tumbled after a profit warning from super retail group and that stock took a dive, ending down by over 14%. ross. >> sixuan, thank you. have a good weekend. now, a reminder of what's on the agenda in the united states today. we've got december housing starts. they're out at 8:30 eastern. forecasts to drop by more than 10%. building permits are expected to rise 11%. at 9:15, we get december industrial production. that's forecast to rise 0.3. just before 10:00 a.m., the first report on january consumer sentiment is out. the richmond fed president is speaking about the economy at noon. joining us for the next part of the program today, jim o'sullivan, chief u.s. economist at high frequently economists. >> morning, ross. >> it's a week now since that employment report. weekly jobless claims fell yesterday. do you think that was an aberration or what is the data since told you? >> ternl the employment report likes like the aberration. even going into the number, we do think that there were weather issues in terms of risks. and there's no question that unfavorable weather in early december was a factor in that report. more generally, the numbers are very volatile. they have been trending 180, 190,000 on the month. you look at the evidence that's coming out since then, including the claims number which continues to signal improvement. more generally, you look at the numbers, retails sales earlier in the week were reasonably solid for december. the beige book was pretty positive. and just generally, the numbers have been consistent with an economy that's improving, all of which suggests that, yeah, the employment report is an aberration. >> okay. and that -- does that explain why we've got a number of fed speakers this week saying we should go a little bit -- fisher .plosser was saying and charlie evans coming out and saying, well, maybe there would be. i wouldn't necessarily be against it. >> fisher and foster are viewed as on the hostile side. >> exactly. they kind of hint that there might be a case. >> they're certainly not doing more at this point. i think at this point, the fed is almost on auto pilot. i think it's 10 million a meeting for now. and -- >> what changes that? what magnitude of data change do we need to change them? >> well, i think you have to look at the inflation numbers, not just the growth numbers. inflation has stayed tame. we saw yesterday the core cpi was tame at 0.1%. the core pc number, the fed favored inflation gauge is running 10.11% year over year. that's running below their long-term goals. so i think you probably need to see some of the inflation numbers tick up, not just continued strength in the growth numbers. frankly, at this point, i think it's easier after all the object session over the fed in takenering in 2013, put it on auto pilot and we don't have to talk about it every meeting. >> are they going to be able to keep the surf where they want it? >> well, i mean, of course, where they want it, i mean, it's not 100% clear what that means. but in terms of long rates, i mean, i think the expectation is if they're right and ultimately they have to tighten come 2015, 2016 and the economy is improving, long rates will continue to buy. >> the pressure goes -- >> yeah. i the fed right now, they have forward guidance. you look at the projections for the funds rate. the median fed official shows the funds rate are zero. 1.75 at the end of 2016. and right now, you look at fed fund futures contracts and they're pretty much completely in sync with the fed. personally, i think the markets will start to second-guess that dovishness as the numbers continue to improve. we start to get some bubbling in the wage inflation numbers in particular in 2014. i think you'll see the markets start to price in a bit more tightening in 2015, 2016 as the status projecting. ultimately, obviously, that puts upward pressure on bond yields. >> jim, good to have you on the set. still to come, apple's iphones are finally on sale today at china mobile. has the wait been worth it? we'll tell you more after the break. a recap of the headlines, shell shocks the market with its $11 billion profit warning. hsbc overstated assets and could face a capital hole of more than $1100 billion. and came over for anyone tendo. the japanese gaming firm warns on profits ar weak sales. still to come, amid taper fierce for the emerging market, we speak to the international chief executive of brazil. let's put some music on.eng. woman: welcome to learning spanish in the car. passenger: you've got to be kidding me. driver: this is good. woman: vamanos. driver & passenger: vamanos. woman: gracias. driver & passenger: gracias. passenger: trece horas en el carro sin parar y no traes musica. driver: mira entra y comprame unas papitas. vo: get up to 795 miles per tank in the tdi clean diesel. the volkswagen passat. recipient of the j.d. power appeal award, two years in a row. i nethat's my geico digital insurance id card - gots all my pertinents on it and such. works for me. turn to the camera. ah, actually i think my eyes might ha... next! digital insurance id cards. just a tap away on the geico app. could save you fifteen percent or more on car insurance. everybody knows that. well, did you know that when a tree falls in the forest and no one's around, it does make a sound? ohhh...ugh. geico. little help here. global banking risks will be among the hot topics in next week's davos forum. joining us for more is charles stewart, ceo of itau bba international. also still with us is jim o'sullivan from high frequency economics. jim, good to see you. one of the biggest latin american banks? >> yes. one of the biggest banks in brazil and one of the biggest private investors banks in latin america, yes. >> all right. jim is here and on automatic mode. is that okay for latin america? we can cope with that? >> well, i think to a certain extent, what we're seeing is -- and our hope is that we're seeing the pain before the gain. i don't think tapering at this point is catching anyone particularly by surprise, except the exact timing of it, perhaps. and, of course, the underlying sentiment that the u.s. economy is improving is ultimately a positive for us in latin america, particularly in mexico. >> mexico because it's right next door. >> yes. >> there has been a -- mexico has been an outperformer already. so is there a lot in the price? >> to me, yes. mexico has had a relatively good run, particularly by em standard over the last 12 months. but coupled with, perhaps, just some momentum in the u.s., you've also got some important structural reforms in the mexican economy, which is impressive. such as the energy reform currently making its way through the legislature and the new president. >> jim, what do you think of mexico's leverage? >> it's closely tied to the cycle. obviously, can do to the north and mexico to the south are part of that. it's hard for them to deviate too far, i think, from the u.s. >> it's a different case in brazil. they just put rates up by 50%. the consumer is under pressure there. they've had a weaker currency and inflation problem. they've got elections coming up. >> yes. >> it's tough. >> there are certainly a lot of what i would characterize as head winds in the brazilian economy. you look at some of the major macro factors in the world today, whether it's slowing growth in china, whether it's tapering in the u.s., whether it's political noise and the election in brazil, and in the end of kind of easy money and consumer credit, those are all negatives or head whippeds for brazil in an em context. but from our perspective, the long-term fundamentals, the fundamentals of the brazilian economy are extremely compelling, whether you look at that from a demographic perspective, the resource story, rule of law and certainly i would argue that many emerging market economies, certainly brazil and south american economies are better equipped to with stand the pressures that we're seeing. >> briefly, you finally got the world cup this year and the olympics coming. is that a problem or is that helped? >> well, you know, i think for anyone who is passionate about football, the world cup will be a very special event in brazil this year. and the legacy of the world cup in brazil, our hope and expectation at a minimum, is that it will stimulate infrastructure investment. it's already doing that. that's been one of the key bottlenecks in the brazilian economy. we see nearly half a trillion dollars of infrastructure investment in brazil over the next four or five years which should provide further support to the medium and long case in brazil. >> charles stewart, thank you for joining us. we're going to keep jim for a couple more comments. intoll missed expectations by a penny. we'll get into the details of the world's biggest chipmaker right after this. mine was earned orbiting the moon in 1971. afghanistan, in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation. because it offers a superior level of protection. and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. you're watching "worldwide exchange." a recap of the headlines today from around the globe, we have a shock from shell. a $1 billion profit warning sends its shares to the bottom of the stoxx 600. the oil giant citing weaker conditions and higher costs for lower fourth quarter forecasts. another research note that is also a bit of a shock, hsbc, it says, could face a official $111 billion capital hold. the managing director told us why he thinks the bank has overstated assets. >> issues of loan loss provisioning and restructured assets that seem to go without any provisioning against them, issues of deferred tax assets, underfunded pension plans, etcete etcetera, intangibles associated with previous acquisitions that are questionable. game over for nintendo after weak console sales. japanese gaming firm forecasting an annual operating loss. plus, intel's fought quarter profits missed forecasts. the company gives disappointing guidance, raising fresh concerns about global i.t. spending. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. a warm welcome if you just joined us stateside. u.s. futures are pretty flat at the moment against fair value after snapping a two-day winning streak yesterday. the dow down 64. we are some 19 points off fair value, the nasdaq has inched up to be around 3 points above fair value and the s&p is around 2 points above fair value. european equities, which have been fairly flat, have just inched up in the last half hour. the uk today experiencing much stronger than expected retail sales in the month of december. 5.3%, the annual rate. the strongest since october 2004. we thought they would come in at 2.6. the cac 40 up around 0.5% and the ftse mib up around 0.3%. shares anyone tell down in after hours trading after the company's fourth quarter earnings missed expectations by a penny. the world's biggest chipmaker said it expects no revenue growth in 2014 as worldwide personal computer sales continue to slide. intel said it overestimated the extend of a recovery in spending among its enterprise customers. patrick wang joins us now from new york. patrick, a very good morning to you the fairly luke warm revenue forecast, is that what is concerning us most? >> absolutely. if you take a look at the way that intel has performed just over the past couple of months here, you can see that investors have been taking expectations higher and higher. they've outperformed the nasdaq, they have outperformed the market. it really started in late november, starting with some signs of rush orders for notebook. over in asia, you know, that started driving excitement in terms of pc builds and things like that. when you take a look at investor sentiment going into earnings last night, i think most folks are looking for a healthy raise. we didn't get that. we goet got a pretty good beat on the fourth quarter. we got an inline first quarter guide and, of course, 2014 was kept basically the same. as you mentioned, no growth. but as you mentioned earlier, i think that the biggest concern has to come down when you peel into the full year guide this year, when they down tick on data center growth, which is one of the nice growth drivers of the company over time. >> yeah. now, personal computer sales, we know, for a long time have been losing ground to tablets and smartphones, which the market has been slower to enter. is there a sign over that slowdown pc sales is going to taper a little bit to give them some room? >> yeah. you know, it's interesting. 2013 was really a bad year for pcs, right? so notebook shipments dropped over 10% last year. so, you know, as we went into the fourth quarter into q11, we were just getting to the point where pcs were stabilizing. so consumer pcs probably aren't going to drop that much this year. and that was part of the reason why you saw investors get a little bit more excited. in fact, you take a look back, just over the past month, there were five upgrades of intel. basically, on that thesis that pcs weren't going to be as bad as before. that said, the one -- the rock for the bullish thesis for a lot of these investors out there had been data center, dcg, the data center group, which shifts into the cloud. it's been a very, very good performer over the last couple of years. last night, management dropped the ball saying, hey, listen, we're seeing enterprise growth below what we had expected. they lowered the full year guidance. so i think that that was a concern. >> and that must be a read through of other firms, right? there must be a read through. >> absolutely. i mean, they pointed to a couple of things. they said enterprise spending is weaker in the fourth quarter. in particular, they pointed to the government. so i think that's something that many of us have been concerned about. the debt ceiling tapering of government spending as we go towards year-end. and it actually hit intel in the fourth quarter, right? on top of that, you know, when they said that when they were in the third quarter, things seemed a little better in the fourth quarter than they had expected. as a result, they still had excess inventory. so they overbuilt in the third quarter for actual demand. i think when you take a look at the markets today, most of the enterprise related companies probably are going to trade down in sympathy, just not on intel's comments last night. i can't imagine why you come out of that feeling great about enterprise spending right now. >> patrick wang, joining us from evercore partners, thanks for joining us. jim o'neill is still with us. it's interesting they said they were hurt by the debt ceiling in the fourth quarter. do you think there will be many others that will share that? >> when you look at the macroeconomic data, it doesn't look like there were big effects. but i think government spending will be down in the fourth quarter. certainly there were some shutdown effects in there. overall, it looks like gdp growth in the forty quarter was at least 3%. right now, my forecast is 3%. if anything, the numbers might be adding up stronger than that. that comes after 4% in the third quarter. but i'm sure there could be individual cases. from a big macro perspective, it's not obvious in the numbers at all. >> the key here is it was interesting, down 6.7%. how much of that is around the participation rate? and then how does that feed through into any point soon anybody being able to ask for higher pay? >> well, i mean, that's been an ongoing debate. to the extent that the drop in the unemployment rate may have been exaggerated by the drop in the participation rate. the aging population, brings down participation rate over time. and you look at the details of the whole employment report and household survey, the employment number that goes into the unemployment rate, different from the payroll survey, is also what i would call implausibly weak. so that weakness offsets some of the implausible weakness in the labor force. and the bottom line is the 6.7% up employment rate does seem to represent consumers. people ask do you think jobs are hard to get? and that number has completely lined up with the unemployment rate coming down. you ask businesses in the nfib survey, do you have job openings? that number is up to 23%. it's the highest since january 2008. at that point, the unemployment rate is 5%. so if anything, that survey is suggesting even more tightness in the unemployment rate. so you can quibble with the details, but the big picture is, there's been improvement in the u.s. labor market. and i think to the point where that becomes a focus. the labor cost numbers have been pretty stable. around 2% year over year per hour. but i think that's the next story in 2014. tho do those numbers start to move up a bit. >> gel, great you have to on today. look at that, 2013 forecaster of the year, your name appears quite a lot on there. >> six times. >> six times out of the last ten years. that's pretty impressive, jim. it's a pleasure to have you on, jim o'sullivan joining us from high frequency economics. disney hopes the movie "frozen" will pick up two oscars this year. more right after this. [ male announcer ] this is the story of the dusty basement at 1406 35th street the old dining table at 25th and hoffman. ...and the little room above the strip mall off roble avenue. ♪ this magic moment it is the story of where every great idea begins. and of those who believed they had the power to do more. dell is honored to be part of some of the world's great stories. that began much the same way ours did. in a little dorm room -- 2713. ♪ this magic moment ♪ new details emerging now about the scope and sophistication of target last month. court joins us for more with the details. morning, court. >> good morning to you, ross. the u.s. government issued a report to retailers and other organizations on thursday. outlining what may have occurred at target, which was hit by hackers during the holiday shopping season. between black friday and mid-december. last friday, target said as many as 110 million customers may have had information stolen when they swiped their credit and debit card toes pay for items in stores. they also later said information such as e-mails, phone numbers, addresses and names could have also been stole.. on thursday, the company agreed to testify about the incident at a house southbound committee hearing next month. a report was prepared by online security firm isight. isight tells cnbc the code comes from a code written in russian. a part of the malware was written in russian and a program was originally published by a russian crime master. isite said the code was available online since last summer, so anyone could have bought and used it. the software was sophisticated, require ago high degree of skill and it's unlikely that it was limited to just one attack. investigators won't say how target's network was breached, but the reports are that the virus couldn't be detected by any antivirus software. it included features to hide that they were collecting copies of data from strip owes customer cards. american express said it had minimal exposure. the company said it has five controls in place on accounts affected by the theft. american express is safer due to its closed loop network. the "new york times" reports neiman marcus computers may have been hacked as far back as july. and the breach wasn't fully contained until this past sunday. neiman said it publicly learned of suspicious activity in mid-december. and a programming note, isight chairman john warters will be on "squawk box" today at 7:00 a.m. eastern time. >> thank you for that. that's the latest on an extraordinary bug, really. let's talk about the oscars. the nominees for the 86th annual academy awards were out yesterday in los angeles. in the race for best pictures, "12 years a slave," "captain philips," "american hustle," dallas buyers club, and "the wolf of wall street." the best picture nominees also get a boost at the box off. zero dark made an additional 90% of box office growth after it was nominated. disney will be looking for a box office boost as it received six oscar nominations for three feature films and one short movie. the studio's smash hit "frozen" is up for best animated film as well as best song. senior analyst at media sternekie, thank you for joining us. how will the studio help disney? >> i'm sorry, can you repeat that? >> yes. how is the studio going to help disney with its earnings? >> well, really, the studio is around 8% of disney earnings. so it's not a huge driver of profit. but i would say that this "frozen" sess ask is a huge success for disney. disney animation hasn't had a hit like this for years. all their big animated films were from pixar. so this is definitely a positive event for disney animation. >> and yet you say that you think contented estimates will have to come down a little bit. why? >> that's not because of the disney animation studio. that's because of i think people overestimating the revenue growth trajectory at the cable networks, which is the biggest operating profitability driver at disney. >> what about the parks? are they going to have to spend more in the parks? does that mean they don't get the margins that investors are expecting? >> you know, parks is a great business, but it's a mature business. it's not going to be massive margin extension unless you're coming out of a recession or an event like '08, or 9 kind of scale. so i think it's a state of growing business. it's probably 40, 50 basis points margin expansion and a benign economic environment. and it's pretty predictable at this point, but it's hard to drive massive upside from the parks given that you need 30 million in edit for disney to move eps by a penny. >> and you've got a neutral rating. good to see you this morning. thank you so much indeed for inning us. >> thank you very much. recap of the headlines, shell shocks the market with its $1 billion profit warnings. forensic asia tells hsbc overstated assets and could face a capital hole of $1 billion. game over for nintendo. the japanese gaming firm warned on profit after weak sales. [ male announcer ] the new new york is open. open to innovation. open to ambition. open to bold ideas. that's why new york has a new plan -- dozens of tax free zones all across the state. move here, expand here, or start a new business here and pay no taxes for ten years... we're new york. if there's something that creates more jobs, and grows more businesses... we're open to it. start a tax-free business at startup-ny.com. and shift through all eight speeds of a transmission connected to more standard horsepower than its german competitors. and that is the moment that driving the lexus gs will shift your perception. this is the pursuit of perfection. hsbc could be facing a capital yhold of more than $1 billion. a research firm told me earlier, the banking giant may have overstated assets by up to $92 billion over the last five to seven years. now, we've contacted hsbc. the banks declined to comment. but actually, you can clearly see that report having no impact on the stock. it's actually up 0.7%. a view that's not widely shared by investors. royal dutch shell, meanwhile, has stunned with a warning of a significant profit miss. the shares down around 2% this morning. they've been down between 2% and 3% so far during the london session. the oil major says high capacity and global refining conditions and current oil and gas prices will sorely dent fourth quarter figures. joining us is peter hauck. peter, good to see a$[yyou. we know that they've had problems with production, getting volumes out. we know there's been weaker refining. but even so, a billion dollar sort of profit warning. is it the size that shocked us rather than the fact? >> yeah. i don't think it's the fact. i think a lot of this is a reminder rather than particularly new information. what's slightly different is sort of the interpretation of what is underlying and what sort of seen as an exceptional item which oil companies such as shell will normally strip out to allow analysts to get to an underlying number. what shell said previously is expiration rights which have been heavy in the last couple of quarters, they've already said that they were going to be pretty much at the same level in the fourth quarter. so i think a lot of peep's numbers. i think there's a twist in this one. that probably underlying about 1.7 billion and they said in the segment this morning that they would only strip out 0.7 of those as nonexceptional. so when you have those back, yes, it's a disappointment. but rather than being the difference between 4.5, which was last quarter and the 2.9, we think it's the different between 4.5 and 4. >> what's the difference between the other oil majors? >> some of these are general. some of these i think would be shell specific and where they are in the management process at the moment. clearly in terms of refining, shell speak particularly of asia and europe. so that does impact all the integrated. but i think we're seeing some rotation out of shell into total because total just needed slightly more secure haven for the moment. so i think that's a general consideration. but i think what is really driving this one is we've got -- you know, shell announced a strategic review on its shale business. it's attacking its level of unreenumerated capital. this will be the third quarter where there are opportunities to take significant write-downs. it's taking that opportunity. we think there's probably sort of within each of the businesses, you know, a lot of the controllers will be being cautious in terms of what they're share offering in terms of profitability at the moment. and all this is preparing the position for the new ceo, who will be on the core on the fourth quarter who really is going to get stuck in from the first -- from the results beginning the 1st of january this year. >> yeah. >> and i think less tolerance for write-downs next quarter. >> yes. if you're coming in, get all the bad news out even before you take the seat. that's not a bad way of doing it, is it? peter, thanks for joining us. u.s. futures have been trying to particular higher from about an hour or so ago. we were currently 20 points above fair value for the dow after we snapped a two-day winning streak yesterday. the nasdaq is currently, what, two points or three points off fair value and the s&p 500 is two points above fair value. allen knuckman joins us now. it's been a topsy turvey start to the year, allen. when are we going to start a trend? >> well, i think we have established a trend. we made new highs. not in the s&p futures just yet. we're going to have another positive week. yields are going down. crude oil remains low. looking at the stock market, we have a 35% sell-off in the s&p. you can add that on to the upside breakout. another 2% high he. and we've seen this happen repeatedly over the last four years. every time it makes new highs, it goes that length of that previous sell-off. >> yeah. look, what's -- and what's the key right now for this to grind up? >> the key is just to step out of the way. step out of the way and let the market keep going. we're getting good, solid earnings keep developing. the financials have come in and you saw new relative highs here. you saw bank of america perform very well. that stock was below 11 within the last 52 weeks. so i think the financials are leading the way. nasdaq, obviously, showing some great strength. i'm keeping an eye on apple. i know everybody focuses on the high price of apple. but you could see 605 here as the next target. if we get up to that level, then we can approach those highs once again. you have to think about apple. yes, it is a big dollar stock. take that zero off it. could it go from 60 to 70? certainly. when you put it in that perspective, it's not that big of a move in percentage terms. >> that would kind of be interesting if that was happening. the dollar sort of recovered all its sort of employment report losses at the moment. and we're back to levels we were at. you got a sense that it -- i mean, there's always this view at the beginning of the year dollar is going to go stronger, it's going to become a growth currency. is it? >> i'm still very negative on the dollar in the long-term. from the standpoint that we are in a weak dollar policy for the last 25 years. and i think the safety of the dollar has gone and people don't need that any more. so i think you're going to see a slow decline. we're at a very important point in the dollar versus the euro. we're at the 1.36 level. we're right at that mid point. on a weekly basis, look for that to hold. you can see us fluctuating. from a risk/we ward standpoint, i'm a buyer of the euro here. i'm a buyer of the australian dollar. we have bullish diversion, meaning that we made new lows, but the volatility to make new highs. that's usually a very good sign of a bottom. >> that's a good call. we'll see what happens. alan, thanks for that, alan knuckman from trading advantage. that's it for today's edition of "worldwide exchange." "squawk box" is coming up next. whatever happens, we hope you have a profitable day. [ cellphones beeping ] ♪ [ cellphone rings ] hello? [ male announcer ] over 12,000 financial advisors. good, good. good. over $700 billion dollars in assets under care. let me just put this away. [ male announcer ] how did edward jones get so big? could you teach our kids that trick? [ male announcer ] by not acting that way. ok, last quarter... [ male announcer ] it's how edward jones makes sense of investing. welcome to "squawk box." general electric and morgan stanley get ready to roll out results. intel misses and offers a weak forecast. that stock is lower this morning and a new report says that the target breach appears to be part of a broader scam that affected several other retailers. it's friday, january 17th, 2014. "squawk box" begins right now. good morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin who is reporting from new york today. andrew, you have a big show coming up. what's on set? >> we are here, becky, at the lowes regency
deep discounting at stores could bring them short of its target. and global pc shipments slump in the third quarter, missing out on the usual back to school boost, but china's lenovo says competitors are taking away more sales and market shares. >> announcer: you're watching "worldwide exchange," bringing you business news from around the globe. >> hello and good morning, everyone. you're watching a brand new edition of "worldwide exchange." ross westgate is out today, but we've got a jam packed show for you. on today's show, the bank of england is expected to maintain its record low interest rates, but wa do unemployment levels in the uk mean in the banks for guidance? we're live at 10:10 cet. shell may be licking its wounds after big losses on sales, but russian's tnk says is it hit big on a recent boom. we speak to the chairman, also known as the prince of pipes. brazil's central bank has increased its benchmark borrowing rate with no indications it will slow the pace. we talk to the ambassador of brazil in the united kingdom at 11:10 cet. janet yellen is officially nominated to take over the helm in january. we get the latest from washington at 11:00 cet. and back in london, we speak with a celebrated fashion designer tamara melon about her controversial claims that jimmy chu didn't design in the shoes. if you have any comments, any questions to our guests this morning, our guest host, he's waiting in the wings. feel free to send in your thoughts and your comments. the e-mail address is worldwide@cnbc.com. to our top story this morning, president obama met with house democrats at the white house wednesday evening. he told them to be prepared for give-and-take in budget talks. the president will meet with house republicans later today. he had invited the whole gop caucus, but house speaker john boehner is sending 18 leaders and committee chairs. house republicans are considering a short increase to buy time for broader policy discussions on the budget. on wednesday, republican senator susan collins proposed a plan to reopen the u.s. government and raise the debt ceiling in return for killing the medical device tax. that, of course, is part of obama care. treasury secretary jack lew testifies about the debt ceiling before the senate finance committee. that's at 8:00 a.m. eastern. he's expected to warn lawmakers he won't be able to guarantee payments to any group such as social security, military veterans or used bondholders if congress doesn't agree to raise the debt limit. lew plans to say he would do all he can to minimize the pace, but he would be relying on an erratic slow of incoming tax revenue and there's no certainty the u.s. could make interest payments. the fed and treasury department are reportedly preparing contingency plans in case of a possible debt default. officials are closely watching the market for banks often use bonds as collateral for short-term use of our banks. officials reportedly don't want to divulge specific details because they don't want to suggest to investors and republican lawmakers the u.s. can't muddle through a dead default. meanwhile, fidelity investments, the largest u.s. mutual and money market fund company has sold all its data debt that comes due this month and in early november. that's the window considered by investors to be the most exposed as the u.s. government defaults on its bills. fidelity says while it expects the debt ceiling toish be resolved, it's taking these steps to protect its customers. fid fidelity's move isn't deterring the bill's growth, so he tells cnbc pimco continues to buy u.s. debt. >> for pimco and for blackrock and fidelity in terms of the bonds funds outside money market space, it is no problem whatsoever. and a buyer in treasury in the next would be advantage and pimco has been advantaged for 35 basis points as opposed to what existed prior to that at three basis points. is it a lot of money? no. but it's what an active manager should be doing and it's what we've been doing for the past few days. gross says the odds are about a million to one that the u.s. will default on its debt, but that doesn't mean the threat isn't affecting the markets. before we pick up on the talk about the debt ceiling and the government shutdown, i want to bring you some news flashes. the ecb and the chinese central bank have agreed to a currency swap line. this is set to last three years. the ecb is set to have access to up to 350 billion yuan. and the pboc in turn can access up to 45 billion euros from cecb. let's bring in our guest host for the first hour, v is iat. thank you so much for joining us this morning. >> good morning. >> what do you think are the chances of the u.s. breaking the debt ceiling and defaulting on his bet. >> i agree with bill gross. the best scenario would be a grand -- coming out of this painful discussions and heckling around. i would assign the probability probably between 15% and 20%. that's not in the market. we should not forget that the worst case, a default on the debt ceiling, that's not in the markets, either. and i would aseen an almost zero probability to that. but it doesn't mean that markets don't care. i think it will become so painful the closer you get to that deadline and the impact on markets that it simply will not happen. >> and that's also what the treasury warned about last week, that we could see this freeze in the credit markets, a big slump in equity markets. we have seen a little bit of worries, not panic, but worries in terms of t-bill yields. they've spiked up, even though they've come back down a little bit. but in terms of the rest of the treasury curve, everybody has been very, very calm. why is that? >> because a default is basically almost unfeasible. it would be a total breakdown and it would look like a chicken game. therefore, nobody assigns any probability to it. it doesn't mean as we get ever closer to it that this one acts up in the market behaving in a different way. there's a significant loss in business and consumer confidence already the last ten days. and that has a real impact on the markets. >> absolutely. and, you know, it's interesting that with all this object session about the debt ceiling, about the government shutdown, it seems as though we've completely forgotten about third quarter earnings season which kicks off this week. it has kicked off this week in the u.s. alcoa's earnings are slightly better than expected even though the guidance has come down, as well. do you think that's going to be moving the needle in terms of what markets are going to be doing or should we forget about earnings season because it's outdated? >> we should not forget about earnings season because that is what is going to move here medium term. and i think the primary trend in the market is for equities up and for bonds down and we have a global synchronized recovery. but mark of issue here and that mark of risk coming out of washington is dominating everything for the right reason. and it seems to me that the average american has more common sense and less -- than the average conman and that's reflected in the polls these days. >> that's the hope on, isn't it? >> yeah. >> we'll get plenty more thoughts from you and more investment advice over the next hour. meanwhile, most members still think it's appropriate to taper the bond buying program this year, even as they held off moving in september. markets were caught off guard by that decision, which the minutes show was a relatively close call. fed members thought investorses would read a september taper as a signal of their willingness to start exiting qe3 and they were worried higher interest rates could slow the broader economy. the bank of england shows its monthly meeting with few expecting change to benchmark interest rates or asset purchases. the imf recently revised up its growth trajectory but current output remains well below crisis output levels. earlier on, andrew stanton said he believes now is the time to start rate hikes. >> when the euro crisis seen, now wasn't the time. interest rates have come down to extremely low levels, much lower than they were in the great depression of the 1930s. so it's quite a challenge to start to gradually raise them. and if we don't start earlier, and keep delaying, we may have a further rate hike down the track. helen, do you think mr. carney's forward guidance will be somewhat vindicated today or over the next few weeks? as we've seen, the recovery in the uk is patchy. it's not a broad based recovery. >> and you're absolutely right. what happens yesterday where productivity missed expectation, we'll kind of tune into the narrative we've seen from the bank of england which is talking about this much longer, much more difficult, much more, as you said, patchy recovery than maybe the market and lots of other economists have been talking about. but remember, forward guidance is really all about telling the market, this is how they're going to interpret the data. and they're looking fourteen employment to hit 2457%. the question is when they think it will be kind of in the beginning of 2016. but a lot of people say that coming earlier. joining us now is phil rush, uk economist. can you tell us, new lines have been much more bullish on lines coming down quicker. why is that? >> it's been a long-term fall. we've expected that essentially what should be a fairly uncontroversial assumption that firms see higher demand for their products and have to go out and meet higher staff to meet those demands. >> when do you think unemployment is going to reach that threshold? >> we're expecting to get to the 7% threshold in the second half of 2014. all that requires is for the upward trend in employment that we've had over the past few years to be maintained. incidentally, that's exactly the same job pace creation that we've had. >> and where are you in terms of growth? obviously, we've had a blip in some of the economic data yesterday, but we've had positive second numbers over the summer and over the course. where do you stand in terms of growth in the uk? >> it's been a surprisingly strong summer. aided by the very nice weather that we've had to get the consumer out and spending. we've been expecting a bit of a weaker winter and the kind of data that we've been seeing over the past few weeks no longer surprising matters to the up side. this is exactly the sort of thing that we need to see to justify our forecasts, which are actually a little bit more pessimistic than the bank of england in terms of gdp. >> so do you think some of those surveys that we saw over the summer were too optimistic? >> yeah, exactly. i'd say they're frothy both in terms of what we can expect in sustainability of growth, but the trend of growth that we're going to get from the uk. but also relative to what we'll see in the hard data. there's a tendency for those survey toes overpredict gdp. >> and a hundred days into the job, our governor, mark carney, has he done a good job of getting that forward message out to the market? there's been some concern that maybe the market is misreading it or they haven't delivered it. it hasn't gone swimmingly well. >> not in terms of getting the market to believe the unemployment forecasts. but that's not so much what the bank is trying to do. it's trying to communicate what its reaction function is. and that seems to be believed by the market. more importantly, as far as the bank of england is concerned, it's being believed by households and firms who are unusually confident to go out and borrow or at least not save at the rates thefb. >> carney is saying that he's not interested in what the markets think, just because people in business are concerned. what about these warnings that we're hearing about this asset bubble in housing? house prices have gone up hugely. you've got a flagship program from the treasury. how dangerous is this? >> it's potentially quite dangerous. already we've seen the new builders go out and jack up the price of their houses by some 10% off the back of the extra mope that the consumers can go out and pay for. this, i believe, is the primary care of the recovery we're seeing now, though. strong asset prices are making households feel better and a net worth perspective and thus their large stock of debt is not concerning them in the way it has been over the past couple of year when these teams come to an end, those terms are going to come become and it could be a painful correction for the uk. >> and the bank of england has been given a review by the chancellor. is that enough of a tool to keep a check on things like health if it is indeed as dangerous as you say? >> it has the potential to step in and it could easily reverse the buybacks if it so chose. however, i very much doubt it will. >> why? because charney is the chancellor's man? yes. has good form in blowing up housing bubbles. >> thank you very much for joining us. i think everyone would agree that it's going to be very difficult for the governor to step in, even though the treasury has given him that mandate. we'll see to see until their review next year. thank you so much for that. meanwhile, let's take a quick check off european markets this morning. the stoxx europe 600 showing quite a nice recovery after three days of losses. it is up by almost 1%, just off the session highs. remember, this in large part is tied to the optimism that we're seeing in markets around a deal in washington because republicans, congressional republicans are meeting with president obama later on today. i want to show you european markets. one by one, we're seeing some outperformance on the french market. the cac 40 is up by 1 is.4% after falling around 0.5% yesterday. the xetra dax gabing nicely to the tune of 1%. and the ftse 100 a relative underperformer, but still in the green one 0.7%. in the government bond space, we're seeing core prices moving a little lower today. yesterday, remember, the ten-year gilt yield hitting the lowest level in some six weeks on the back of industrial output and trade data this morning at 27705%. the ten-year bund yield at 1.83%. and the ten-yee italian yield is at 4.36%. remember, we did see a really good demand for that seven-year action yesterday. today we're getting a 12-month t-bill action. let's take a quick check of the forex markets where we're seeing dollar strength coming through. again, this is on hopes that we will get a deal between the republicans and the democrats. the u.s. dollar against the japanese yen is 97.70. the aussie/dollar did see some seesaw trading earlier in the session after jobless claims came out. but then it fell because the participation rate was lower. and the cable is 1.5936 after disappointing data yesterday. the pc market was denied a back to school boost in the third quarter as consumers put off new purchases or turned to lower cost tablets. gardener's latest figures show sales dropped to multi year lows. but lenovo managed to pick up gains in market share and shipments. that's despite a share in its chinese market. lenovo traded about 1.3% higher on the news. let's check in on how asia is trading today. we are seeing some outperformance on the nikkei 225. sixuan has all the details for us. good afternoon. >> yeah, good morning to you, carolin. thanks for that. it's a mixed bag for asia today, but japan outperformed its asian peers on the back of strong data. in a stronger dollar against the japanese yen continued to lend support to ex forter stocks. the nikkei 225 climbed over 11%, climb to go a one-week high. but china markets pulled back after rebound trading ahead of more official data due out later this week. korea's kospi is waking up from yesterday's one-daybreak ending down by just a touch. over in australia, the latest jobs data is taming low expectations for further job cuts and the asx 200 lost a modest 0.1%. we have earnings news out of japan. takashimaya was a top gainer. the department store is increasing its outlook and is expecting its first half profit to jump over 15% all year. shares of taiko pharma raised its outlook and shares ending higher over 4%. back to you. and still ahead on the show, why ecb president mario draghi's whatever it takes attitude has one strategist turning bullish on eurozone equities and why he is calling this a goldie locks environment. that's coming up after the break. i love having a free checked bag with my united mileageplus explorer card. i've saved $75 in checked bag fees. 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[ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. ♪ welcome back pop show. spain and friends can begin to slow their austerity drive according to a top imf official. the positive comments didn't flow through to greece, though, with the organization warning the indebted country will miss its 2014 bailout target. in a report, the imf said recent budget surplus would hit 1.1% of gdp next year, instead of the 1.5% target required under its bailout program. greece is unlikely to get the next aid if it fails to reach this target. margo draghi took aim at u.s. critics says euro doubters underestimated the region's political will. >> in the dark days of the crisis, many xheb taters on this side of the atlantic looks at the euro area and were convinced it would fail. they vastly underestimated the depth of europe's commitment to the euro. they mistook the euro for a fixed exchange rate regime which, in fact, it is an irreversible single currency. and it is irreversible because it's born out of the commitment of european nation toes close integration. >> the ceo doesn't doubt the eurozone recovery and thinks now is the time for a rotation into european equities. you are nodding as we played that tape of mr. draghi. you completely agree with him and that's why you say we should be piling into european equity peps. >> well, i have no do it whatsoever that he's right and has been right about it. and he has a classic turn around situation right now in equities. investors realize that the integrity of the victim is reserved and it's a single currency. that's one thing. the second point is that the eurozone has exited its recession, just read the bundes bank report and they are certainly not talking nice or writing nice. it's now stabilizing. the thirs third thing is, there's plenty of liquidity, interest rates, the corporate balance sheets are very strong. that's now starting to have a look at it. >> absolutely. also, i want to draw the discussion to u.s. equities. you said about a week ago that your view remains unchanged. the 2013 and 2014 are the years in which equities will beat bonds and cash by a significant margin, particularly in the u.s. is that still the case with all the political wrangling that's going on? >> yes. it can hurt short-term. they have a global expansion in the economic cycle that the central banks will do whatever it takes to accommodate the situation and that corporate balance sheets are very, very strong. . >> i have a question for you and viewers, as well. the world's most expensive bottle of wine will go on sale today at just under $200,000 a bottle. ohm six bottles of the 2009 chateau margeaux goes on sale. so a ridiculous amount to pay, or worth ever drop? what is the most you would take for a good bottle of wine? get in touch with us by e-mail, world would it@cnbc.com, via twitter @cnbcwex or direct to me @carolincnbc. how would would you pay for a bottle of wine, 200,000? >> certainly not. but the conundrum here is that the demand is rising with rises prices. it's not about to drink that wine from that bottle but to show everybody else that you're able to afford that. that's the point. so it's a great thing for the buyer. probably, too, but for the various reasons. >> let's see what the viewers say. beat, thank you for for your input this morning. >> thank you. celebrity endorsementes and liberal mentions in tv shows likes sex in the city, how they share a global shoe empire. but now the co-founder has claimed chu himself did not actually have a chance in the designed of the trademark heels. accessory editor tamara melon makes the revelations in a new book which slams the role of private equity in developing the luxury brand. my colleague, karen, caught up with the fashion brand to find out why she has ditched pe. >> private equity was a very difficult thing for the fashion business because it's two different worlds that don't understand each other. for me, i think what's happened is private equities become something that was never meant to be. a lot of these guys now, they want to come and flip companies for a carried interest. and a fashion brand cannot go through a sale process every two to three years. it's just not sustainable. >> how hard is it to access capital without private equity or a big backer? >> well, the most interesting things about jimmy choo is private equity never put capital into the business. they bought shares. and, in fact, they bought shares with debt. and the company had to pay the interest on their debt from cash flow. so not only were we growing ourselves, but we were also paying off their debt. >> well, you do have your own brand now, tamara mellon. just how different is your strategy in 2013? >> it's completely different. what i'm doing now is just the pioneering which is what i did with jimmy choo in the early days. the world has changed. since fashion shows are online, everyone can see them, b but it takes six months to get into the store. so we're broad, we're over it because we've been looking ate for texas months and we want the next new thing. so i've designed a business model where i'm doing monthly fashion drops and in season. so it's buy now wear now. the fashion calendar is also off. department stores have pushed designers so much to have the merchandise first that it's got earlier and earlier. now you have coats in july, spring summer dress necessary january and nobody wants to shop like that any more. i don't want to think about a coat four months in advantage. jimmy choo's success was built partly on the growing demand for luxury products in asia. how sustainable is that growth? stay tuned to hear more of tamara mellon's thoughts on that. and still coming up on the show, shell may be looking at big losses, but russia tmk says it has one big on the recent boom. we speak exclusively to tmk's chairman after the break. president obama sends out an e-vite to try to find some common ground over the u.s. government debt ceiling. no resolution on the u.s. debt ceiling would push member states back into recession next year. a three-year currency swap deal starts between europe and china. and the ecb will gain access to 350 billion yuan. japan's south retailing brings out record full year sales and operating profits ahead of next year's sales tax heex. but deep discounting stores keep earning short of its targets. good morning, everyone. let's take a check off where european markets are. we are seeing optimist returning to the market. this is hopes for a deal between republicans and democrats later on today. the ftse 100 is showing gains around 0.8%. the xetra dax is up 1%. the ftse mib is up 1.5% following three days of losses. so a modest bounceback for european markets just off their one-month lows. in terms of the bond markets, as a result of that optimism, we're seeing core prices moving a touch lower this morning and adversely, yields are moving just a smidgenon higher. ten-year treasuries, been unchanged over the last two weeks, really. it's fascinating just how stable it's been despite the rangeling on capitol hill. yields at 6.9% and the ten-year gilt yield recovering a little bit from yesterday's big fall after the disappointing economic data at 2.7%. the dollar is higher against the yen at 97.76. it is higher against the euro at the sterling. sterling/dollar at 1.5939. it fell back on the back of the down beat economic data and euro/dollar stabilizing just below that 1.35 level. if you have any questions, comments on anything you see on this program, do send in your e-mails to worldwide@cnbc.com. shares in telecom eye taitaa are higher. claudia is here in london, not in milan. it denied that report, but a sale is going to come at some time, right? >> well, sure. it is the telecom that is in focus as of late. this is after the spanish group did gain the majority control of telco, which is a company that controlled telecom italiap. after that, the ex chairman and ceo did step down from that position and he was pushing for a capital hike versus the sale of the asset. yesterday, the stock did rally on the heels that that stock may be closer. the company did deny that. that asset could be worth somewhere around $9 billion to $12 billion euros. today is stock is trading flat yash. the fixed line network is ready to be spun off, as well. that could be helping on the debt front as some of the debt may be put in the company that gets formed there. so for telecom italia, where domestic business is quite flat if not declining, their debt is, of course, very important, as well. >> claudia, we're watching italia is continually suffering woes. they're scheduled to meet today to discuss a capital increase which the carrier needs in order to avoid a default. can italia make it? >> it's strange. alitalia hasn't been making profits. it's in and out undid itted up to 1 billion euros. and the fuel provider for alitalia said it's not their job to keep alitalia flying. so they want that money that they're owed. investors are kl ready to put some capital. will air france that owns 25% of alitalia underwrite a big question? for alitalia, the future is unclear. will they go bankrupt or will they get this money? they need $500 million euros. will the government take a step? they met with the industry minister, as well, last night. what happens next is the big question. italy wants to keep some sort of hold for that carrier. it means a lot so it's dominating the news even though it's not listed. >> claudia, thank you so much for that. >> saying in the air, europe is bracing itself for region wide disruptions as a region wide strike takes place. >> the french division of aviation authority has requested a 10% consolation for all flights today in froons because of the strike by air traffic controllers. this is mainly impacting flights to and from the southern part of europe, mainly in spain, italy, and northern of africa. roughly 10% of flights -- but because the strike is also disrupting the traffic over the country, some european flights have been canceled. it's the case for easy jet and from a 30% consolation of their flights today in france. air traffic controllers are protesting against the plan to reorganize the european sky to create a single sky. the plan was to have a pan european strike today, but all plans have pulled out of the movement except for two small movements. that's the reason why the disruptions today are rather limited. but we have consolations, roughly 10% of flights today are out of paris. so that's the reason why. we're watching air france klm. as claudia was mentioning, there is another reason to watch air france klm to make a decision regarding the future of alitalia. the pressure is increasing on air france klm. >> stephane, thank you so much for that. staying in france, we want to bring you comments from the president of the bank of france. it was says the bank of france has actively supported the ecb/pboc swap deal that we were just telling but a few minutes ago. this is a swap deal that will last about three years. the pboc can access up to 45 billion euros from the ecb and in turn, the ecb will have access to some 350 billion yuan. noyer says the ecb/pboc deal gives eurozone banks long-term security, is for a significant amount and just to add, it's said this deal recognize tess rapidly growing role of yuan in internshl finance flows. peter roser maybe regretting the company's huge gamble on shale sales, but another deal is benefiting from the boom. the 1.2 billion investment allowed the russian company to take advantage of a surge in demand as oil companies in the u.s. rush to expand oil reserves. now it's poifd poised for continued focus as the focus in the u.s. shifts from shale gas to shale oil reserves. pietra, thank you so much for coming in today. >> thank you. >> i know you have a busy day today. what are you going to be telling your investors who may have been concerned in the first half of the year about pricing pressures in your business? >> well, i would say to them that they have very well situated in the most dynamic pipe market in the world. the united states drills 45,000 wells a year. that's three times more than any other region like latin america or russia. so it's a very dynamic market. we're well positioned. we now have 13 plants in the united states and canada. we've been working on taking costs utah of our production. we've been ramping up on the services side. we have 20% of the on shore premium connection market and in a special niche called the intergrove premium connection market, we're almost at 40% so we're well positioned. >> before we drill down further into the u.s. business, which is obviously very promising, i want to extend a little bit more on europe where you saw very challenging environments over the last couple quarters and russia where you mentioned that you saw an unfavorable sales mix. how are these regions supporting? >> well, europe is i think in your on previous interviewer made the point that europe is stabilizing and perhaps even beginning to grow again. so we look forward to growing with europe right now. of course, we are down there. russia is a very stable market because there's few players. 35 i'll and gas companies. we tend to find long-term contracts with them. they are doing a lot of drilling. they're going into eastern siberia and drilling. russia is really the motor of the company and the american operation catch. the up side win this volatile american market turns around, which it's beginning to do. >> but the u.s. market to some extent has been dogged by overcapacity. how is that affecting you? >> well, the overcapacity has come from unchecked and unfair imports. so the industry has gotten together and started a trade case. the six itc commissioners voted unanimously to pursue the case. so we think that that is going to take some of that pressure off the market pricing. in terms of overcapacity, there are a lot of plans being planned. but we think that that overcapacity of the new plants will take out the import one to one, really. >> in our introduction to you, we said that you were profiting from the fact that the u.s. is moving from gas shale to oil shale. talk us through exactly how you would be benefitting from that. >> well, for one thing, the move from gas to oil has been dramatic. five years ago when we bought the american operations, 75% of our pipe was being used on gas wells. and today, it's the other way around. the only real difference to us as a supplier of steel pipes is that as our clients move to oil, they tend to require larger diameter pipe. otherwise, the rest of the mix is the same. except perhaps for the connections. drilling for gas requires metal to metal seals, a fully premium connection. oil requires a semi premium connection, which we have introduced to replace the standard api connections. >> very quickly, before we let you go, what are you expecting to come out of president obama's decision on keystone? are you worried about that? do you think that the environmentalists have won him over? >> i think that keystone is required by both countries. canada wants to sell its oil sands oil as much as the united states needs it. because the united states has 37 refineries on the mexican gulf coast and they're set up to run heavy oil. and the traditional suppliers, mexico and venezuela, are not keeping up with the demand. >> okay. unfortunately that is all we have time for, but hope you have a couple of good markets today. hope the one in new york went okay. thank you so much for coming in. >> retail earnings are out with strong results. but they show benefits mostly benefiting high end consumers. >> hi. there's 26% in the year-ended august and sales jumped 20% compared to last year, topping the 1 trillion yuan mark for the first time. but most of this growth is coming from china and the other asian markets. at home, average shoppers continue to hunt for bargains. meanwhile, department store operator earnings are strong cashing in on high end consumers. it is upgrading its net profit full year forecast by 6% hoping many will rush in to buy expensive goods before the sales tax hikes in april. still, they say the consumer spend sg still not recovered and expects to lose some $20 billion yen in operating profits over the five years following the spring tax hike. that's all from the nikkei business report. back to you. >> thank you so much for that. and still to come on the show, rbs says there's a 60 billion pound economic potential being missed in the uk. more on women and business after the break. don't go away. janet yemen is the first woman ever considered to lead the fed and along with german chancellor angela merkel and the imf's christine legarde, three women would hold three jobs with the most impact on the global economy. well, yellen is most likely not on the list this year. fortune magazine reveals its annual ranking today of the 50 most powerful women in american business. also being held today is the annual 25 most powerful women in banking awards dinner. for more on the female business leadership, i'm joined by heather jackson, founder of business forum and andy keeling from the royal bank of scotland. hello, ladies. it's an all-ladies round this morning. that's great. heather, let me kick things off with you. what are the main impediments to a gender diverse business? >> many impediments in this business now is actually the pipeline. the pipeline in the flow remains coming to an organization. the majority of companies now are attracting great female graduates saying 60% are coming in at graduate level. the finding is now in the uk of 6%. we have to try and build that pipeline better now. >> you've said putting women on bores is just a farce. >> i take the point because at this moment in time, we haven't got the state of resolutions. it's a cosmetic reactive model. what the uk and the world right now need is a sustainable model that tracks women all the way through. because gender balance team throughout an organization builds better balanced business. >> an did i, would you agree with that? >> absolutery, i would. it's not just about getting to the top. it's building that sustainable pipeline for sustainable growth and economic success for the future. >> so at rbs, what exactly are you doing about that problem? >> so i guess we've invested in this over a number of years. but right now, my job in bank wouldn't have existed a few years ago. and it focuses not just on how we support women inside the organization and getting into more senior positions, but also the -- i guess economic values for the future, both in supporting female led businesses and out to our customer base doing that and working with our corporate customers to work with them on this agenda. because other than the usual wall for talent, we don't compete at this. and the brt we work together, the quicker we'll turn the dial on achieving success. heather, i know you brought in research saying that companies would have gender diverse businesses that perform better. andi, do you see that as you get more women in senior leadership positions or even into middle management? do you actually see evidence of that? >> it's not easy because in the uk, we're not brilliant at doing it. but the research sluicely suggests and states that those companies who do have that balance in leadership teams and at broad levels do achieve that discuss. >> let me play devil's advocate here. one of the frequently used arguments against introducing a quota for women in companies, obviously, is, you know, get the person with the best qualifications, with the best skills in there. does it matter whether it's a man or a woman? >> it goes -- it definitely does because what we need is a diverse team and the diverse team is sinking into it. >> how does that make a business better? >> it supports confidence in the business. it quadruples innovation. now, you tell me it starts to react to the business. but one of the big holders back on this, it wants to take more women to the top. the government can't be putting on the pressures on the -- and the chairman puts pressure on the chief exec. but what we've now get to is build the organization with women. their skills and talent is required. >> andy, i don't think we should feel sorry for any banker in london. would they not with at the males, would they not feel disengaged, miss dissolutions about their prospect? >> it's different on decision making. i think that's a good thing. men and women do come at things from different angles and in different ways. different challenges are made and that's where you get different decisions made. which i think is a good thing. >> okay. thank you so much, ladies. heather jackson, founder of women's business forum. still to come on the show, obama needs gop leaders later as the government shutdown enters day ten. but are you over it already? our next guest, the financial -- outweigh any political negatives. welcome to "worldwide exchange." i'm carolin roth. these are your headlines from around the world. president obama sends out an e-vite holding talks with democrats and republicans trying to find common ground over the u.s. debt ceiling. shares in europe trade higher this morning, rebounding from one-month lows on hopes of a resolution in washington. investors keeping an eye on the bank of england. the oecd secretary says no resolution on the debt ceiling would push member states back into recession next year. the pboc and ecb great on its debt ceiling saying it will give the european banks security. hello, everyone. good morning. you're watching a brand new edition of "worldwide exchange." if you're just tuning in, thank you so much for making the time. let's show you what u.s. futures are up to. we're expecting a bounce for u.s. stocks today. this follows the slight rebound in yesterday's session from those four-week lows. that is a big percentage off for the s&p. the nasdaq was off 17 points, but the dow was up by 0.2%. year-to-date, still up by 13%. so we're expecting to see a continued positivity in the u.s. trade today. the ftse cnbc global 300 is just off the session highs, but up by 0.3%. european markets by and large, they're trading higher after three days of losses. this is on hopes for a resolution between republicans and democrats as they meet later on today. the cac 40 and the ftse mib, the periphery seeing a little bit of outperformance up by 1.4%. and the xetra dax in germany showing nice gains of almost 1%. in the bond market, we see prices of core bonds moving a touch lower today. this is, of course, as a result of the optimism. ten-year bund yields at 1.836%. the gilt yield falling on the back of weak economic data for the uk in terms of trade data and industrial output. the yield sitting at 2.7%. and i want to show you the ten-year treasury yield. it is at 2.69%. in the forex markets, we are seeing is a little bit of a rebound in the u.s. dollar against all major currencies against the japanese dollar, the euro dollar has actually fell below that 1.35 level earlier on in asia trading. the aussie/dollar showing volatility this morning after the release of the jobless claims and the pound is just down a touch below that at 1.5935. let's check in on how the asian trading session is fairing with sixuan in singapore. >> thank you, carolyn. a bit of a candy stretch today for asian markets. japan outperformed its peers on the back of strong data. in a stronger data, the yen continued to lend support to japanese exporters. the nikkei 225 climbed to a one-week high. but china markets pulled back after two days of gains while stocks remained range bound. in australia, the latest jobs data extend lower expectations for further rate cuts. and the asx 200 lost modest 0.1 pefrs. moving china some related stocks outperformed the broader index on speculation the northern chinese port city may get free trade zone approval. property developer jinbin and tj songjiang surged 10% and 3% respectively. and tianjin marine surged almost 6%. these were up yesterday by 10% and they continued their upward trend in today's session. back to you. >> sixuan, thank you so much for that. president obama met with house democrats at the white house wednesday evening. he told them to be prepared for give-and-take in budget talks. house speaker john boehner is only sending 18 leaders and committee chairs. reports say house republicans are considering a short-term increase in the u.s. debt limit to buy time for broader policy discussions. on wednesday, republican senator susan collins proposed a plan to reopen the u.s. government and raise the debt ceiling in return for killing the medical device tax that is part of obama care. joining me now is ken heyman. thank you so much for coming in. are you as optimistic as equity markets this morning that this could be paving a way for this big deal? >> i have to say, i wasn't pessimistic to begin with. these types of thing have an anatomy of their own. both parties are digging in so they could say to their core that we tried, we did what we could and then we come to the table. it's deja vu all over again. the shut yao has happened now for the 18th time. there's an anatomy for these things and it's following the script perfectly. >> there's still that 1% chance of the u.s. defaulting on its debt. with that in mind -- >> i don't think there's a 1% of them defaulting on their risk. it makes a great headline, but default means we're not going to take in for bonds. it's more of a shutdown thing. it's more about paying for people to do what they do. it's a different issue. but i think markets are actually taking it pretty inch stride. if there was a real concern that we were shutting down and it was all over, the markets would be trading 30% lower than where they are today. >> absolutely. and then treasury yields wouldn't be where they are right now and have been extremely stable. let's move on. treasury secretary jack lew testifies about the debt ceiling before the senate finance committee at 8:00 a.m. eastern. he's expected to warn lawmakers he won't be able to guarantee payments to any group such as social security, military veterans or use bondholders if congress doesn't agree to raise the debt limit. lew plans to say he would do all he can to minimize the plan, but he would be relying on an erratic flow of incoming tax revenue and there's no certainty the u.s. could make payments. the fed are reportedly preparing cob tingsy plans in preparation for debt default. interest rates hit five-month highs on wednesday. officials reportedly don't want to divulge specific details because they don't want to suggest to investors and republican lawmakers the u.s. can muddle through a debt default. meanwhile, fidelity investments has sold of its short data u.s. debt that comes due this month and in early november. that's the window considered by investors to be the most exposed at the u.s. government default on its bills. while it expects the debt ceiling issue to be resolved, it's taking these steps to protect its customers. fidelity's move isn't -- so they continue to buy u.s. debt. >> for blackrock and fidelity in terms of their bond funds outside money market space, it is no problem whatsoever. and a buyer in treasury states the next 30 days would be an advantage. it's been an advantage for 35 basis points as opposed to what existed prior to that at three basis points. is it a lot of money? no. but it's what an active manager should be doing and that's what we've been doing for the past few days. fidelity sells, pimco buys. >> he says the odds are about a million to one that the u.s. will default on its debt, but that doesn't mean the threat isn't affecting the market. so whose camp are you in? >> they're both in different games entirely. fidelity with the mope market issue does have an issue. if they do default, if they do delay making payments, not even a default, they have their money markets down dramatically where the longer term holder can take advantage of getting some extra yield. so they're boith doing entirely different things. >> and gold ticks a little higher, but largely it's been unchanged over the last two weeks. we've seen more downside pressure than upside pressure. you would think gold would rally against this back drop. why hasn't it been behaving as a safe haven asset? >> well, you have a number of things going there on the gold trade. one is that without tapering starting, the fact that easy money is going to stay around for a while, it says that inflation is not the boogeyman that the fed is worrying about. so if you look at gold as an inflation hedge, we've been told that that's now pushed out. it's not the type of thing they're losing sleep over. with janet yellen being appointed to the fed, you have a more dovish stance coming for a longer period of time. >> and so why not buy gold now? >> we have a bit of a runway, maybe there's lodge iblg in holding off. plus gold has disappointed a lot of people over the last year, let's say, and you have a lot of them not enamored with the midnight commercials about owning gold, owning gold, so i think you're seeing a shift in psychology from people thinking it's a safe haven asset the. because while all the rhetoric is the highest, you would think gold would be going to your point and it hasn't. there's a lot of novemberis players that are flooded into the gold market and a fear trade. >> ken, stay with us. we're going to talk about another safe haven asset potentially. the world's most expensive bottle of wine goes on sale today. the wine goes on sale at a luxury wine dealer in dubai. so a ridiculous amount to pay or worth every job? how much would you pay for a good bolthsdz of wine? join the conversation here on "worldwide exchange." very quickly, how much would you pay for a bottle of wine like that? >> i don't think i'd pay $200,000 for a bottle of wine. >> i wouldn't, either. >> how much would you pay, $250? that's what the director just said. >> you reach a point in your life where you realize you can't take it with you. if that's your thing and you want a bottle of wine, i suggest it's a good use of capital for something. andrew stanton says now is the time for mark carney's team to start raising interest rates. stay tuned. we'll ask next if anyone agrees. opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. u.s. president barack obama invites republicans and democrats to meet. the oecb warns europe could slip back into recession. and the ecb and deals with a currency swap with the peoples bank of china. the bank of england holds its monthly rate meeting later today with few expecting change to either benchmark interest rates or asset purchases. the imf recently revised upwards its forecast for the uk growth trajectory, but current output remains well below crisis levels. many people said they would be a bit of a smooth seg, but that's exactly what mark carney wants, right? >> yeah, i think you are right. it's going to be a quiet day in terms of interest rate decisions. i don't think we're expecting any difference in the qeo any difference in the interest rate decision. i just know the inflation report is coming out in december. but that doesn't change the debate that is rambling on, which is can we sustain mark carney's kind of flagship program of forward guidance when we've got so many positive indicators in the economy? i mean, you spoke about the blip we saw yesterday where productivity didn't match expectations and you're quite right. but essentially, for the last two or three months, every other economic data we've had out has been positive. especially that from the imf this week. earlier, they said that they would have to revise their forecast for gdp, both this year from 0.9% to 1.4% growth and next year. that's a hell of a turn around. and it's happened across the board. but what the bank will say behind me is things like yesterday prove that this recovery is going to be a lot slower than expected. and fears about things like the housing market, asset bubbles, they have not of the volume yet that needs any kind of interference from the bank. i think what might be interesting, carolin, is what's going on in the u.s. as we understand it, people within the bank have already reached out to people in the city asking them what kind of contingency plans are in place. if there was a default coming out. and that really is maybe the most kind of interesting chat that's going to be happening at mpc. now, whether we ever hear about that, whether it will be in the minutes, i don't know. but almost certainly it will be on the agenda today. >> absolutely, everyone is watching that. thank you so much for that. meanwhile, the minutes from last month's fed meeting show most members showing it's appropriate to taper their bond buying program this year even as they held off in september. markets were caught off guard by that decision which the minutes show was a relatively close call. fed members thought investors would read a december taper as a signal of their willingness to start exiting from qe3 and they were worried higher interest rates could slow the broader economy. now, how much do you actually care about the fed minutes? because first of all, they didn't tell us much about when taper sg going to start. and secondly, they're completely outdated because the landscape of the u.s. economy has changed so much in the last three weeks. >> yeah. i think the thing people have to keep in mind is the story for the fed is prewritten. it's a timing issue now. we know tapering is going to start. we know at some point interest rates are going to start going back up. it's a question of when. all we had over the summer was an expectation that the party was going to end and in september we found out people can hang around for one more drink. but the reality of it is that the answer is already out there. it's just a question of timing. so people need to prepare their portfolios in such a way that we will see tapering. if not by the end of the year, i would certainly think we would see it by the end of the first quarter and it will be quite a while before we see interest rates move. so it's much ado about nothing at the moment. >> ken, i want to change gears at the moment. it takes it won't be giving in to blackmail over seized prime minister. this morning, britain's secretary hague says he condemned the abduction of the libyan prime minister and he called for immediate release. still tom to come on the show, disturb bornly high interest rates in the country have been raised. when will the tightening stop? after the break, we talk with his excellency, the ambassador of brazil to the united kingdom. brazil's central bank has increased its benchmark rate by 50 basis points. the bank gave no indications it will slow the pace of increases. joining me now, the ambassador of brazil to the united kingdom. thank you so much for joining us today. brazil is facing a conundrum like many other emerging markets right now. why is brazil putting a priority on fighting inflation? >> brazil has a history of very high inflation. and this has hit the country very hard for more than 20 years. we have this balanced microeconomic organization. and this is a priority for the nation. and so keeping inflation low, according to inflation targets, is a must. >> if interest rates move into double digits, if that's at 10.5% now, that will be unpallet knowledge ahead of elections next year. is that the not a factor? >> that as an intellectual impact, as well. >> if we look at growth in the second quarter, that bounceback kwies surprisingly was up 3.3% on the quarter. is that a one up or do you think growth has hit a bottom and it's going to recover more consistently from here? >> we are very confident about that recovery of the growth process in brazil. we're undergoing a change. we have a very inclusive growth process. this is going to continue, but this is not going to be the most for growth any longer. in fact, we're undergoing a change which is reversed what chieng na is doing. we're increasing investment and growth based on investment. i think this is going to help shape future growth for some years. >> we've talked about this time and time again. to what extent will the world cost the olympics booth growth in your country? >> well, they have accelerated and investments and infrastructure that was required. all of this requires enormous investments for the world cup specialty and also for the olympic games. these were investments that were required in infrastructure business. there's also the investments on the stayed ya and this is a different matter, which is subject to some department. but not investment. because 75% of the world cup is really infrastructure investment. >> but it's also, at the same time, led to considerable social unrest. is it worth all the cost? >> well, this is obviously an open question. the assessment i have personally is that it's clearly worth the cost. not only that, but that when brazil was announced as the host, there are issues involved that should be cleared. >> isn't it fascinating how at the beginning of the year, everyone found out the global currency war was going to be the big topic in the world economy in terms of forex markets and now it's completely moved off the radar. and brazil is getting an example. they're now trying to boost their currency. can we just completely forget about global surnt currency wars? >> well, that's a very big statement that we can totally forget about it because a lot of people make their living in joining the battle. but i think what we're starting to see is that a lot of world is flattening out, if you will. the economic tides that have flowed by first china, you know, really sucking so much resources out of the raw materials out of the globe and low interest rates being able to fuel the emerging markets, you know, certainly from an infrastructure point of view is really, you know, spurred that along tremendously. but what we're seeing now is a demolition of that activity in the emerging markets and bra z zill. >> regarding tapering, we've talked about it and now it's janet yellen being the new fed chair woman. that may have been pushed out. also, of course, relating to the u.s. government shutdown. does that still worry you when it happens? >> well, of course, it worries everybody. up till now. i think they have adapted. in the case of brazil, we have enormous buffers. but also in terms of the central banks that i utilize to make sure that we're going to have a smooth transition through that period. >> okay. thank you so much for that. ambassador, brazil to the uk and ken cayman, thank you so much for your input, as well. i want to bring you the latest on libya. we told you about these reports that the libbal prime minister zeidan had been taken hostage. he has now been freed, according to government and security forces. if we have any further development, of course, we will keep you updated. taking a check at brent prices, they're up by roughly 0.5% at 109.56. still to come on the show, most employment reports are delayed due to political issues in washington. all eyes are on the weekly jobless due out today. how the government shutdown has affected employment figures, after this. and we'll leave but a look at how the futures are trading what ed of the open on wall street. mine was earned orbiting the moon in 1971. afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. we know what it means to serve. welcome to "worldwide exchange." i'm carolin roth. these are your headlines from around the world. president obama sends out an e-vite to republicans and democrats to find common ground over the u.s. government and the debt ceiling. shares in europe trade higher on hopes of an end to the impasse in washington. investors keeping an eye on the bank of fwlnd. but u.s. treasury secretary jack lew is set to warn congress today as they have the consequences of a possible debt default as the government reportedly makes contingency plans just in case. and the oecd secretary general cautions that no resolution on the u.s. debt ceiling would push member states back into recession next year. good morning, everyone. if you're just tuping in, thank you so much for joining us on the show. here's how markets are faring ahead of the u.s. open. the dow, the nasdaq and the s&p have upped their values taken into account are set for a positive start to the trading day. this follows yesterday anticipates slight rebound. the s&p was up slight lit, the dow was up by nearly 2% and the nasdaq lost by 17 points. the biggest off its three-month highs. we're seeing a similar picture here where we're just off the one-month highs. up by 11 points and the italian market is doing nicely. these markets just off a one-month low. how do you make money in these markets? here's what some of the experts have been telling us this morning. >> we would argue pay is relative. and even if they do, this would be a -- something that would change over a few days and then you would get that back again. >> on the equities side, people are worried about issues around regulation, what popularity is going to be given a much bigger capital base. but febl in an economic recovery, over time this group should outperform. but i think they're still quite cheap. there's still a lot of legal incentive. we have an ee complex im turn around situation right now in european equity peps one thing is that the investments realize that integrity of the system is reserved and it's not a fixed currency regime. that's one thing. the second point is that the eurozone has exited recession in the second quarter. >> the option key employment figures since the start of the u.s. shutdown has left its economist on the start. recent jobless claim p claim figures have remainsed around a six-month low and are back to precrisis levels. that's great. however, a slight forecast is expected for today's announcement as employers are expected to cease-fire as confidence slides in the economy's shutdown. joining me now from cnbc's headquarters is patrick o'keefe, director of economic research at conresnic. patrick, thank you so much for talking to us this morning. so to what extent will jobless claims reflect the government shutdown? is it too early? >> well, we should see in a special category claims jump because with respect to federal workers we have a special program for them. so to the extent that we have a direct furlough effect, we will see that in the federal claims. i think in some of the other areas, we may see an uptick because some employers, particularly those who are immediately dependent on clash flow from the federal government may have furloughed or laid off some workers. so i anticipate we will see a bit of an uptick in the initial claims this morning. >> patrick, even if we see further out takes for the next couple of weeks, surely this government shutdown hasn't been solved just yet. would it really scare markets? >> i think temporarily. a lot of what is going on in the general economy and in the markets is the expectation that at some point the elected leadership will come back to their senses, reach a deal and move on. the real problem is that this over time could become a cumulative drag on the economy. if it's within the normal fluctuations that we see this time of the year, maybe a little bit above it, we'll say, okay, that's the turmoil in washington and we won't draw any longer term inferences about that. >> even if we see an uptick on the jobless claims, you think this is a screaming buy. tell us why. >> i think what investors have to do is look at the market and realize that stocks, equities train on corporate balance sheets, on the prospects for corporations. and those are doing very well, not political angst. and right now, if you know what you want to own, maybe when the market ran up earlier in the year a couple months ago and some stocks got away from you, now might be the time to readdress that list. remember, what's going on as your guest just said, what is going on in washington is going to wind up being the speed bump. we're going to look at some anomalies and numbers a month out or two months out from now. if you have something on your shopping list that got too expensive, maybe it's moving to a price you'd own it at, now is the time to move it. >> thank you so much for that, ken. the minutes from last month's fed meeting show most members saying it's appropriate to taper their bond buying program this year. even as they held off moving in september. markets were marched by that decision which the minutes show was a relatively close call. fed members thought investors would read a september taper as a signal of their willingness to start exiting qe3. they were worried higher interest rates could slow the broader economy. joining me now, patrick o'keefe. patrick, it's interesting. one trader said to me, look, the impact of this nom nation isn't going to be that huge. the bigger impact, really, is who is going to be the new vice chair and more importantly, the rotation of the fed governors who are going to be voting members next year. eve got two hawks coming in. would you agree with that? >> well, i think the entire composition being in flux the way it is is a problem. maybe that's one of the real issu issues. she has both the stream of consciousness by which the fed has been driving itself and at the same time help the members of the fomc keep the consensus. >> patrick, what have you heard from the minutes last night? is there anything that gave you further indication that tapering is going to be pushed out until next year? >> i thought that the minutes did at least flesh out the thinking. and that the debate was as close as it was was a little surprising to me. because i thought given what the data was, given what we had hanging over us in terms of the fiscal follies we're going through, i thought that the fomc would say, look, we've got to take a pause in the pause. looking forward, i still think that the data does not support -- and knight not because i'm a supporter of the qe, but because the fed has laid out its markers, i don't think the data shaurts tapering at any time this year. i think we're into 2014 before that occurs. >> you could argue that the fed's month move in september was a wise one because of the troubles on capitol hill. stay with us, patrick. we'll come back to you for more later on in the show. coming up, one mutual fund giant takes steps to support the default. details, straight ahead. 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[ anthony ] i use the explorer card to earn miles in order to go visit my family, which means a lot to me. ♪ ♪ [ male announcer ] eeny, meeny, miny, go. ♪ ♪ more adventures await in the new seven-passenger lexus gx. lease the 2014 gx 460 for $499 a month for 27 months. see your lexus dealer. . welcome back to the show. fidelity management takes steps to protect investors in case congress fails to reach a deal regarding the debt ceiling next week. >> good morning to you, carolin. we're starting to get worried about what specially could come. if a dil dellty says it sold off all its holdings of fidelity debt that comes due. that's considered to be by many investors to be the most exposed if the u.s. defaults on its obligations. and the treasury must pay $85 between november 1st. for social security, medicare, as well as pay for military vets and interest on u.s. debt. nancy pryor, the head of fidelity's money market groups says the company has been refocusing its portfolio and has moved a significant portion. pryor says, we expect congress will take the steps next to avoid default, but in our position as money market managers, we have to take precautionary measures. fidelity has taken similar actions before, most recent willy in the summer of 2011 bht u.s. comes close to a default and downgraded the country's credit rating. >> for pimco and fidelity and bond funds, it is no problem whatsoever. and a buyer in treasury space for the next 30 days would be advantaged and pimco has been advantaged for 35 basis points as opposed to what existed prior to that at three basis points. is it a lot of money? no. but it's what an active manager should be doing and that's what we've been doing for the past few days. sofa dellty sells and pimco buys. >> gross says the odds are about a million to one on this debt. but that doesn't mean it isn't affecting the markets. here is a reminer of your headlines this morning. u.s. president obama invited democrats and republicans to meet in a bid to prevent washington gridlock. and europe's central bank announces a multibillion currency swap deal with the peoples bank of china. and let's take a look at these other top stories. chevron is warning its third quarter results will be lower than in the second quarter because of the significant drop and we're finding earnings and fuel margins were squeezed. analysts have been expecting third quarter earnings of $3.08 a share up from $2.77 a share from the previous quarter. chevron reports full results on november 1st. and shell's shares fell by roughly 0.5%. the move would prevent new investors from gaining sizable control of the company, diluting the value of its stock and flooding the market with new shares. men's wearhouse says the plan was adapted in response to the joseph a. bank offer, but not to prevent a future bid the board finds more favorable. men's wearhouse closed up 29% on wednesday. meredith whitney rose to fame on a well timed called ahead of the financial crisis. in 2010, whitney predicated a wave of municipal bankruptcies across the u.s. which has yet to prove true. still to come, bridging the gap. will president obama and house speaker john boehner be able to put politics aside to open the government and avert a u.s. debt default? opportunities aren't always obvious. sometimes they just drop in. cme group can help you navigate risks and capture opportunities. we enable you to reach global markets and drive forward with broader possibilities. cme group: how the world advances. welcome back to the show. markets are higher in hopes of a resolution on capitol hill. u.s. futures pointing to a higher open. the dow, nasdaq and s&p 500 are seen just modestly higher after the nice bounceback we saw in yesterday's session. let's give you a look at what's on today's agenda in the united states. september import prices and the october federal budget statement were due to be released today, but they've been postponed because of the government shutdown, of course. jobless claim will be out at 8:30 a.m. eastern. the fed governor dan tarullo and sdpran fed president john williams speak this afternoon. president obama met with house democrats at the white house wednesday evening. he told them to be prepared for a give-and-take in budget talks. the president will meet with house republicans today. he had invited the whole gop caucus, but house speaker john boehner is only sending 18 leaders and committee chairs. reports say house republicans are considering a short-term increase in the u.s. debt limit to buy time for broader policy discussions. treasury secretary jack lew testifies about the debt ceiling before the senate finance committee at 8:00 a.m. eastern. he's expected to warn lawmakers he won't be able to guarantee payments to any group, such as social security, military veterans or u.s. bondholders if congress doesn't agree to raise the debt limit. lew plans to say he will do all he can to minimize the pain, but he would be relying on an erratic flow of incoming tax revenue. and there's no certainty the u.s. could make interest payments. for more on the shutdown, i'm joined by ed o'keefe and still with us is patrick o'keefe, director of dmk research at resnik. there is optimism in the market today that we are going to be sealing a between between the republicans and democrat. could this by r be a false dawn? >> absolutely it's a false down. we're marveling down here in washington to the fact that wall street sxinter national markets still believe that a deal is on the verge of happening. it's not necessarily. you know, the president is bringing in the different caucuses of the house and the senate to talk. but nothing seems to be happening. i think the fact that he warned his colleagues in the house who are democrats yesterday to be prepared to make perhaps some concessions is a signal that the white house may be moving now in the next few days to begin to try to make a deal. but what that deal is and what exactly it will look like is still very unclear because, among or other things, republicans can't agree on what it is they might offer the president in the form of a negotiation. >> patrick, would you agree with this? is it, in fact, a false dawn? >> from where we sit here, yes. i think building on what ed has said, even outside the beltway that we're not seeing more of a reaction to this political spat within the beltway is because the general public recognizes that a lot of this is political feeder and expects that as that deadline approaches, the elected leadership will sit down and do their jobs. but i must say that those who keep asking the question, who gets the blame, in several different meetings over the past couple of days, it's very clear that everyone is quoting romeo and juliette, saying a plague on both their houses. >> who has more to lose at this point? if you look at approval ratings for congressional republicans, this really hit rock bottom. they're at about 5%. you would think that they would be more worried about their actions going into the midterm elections next year. >> they might think that but, you know, if they've hit rock bottom, they don't have much farther to go. i think the white house and senate democrats especially are sensitive to how they might be perceived in the coming days. if they're seen now as inflexible while republicans are attempt to go put forth something, their numbers may crater, as well. we're still more than a year from the current elections. democrats think they can use this current flight plus republican rejec of so many other proposals and use that against them next year in hopes of holding on to the senate or somehow picking up the house. but that's still more than a year to go. and if they're going to merely extend things for another couple of weeks, then this will continue on. while there might be some political gains, certainly the economy will remain in shambles and washington certainly won't be able to do anything else. so it's an incredibly frustrating time. and, again, there appears to be no -- we're not any closer today than we were yesterday. we may not be near the end of today towards an agreement. the treasury secretary is coming up here and has to remind people of what might happen if the debt ceiling is exceeded. it shows you that there's still the lack of appreciation for what might happen and there are still dozens of lawmakers here who don't necessarily think it would be bad to exceed the debt limit or don't entirely understand what that would mean. and the fact that there are so many and the fact that the treasury secretary feels the need to come up here and remind you of that still shows you that there's this large gulf in understanding and is somehow reaching an agreement. >> ed, quickly, do you think that october 17th date, is that flexible at all? >> you know, to some extent, i think it might be. and i think jack lew will be hard pressed today to explain why it is that october 17th is the drod drop dead if the treasury has said november 1st really is the drop debt because that's when they have to pay out $90 billion in social security payments. if it's not the 17th within might they be able to go until perhaps the 20th or the 21st? we'll see. >> thank you ed, thank you so much for patrick, as well. that's it for today's show. i'm carolin roth. we'll see you tomorrow. mine was earned orbiting the moon in 1971. afghanistan in 2009. on the u.s.s. saratoga in 1982. [ male announcer ] once it's earned, usaa auto insurance is often handed down from generation to generation because it offers a superior level of protection and because usaa's commitment to serve current and former military members and their families is without equal. begin your legacy. get an auto insurance quote. usaa. know what it means to serve. good morning. it is day ten of the u.s. government shutdown. pimco's bill gross saying he's a buyer. ice thursday, october 10th. that's how i figured that out. october 17th, 2013. "squawk box" begins right now. morning, everybody. welcome to "squawk box" here on cnbc. i'm becky quick along with joe kernen and andrew ross sorkin. in washington, house gop leaders will be meeting with the president at the white house today. there have been some hints of a brief truce. both sides are said to be open to the possibility of a short-term extension of a $16.7 borrowing limit. we'll have more from john harwood in just a few minutes. treasury secretary jack lew will be testifying on the debt limit before the senate finance committee this morning. we will have complete coverage. u.s. equities are indicated sharply higher. this has to be because every newspaper in the country is run, these headlines that say there is the suggestion of a potential truce. right now, the dow futures up by triple digits, up by about 107 point. s&p futures up by about