Abigail doolittle is with us. Lots going on in the market. On indeed. Ats going investors are not taking to pick up commitment. Small move for the major averages. Doubt, s p 500, and nasdaq, flipping between gains and losses. This is due to the choppy, jittery trading we have seen with intraday reversals to the downside. Investors are trying to make sense of what is happening with ,axes and other issues in d. C. Plus the yield curve flattening. What is the effect of that on the overall market the head of Technical Analysis at oppenheimer is saying stay the course. He believes we are in the second year of a bullish market trend. Lets hop into the bloomberg, because there is another view always. 53, thisok at g btv 20 is the longterm chart of the price to sales ratio on the s p 500. Typically we look at the pricetoearnings ratio, but this is more cyclical industries. It does not measure taxes and other issues. It is considered by some to be a pure measure evaluation. What were looking at is the fact that the sales above s p 500 above 2. 2 times, relatively high. We are reaching levels we thought in 1999. Some investors are taking a look at this valuation and send that perhaps the bull market we have had, secondlongest in history, is a bit extended. The potential rotation out of technology if we look at what is happening at the tech sector today, we are going to see green. We are seeing a bit of a rebound. These are some of the big winners including paypal and facebook and now for that. Down, theret apple is a report out of the nikkei, saying that the camera lens maker has taken a hit as apple has cut the iphone quarters and that is way the iphone x orders and that is weighing on the supply chain. Here is a pocket of weakness in the tech sector. Mark down by 1. 3 as an industry group. Onemain gauge, stoxx 600, third of 1 lower today. This is a big decline, shares a record 72 . The chief executive resigned amid accounting irregularities. This is a company that owns a furniture chain, french firmture chain mattress in the United States, should i say. Southng turnaround for africas fourth richest man and the biggest shareholder in this company. Those shares are getting hammered today. The shares are up by 16 today. U. K. Ideal that values the , 4. 4 billion pounds. 2. 539 pence per share. It would create a Real Estate Investment trust of roughly 21 billion of assets. The company is expected to sell about 2 billion pounds of property if the deal goes ahead. Of a month Prime Minister theresa may reportedly facing rebellion from all sides, the next move for sterling. Thatys it is probable there is a french commitment on the irish border. Fudged commitment on the irish border. He says you can kick the can down the road. The low volatility holiday season, breaking up to the highest levels we have seen in more than a year. One half of 1 lower. Be givingd we will and i, mark. It is time for a bloomberg exclusive. It connected ramifications. The next guest knows a thing about that. Erik schatzker. Erik im here with carson block, the cofounder of muddy waters capital. Good to see you. You have a new short position. It is and what stock . Carson osi systems, which most people would better know as the maker of the airport scanners and scanning equipment. Erik what is the issue with this company . Carson we think this company is run to the core. Erik ok [laughter] erik not mincing words. Carson we have what we think is smoking gun proof that this company got a turnkey contract a few years ago in albania can work 159 to 250 million top line, that they paid a bribe, kickback almost half of that concession. To me this is damning evidence. Then we also look at major, Major Contract is guys have is the turnkey contract in mexico. That is up for renewal next year possibly in the early part of the year. The pricing on that appears to be egregious. A lot of investors dont understand the economics of this, because the company has not been very forthright about it. We estimate that one contract in mexico is worth about 50, 55 of s event off of the last fiscal year. Bitda for the last fiscal year. We estimate that the ebitda margin on that contract is 55 plus ebitda margin, whereas the rest of the companys business is 7. 5 margin. If you own oocyte right now, if you own osi right now, you own it for this one company in mexico that is up for renewal and should be looked at closely. Erik lets be clear, you think you have found evidence of bribery or kickbacks in albania, and if i understand you correctly, the pricing on the mexican contract suggests is suggestive of something similar . Carson we have albania in terms of what we think is a smoking gun. We have spoken to a number of former employees who have painted a picture of a company as just within this division anyway constantly breaking rules and crossing the line. If you take a company that does and you in that way look at the contract in mexico, 15 of revenue, but then 50 to tda, you have to ask yourself, mexico, massively fat contract white is the contract so fat what is the context so fat . It should be scrutinized on renewal. You look at this as marketbased prosecution. What is the motive here . This company has a real business. Erik, it is money. Companies lie. Companies do bad things. It is about the bottom line. Erik what is it what im getting at is, if you are right and they bribed somebody in albania, and it is possible that something similar went on in mexico, it is because if they didnt drive and somebody didnt receive a kickback, they would have lost the contract to someone else . Carson i dont know. If you look at albania, what happened was they set up a company in albania that owns the concession. They are awarded the concession and then they transferred 49 of the companies away to come anomaly two, nominally, a doctor he runs this hospital in toronto they transfer the concession to 4. 50. 4. 50 for half of the economic value of a contract worth 250 million . Carson yes. I cant think of a good explanation of the than this is a kickback of some sort of that type of transaction. Erik we have no nuisance or call on sino forest. You said that was zero and it proved to be zero. How much conviction do you have on osi systems compared to sino forest or anything else you are since . In the period carson osi systems is a company engaged in corruption, 100 convicted on that. We have smokinggun evidence. A lot of this has to do with mexico. Mexico got renewed on the same terms, you will not see the bottom fallout of it is the if there is scrutiny of the contract and the prices lowered a decent bit, that will obviously washed through and our estimates are anywhere near correct in a big way. Almostsi certainly is going to sue you. Any reason you could be wrong . Carson well, i mean come on albania . No. Give me a better expedition and tell me why you did it announced this years ago. If they want to sue, we will accept service. It is not hard to do it. If they sue, we are going to open these guys up. Im confident there are a lot of skeletons in the closet. Erik what do you know about the ceo Deepak Chopra not the one everyone is familiar with. Another one who happens to be called Deepak Chopra, whose background seems to go back to the early days of the Semiconductor Industry in california. Carson look, he is a real entrepreneur, he has built a real business, and he is not that Deepak Chopra. One of the things that is a little bit concerning about the company, the picture that has been painted for us is that within the Senior Executive ranks, there is a tighter inner circle of mr. Chopra and another executive who has signed the power of attorney authorizing the sale of the 49 in helping you erik do you think it is possible to Deepak Chopra we are talking about doesnt know what is going on . Carson look, i dont know. Litigation would probably answer that question. The picture that has been painted for us is that he is very involved in all aspect of the business. Erik what any public company, osi systems has an auditor. I checked on their filings. Where is the auditor here . Number one, im never impressed when somebody says oh, we are audited by xyz, because we can point to a litany of audit failures. But in a company and you are not audited by big 4 i dont know the assad of stability in albania if there capability in albania is rockstar. Maybe im missing something. But it used to be audited by big for 10 or 15 years ago. There is a question as you grew in the post9 11 world and you and overseas, why take a step that take a step down . Erik i want to raise another point. You chose this short to do some thing you have not done before, raise concurrence with this video. Carson second class certification regarding antibribery laws. There is very little specificity as of the type of training you have to provide. Dont see any schedule to this agreement that lays out what the agreement is. Theres talk imitation around how not to bribe officials. Erik in the video we see you doing a lot of that. We see you talking to your team, we see you in a car, and a cell phone, talking about what you believe to be the nefarious osi systems and the contractual partners. Why do a video . Were used to seeing bestie tilde reports. Carson we do have a detailed written report we are putting out. Aree are two reasons we doing the video, and this is an experiment. Number one, we think it is important to try to expand the people who consume this kind of content. People are throwing money into the etfs that are passively allocating it. It is important to educate a larger swath of the population here. There are reasons why you dont just want a closer rise and by. Up thisrying to open. Ther world of financing there is a lot of general interest appeal in the shorts that we do maybe not when we a, but takingebitd a happier concession and giving it to some doctor in albania for no good reason. Those sorts of things have appeal. It is important to expand the audience erik you want people in mexico to know. Carson but also people in america to say, you know what, if im just throwing money blindly at companies, are they doing things with it that they shouldnt be doing . The other thing is a little more defensive. Ago, i was onrs your show for the first time, and during that time, human Attention Spans have not gotten longer. We are being programmed by the pdas, and i used to think that the average investor read the. Irst three pages of the report i think it would be wildly optimistic now. Delivering the content in a way that is more suited to the brain function is something i wanted to try. Erik great to see you. Thank you for joining us. That is carson block, managing editor of muddy waters capital, tapping into video to reach the world of shorter Attention Spans. I want to add 2 things. His record is a short seller speaks for itself. We have not contacted osi systems, and of course we will for, and subsequent to this conversation. Vonnie thank you. That was a great interview. I want to know who were those characters in the movie with carson. Its checked in on lets check in on first word with taylor riggs. Taylor as political decisions go, it is not too much of a shock. Russian president Vladimir Putin announced he will run for a fourth term in march. He will be a heavy favorite to win a new sixyear cap. President trump makes it official today he will officially declare jerusalem to be israels capital and will order that the u. S. Embassy be moved there from tel aviv. It is an historic shift in policy that will likely anger key muslim allies such as turkey and saudi arabia. The white house says the actual move would take years. British Security Forces have broken up a plot to kill Prime Minister theresa may. According to multiple reports, Police Believe they kind of to at downingbomb street offices. Chances of getting a breakthrough on brexit this week are receiving. The Northern Irish political the is resisting a deal on border of Northern Island in the republic of ireland. News 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am taylor riggs. This is bloomberg. Mark thanks very much indeed. Coming up on Bloomberg Markets , oil futures lower ahead of Inventory Data. The numbers show a surprise gain . The vti oil down by 1. 5 . This is bloomberg. Vonnie live from new york, i am vonnie quinn. Mark and im mark barton from bloombergs new European Headquarters in the city of london. This is Bloomberg Markets. Lets get to it. Futures in focus, oil retreating. U. S. Gasoline stockpiles group for the first time in four weeks. Joining us this device president of blue light futures. How are we position ahead of Inventory Data . At think a lot of the pullback to start the week is on the back of last weeks opec decision. We saw the blitz Headlines Press towards the psychologically significant 60 level, and this week we have not gotten the bullish headlines and the markets have stalled out ethnically technically. Fridays report showed that the long position increased by about 59,000 contracts. This is one of the bigger long positions in recent memory. 398,000, a record. The lack of bullish news and the technical failure to break out has led to long liquidation, and we could see that continue and press prices closer to favored 55. 30 54. 30, opec does put a little bit of a floor on the market. U. S. Production is what we are keeping an eye on, and they these production as we approach the 10 Million Barrels a day level. This is a great opportunity to be the trader between the 50 and 60 level. Mark what about gold . We are new the bottom end of the threemonth range, the moving average. What is the catalyst to take gold higher . Oliver really just a firefight. We have got fire strike. We have not gotten a catalyst to get us about that psychologically significant level. We are lucky bottom end of the threemonth range. We have the 200day moving average, and it will be very, very significant on the closing basis. If we see the close below that, not a lot of Technical Support until the 1200 level. That said, january has been a good month for gold over the past two years, with asset allocation. End of thet lower to year, there will be a buying opportunity to start 2018. Lot. Oliver, thanks a still ahead, the decision that could unleash a new wave of security challenges in the middle east. President trump will proclaim that the u. S. Recognizes jerusalem as the capital of israel. That is coming up. This is bloomberg. Mark this is Bloomberg Markets. I am mark barton, from bloombergs new European Headquarters in the city of london. Vonnie and from new york, im vonnie quinn. Time for the biggest business stories in the news right now. The owner of saks fifth avenue and load and taylors is reeling from retail slumps. Down 14 in canada trading today after a loss much larger than analysts were looking for. Also fell. Sales ironically, ecommerce efforts were hurt by job cuts which had been meant to reduce costs. The Worlds LargestHome Improvement chain, home depot, plans to live back 50 billion with of shares, and confirmed its guidance for fiscal year sales. Home depot stock was up 36 for the year. The Asset Management industry has entered what mckinsey is calling the new abnormal. The Consulting Firm says that for the next two decades, as it managers face a number of challenges. Among them, longterm investments, pressure on fees, and aging clients. That is your latest Bloomberg Business flash. We are moments ahead from the release of weekly u. S. Crude inventories. He was oil ahead of the data. Crude oil down about 1. 5 . This is bloomberg. Mark live from bloombergs new European Headquarters in the city of london, i am mark barton. Vonnie and from world that what is in new york, i am vonnie quinn. This is Bloomberg Markets. We are awaiting Oil Inventories. An average drawdown of 2. 8 Million Barrels. Oil is trading lower ahead of the released by 1. 5 for a barrel of crude. And the guilty little is with us now as the numbers come out. Abigail too little is with us now as the numbers come out. Abigail a much bigger drawdown than what the survey had been calling for, 5. 6 Million Barrels relative to the survey calling for a drawdown of 2. 8 Million Barrels. That is bullish, a bigger drawdown than expected. Main inventories is bearish. A build of 627 Million Barrels of gasoline relative to the survey calling for a build of closer to 2 Million Barrels. Trading sharply lower, down 1. 3 near the lows. It often takes investors little time to digest the report. Bloombergs commodities strategist thinks we are going to continue to see inventories will come even though that is not what we are seeing today. If we hopped into the bloomberg and look at cheap btv g btv, this is the intraday oil and we are well off the lows. Taking a little bit of an effect here. Down about 1 . It will be interesting to see if that reverses as the day goes on. Bigger picture, if we look at the longerterm chart, this is g , and what were looking at is around the time of the oil crash, oil is going sharply lower and inventories starting to build. More recently this year can we have seen inventories drop down. That is helped the price of oil recover. However, funny, the bloomberg commodities strategist thinks there is reason to believe inventories will move higher again and that could weigh on oil. Were looking at a relatively bullish apartment of energy