Personal life looked like a train right wreck this year. I am stephanie ruhle. It is Christmas Eve. I would like to say that the breaking news is that it is my birthday. The real breaking news is the november home sales report. Michael mckee is in the newsroom with the headline. What is the real deal here . It would be a lot easier to talk about your birthday. I agree. We beat expectations and still declined 2. 1 . The prior month was revised higher. Sales are up to 464,000. 10,000crease makes for a decrease on a monthtomonth basis. You want to look at the annual sales rate. 464,000 is still better than we have seen for quite some time. The overall numbers improving and we are seeing a decline in the number of homes out there for sale. We are starting to see inventories get tight and that should incentivize builders to build home next year and that is good for jobs. Even though we are down by 2. 1 it is good news. The Richmond Fed Manufacturing index comes in a 13 . We are still seeing a pickup for manufacturing. The economy does seem to be picking up momentum. Everybody out there is buying homes, increasing production lines just because it is your birthday. And filling their homes with new appliances and other home gear. Stay with us, michael. Ofant to bring in the head economics at renaissance macro. Is this a sign we are now in a true recovery . Nobody is afraid of taper. The data is good. Should we be caring . I would like to hope so. After going through four years of basically modest economic growth, now we seem to be breaking out to the upside. If you look at the Third Quarter gdp number, it was revised up above 4 . The Current Quarter is tracking above three percent. I think all indications are is that 2014 was going to be a good year for the u. S. Economy. I think the onus is really on the bears right now. How. . To lose their case . I dont think they have one, quite frankly. Hold on a second. You are saying there is no rational bear case out there. Absolutely. Unless something comes in and blows up the entire planet. Next year will be the best year we have seen in years. Really . I want to ask a fragile that forecast is. The weekly retail sales reports for december werent as good as in november. If we got a weak sales report for the Holiday Season or for the month of december, could that then undermine the confidence that seems to be building . Well, i mean, that will just be noise. Yes, but economists, the average person on the street they will say, nothing has changed. The average person does not look at retail sales data. What is important is the trend. The economy is generating roughly 190,000 jobs on average. If you had told someone that in january, you would have been laughed out of the room. Consumer confidence is up. Nominal gdp is likely to accelerate in 2014 coupled with some improvement in productivity. That will be a healthy backdrop for corporate earnings. Our job is to link with a call is on the economy to the markets. I am not here to make social justice about whether the growth is good enough to satisfy some people. It will be good enough for equity market investors. Ok. There have to be some headwinds. If you are an equity market investor, confidence is relatively thin. What should they have their eye on . Reason to be not a a bear, maybe it is a reason to buy. Because i am so optimistic, how is get asked what i am wore it about. I am worried about the data we got this morning the core capital data. If Capital Spending does not pick up, you will get a real hit to productivity sometime late next year and that will be a big threat to corporate profitability. That isd about not my base case. What do you think is holding back Capital Spending . Political uncertainty . I think that might be part of it. I think it is just general economic weakness. Improving, sore you would expect Capital Spending to pick up. Does it seem that corporate ceos are taking less action because they are afraid of shareholder reaction . Activist investors . Afraid of their board . I think they are doing a disservice to their shareholders that they are not investing. The profits are growing. The fact that profits arising is a signal for future investment. If you are investing, you are going to hit the bottom line. That cash that would go to shareholders is going to go out the door. How do you reconcile that in an economy, in an earnings environment where everybody looks quarter to quarter . Probably see some moderation and margins. With the equity market is going to care about is profits. You tend to see margins peak and even when they go down, the stock market continues to rise because revenues are going up, total profits arising. That is ultimately what is going to matter. Thank you so much. Michael, great conversation. We should all be happy. Time to be bullish. Time to be long. Michael mckee, our own economics editor. Even though you are super bullish, you dont get fired up. I like that. Turn to theor us to newsfeed. The top business stories. Big discounts did not do much to bring in the crowds last week. According to a shoppertrak founder, stores visits plunged 21 in the week that ended last saturday. Retail sales fell 3 . Kkr has raised 1. 5 billion for its first real estate fund. It will spend most of the money here in north america. They think there is great opportunity. This fund could invest in companies with sizable real estate holdings. Thousands of people in Eastern Canada they have a blacked out christmas. 250 thousand homes and businesses are still dark after a weekend ice storm that toppled powerand brought down lines. Many of them are in toronto. Erik schatzkers family is among the powerless. Luckily, he knows how to build a fire. If you didnt know it already, he was a boy scout. Rob ford said there is no way the repairs will be done by tomorrow. He said things are improving. Hopefully santa can find his way. Erik claims he is from canada. Fromorlds biggest manager alternative assets has surpassed its ipo price for the First Time Since 2007. The rally ends a six and a half year doubt. Blackstone does pretty well. To lee hyman joins me. So much for people not buying into the private equity model. L boom. Blackstone was definitely guilty of black bad timing. People who try to buy into what they thought would be a private equity boom at the time were sorely disappointed once the financial crisis hit. Now we have climbed all the way back from those levels as stocks overall have risen this year. Blackstone has,. Gone up. It does reflect the comeback of private equity and the comeback in almost all of the stock related assets that we have been wanting. Are analysts saying that making a private Equity Investment taking makes more sense than a jpmorgan . You also dont have the regulatory overhang right now with a private equity firm like blackstone that you have with them were challenged jpmorgan. Blackstone also has these assets that it has been rolling out this year. The latest is la quinta. That is their Midscale Hotel chain that they will be bringing public. They made the disclosure public. Makes less than 1 billion in revenue. They dont have to give many details. We know it will be coming becoming public soon. Extended stay, as well. Those were the other big ipos. Both of the stocks are up. H stocks generally have been doing really well this year. Bloomberg has an index that tracks hotel stocks. Blackstones timing with these ipos looks a little better than its own. It is still trying to ride that wave. What is our biggest take away . Betting big onre real estate. The fact that they are rolling out la quinta are they selling out of it or do they want to take these Companies Public . In hiltons case they did not sell out of their share. Looking for, we do not know. Quinta, we do not know. We will. At some point, you have to get some of these properties off their Balance Sheet and start to monetize them somehow. The boys at blackstone. Julie hyman, thanks for the latest on blackstone. Now we have to talk about another man who was once known for his billions. The russian former oil tycoon talks about his 10 years in prison. He said them with bloomberg for an interview. This is Market Makers. Streaming on your phone, tablet, bloomberg. Com, and now you can watch us on apple tv. Welcome back to Market Makers. Mikhail khodorkovsky was once one of the powerful men in russia. Putin afoul of vladimir and then the next 10 years in prison on what many consider to be trumped up charges. Putin pardoned him. He gave out a small number of wasrviews and bloomberg one of the lucky few to make the cut. Describe your single most difficult day in prison. I had around 4000 difficult days. To say which was the most difficult is pretty tough. They the most difficult was when i thought starting to. Estroy the company or maybe the most difficult day was when i learned the companys Legal Counsel had died. Wasaybe the toughest day when i got a knife in the face. Stabbed with a knife. It is difficult to choose. What was the most difficult thing about prison . The most unpleasant part of prison was the feeling of wasting time completely. Food, clothes, a closed space. That stuff you can get used to if you have selfdiscipline. I spent all of those years in prison on socalled double surveillance. In a prison within a prison . Yes, and even a third prison within that. The first level is where you are a prisoner like everybody else. The second level is when the right camera trained on your workstation, bed, table. The third level of security, just to give you an example, are when there are at least four other prisoners reporting back to the authorities on your every move. Because president putin was personally interested in how you were treated . Of course. How what would you like for christmas . I really hope i will get the president i have waited for tomorrow when i have my wife. Thank you for that interview. Extraordinary when you listen to some of his most difficult days in prison. I thought it was interesting day when thethe chief Legal Counsel died i wonder if he meant when he was killed. One more thing you should hate about travel Airline Baggage fees. We will show you the airlines that are making a killing. We will have that next right here on Market Makers. If you missed those interviews or you want to catch the rest coming you can watch us on Bloomberg Apple tv. A brandnew experience featuring Live Streaming and ondemand videos. Stay with us. You are looking at the bloomberg World HeadquartersChristmas Tree. It is the season. This season to be packed like sardines and paying higher fares to fly across the country. Are a boon tos airlines top and bottom lines. Off thect in todays charts. Scarlet, i cant stand it that people now have to pay to check their bags. Everyone is jamming giant bags on the plane. I dont know why no one is checking them. Even get the teenage mutant Ninja Turtles backpacks into the overhead compartment because people have giant north face backpacks that theyre going to trek across europe with. Is all because airlines are charging you to check in luggage. All of the ancillary fees easy money for the airlines bottom line. It translates into net income for an Airline Industry that has been beleaguered over the years. Consolidation has gone a long way toward that. Overall, the industry collected 2. 6 billion dollars in baggage fees in the first second and Third Quarters of this year. The airlines that led the way delta air lines. With 471second million. Airlines discount you tor they charge bring in a carryon bag. Are we the trumps chumps . We are interested in the cheapest flight. Do we forget the fact that we are paying upwards of 50 to check a bag . We have to pay for a blanket, a pillow. It shouldnt we just want to pay 50 or 75 to it a better experience . When it comes down to it, people like to pay for the service they are going to use. If you dont want to pay for that food, you dont have to. Sweaty cheese sandwich, potato chips whatever the issue people want to pay for the service they use. Even though it is annoying, people would rather pay for what they use than rather what they dont use. If you were to shift a human from new york to california overnight, that was cost you about 1500. You could get a deal on some should be happy with how low the fares are over well. Mobsters come are you watching . Check a human body across the United States human body sized box. Sorry i misunderstood. Thank you for putting together the charts for us. iheartcharts. I. Leave it to scarlet and we cant seem to give you credit. We are now approaching 26 minutes past the hour. Get ready for bloomberg to take you on the markets. I want to look at the s p 500 and dow. They are at all time highs. A gift to my birthday. A green across the board. Lets look at one individual company. Tesla. Shares jumping more than 6. 5 after seeing the fivestar safety rating for the model s sedan has been reaffirmed. People could not stop watching those fires on the internet. Following the last economic data, homebuilders are rising after new home sales exceeded expectations in the month of november. A couple of individual names. All of them are up at least 1. 5 d. R. Horton and kb home. Clearly a very big positive. All 11 homebuilders in the s and p are higher. You have every single one of them gaining. There is a durable goods report that came in better than expected for the month of october. November. Long or wrong. We will be back talking netflix versus hbo when we come back. Live from bloomberg headquarters, this is Market Makers. With Erik Schatzker and stephanie roll. Welcome back. When big media theme has been the rapid growth of netflix which started creating its own, very popular original programming and now is the biggest paytv service and the country. Bingecentered around a viewing model. Now, your kids can do the same. Scarlet fu is back with me. When i think binge, i dont want my Kids Associated with that word. They are not going to allow your kids to binge watch an entire season. Theyre releasing their own kids programming. It is called turbo fast. You can get five episodes at once. Episodes atall five once during the Holiday Season. Or maybe dad needs to make dinner and mom needs to go out and run errands. Mom a need a break for that matter. Are they partnering for dreamworks or making it themselves . Partnering. This is the whole idea of netflix creating its own content. This is all in service of making sure that you dont give up on your Monthly Subscription fee. The e will continue to fork over that eight dollars per month. How big is the kids market . Could the kids market be just as big . When i think about who watches tv and my house, it is kids away more than a disney. Half of netflixs customers are households with children according to an estimate. This is really interesting. A lot of other competitors are looking at the kids market as well. It netflix needs to customize programming for them. Content may be the mechanism by which netflix can eventually raise prices. The rain not may not raise your monthly fee, but since you have a kid, maybe they have a kids package. A kids dvd is 22. It sounds like a pretty good deal. This is one possibility. It is an area that is ripe for competition. Amazon has a prime instant video. They put together pilots for six kids tv shows. They have not picked which one they have they are going to pick. Pares its prime service with its video service. If they were to decouple it and charge it a different fee, at that point, a lot of people might switch from netflix to amazon. Watch out for amazon. Watch over jeff bezos. Thank you for the latest on the big media story. In the race for u. S. Subscribers, the u. S. Has taken the lead over hbo. Hbo letse maybe that go of the expensive cable subscriptions. We asked a legal media analyst what he thought on the subject. Take a look. The reason that the media act a system ecosystem has worked so well is that all of the Digital Opportunities have been incremental and they have not cannibalized any of the core opportunities. The key is what hbo is trying to do. I think they are trying to get the core. The 25yearold who thinks we are using dialup modems. Bunny ears on my tv. Maybe she doesnt have a cable subscription. I think she will get one. For now, there are a subset of people who are cordnevers. If we can get them to be hbo subscribers without turning off it is a really, great opportunity. But that is asking of them to for some presumably, basic cable subscription with hbo attached than they would have to pay if it were just hbo. Unfortunately come of that is true. Hbo alone what would hbo alone cost . That is a great question. I dont really know that you could charge a whole lot more than you are charging today. 15 per month . I would think a little less than that. Given the relative price point of netflix, you are probably going to be stuck somewhere in that range. The truth is, the Cable Companies use it to upsell the expanded digital products. Hang on a second. Lets just play a thought experiment. Lets say you could them by hbo go for 10 per month basically the same as netflix. Moretflix gives you a lot than hbo go does for that amount of money. Far as new content goes, you are getting more on hbo. How many hbo original series can you name . I am in love with hello ladies. There are not that many that ae current. Game of thrones is probably the biggest one. My experiment is this, if time warner were to do that, would it be worth 20 billion . That is a great question. At the expense of the rest of the bundle him a it is not worth answering. If i could by hbo alone and it was so valuable and the entire universe decided to buy it as a replacement for netflix, then ultimately you would potentially turn off the cable subscription and there is too much to lose and the rest of the bundle. I am av