Im stephanie ruhle. Eric was under the weather this week. Im happy to be back. Breaking news about the housing market. Home sales for december are out. Scarlet fu is in the newsroom. Unexpected decline in the number of contracts to buy previously owned homes. It comes from the National Association of realtors. A drop of 3. 7 for the month of december. That is the biggest decline in the the year. On a yearoveryear basis, pending home sales increased 8. 5 . That a small at the what economists were looking for. They were into speeding an increase of 10. 5 . S p 500, paring it is extending losses following the news. We have the 10 year yield pretty much where it was. We will continue to monitor all of this. The fed has said it is data dependent. This shows the housing industrys recovery is still on even. That a scarlet fu with the latest. Lets take you to the bulletin. Top is the stories. Shares of alibaba are getting beat up today. The stock fell as much as 7 after the Chinese Ecommerce Company reported quarterly revenues that missed estimates. Alibaba has been spending more money to attract customers on mobile phones. The collapse in oil prices means big cuts at royal dutch shell. Shell will cut 15 billion worth of investment over the next three years. It is the first of the Big Oil Companies to report earnings since prices plunged. Fourthquarter profits missed estimates. Shares of mcdonalds are rising today after the shakeup we heard about last night. Ceo don thompson will step down march 1. He will be replaced by steve easterbrook, who is credited with turning around the u. K. Division. Donalds is stuck in its worst u. S. Sales slump in more than 10 years. Bill gross says the fed will raise Interest Rates late this year to save capitalism. Gross just came out with an Investment Outlook for his new employer. I feel it bill gross works for himself. He says the Global Economy is at the point of breaking down because of 0 Interest Rates. President obama wants to put an end to the budget cuts. At a retreat for democrats in philadelphia, the president will propose a spending boost for domestic programs in the pentagon. That would reverse the acrosstheboard legit limits known as sequestration budget limits known as sequestration. I do not think there is such a thing as a retreat in philadelphia. What would you call it . And offsite . Just saying. The stock is currently trading below the first day after its Brendan Herne is th. Paul sweeney is here as well. Brendan, is the revaluation of alibaba below that first day pop justified given what we have seen from the past two earnings reports . The company had a fantastic quarter from the business perspective. The business had a great quarter. Going from revenue to net income, we had a large stock compensation expense which brought them net income. Can you break that down wartime . One more time . The company grew gross merchandise value to 126 billion. They grew revenue 40 . About 4 billion u. S. Getting from revenue to net income, a 4 billion rmb which is about this is a net income miss. The business is very solid. You have an overhang, the state administration of industry and commerce had a report. This was last july. Counterfeit goods, the company defending itself. They are calling out the actual individual Government Official who took a minute sample size of goods sold. This is almost a year old. White is coming out now, why it is coming out now, we think it is overblown. Joseph size joe tsai says their signature coney in approach. Peter coney and approach age or coney and approach. The company is growing very quickly. You have an issue around the counterfeit goods issue. Additionally, for investors msci announced it will be adding alibaba to their indices in november. 1. 5 billion will be coming into alibaba in november as index funds need to own the stock on the third day in november. That is a good data point. What is impacting the stock today, they had a revenue miss and the question is, what is going on on the top line . What is happening, 49 growth of goods and services. More and more of those goods and services are being transacted on mobile devices. Ali baba monetized mobile users at a lower rate than they do pcbased users. The fees you can charge to list goods and services, the advertising rates are lower. They had a revenue mix issue they did not telegraph well to the street. That is impacting the stock. This issue with the government. You never want to get into a shoving match with the Chinese Government. Is ali baba going to be offsides with the Chinese Government . They were very aggressively responding to the charges leveled by this report. I think the level of aggressiveness they came back with surprised investors. Playing nice with the Chinese Government is job number one for any company, including alibaba in china. They called it out in the risk factors. Is it possible that concerns or questions over what ali baba is going to do with that yahoo spin co are playing into the situation . I want to play in at cirque from what joseph from what joe tsai had to say. We do not anticipate entering into an agreement with yahoo or spin co. This is something that is the right of yahoo to do. Their board has decided to do the spinoff. From our perspective, operating the business day today today we have a 15 shareholder in us, that is yahoo . After the spinoff, another 15 shareholder. It does not change anything. Are investors disappointed that alibaba is not going to do a 40 billion stock i back to taking out the spin co . That is what investors were hoping for. Despite the companys comments eventually, they may consider it is an efficient way to reduce their share count. At some point down the line, they will take a look at spin co. I want to move on to facebook. It reported another jump in earnings. Zuckerberg can do no wrong. That makes up nearly two thirds of its total ad revenue. The company has said it will be spending as much as 70 more on mobile this year. Zuckerberg says he is focused on new technology to drive future growth. Is Mark Zuckerberg turning into the new jeff bezos when it comes to spending . Shareholders hope not. This is something when the ipo came the whole issue was the did not have mobile rights. He leaned into it focused on mobile, spent all that money and now it works. The good news is, they beat revenue expectations. Theyve done that the less several quarters. That is bought him some time to say 2015 is going to be a year were we spend more because we get payback on our spending. This is still a profit story. People want to see profit growth. As long as they continue to drive the top line, the street will give him some leeway to invest in the business. Frankly, there is upside. Theyve not begun to 22 billion on a rush he is getting leeway but i think it some point, people want to start seeing revenue from these acquisitions. One thing facebook is done well is, theyre driving the monetization of that movement to mobile. Alibaba will be increasingly focused. About 3 nonmobile non monetization. Alibaba has a lot to learn from facebook about how to monetize that movement to mobile. They have not won you over. Not yet. Whether it is ali baba or facebook, weve seen these numbers. Analysts will revise estimates. Each of them is trading at 40 times forward earnings. Howd you price a stock like this . One aspect that is been talked a lot about is you have a low Interest Rate so you have that dividend discount or growth model which is of low Interest Rate, it creates a higher evaluation. The valuation concerns are driven by the low Interest Rate environment. Investors globally need Growth Companies in their portfolio. Alibaba and facebook are two such companies. Does that mean investors are overpaying for growth . You have to be thinking about what is coming ahead. To pauls point, how did the integrate that . That is been a drag for alibaba. Facebook is further along in integrating companies. I want to talk about the revenue they are generating per user. We have it pulled up graphically. I want to get an understanding. Can they be making more of each individual user . What are they make off of me nothing. All i do is get my heat ealings heard all i do was get my feelings hurt on the talk about teeth whitening. For facebook, the monetization issue is a big plus. It is 2. 81 on a blended global basis. Over six dollars for u. S. Facebook users. For the rest of the world, it is less than a dollar per user. After Growth Continues to grow internationally, the challenge is to monetize their International Users to the extent that they can monetize western european and u. S. Users. There is the delta. The question is, can they do that . They remain confident that they can. There seems to be expectations by the company that they can increase the monetization of their International Users. Are they ever not confident about anything . No. 40 times earnings, that breed confidence. Alibaba is creating a credit scoring system. They know what buyers and sellers if they are paying on time. They created a company that will be providing Credit Scores within china to facilitate loans. That is because alibaba has information about the way people actually spend money. What information does facebook have that moves the needle . Ex boyfriends i like to look at . [laughter] facebook has a lot more information than google does from search. Facebook goes to advertisers and says, we know users better than google knows its users. You should pay more to reach our users. Alibaba is buying a piece of a Life Insurance company in china. They can see, are people buying healthy goods or not healthy goods . What you want to sell Life Insurance to people who are buying healthy goods . Think about the information advantage alibaba has. They are the largest their money market business is 85 billion. I do not like any of that. Thank you both. Brendan ahearn and our own paul sweeney. Fortis putting two dozen 14 behind it and says wait till this year. Youll hear from bob shank. We heard it last year in. s in davos, billionaires love the u. S. This is Market Makers. Erik schatzker, with stephanie ruhle. The government of malaysia has declared the missing flight 370 was an accident. All people on board are presumed dead and that will help families get Financial Assistance because it is illegal there is a sign that doctors are winning the fight against ebola. New cases of people in west africa have dropped to less than 100 per week. The epidemic has lasted more than a year. The Islamic State has set a new deadline for jordan to release a convicted terrorist. Militants say if she is not released i sunset today, they will kill a jordanian pilot there holding. The Islamic State is threatening to kill a japanese journalist. Lots of other earnings stories. Including ford. It Beat Estimates for the Fourth Quarter, even as its net income disappeared coming in at just a penny a share. Matt miller owner of an f1 50 of an f1 50. Arguer homesick matt picked me up on the snow day in his monster of a truck. That thing was hot. The biggest engine you can get is a 3. 5 liter v6 with turbos strapped to it. And, im concerned about their forecast. They did better than analysts had estimated in the Fourth Quarter. Yes, they are expecting or forecasting higher profits for 2015. They are saying the loss in your might be worse than they the europe the loss in europe might be worse. Heres a great chart they had in a Conference Call this morning. 2015 plan, it is going to start out weaker in the first half of the year and get better in the second half. That compares to the 2014 actual results which got worse as they started the changeover to produce the new f1 50 f150. How will it stronger dollar affect ford when they compete against german carmakers . Especially japanese carmakers who have a huge advantage from super weak euro and yen . The cars that ford is selling in europe and overseas many of those are manufactured overseas. Japanese will to you the safe the same thing. If you ask jim lends, he will say all the nissans were made hell we sell here are made here. It does not stop executives from getting angry about the change. Mark field has kept his cool. If you remember last year, Alan Mullally was very angry about the fact that the yen has depreciated so quickly against the dollar. He said it gave japanese carmakers and advantage. I do not think he was just saying that. I think there is a lot to that. A picture of the new ceo, mark fields who is really excited about the new truck. Why are they releasing less models this year . They released so many last year. Fewer this year, but still a lot. Thank god eric is back. I appreciate the grammatical direction there. 15 is still a lot of new models to release. That is going to slaughter profit in the first half of the year. The remaining question is how lower gas prices will affect. Products are more fuel efficient. Does that mean consumers are less likely to flock to dealerships . That is a matter of choice. Gas prices are cheap today let me buy a guzzler. That is ridiculous. The concern is that since gas prices are cheap, people will not go out and buy more fuelefficient cars. That is what im saying. They do not feel they need a fuelefficient car. That is what a lot of analysts that seems crazy to me. They are saying the same thing. Im going to go back to tweeting. Will be speaking to bob shank, the market next hour on Market Makers. Stay with us. You are watching Bloomberg Television. Gdp growth feels good but are we simply the best of the worst . People are saying the u. S. Economy is back. She has been called the Erin Brockovich of a few of food and she is taking aim at a number of companies. Stay with us, youre watching Bloomberg Television. Live from bloomberg headquarters in new york, this is Market Makers, with Erik Schatzker and stephanie ruhle. you are watching you are watching Market Makers on Bloomberg Television for stop i am Erik Schatzker. People may not be feeling it but the country is far better shape economically than the rest of the developed world. This was the principal theme of president obamas state of the Union Address last week. The growing economy, shrinking deficits, bustling industry, Booming Energy production we have risen from recessions freer to write our own future than any other nation on earth. Bloomberg has been well ahead of americas economic comeback, so it is once again the focus of this issue of bloomberg businessweek, you can read it online and at bloombergbusiness. Com. Peter cory wrote the story and he is here with us. Peter, a triumphant return for the american and economy not quite, right . Roar eagle, roar. You guys were both in davos. Without the feeling around the u. S. , it is not what was in a 2008, 2009 when people were either ridiculing or despising the u. S. For its role in the financial crisis. I have a great way to answer that. Listen to on tuesday and, of Deutsche Bank talking with u. S. Economy. This u. S. Economy feels very real. It is not just running on one turbine, it is running on multiple turbines. Technology, Interest Rates consumer and demand, shale. It will have a stimulative impact on global demand. You might accuse an american ceo, but you cannot really accuse a german ceo. Is anshu jain considered a global because he makes most of his money in the u. S. . He has to report to german regulators i cannot think any european ceo can sit there and boast about how great the european no. Precisely. That is the point. That is a great quote. I almost wish i had in our story. We had a quote from a Canadian Pension Fund executive who said pretty much the same thing and he is putting the money where his mouth is. Brought in new york bought a new york sky scraper participated in the purchase of petsmart. Where can we return to a stable country with some sort of a stable future, and they are turning to the u. S. People across davos depending on where they are from, depends on where their sentiment is. Europeans are cautiously optimism. People in china fill aeel like they did not know it was in store, but in the u. S. , they were feeling it. You dont want to turn it into like well, everything is fine, because it is not, and the u. S. Have a lot of problems. The inequality theme cap coming up again and again and again. You cannot just look at the gdp growth. You have to look at per capita Household Income in the median Household Income in the u. S. Adjusted for inflation is lower now than it was in the year 2000. That is not a good sign. But from an investing standpoint, you have just put your money somewhere, and the u. S. Is that are than anywhere else in the world. And has been. Has been. Scott minor of Guggenheim Partners has been on the show. We do know him. He is bullish on the American Economy in the sense that he feels it is strong. He does not feel like it is a good place for Equity Investors for the very fact that investo