Speculation chinas government will add stemless after inflation reports. Of estimates below 2 . The price of oil has resumed its slump. It may go lower. West texas intermediate fell below 63 a barrel. Brent crude also down. In official in irans oil minister critics the price could fall as low as 40 a barrel. That is if there is a price war or of divisions emerge among the members of opec. The new Federal Reserve relation may be expensive for jpmorgan. They may need to come up with more than 20 billion in capital to meet the new standard. Jpmorgan is a ready facing the highest capital surcharge under International Rules. The bank might have to delay Dividend Increases and stock buybacks. Jpmorgan says it intends to meet the requirements. And the weather watch, we go out west, Northern Telephone in bracing for one of the biggest storms in years. People putting out sandbags. Up to five inches of rain expected starting today and winds up to 60 most per hour. Another danger, but flyers mudslides. Headlinesour top today. This is an odd data check. Likes are moving kind of may be pushing up against some interesting points. Futures, flat. Currencies, dont do much. Oil has a weight to it. It is not down to recent lows, but there it is, 62. 79. On to the next screen. Spread. Nts drea sayt looks weird to have a 158. 22 . I missed that. That is basis points. That is mislabeled. That is the difference between the 10 year yield and two year yield. 158 basis points. That used to be 200. Nowhere near recession, but i thought it would throw that in. That was my mistake. A terrible typo. We have not talked about this enough. This is mexico and the peso 30 years back. 1998, whatever financial crisis, and this is positively rublelike. It shows how hard it is to run a diversified economy when you have natural resources. Done in a credible job of diversifying its economy, done everything right. And because the price of oil, you see this movement right here. This gets my attention. The peso is weakening out over 14 from 2, longterm devaluation versus the u. S. Dollar. Michael spence is in awse were talking international economics. It doesnt look like ukraine, but i thought it was interesting. Good morning to all listings in mexico, Bloomberg Television in mexico. Lets bring it into the Financial System. Slides, all markets react, but was signal does the new volatility send . Michael spence has truly spent his lifetime linking finance and economics to his core mathematics. He is a Nobel Laureate and professor at Nyu Stern School of business. Michael, i look at the system and go, once again, it is out of whack, overleveraged. Saw inrepeating what we 2006 and 2007 and 2008 . No, i dont think so. We have two relatively healthy major systemic economies, the United States and china. Although, theres some debate about that. And we have two big weak ones, the whole eurozone and the japanese economy. I think the story is more about the virgins and volatility related to it rather than a sort of generalized over leveraging leading to disaster. Living in italy, he spent an inordinate amount of time looking at character and quality. Are the american institutions, our fdic, central bank, our congress for that matter, are they as strong and resilient as they need to be if we see some further crisis . On balance, i would say everybody tends to be self critical. Of their own institutions. But on balance, hours are pretty solid. The Federal Reserve is a nextdoor near institution that mountaineers us through many things. Institutionnary that mountaineers us through many things. Great strength in the american economy. The judicial system, and so on. When we are fussing, we might think it would be nice of congress we never fuss. Congress would stop disagreeing about things and get on with some programs but the institutional character is there if we face another crisis . The main front line of attack is the Federal Reserve and a great metaphor to use. The Federal Reserve has really been a sure but in this crisis ina at whose doorstep do you lay the blame for that . There are lots of parties like it to be on the list. Excessive conservatism in response to the crisis the berlin prescription as has structural change above all. It is difficult. Europe as a whole has the capacity for stimulus him a but individual countries dont. But there are countries that need reform since i want. You cant identify one place that caused the problem. The capacity is there to spend money, but this isnt about money still made on a country by country basis. In italy where i live, it would have to say there is not that much fiscal capacity. We need help in the short run tuesday minute the economy. What about the physical capacity of greece . I dont think reese has much has muchom greece wiggle room. That was diplomatic. That may be the quote of the day. Are we going to see another default or another bailout of a different sort if these snap elections dont go off the way planned . It could. I think greece is not systemically important step it is small enough that whatever it happens it could withstand it might be late and just when you got to the edge spence looks at the mathematics of acceleration. Do you see the decline in oil prices as a mirror image of 1986 . Is there Something Different this time . Are you taken aback by the speed of the recent moves . No, i was stunned by this. Ive spent a fair man of time trying to figure out what is going on. What is going on . We need to make some news this morning. It looks to me to be largely a very large increments apply combined with relatively slow demand growth, and much slower than people predicted because of the slowdown in this dimension in china. This has happened in other commodities. But it looks to me like this is an overreaction. That is when you look longterm, youre going to have substantial demand growth we have to make some news. Professor spence, when his oil p. M. Thisatch, 3 00 afternoon, thats thursday . When is it going to go up . It did briefly yesterday. When is oil going to catch a bid . Sometime in the middle of next year. There we go, i love it. Market strategist, Michael Spence. Theres a moment when it turns into politics. If we dont do these things, they will be radicalized. You live in europe. Are we looking at that moment in europe . Some people think so, but i dont. I think europe can stay in a relatively unpleasant, low growth situation that is not in isble provided the ecb committed to the Financial System and the sovereign debt market. So youre not worried in italy about the power link . No, i dont think so. Showedrepeatedly has resilience in sticking to the project, despite the shoretel problems in Economic Performance despite the problems in Economic Performance. Bill emmett and the Financial Times had a great piece about a week ago, pointing out, as you look around europe, there is movement we havent seen in a long time. But you think that is part of what weve seen over the european project for the last 70 years. Well Movement Toward radicalization and varies countries. No, the downside risk, the populace radicals, antieurope sort of antieuro forces increase in power and eventually, this support i mentioned a minute ago, starts to dissipate. If you roll that out, i think they will just forgive these of the term mountaineer through you are killing me. Im going to have to go back and look at my jargon. Were going to make mountaineer one of our quotes of the day. Are you going to mount through mountaineer through the sickle best chart . First, regional results. To what extent, do people buy gas in bulk . Cosco is that with quarterly numbers. We will discuss. Were going to put on our booze spikes and waited to the Earnings Report whod spikes and wade into the Earnings Report. Good morning, bloomberg surveillance. I am tom keene. 62 . 75. To be kind, 62. 75. Costco to investors, we beat earnings per share estimate and increased samestore sales 7 last quarter. Then they had a great november. Is that good enough for you . Costco, it really has no amazing ethic inside the company where the price drops wholesale . 24, they drop the cost when four cents, not . 20. Theyre not focused on increasing margins. Look at the prices, they break it down into unit price. It will say, . 12 per diaper or five cents per lets look. Im not looking at diapers. Dont break any news. Lets compare the margins. Costco is the white line at the bottom. It is not even in the same ballpark as anyone else. As crude of gas, drops, theyre following it all the way down. We dont have any data on this, but we noticed they have lower prices at the pump, bringing people to costco. They stop and buy stuff. Sort of amazonlike. Giving away the income statement. It is not amazonlike, and they are turning a profit. They make money. Earningspershare were up. For the last 10 years, your return shareholder is 13 , which is pretty good. Michael spence with this, the Nobel Laureate. Youre not looking at regional analysis of our regional business, that you do look at the resiliency of the consumer, the consumer is in power today. There has been a Creative Destruction that means the consumer is in control of the price mechanism far more than it used to be. Thats true, but you kind of have to markets. The Median Income is not going up. I think people who study this say people are looking for bargains, shopping in a different way in that segment. In the upper end, theyre doing something complete different, shopping more online speaks to two americas. Are both at costco . Even more than the two americas, looking at this before this isings report, david strasser, looked at amazing concert in november. Costco famously does not open its doors on thanksgiving. It wont do it. It treats its employees very well. They had great cops and november and beat a lot of other stores. You can be good to your employees. You can be part of that time being good to both americas and do well. Everyone was buying in bulk every thing they needed for thanksgiving dinner. A costco executive a few years ago actually said they would consider expanding to europe in the next few years, including germany and italy. Would cost go fly and italy . Isi think so there considerable success. I think germany would be tough. It is been tougher other players. Come on these incredible lowcost supermarkets are coming to the u. S. , one out in queens now, the german supermarket. Interesting what strasser says. What is the difference between cosco and others . I go to cosco because i like it in general. They take any returns back. That the wide variety of stuff. I havent gone of the other ones. I only have room for one membership wholesale club. They treat their employees well. They have better attention retention, and that helps them keep margins down. This stuff works. Their turnover is really, really fast. If youre buying fresh meat or fresh food, it is always fresh because it comes in they have one problem right now. Weve been doing happy talk about cosco. The one problem is for ex. F stores on mexico and that is the one drug on their earnings. You know who has a strategy like this in a different space . Ikea. Their whole Business Model is to take cost down, prices done with them. The prices will be lower every single year. Michael spence with those from new york university. Coming up, we look to washington. Kenneth feinberg will join us on any number of conflicts including ken feinberg on the in newdecision yesterday york city. Our twitter question of the day there it is. A vote coming up. The sausage making was brutal in washington. One of our themes for the next at bsurveillance. Good morning, bloomberg surveillance. And tom keene with fu greeley. Time for the must read. Were getting to the end of the year. Not of the year, but how about the financial crisis . Short and sharp, our guest host, im spence in 2010 gasping, im so excited. Type one, type two mathematics, which were not allowed to do before 11 00 a. M. , but within that is the idea of overreaction. Lets start four years down the road. If we overreacted in a new reaction regulation. Yes, im pretty sure in some dimensions we have. We were alerted to the need for safety and we probably overdid it in some places. Today, the headlines are jpmorgan and the evil jamie dimon, they need to come up with 20 to dollars 20 billion. It is like, six days revenue . Im kidding, i dont know. Do scope and scale of these billions and billions, are they all that big . I think youre raising important point. My view, to put it simply, is you have to figure out which Balance Sheet is line behind this. And if there is a big Balance Sheet, whether it is a country or company, then it is not relative to the size of the flow, then it is not a big hit. Jpmorgan, it for citigroup, Merrill Lynch . Alex sheet. Balance sheet. They are regulated now out of certain sectors that were profitable before, and that is not going to reverse. It may not be fair to say that banks are being turned into utilities, but they are constrained in scope by regulation in a way they werent before. Eurozonek. And the have done the same thing, macro provincial stability and put it right in the central bank, a movement that weve moved away from in the last 20 years or so. The u. S. Has taken an Interagency Group approach. In europe, it is context specific. Both of them are probably right. The ecb is the place. Centralized regulation of banks because many of these banks, to savor the national level, they just have to do this. They need the insurance and centralized resolution mechanism. I think for now, the logical place to put that. The ecb will be the regulator of last resort anyway. And the lender of last resort. And it works for the bank of england as well. How much do you weigh this withss of our nation, clear markets, that we just go and make decisions within our ugly system that other nations arent able to do . Is that a big deal . It is a big deal. Cleanuprelatively rapid a bank Balance Sheets was a very important part of the recovery. The italian lira, every time i plug Michael Spences oped. If you do one thing in your study of this financial crisis, essayichael spence 2010 on type one and type two risk. It is in english. There is still mathematics. It is the single best essay out of the financial crisis. Ned phelps had the single best speech in geneva. With a lot more coming up on bloomberg surveillance. In the next segment, we will discuss the Tech Industries diversity problems. Too many young white men and not enough women, blacks, hispanics. How defects this . How do you fix this . We will discuss. I wish you are here, folks. Michael spence turned the part Bloomberg Business week. 85 choices on their 85th anniversary. He has some different opinions. You did not think kitty litter was one of the main innovations . Extraordinary. Disagreeing once the placement of the world wide web. We will get a that later in the hour on economics. Lets get to our top headlines. We start in washington, commerce foes on a spending bill this week. While it doesnt please everyone, he would avert a Government Shutdown. Conservatives say it fails to charge challenge immigration policy and some democrats say it rolls back rules. Supportof both chambers the measure. The house expected to vote tomorrow. Marathon shopping hours coming to kohls, keeping its doors open for more than 100 straight hours so customers can shop online and pick up at a brickandmortar location. Several chains as a theyve seen Strong Demand for store pickup options. 100 straight hours . A new set rogen comedy interview may have prompted a cyber attack on sony. That is according to thepublic by the hackers. In another message or another sony executive message, gave input and ultimately the goahead to atone down seen that typically death of Korean Leader kim jongun. Quickly, brendan greeley, this is the anticostco, isnt it . It is insane. I think we miss the lead in a story, which is where learning about how important it is to have a physical point of presence. Everybody goes online stuff has to exist in the real world. All of the stores that exist in the real world forgot they had places. Every shopper wants options and this gives you all kinds of options. Lets mountaineer our way to the single best chart. We take aim at diversity or the lack thereof in Silicon Valley. The biggest u. S. Tech comedy seven releasing some of their Workplace Diversity data and when you limit it to tech jobs, so were stripping out administrative operative sales positions, women make up 20 lessof staff, six 60 on apple, google, and twitter. Hispanics, blacks, make up a combined of 6 of jobs of these Tech Companies. But spring interest in walker. Welcome. We talk a lot about diversity here in the tech world. That will be pushback from others who say, talk about artificialakes it as emphasis on diversity for diversitys sake. How do we get away from that . First, i say they are wrong. The one thing i tell a lot of folks who are kind of contrarians, i say, it is not about explicit bias. I think the more important thing we need to have a discussion about is implicit bias. When a look at our company, over 50 of our employees are minority. Over 50 are women. We have been able to do it by breaking down the barriers. Standard operational engineering some do, most dont. I think that is really telling are we mismatching the tasks needed at these companies to a desire to be diverse . How many minorities are at caltech . Actually, what is surprising to most is the percentage of folks who are studying Computer Sci