Police officer shot. Nypd unions from chief patrick lynch, who blames protesters and mayor bill de blasio. New york has seen demonstrations following the Michael Brown and eric garner decisions. President obama condemned the killings. President obama refusing to call of Sony Pictures and act of war. The attack cost sony hundreds of millions of dollars and torpedoed plans to release the interview. Applet raising iphone prices 35 , the second increase in less than a month as the Company Accounts for the rubles plunge. 955 ine 6 loaded costs russia. 649 in the u. S. A major storm could fill a wrench in your Holiday Travel plans. A system stretching from chicago to new orleans is heading towards the east coast. Heavy rain and strong winds to 2 3 of the country. Aaa says 99 Million People will thisl 50 miles or more year. Brendan greeley will go back and itth to the Grocery Store is already done. Check another storm, mostly rain. Santa will get through. Equities, bonds, currencies, commodities. Futures up yields churn. Oil stronger. 57. 67. Next screen. 16. 49 on friday. Yield showing a reaffirmation of a better view on america. 0. 64. Brent crude over 60. Russian ruble was 57 when i walked in. Ver stronger ruble that might not be for good reasons. We can do this on the bloomberg terminal. This is three month dollarruble swap. Liquid money around the system, russias emerging market. Then we go up. This is the improvement over the last couple days. Still massively elevated. Interesting news of the weekend. China has offered a yuanruble swap. Are they offering a friendly hand . Are they sincere . Is this an attempt to increase ae value of the renminbi as reserve currency. It does show how we are back to where we were in 2007. Discussing solvency and liquidity, 2 different things. It shows how few options russia has. They have a limited choice from economic tough financial crisis. There is quiet in the markets this morning. It is deceptive. Switzerland thursday and friday offered negative Interest Rates to keep billions of dollars away from switzerland. Russia riaaised the overnight let to panic levels to not money go to switzerland. Partied this weekend, josh did not. He read on russia. The feeling i have is we have seen this before. Is that what it looks like . Weve seen plenty of emerging market crises. This has a familiar ring to it. In economics 101, chapter 16 or 17, linking banking and finance into economics. Facing,what russia is banks are front and center. They have not developed the thickness and richness and their economy that they can withstand these kinds of shocks. They are so dependent on oil and that is what people are concerned about. Something even Vladimir Putin admitted in his press conference, that russia did not diversify. Hes going to dig in his heels. He did not say we are going to set a new course. It is focusing on nationalism thetrying to circle all wagons. That is the issue. Where is the plan . How are you going to develop a richer and broader base of growth so you can survive tougher times . U. S. , do you think janet yellen is understating the impact from russia . Shes done a good job of trying to calm people down. We dont have to worry about the first order effects. She has not gone into detail of theseiscussion that as issues persist, where is the threshold where it does spill over into your. And from europe into the u. S. Over the last two weeks with russia, investors in other emerging markets are pretty sane. Able to draw a distinction between what is happening in russia and other emerging markets. That will be a theme for 2015 differentiation. The men from the boys and the women from the girls. We cannot just rely on the quiddity from the fed. How do you differentiate . Importers versus exporters . That will be a main thing but there are a lot of other things. There is business culture, rule of law. That is what smart investors are going to be looking for. Does its bill over into other emerging markets . Or does it spill over into the g3 countries, particularly the u. S. . Not directly. The question is the exposure of european banks to russia. U. S. Banks to russia, it is less than 1 of exposure. It is about a knock on effect. What did you read over the weekend . I tried to read about cuba. I started to read various fed dissents. You are a researcher at the new york fed. After the fomc announcement theres nothing to read so you look at other regional fed chairs. Whos the one to listen to . The San Francisco fed president williams had an interesting interview. He was talking about the fact that inflation will be low but we are still going to be able to raise rates next year. That is the other big thing, the fed is lifting but what is the path going to look like after they raise rates for the first time . That will interact with the disinflation story and we will hear what that could look like. The relationship between nominal Interest Rates and real Interest Rates. Does other variables in place for the fed. What is the risk of the fed raising rates too soon . Do you think there on the right path and looking at the right data . They are looking at the right data. They are broadcasting their move very clearly. Year of in many ways a hangover from the tape attention of 2013. 2015 will be as well. Instead of us being on a taper how do we is about raise rates and avoid the kinds of tantrums we saw. What you said is repeatable from 12 months ago. What is the ability to have sustained lower rates, which has been the correct call . Hade 1981 weve disinflation. Everybody got it wrong 12 months ago. What is the assumption of jumping to a higher rate regime . I do not see the real economy events that get you there. The point. Theyre not going to jump, theyre going to take baby steps. It has been an extremely methodical move by the yellen fed. They have broadcast almost everything they done in speeches and minutes. Thisu read the tea leaves, is a fed that wants to communicate. That is the lesson of the taper. Something we will touch on. From Bloomberg Economics. I am fascinated by russia. More inzed it is not the papers. It is not front and center as it should be. While we are predicting disaster here, we ask you art question of the day. You more confident than five years ago, tweet us bsurveillance. Bloomberg surveillance, streaming on your tablet, phone, and bloomberg. Com. Nouriel roubini on market makers. Most interested in the linkages of europe to america. An important conversation later this morning on market makers. This is bloomberg surveillance, im tom keene. Brendan greeley and leslie picker. In on a monday for scarlet fu. Welcome to the show. To president is disappointed in how sony handle getting hacked. George clooney is disappointed in all of us. They did not lose consumer information, they lost their own. Lets take a look at a Research Report from Pivotal Research group. Pointing out how what happened to sony is likely to change what other corporations do. One, executives are going to discuss last of her email. You will have to stay closer to the home office. Their companies, a lot of things k revealed about things deals they had with the new york times. Discussions with Partner Companies are going to become less full of trust. It is going to be harder to offer unique terms to each customer. It is a difficult thing to offer a premium. The idea that we will use email less. It is a game changer for everybody. I dont understand why we did not know this before. Every time there is a hack it is reaffirmed you should not say things in email. It is not just that you should not say inappropriate things, you should not say anything you want a competitor to learn. I give you credit for being out front on this. To another generation it is like, duh. It is brandnew. What is the president saying about sony . Always been semantics about cyber warfare versus hacking versus theft. The media has a bad habit of taking attacks and turning it into war. What anonymous did it was a form of protest online. What is happening with sony is harder to tell. I would agree with the president that it is not an act of war. It did not destroy critical afrastructure or shut down powerplant, something you could do if you wanted to. The threat of war wasnt there. Was there. They threatened september 11 style attacks. This is part of the problem. We do not yet have in place, during the war, we knew what the titfortat was. A nuclearat merited or conventional response. We do not have that yet. Is this a comedy, this movie . Yeah. Im looking at the footage and a lot of it is not comedic. I was looking for to seeing. I see that it is pretty bloody, is that a comedy . Om says you do not party, or you have gone to see this . I would have gone to that after it hit all the headlines. A lot of people might be put off but it made me very curious. The thing that is interesting is this conversation has been bubbling beneath the surface for a long time. 10 years that lawyers have been working on trying to develop treaties to manage cyber warfare between states. That has not reached the public consciousness. We have a lot of catching up to do. We have new technologies. Apply the same principles. Controlling your paper trail is something we can do in the 20th centuries. There are new ways to do that in the 21st century. We do not have a response. If there is a cyber attack, do you have a response . I will rip up the script. The last chapter of the kissinger book is what you have been out front on for two years. Dr. Kissinger is writing about brendan greeleys world. Worrying about internet and cyber. Dr. Kissinger agrees, weve got to yank ourselves in to a new generation. Took a decadear to settle. Game theory was an idol idea in 1950. Over the theory, game theory was applied and became what we understand as part of the cold war. This is still relatively new. The speeds are different. What does it even mean to respond to a cyber threat . You launch aar, missile, someone else launches a missile. Youru measure response by the damage you do are the action you have taken . Taking this to the world of cyber warfare. Is it time for a physics . Equation . V. W rate, 2 pi f times in the old days, you had slower reaction functions. Now, with cyber, its like this. Cyber is a terrifying word. What, when we look at sony, an act of vandalism is fair. It is not that destructive. A lot to talk about in the next hour. Gideon rose, the editor of Foreign Affairs magazine. On innovative and disruption. Stay with us, we welcome you. Bloomberg surveillance. Good morning. Good morning. Bloomberg surveillance. Leslie picker in for scarlet fu. Brendan greeley has our morning must read. We been talking about how we inflation number and how that became gospel among central bankers. This weekend in the new york 2 ow a a piece on inflation target became economic gospel. It started in new zealand. What if it is wrong . There it is. Anjosh, are you in favor of 8 target . Not in the near future. Hindsight is 2020. 80s and 1990s, inflation was too high. About how 4 lking would jumpstart the global economy. With core inflation, which we invented post arthur burns, are we going to go back to forgetting about core inflation and looking at topline inflation . I dont think they can do that. You have to talk about headline invasion. Headline inflation. Nominal Interest Rates versus real Interest Rates. The fed is focusing on longterm inflation. To get to the 2 percent number, the genius of it is that it is not scientific. It is so simple. It avoids the false precision of pretending there is something magical. Is it a simplistic rule . It provides simplicity to market. Inflation is based on anecdotal evidence that workers do not accept nominal wage decreases. You greece the you grease the gears. On anecdotal data, not numbers based. Some history behind that. Inflation is a tricky thing. We are worried about it being too low. That is more of a concern then being too high. The reality is that inflation is a disincentive to safe. In america we have a situation where citizens are not saving enough and corporations are not investing enough. When you look at the if and when wet, do reach a sustainable path of inflation, how do you know that that is not too late to raise rates . In the sense that once you get to a high enough inflation findt that you do not yourself in trouble . No one knows for sure. That is the debate for the fed. Disincentive to safe . Distinctionraw a between people who need to save for retirement and a glut of savings desperate for yield. We are talking about convincing people to save. There are two classes of savings deke glut of savings is a broad. American are not saving enough relative to the rest of the world. That is a bad thing . Right. That is one of the reasons we are having trouble in russia and china. A tremendous time of change. The forces come together and in ways they have not before. So many emerging markets are buffeted. We speak to pablo from blackrock. It is bloomberg surveillance. Good morning. I promise to see the hobbit after i have seen frozen 10 times. Apple raising iphone prices in russia. For the second time in less than a month, the company trying to account for the rubles plant against the u. S. Dollar. 645e 6, 955 in russia, in the u. S. Makers largest smartphone raises about 1 billion. The company is expanding overseas. Omii ha overtaken samsung. Hospitalized with pneumonia. A Spokesman Says it is a mild case and he should be out of the hospital soon. Is battlingold ali parkinsons t disease. He is in stable condition. On to emerging markets. What to do in 2015. The equities and bonds of emerging markets go first. F you dare, where do you acquire foreign bonds . Pablo kohlberg deals with this every day with blackrocks emergingmarket debt team. Youfascinated with where do go when you want to find higher yields. You need to look for good fundamentals. A couple headwinds. Oil prices could be great for consumers but are bad for some emergingmarket countries. You will be having a liftoff in 2015 by the fed. A letter debate. You need to go to the less volatile parts of the asset class. Give me a country. Right now in some cases some trouble spots, brazil, prices have been coming off a bit. In russia, a couple under weights in other places. Are you buying russian paper . We have it. It is not that we are adding. How can you go in and buy paper given the inner market rate . We are buying hard currency debt. What is that mean . It is bonds denominated in dollars. I read your research from november on emergingmarket fixed income. There was no mention of the price of oil at that point. We had not seen massive movements. How much did that scramble your plans . The drop in oil prices was important. Time to find out what are the domestic and International Impact of that. In some countries these things translated into weaker currencies, like russia. In some countries it translated into weaker prices of bonds like ecuador venezuela. It depends on the variables they have to adjust to the shock. In places they cannot do it through the exchange rate, there will be concerns on credit volatility. And emerging markets, both equities and fixed income, are more sophisticated this time. They are able to distinguish among countries. Yes. Weve seen more and more diversification. Nextink that the trends of year are going to be for diversification. We will play a thematic approach. Oil importers versus oil exporters. The countries that have ways to adjust to the oil shock against countries that do not have ways to adjust and are more rigid. This is the approach we have. Are those the fundamentals you speak about when you try to decipher between countries . What are the key things you are looking for . We are looking for solid balance sheets. Good liquidity. We are looking for growth stories. We are trying to look for places that will take better care of the volatility that will come along. That is why we are preferring at highgrade bonds over highyield bonds. The summerwhispers of hedge funds leaving brazil and heading towards col ombia. Ive been hearing for 10 years that colombia is the country of the future. Incolombia is doing a lot terms of the Peace Process. The oil pressure has hit colombia, weve seen deterioration on hard currency debt and in the currency as well. There a point where value comes back. This is what we monitor day in and day out. On it,a put a fine point it is the Peace Process that is driving it. It is a good start. Also the improvement in nontraditional exports. To bring this to cuba, what has blackrock thought about a new cuba . We are here. Its still too early to know i want your best research on how cubas capitalism will unfold. It is very early. We need to see which kind of process they follow. Are they going to be a process like china where they try to bring a lot of capital and put rules for capital to come in. 90 miles away, i think the idea of a china model for cuba its going to be a big challenge. At the beginning of 2014 we saw a lot of backandforth amongst global central bankers. Emergingmarket central bankers laming the fed. Do you think we are going to get the same scapegoating in 2015 . Central banking has been difficult in emerging markets. It is not necessarily that they blame the fed. A majorear that when Central Banks starts changing gears it will affect everybody. We expect to see Monetary Policy diversions. Some countries will be able to cut rates. Will have tos defend their currency with high rates. To a nation, i respect their central bank so much, chile to me is almost like a developed economy. Is chile a developing market . The definition has always been tricky. When you look at geographically and politically, singapore would not be considered in emergingmarket. Chile has also been dealing with a little bit of a commodity price shock. Corporate press is going lower earlier than oil prices . There the currency can adjust a lot. A process similar to china, a slowdown on their potential rate of growth. The country has done a little bit of the chile model, peru. You so much. A great overview. Why do i see february in santiago . I thought we were going to havana. We can do both. Im going to sao paulo. We are going to talk about the challenges facing millenials in terms of getting jobs and saving money. This is bloomberg surveillance. Good morning. Bloomberg surveillance. Leslie picker and for scarlet fu. Brendan greeley spent all day yesterday going backandforth between frozen and his s