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tv   Market Makers  Bloomberg  December 31, 2013 10:00am-12:01pm EST

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♪ >> live from bloomberg headquarters in new york, this is market makers. new yeart in, the celebrations already underway in asia. we look forward to a 2000 -- to as 2013 endsds with a bang. >> after the teen sutra -- mojo, andlost his online retirement announcement, and a flop at the box office. >> we will look at who left, who
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cap have, and what they jobs are still open. you see monks here at a temple in tokyo ringing bells to celebrate the new year. they are right outside, as you can see. new year's is getting underway already in tokyo and overseas. new zealand started off this morning. welcome to our new year's eve edition of "market makers. the final day of the year. >> we have breaking economic news as well. consumer confidence numbers are just coming out. we get a better than expected reading in consumer confidence for the month of december. eric, you are just checking that this is the highest since when? >> september. calexico decline has been revised higher to a read of 72. >> it is in line with what we have in seeing.
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university of michigan, confidence index, all rebounding from lows they saw a couple months ago. >> so we are coming off of base here. this is certainly a way to tie in how people are feeling as we head into the new year. it is backward looking because it included the run-up to the holiday shopping season and we know that season left something to be desired. a close relationship between consumer confidence and housing. a year of recovery for the housing market. prices are up more than 13% since last december, the fastest increase in eight years. the data are not done yet for the year of 2013. with us is the chief economist of the real estate service in san francisco. good to see you. characterize 2013. how strong of a recovery has it in? people say the real estate
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is local.arket there is stuff that is good and stuff not so good. >> the housing recovery this year has been strong yet uneven. in some markets like las vegas, prices are up 30% year-over- year. in other markets, prices are still close to flat. it is not only about prices. we look at construction and where construction is rebounding, some of the places with a price rebounds like detroit and atlanta are still way below normal when it comes to construction activity. recovery has a ways to go. >> why is it some markets are recovering so much faster than others and the trend continues, as you just pointed out? >> we see price rebounds in the markets hardest hit in the housing bust last decade. a lot of the pricing we are seeing today are still rebounds. it means now that the market has rebounded more, we will see
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slower price gains next year because there is less room to continue rebounding. that is a good thing. as the market starts to level off a bit, we start to see job growth and other more organic factors, we start to drive improvement. >> it will lead to a more balanced recovery price this year? >> we should also see construction continue to get closer to normal levels. it will still be several years before construction is back to the 1.5 million longer-term normal level. upshould also see sales keep , as they did this year. the big change in sales will be the shift from foreclosures to conventional home sales. that is another sign of the markets recovery. >> one big driver for housing price recovery this year has been the role of institutional investors coming in to buy houses and fix them up and turn
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and rent them out. appetite now that prices in some areas are at new highs? >> 2013 was the year of the investor. 2014 will be the year of the root the homebuyer. we will see lest it -- less investor interest because prices are now higher than a year ago. it is less good for investors today than in years ago. first-timers face the challenge of higher mortgage rates, which makes affordability worse. repeat homebuyers, people looking to sell the home they are in now and then buy a new home, trading up or down, they are on both sides of the rising prices, even though the home they might buy is more expensive than a year ago. in the see more of them market next year, taking the place of some of the investors. >> what happens if some of the institutional investors like blackstone, who have been buying
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up homes and turning them into rental properties, are successful in creating an asset class for rental properties? if they could get other investors to invest, might we not see forinued investors demand the single-family homes? >> they will buy less but not the same as starting to sell. they want to houma -- hold onto the homes for several years because there will be ongoing demand for rental family homes. it depends on longer-term how ton folks who lost the home foreclosure and are now renting a single-family home can now qualify for mortgage again and get back into home ownership. for a lot of families, it will still take several years which means continued demand for single-family home rentals. >> you are based in seven cisco and i know you see a lot of the results of the wealth generated
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over the last couple of years. we have seen you quite a bit in new york there there is a sense of how much bonuses buffet and boost domestic real estate market. what have you learned about the buying power of salaries? pricing andeen big rent increases, especially in the bay area and less so in new york. the effect of technology in san francisco has boosted prices. it is also difficult to build in both markets. both san francisco and new york have in common that it is hard to build new housing, even though there is a construction boom in both cities right now. we amount of construction see now in san francisco and new york is still low in comparison to what is typical in places like houston. plus tightdemand supply is what keeps housing expensive and not very
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affordable. san francisco and new york. sharing yourfor thoughts. we wish you a happy 2014. chief economist. next up, steve schwarzman says, if you want to be successful in business, you better understand china. he donated $100 million of his own money to help young people do just that. the only floppy justin bieber had to deal with was his hair but the latest movie just bombed at the box office. is he fading? we are streaming on your smart phone and tablet and you can watch all of our interviews streaming live and on demand at apple tv. ♪
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"markete watching
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makers." gave moneyumacher modeled on the road scholarship. we spoke to him earlier this month about the scholarship and more broadly about china's growing power and influence. program soted this that 200 people a year can learn about what you believe will be the most important country for the next 50 or 100 years. of the new think leadership in china and the job it is doing confronting that country's biggest challenges? >> tiny has got a lot of issues. not a wealthy country. it just has huge reserves. but it is around 100 in the world in terms of per capita income. whereas we look at china as a rich country, they look at themselves and do not see themselves that way. they do not have a developed
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social security system, which is a surprise for a country of that type. they do not have adequate medical care. there are all a lot of fundamental things they have to address. >> more and more, chinese people want those things. >> of course they do. they do not want pollution. and a variety of other things that have grown out there. the new government is interesting because these are pretty, get it done kind of people. they are pretty courageous. they understand the problems they are dealing with and they issueut in this recent the whole series of things that they want to do over the next nine years. the chinese are difficult to bet against. >> do you think they can do all of those things?
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>> well, he has got his views and i think he is always short. i cannot really talk about him. still apparently growing at 7.5 and 7.8 sent per year. will it come push everything? who knows. do they have a fundamental thrust? for reform, diminishing corruption, addressing central issues, at some point, developing convertible currencies and things like that? focused. group very of not being aue democracy in a western sense is that you could do some things that may not be as popular that we could not execute it may be useful for them. >> optimistic perspective. is it an acceptable trade-off? >> that is one you should ask a
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philosopher. i am probably not that person. there are horses for courses. at this stage of economic development, and societal development, certain things need to be addressed. part of what goes with their system is alien to ours in terms of certain types of freedom of expression and so forth. think the world is a more pluralistic place than we may look at it. each system has very significant advantages. >> let's say people who agree with you about the importance of china, and it is pretty hard to argue. not everybody will be a scholar of him. what do you do? >> you have to hope somebody gets sick. what do youiously,
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advise people to do? the people who care about china who agree with you and want to make understanding that country a part of their education and future? i think looking forward, i just had a breakfast meeting with somebody who covers the area for another firm, that not an elective course. it is core curriculum. you really have to know about the number two economy in the world, which, within 20 years, in all probability, will be the number one economy, with probably the largest population in the world. it is a bit of an alien culture to westerners and the language is must -- much different. the history goes into over 5000 years. and have a point of view culture different from ours.
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to not find a way to understand, whether it is going to school or part of working a company and have a rotation, to asia and china, to not touch that part of the world is a real fall short. >> that was the blackstone ceo. ranginga wide- conversation and we finished up on china. he feels so passionately. but did not realize this the construction of a residential college named after him is going now. it is an eight story building and has got an auditorium and garden and dining hall and fitness center and all of the luxurious comforts of a residential college. >> his name is on the residents and the new york public library, two. -- too.
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>> it is a mouthful. >> all right. we will see if his productions start to come true in 2014. >> ok. coming up next, 2013 had winners and losers. we will take a look at the top executives fired and hired in the past year and which top jobs are still open as 2014 gets underway. ♪
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>> there has been no shortage of cecil -- see sweet shakeups. a long list of the consecutive had it -- from microsoft to general motors, jcpenney and groupon, matt miller joins us to recap the most notable ceo exits of 2013. and what remains open as we had to the new year. you have got a couple of big names. >> i want to bring it back to steve schwarzman, the interview. >> not going anywhere. >> no, but he invested $200 million in crop. john is stepping out of crocs. >> yes. >> i went and bought a pair just now. i drove over to the upper west side and picked up a pair, not for steve schwarzman. i am wearing them right now. there was a time
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when everyone loved crocs so much. i could not stand them. now that everyone has a problem with them, and i think they're kind of cool. they are very comfortable. incredibly unattractive. >> the problem was, the ceo, it will be four years since he stepped down in march. when they went out of fashion and they had no traction in the high heel market or the winter boot market, he decided the best plan of attack was to open 100 new stores or at he has opened 100 new stores. it did not really help boost sales much and it really ate in the margins. the next ceo to come along will probably close down a lot of those stores and i thought i better take advantage of the opportunity. >> you should've waited until they close down. >> you might not be able to get the duck commander version anymore. i thought that was interesting and of course the shares went up more than 20% yesterday on the announced that he is nothing down. expected to happen today,
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although it is not really a high-volume market. the most interesting eeo sweet shakeups has not really happened yet. that is steve ballmer and microsoft. i have covered it all year because al has been tapped as a possible replacement for steve ballmer and has done a great job ford.m -- forward -- seattle. front -- from he does not really deny. >> one good reason why not to go. he would be reporting to steve and bill gates. assume held have to negotiates a more powerful position. he would probably want to negotiate independence. we have no idea what negotiations have been taking place eric wedge see also has no background in tech. >> according to steve ballmer, it does not matter. he could do anything.
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mason was jumping around a lot of stages but he did not do very well over at groupon. one of my favorite resignations of the year, because his letter to shareholders was so wonderful, you see him there with a cofounder who replaced him as ceo. andrew mason said he needed to step down to stem more -- spend more time with his family. just kidding, he got fired. that is basically what his resignation letter said. >> how old is this guy? >> he is 28. he has the least a new album recently. that is what he is doing with some of his free time. it is called "hardly working here: >> appropriate. not running for steven ballmer can't his job. >> probably not. but, it has more than doubled since he left. another testament to what you could do when you change out one position with a company. >> matt miller and what to watch.
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>> we are approaching 26 minutes past the hour. yearll look back at the that was for gold. this is what is happening today. gold is down 29% in 2013. the biggest drop in more than 30 years. institutional investors by and large lost confidence in gold. traded out of gold. >> very ugly. if you look back, you have to go back even further for corn. it is -- production climbed to a new record high that outpaced demand for feed and fuel. there is talk about ethanol and what happens next for fuel in
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the united states. class we will be back coming up, does goldman sachs need to change its business model? wondering what it will take for wall street's top bank to find nirvana again. ♪
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>> you are watching the new year's eve edition of "market makers." off for new is year's eve and will be back on friday. in the meantime, we are here to take you through the next hour and a half their request we will talk about goldman sachs -- goldman sachs. more than two thirds of its profit comes from trading. investors have almost zero visibility. it is difficult to know how much money goldman could make. bernstein has asked himself what would nirvana look like and he
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is here to tell us what he found. next to you and happy new year. what is nirvana for goldman >> goldman has done very well. the stock has performed extremely well. what we want to say is, how good could it be e we added heat equity capital market. and trading, peak investment portfolio, everything. --got to 15%, >> pathétique from the best levels they ever had. >> and, when you do all of this analysis and then say, leverage dropped, maybe that is the answer. fundamentally, that is the answer, which is the old goldman just is not there anymore. it still means it is a very good stock. stocks are only generating 11% now. some of those peaks can occur.
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capital markets are doing brilliantly and m&a is picking up. certainly, the wind is in their sales. >> what does it mean for goldman sachs? what does it mean for utopia for will -- for goldman is return on equity. a bank of only 15%. >> at least goldman is outperforming the rest at 10. 30%.t is nowhere near there were some quarters during the market were goldman and the lehman brothers were delivering 40%. >> exactly. >> we really only have two thanks meeting cost for capital. jp m and goldman. you here they all talk about normalized. we are all waiting for normalization. it just has not occurred. let alone nirvana. is the fundamental issue. these are good stocks. we have seen a rally where they
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are trading below liquidation value. where do you have to get off? goldman sachs, you will have to get off sometime when they get into the 13 or 14% because they cannot get much higher than that. >> why would goldman sachs want to continue to stay on as a bank holding company? why not just go back to what it was? question member. frank rules. the hotel california clause, any of thef you took money, you cannot get out of it. there are games that could be played. not easy. fundamentally, they are stuck as being a bank. could they change the mix around? i think that is really what the solution will be. you will see trading businesses are constrained and investment banking will grow and asset management will grow. it cannot be done quickly. >> to your point, that is just changing it.
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does goldman need to change its business model fundamentally? the two very have different strategies. morgan stanley has sharply changed their business. oldman says they can profit from where they are today. you could make an argument that what goldman's management doing is running trays -- trading businesses. we do not know which one of the businesses will generate maximum return. the market is changing and ubs is pulling out of six and come to the royal bank of scotland is pulling out of equities. we will see more and more banks making those decisions. goldman says in the end, capital markets make good business. we do not know what the normalized return will be out there when other people have made their changes. they are sticking with the old model. morgan stanley is going with the new model. 2410 2050 will be fascinating because i think this is where we will start seeing the two trends are part.
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>> what is the read? who is doing better as a result? >> goldman. morgan stanley's -- >> is it in a better vision five years down the road? >> they make the argument that wealth management is a very predictable business. what they're really saying is the cost of equity should drop. if that is the case, morgan stanley with a lower could generate more value than goldman could with a higher because they are going after a risky business. class does morgan stanley have more earnings leverage? when retailainly do goes back. the operating level is huge. we have looked at retail and said that incremental dollars for retail can generate over 27% pretax margin. morgan stanley has pushed a little bit back on that one. what it really says is a does not cost more to do another trade when retail comes back. >> what about compensation? how big a role will that play in
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deciding how profitable the firms are? >> there is the strength with goldman. we have seen goldman -- yourior to the crisis, if were to say which of the firms had the greatest discipline in compensation, you would not have guessed goldman sachs. they have clearly done it. >> jpmorgan levels. >> they have reduced the partnership and put off the partners, which is where the expenses are done. i have been very impressed. todman has been running it try to get the margins up. >> do they stand to lose talent and the biggest assets as a result? >> that is interesting. it is always fun to write about that. >> it is fun for people to talk about it, too. >> is there a shortage of people who will work for $1 million a year? i do not think so. it is very difficult to manage somebody who used to make three and tell them they are now making one.
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but the new generation, i think we will have a generational shift and partly talented people in their and wall street will continue to get a large group of smart people in. i am not losing sleep that one. >> thank you. >> i hope you lose a little sleep tonight. it is new year's eve. >> happy new year's. >> happy new year's. what was here to tell us he found. >> kick around. shopping and dining might never be the same. a ceo says big data is the key to driving sales in stores and restaurants. >> global burger domination. a new york city restaurant in the middle of an international expansion. we will bring you an inside look. >> that will be my lunch. ♪
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>> not so long ago, the retail experience, the products you saw
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on store shelves and the prices you pay for all of that, they were largely a matter of gut instinct. the people who managed stores and restaurants are just getting -- guessing on what people wanted and what they were prepared to spend your it in the future, it will look different. all of the things are increasingly driven by big data. predictiveapplied technologies is on the forefront of the fascinating new field and he is here with us. >> happy new year. >> talk to us about big data and retail and restaurants and the customer experience and how it is changing those industries. >> you have hit it on the head, retailers, banks, consumer products, companies will tell you they are all trying to leverage a wealth of information that was never available to them to wear. >> how are they getting it? it has never been available before for a reason. there is a reason it is available now. >> it is technology, fundamentally.
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leveragingis making that had been collected before but could not be rapidly process. fundamentally, there is a -- an expansion of information available about the world, whether that is competition and social media, et cetera. >> the information comes from what? using one of the discount cards? had he get that information about what i would like to buy? questec to be from the transactions. as an example, in our index, we collected details and sales information from 50,000 locations across the country. >> what are you tracking? you collect the data, but what are they show? it is true that if i can see more accurately the number of people who bought a specific item when they bought it -- but you do not really know that much about the individual. do you need to know a little bit about the person and the kind of customer you are dealing with?
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>> you can know about the where theyography of live and sometimes you can get customer patterns and the purchases they made. the data provides a huge opportunity and some risks. we as humans are conditioned to see patterns where they don't exist sometimes. the way to really understand as a retailer, does a new approach click and select, it is to experiment and try it. in some stores and not others, with some customers and not others. experimentation is the way to leverage big data. >> i wonder if it limits that experimentation because if the pattern is not shown, people might be reluctant to try something new. i will go with what the data tells me and not what it might suggest. >> that is really the opportune. it is the big trend we will see in 2014 and beyond. rather than just looking at patterns of data, any time someone bought a sweater, they
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became a good customer. all we have to do is put sweaters on sale. we may learn, no, all that happened is we sold a lot of sweaters and we did not actually change consumer behavior. experimentation really defines causality. in understanding what works and what does not, the more you can understand about the environment you are operating in, the better you are. i think the holiday season this year really exemplify that. there were big winners and big losers. >> tell us about what the big lack friday, about which a lot of people criticized for producing artificial spikes in sales and artificial dips in sales later on. >> black friday has become an important part of our psyche and approach to shopping. retailers have done a good job saying the gun goes off and we start on black friday. this year, the holiday season for saints doors sales in-store, the retail index was down 1.6%. one of the reasons is black friday occurred on the 29th this
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year as opposed to the 23rd. we had fewer shopping days after the gun. >> that made a difference buy,se gifts is what they for the most part, between things giving and christmas. does it really matter how many shopping days there are? >> it does. we saw that back in 2008, we had so many fewer shopping days that came after black friday, as opposed to before, but what is more interesting is the variation in what happen on black friday. some cities were big winners and big losers. >> your company is 15 years old there it applies protective technologies. investors love big data. they have thrown money at it. is it time to consider going public? is a veryig data important opportunity for the clients we serve. there is a lot that may be attractive to public investors.
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we are serving a large part of the global economy. we are a high-growth company. we are addressing very important problems and driving significant return on investment for our customers. >> if you were to go public and raise money, as opposed to just giving liquidity, what would you do with it and how would you spend it? christ we are today investing in growth internationally. we invested in our tokyo office. we will likely open one or two additional offices outside of the united states this year. in ourinvesting a lot product platform in serving clients more effectively to ways they cane lever -- leverage big data to make decisions. we are serving additional and more and more industries and are already working with transportation. >> quickly before we let you go,
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social media, what kind of a role does it play in your analysis of data? >> more frequently, our clients are leveraging sensitive analysis, will looking at results from trip advisor to understand what the customer satisfaction above the surveys they are collecting, but really, it is trying to translate that kind of feedback to the bottom line. as we see increases in customer satisfaction, what is that translate into in terms of additional bookings? it is understanding the patterns of the data and where we have made a change and changed our approach of what the overall impact that happens to the bottom-line. >> if you end up going public, comeback at a time and speech was then. >> big data is powerful stuff. thank you very much. happy new year. the ceo of applied predictive technologies. >> coming up next, has justin bieber fever finally gone away?
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disappointing performance of his new movie, "believe." ♪
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>> is started more than 10 years ago as a simple hot dog cart in new york city and it is now out to conquer the world. we're talking about shake shack. the chain has expanded beyond manhattan across the globe. 2004, a small burger shack in madison square park in new york city. 23 restaurants now worldwide. dubai and thisn month, the ceo set up shop in and saudi arabia. we are told how the company brought find dining to the burger joint. ♪ >> i have been into find dining my whole life. that is really how it was born.
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like we treat it all of our fine denting restaurants, with exactly the same mindset. we hire people at a higher wage than fast food was. we give up to one percent of revenue every month as a bonus to our team. these guys working here today, they want to be a part of our success there nothing upsets me more than when i hear people say, foot being burgers is the lowest form of work area these guys turn this into management jobs and general management jobs. wille hungry today so we try some of the classics. everything here is cooked to order. that is what we have changed. we do not think there are a whole lot of other burger joints selling for dollar burgers and all the premium ingredients we take a lot of time to store. it was born as a hot dog cart. but start it was this chicago
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style hot dog. the thing that changed everything was this beauty right here. we met with the original book -- butcher to taste all different parts of the cattle to say what would make the perfect classic turgor. it never gets old. a borns that guy salesman or what? >> i cannot believe it. what is your favorite item? >> the devil burger with cheese and the sauce and the fries for sure. maybe a shake. >> the fries all the way. >> saudi arabia and russia, he is looking to do more expansion and is talking about going west. maybe not quite so far as california but he is talking about chicago and las vegas. i do not know in n out burger. >> a big california think. i'm not that ache on it but i am
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a new yorker. one movie that came out on christmas day was justin bieber, his latest movie. his second film. lot ofas a whole marketing surrounding it and the strip -- the distributors of the are aclaim they theatrical version of beyoncé's. album. they did. open up a lot of screens. they claim, this is a whole new business model. class a whole new business model doing exactly has well just how well? >> not too well. worst debut of a concert documentary in recent memory. it probably qualifies as a flock right now. can point it right now that it was a flock. >> they did not cost much to make. $5 million. his last --
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screens.own on 3100 a lot is happened. justin bieber is no longer squeaky clean. he gets photographed urinating in buckets and insulting president bill clinton. >> what about the record? see -- he is still a musician. >> yes, the album name, it was available for only two weeks on itunes. a compilation album. not a lot of original stuff. a couple of previously unreleased tracks. reviews were not great. grabbing up the walls of fleeting believers, one said. >> when was the last time a -- reviews? >> the sales is what they were counting on. he has almost 50 million twitter followers. >> but they did not help them sell movie tickets. >> they did not. they are a little bit fleeting. maybe they are put off.
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>> disbelievers. >> he tweeted he would retire, which he then later deleted. cannot make up his mind. you are a canadian. ow big a deal is he in canada? >> he was huge, but they do not believe anymore. same is down here. [laughter] next hour, the biggest flops and biggest hits of 2013. what will rule the box office in the year ahead? ♪
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>> 2014, the year ahead. just a few hours before we will 2014 in new york city. we are looking at the year in global business. you can see right here the clock striking midnight in shanghai and hong kong, new year is underway in china. >> they counted down in mandarin in hong kong. you are watching a special new year's edition of "market makers." >> what are you doing for new year's eve? >> having a party with friends. >> very cryptic. >> it is my anniversary tonight.
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had to say.ll you congratulations. i am flying out to california. i will be behind the whole countdown. >> you will be celebrating every hour as you move west. >> bp wants the federal appeals court to block payments to people who cannot linger economic losses to the 2010 deepwater horizon disaster. the company says a judge in the case is ignoring a previous decision that required the court to determine if they need to pay a payout. train derailment in north dakota forcing the evacuation of more than 2000 residents. a shift in the mother could increase the risk of caring the smoke from the flames. investigators expect a second train carrying grain on an adjoining track could have caused the derailment. a new york general attorney
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investigating after an insurance company drops 2000 doctors from its plan. the report says attorney general eric schneiderman sent letters about the investigation in early december. unitedhealth group said to be cooperating with the request. the s&p 500 is up big in 2013. it was a much better year for stocks than many may have guessed, perhaps including you. if you guessed wrong, do not worry, you are not alone. julie hyman is here. the s&p 500 did better than pretty much anybody thought. who was closest? which was pretty close. he gave himself a grade, went through what he went wrong. he was at 1650. today we are around 1840.
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the median of strategists on wall street, 1555, so they were off 15%. the lowest was gina adams, 1390 was her projection. >> 1390. she is off by 450 points. >> i was looking at a note from barry knapp. everybody low balls it, and he had a lower projection. he said that people thought the fed with dark tapering sooner than it did. of course, we had that shock to the system in may. markets took a bit of a hit. and then the fed kept right on going. >> and when we did eventually taper, the markets reacted positively. that point, economic data was perhaps long enough that
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people could take it in stride. now we have to look ahead to predictions for this year. 1975 for the current year, according to the best forecast. he is pretty much in line with what other people are looking for. michael purvis is looking for 2100. barry bannister at stifel is looking for 1550. the consensus thinking seems to be that we are not going to see the same mentored of games, but some of the day -- same thing that propelled us this year should propel us next year, in other words, an improving economy. >> this was the year of multiple expansion. the improving economy did not necessarily help, but it did -- >> people are looking ahead --
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>> it is a discounting mechanism. people are looking ahead to where we should be on track. and then we had some validation of this thinking when you had the fed starting its tapering. washington did make some progress. that helped sentiment as well. all of these things adding up to a higher market. >> we will see how wrong they get it this year. missing by 18% on average? i guess that is not unusual, but nobody saw this. >> it is the same problem we run into with earnings. is it the company or the stock market doing that well, or to your point, those whose job it is to predict the future, are they getting in that wrong? >> we will leave that to another date. >> thank you, julie hyman. >> we continue to look ahead as well.
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mine is one of the stocks hoping for a big rebound in the new year. it was the worst performer in the s&p 500 in 2013, down by 50%. let's take a look at the reason preciouse dive with a metal miners analyst. it is not unique, in that all the miners took a hit. ont is not unique, in that all the miners took a hit. >> what we have seen over the past three years is the price of gold is down 15%. the average company is down 60%. the model is broken for miners. a lot of things are going wrong for these guys at the same time. >> they have written down tens of billions in assets. how much more do they need? >> many are acting more in the
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future, and that is why people do not like miners. you buy a gold stock because you want to participate in the price. and then the price goes down, risehe cost for miners almost perfectly with the price of gold, so investors do not make money. they have left those companies and are going right into the etf's if they are interested in gold. >> how much of a problem for these companies and those that do or do not want to invest in them, how much of it is rising production costs? >> all of it. when you buy a company, you'd expect to participate in the upside of the company. if you think gold is going to $2000 next year, you will buy some gold mining companies and make some money. that did not work out in the last decade, so these companies have come under a lot of pressure, and it has caused a lot of problems. if i want to buy gold and i like
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it, i will be like polson and load up on gold etf's. not saying that it is wrong or right, but that is what they are doing. >> when you look at these gold miners, but is there production cost on average? we know where gold is, $1200. >> the industry is trying to right the ship here they use to have cash cost, but they since come out with something called all in sustaining cash cost. that is supposed to be an apples to apples measure of what it cost to produce an ounce of gold. it is about $1000 for the seniors. for the mid tier, about 1200. pretty much where we are with the price of gold today. >> if goldman sachs is right and gold drops to $1000, these senior mining companies would, honestly, be making nothing? >> exactly right.
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what we saw in the financial crisis, when the price of gold took a sharp downturn in 2008, you saw a 20% reduction in gold production. you are seeing that phrase come down to low levels again. it will be interesting to see when they come up with their fourth quarter, will they have write-downs again, will they close down mines? there have been revisions of pushing back production. that has been a big issue for these guys. >> thank you so much, ken hoffman. "ironman" led the american box office in receipts. we will find out what worked and what is ahead for 2014. can come midnight, your favorite tax deduction could be gone. we will go through the full list
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of expirations for your 1040. ♪
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>> you are watching "market makers." i am erik schatzker. shows 73% ofdy online adults are now logged into social networks. the most popular site is facebook with 70% of adults having an account. two thirds of users login at least once a day. linked in comes in at number two. netflix is testing prices for the video streaming service. to deals range from $6.99 $11.99 the spending -- depending
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on how many users and screens will view the device. apple executives could pay scrutiny as the antitrust at e-r appoints a look book pricing. the monitor should be able to interview top leaders, something they have been denied since october. "ironmang with media, 3" took the number one spot at the box office this year. here to sort through the best and worst movies of 20 and for a preview of what to watch for in 2014, we have our senior media analyst. paul, happy new year's eve. not long ago in the summer we were talking about these big flops like "the lone ranger" but
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we have had a record year for hollywood. was it the hollywood season that did the turnaround? >> that was a big part of it. we had a summer with a lot of high profile, big-budget failures, or so it seemed. actually, when the final numbers came in for the summer, we had a record-breaking summer in terms of revenue. the perception, when you have these big budget films, that becomes the story. that takes away from the fact that other film did really well and the overall marketplace was huge in the summer. fall and holiday season have been chock-full of movies. if you look at the christmas day bomber office, five brand-new wide release openings, the second-biggest business day ever. it was a bit of a roller coaster ride. one interesting distinction
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this year is that the studios spaced out their big releases, no longer going head to head with each other. they realized they could all win in this. what evidence is there that they will continue with the strategy? >> it is funny. when you have big tent lock buster movies, and you have one every weekend, moviegoers will migrate from one big film to the next, so it is hard for some of these films to stay at number one for more than one week. hollywood is learning a lesson from that, and the lesson in 2013 is coming if you do that, everyone can share the wealth. at the end of the year, it is a virtual traffic jam at the theater. when you have films like "the ho "frozen," there are so
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many movies out there, people will be catching up in 2014. "the wolf of wall street" is three hours, people are mixed on caprio andis di scorcese. there are some great films out "nebraska," "mandela," along with the big blockbusters, so you have a pretty good mix. you also have films like which are hustle" critically acclaimed. it sounds cliché, but there is something out there for everyone in the marketplace. >> when we talk about movie receipts hitting a record, $10.9 billion, how much of that is explained by pricing?
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our movies much more expensive to see now, her people see movies as frequently as they used to? thehen we look at attendance for 2013, we will find it is about par with last year. the fact that the moviegoing own,ience is holding its even if attendance were to stay flat for the next five years, that would be a good scenario. look at the options for entertainment that are out there the a mobile device, services the wayslix, hulu, that people can consume entertainment are everywhere. going out to the movie theater is still, in my opinion, the best way to see a film. isething like "hunger games" close to $400 million in america, huge attendance in its opening weekend. the movie theater experience is
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still as viable and important and relevant as ever, but going back to your point, of course, ticket prices go up every year, but the moviegoing experience is holding its own in the face of a lot of competition. i would say that is a win for the theaters. longer in movies are length, averaging almost three hours. look ahead into your crystal ball. big releases in 2014 and the one that will be pick successes? are a lot ofere big sequels. we have been talking about them dominating the marketplace. i think that mentality will continue into 2014. we have things like "the amazing "monument men,"
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featuring george clooney about nazi germany. there are a lot of big movies coming in 2014. i know it is early, but look out for 2015. we will have the next avengers, a james bond movie, the next star wars is coming out. this is good news for hollywood. the next two years look really strong. that is good for the industry and moviegoers alike. people love going to the movies, and they are going in big numbers still. >> thank you so much. out of all of those movies, i monumentant to see " men" the most. up, what is ahead in
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deal making in 2014? our deals reporter will be here. and as we go to break, one of the best of the year pictures. you are looking at a turkey farm. one of the birds that ended up on your dinner table. >> he knows exactly what is coming. ♪
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>> there is an ipo boom in mexico at the government loosened its grip on the oil industry. this year, president enrique pena nieto opened up the stake of oil industry to private
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investment for the first time since 1938. it created an initial boom in public offerings. if your figures showed a record $12.3 billion in record sales, 36% higher than the previous record. the biggest deals of the year .as a $2.5 billion ipo other big deals include a real estate trust and retail and restaurant chain. that is today's latin america report. now a store that caught my eye. eight out of 10 americans say they like canada. my hometown -- home country. just ahead of the u.k.. there we go, music to my years. coming in dead last, saudi arabia. of americans say they have an unfavorable view. why.nada, i can understand good donuts, hockey, nice
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people. >> it is clean, well behaved. liebers here. >> and when it comes down to the affordable care act, many say, it would be nice to go up there to get care. >> thousands of dollars less than it might be here, if you are uninsured. past the hour. it is time to go on the markets. are flat but the yield on the 10-year, 3.01%, the highest since july 2011. the two-year at 38 basis points. treasuries continuing to fall on this final trading day of the year. not be asup, it will bad as last year's fiscal cliff, but as of midnight tonight, tax
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incentives covering everything from your company's research and development expenses, even to your commute to work, they will expire. ♪
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this was the great wall of china about 30 minutes ago when they rang in the new year. that is the kind of music my father in law would be listening to. looks pretty freezing out there as well. certainly not the scene that we saw in hong kong, where it is probably balmy comparatively. for you dealmakers and deal fans, 2013 was a bit of a yon.
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there were some big takeovers and others that were smaller, but nonetheless, there were some big ones like american airlines. at some of the themes and what to look forward to in 2014. >> meh, you can do it. >> we had some big deals. >> that is what made everyone feel like it was ok. if you look at the number of deals that happened, it was down significantly and that was the story of 2013, the year of the big deal, like dell. even when verizon wireless vodafone, aest from $30 million deal. and then of course you have borne but the buying heinz. comcast buying nbc.
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all of that combined and you have 20% of overall deal volume driven by those five or six big deals out there which was incredible. the fact that verizon pulled the deal on their stake bumped up telecommunications to number one, even though it is a very highly consolidated industry as it is and there is very little to do there, but we should see more in 2014. bigveryone says the next moves in telecommunications will be in europe. >> that will be big. >> what about joseph a bank? >> there are a couple of deals in the pipeline. who will be the buyer, who will get the deal premium? it will either be joseph a bank or men's wearhouse. the question is whose management company, team gets to keep their jobs.
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and then we have time warner cable still out there. ter has been rattling the cages. we know that regulatory pressure has eased quite a bit. and then we have t-mobile hanging out. we should potentially see sprint, which is now backed by softbank, get aggressive about consolidation. >> one question about compensation. all of these big deal sound great, but they actually pay less. were pretty flat, number one onut volume and number of deals -- these are highly manipulated -- but what happens is investment bankers are gaining more power over the traders. historically, the traders at hadman and morgan stanley
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been -- and they took a large part of the bonus pool. now investment bankers say it is our turn. dodd frank, your trading records have not been great. we should have a greater piece of the bonus pool pie. we are seeing those fights go on quite bristly -- vigorously inside goldman. much.nk you so happy new year to you. >> same to you. >> sparkly jewels. >> just for you, erik. coming up, what is the connection between jobless benefits and the unemployed rate? we maybe it would to find out now that congress has allowed benefits for the long-term unemployed run out. ♪
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>> as the ball drops tonight on the east coast, more than 50 federal tax breaks will expire as congress failed to extend them into 2014. has been looking over the list and has the details. i know that my daily train ticket commute is on their. >> the subsidy, the break for employers offered benefits on travel and transit will drop as of midnight tonight. it is about $240. it will gone down to about $130. or do you curse -- for new yorkers, this is a huge deal. it is not just an individual thing. it has a big impact on big business, which is why their lobbyists care so much about this. start to look at some of the brakes. -- breaks.
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you have energy efficient buildings, the r&d tax credit. have from the retail and services industry side, provisions about hiring veterans. not just individuals but businesses, too. big change is starting tonight. >> you have a basket of 55 tax breaks. through somewent pretty ordinary. which are the ones that stick out? >> you always have lawmakers that get their own things in there, so you have depreciation for racehorses. we may have a senate minority leader on kentucky named mitch mcconnell who may care about that. hollywood and production studios have a break that they care about. on the more practical side, teachers get a break for supplies they purchase on their own dime. that goes away as well. that is a big issue.
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you have your on balls and the ones that are pretty micro, but that hit home for the general public. taxe can count on these breaks expire in tonight because congress is not in session to extend them. theytypically happens is can enact these tax breaks retroactively. is there evidence that this will happen again? >> a lot of people do not pay attention to the expiration of these extensions because they are always retroactively extended. here is the issue they are dealing with now. you have lawmakers who want to do a broad tax reform overhaul. the chairman of the two committee doing this always say we do not want to do the extensions now because we want to include it in broad tax reform. tax reform is not looking great with max baucus on his way to china as the ambassador, but also, these tax breaks cost
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$52.4 billion. where are we going to find the money in the current congress? it will be interesting to see. a rough couple of months ahead for the company that want and need these breaks. >> thank you so much, phil mattingly. americansan a million who have been unemployed for more than six months lost their unemployment benefits over the weekend. the program extend the benefits for those people looking for work but cannot find any. extended benefits is a topic of much debate out there. are people who collect them less likely to take a job, and how much do those benefits help the economy? with me now is a senior economist at bloomberg government. where do you come down on these benefits? they ran out over the weekend.
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is this a disincentive to job hunters? the one economic issue that has not recovered from the great recession. we have seen the stock market rebound, housing, but there is this iceberg called long-term unemployment than simply has not melted. 2/5 of the unemployed are long-term, and these benefits help to cushion those who could not find work long- term. the cbo and other research organizations have shown extending benefits actually helps buffer demand in the economy, helps businesses over the long-term, so yes, it is good for workers, but also good for the economy to extend these benefits. people raise quality of growth questions about that kind of economic growth, whether the spending from the long-term unemployed is really doing all that much for the american passing taxer than
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dollars from one group of americans into the pockets of others. >> we all pay for these benefits. every worker in this country pays for this in their paycheck for unemployment insurance. this is not unique. in every recession there is an extension of benefits for those workers that find themselves out of work involuntarily. that is the key. these are people who did not quit. these are people who were laid off. importantly, the characteristics of the unemployed are interesting. they are older and more educated. or that reason alone, it is harder for them to find a job in this economy that is creating a lot of part-time work thomas but not a lot of good full-time jobs with benefits. time, this will drop the unemployment rate sharply. go beneath the numbers and tell
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us what will happen there. >> it is really important to be cautious of the headline number. because you have to be actively looking for work to get these extended benefits, it keeps people engaged in the job market. they are in the market looking for work and they are counted as among the unemployed. are concerneds about, when you allow these benefits to expire, as they have, is that people will give up, stop looking for work, and leave the labor market entirely. the plus side for those that only look at headline numbers, is that the unemployed rate decreases, but it is a false decrease. we have lost workers in the economy. the important thing is to keep workers attached to the labor market, and it is thought that benefits will do that. i suspect this debate will remain a thorny one, particularly for congress. nela richardson, happy new year.
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>> the right way to drink champagne. we have an expert here who is about to school erik and me about this. ♪
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>> you are watching a special new year's eve edition of "market makers." why do we save champagne for special occasions? maybe because champagne is a mysterious wine. how many of you know what a brut is? with me now is an award-winning and a console that one of the greatest wine producers. we have a lovely selection here. start by educating us here on the label. thehis is the producer, maison that produces the champagne.
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if you look at the bottom of the label, you should be able to find the word brut. if you like a dry champagne, you will look for that or even up to demi-sec. you will also find the town chandon wasnd produced. blind --he name of the blend. grapes,he three major like most major producers. you can find certain of those great in some champagnes and others in different kinds. all threee uses grapes and we are adding a bit more pinot noir to give it that color. e de noir make a blond
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by adding some red grapes. we have picked out our champagnes and we have looked at the labels, there is a right way to open it and a wrong way. >> do not point it at your friends. every bottle of champagne has this pulltab. we want to remove this foil. the next thing is to pull down this time and there is a number -- magic number for turning this tab. six times. some people overdo it or not enough. you want to loosen this wire cage which is on every bottle of moet et chandon. do not shake it. i notice some people are moving around a little bit. is give it a to do twist holding the bottom of the bottle and applying pressure on top.
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ready? we dot at 45 degrees so not have a fountain of champagne. >> it did not make enough of a noise. >> i was doing a medium level celebratory pop. >> i notice you are not pouring it into champagne flutes. >> we want to be able to appreciate the bubbles and the aroma. ball moren in the than two years. it is aged in the seller, and you get all of these wonderful aromas. if it is aged properly, you have the yeast work,doing their producing a bit of a smell like a bakery, green fruits. you cannot really get that when you taste it in a flute.
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like to elegant, but we drink in a wine glass. >> happy 2014, everyone. >> the champagne educator at moet et chandon. that is lovely. ♪
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>> this is a special new year's eve edition of "market makers." if you thought i was going to
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get to drink this entire bottle myself, you are mistaken. these are the folks that make it happen at bloomberg television. they, too, deserve to celebrate. join me as we toast the year to the year, 2014. raise your glass, everybody. drink to 2014. , wonderfuly new year new year's eve, and see you in the year to come. >> happy new year. it is 56 past the hour which means it is on the markets. the year coming to a close but huge market gains. low levels on wall street's fear gauge, known as the vix. for more on how to play the i have a guest. this is the insurance trade. >> right after champagne we talk
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about the vix. a good way to end the year. i am looking to buy some protection using vix options. we see some smart money managers doing this. the trade is relatively straightforward. you are buying a bullish call spread in the january expiration. the 21ke calls, selling straight calls in the vix. the whole thing cost about $.40. >> why such a short timeframe? there will not be a whole lot of catalyst to drive the vix in the first few weeks of january. companies not reporting earnings, the next fed meeting not until after the options expire. a forward-looking indicator, so when it expires on january 22, it will be looking at all the events yet to come. will have already
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reported by the january 22 expiration, but there will still be companies that have yet to record. there is also a january said meeting on the 30th. -- fed meeting on the 30th. it also makes sense because january options are expiring a few days after the regular expirations. normally it is the friday before. the vix options is the 22nd. >> do you see the vix hitting 21 by january 22? >> know, the market is not implying a major scare, but at the same time, the market prices reflect that. cost of insurance is also quite low. yes, the vix may not hit 21, but it may hit 18. get bymium that you selling at 18 is not much higher than the premium you would get by selling 21 strikes. you want to extend it to 21
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because there is not much difference. at the same time, if you have to close the trade early, you would better be off closing at 21 strikes. it is always better to close at a higher strike. as a hedge orthis a new investment that you want to take on? >> let's say you are heading into the new year and you want to add to your portfolio. we are seeing portfolio managers are bullish. this is a way to have some downside protection so that you can add on more risk to your portfolio. in terms of the sizing of the trade, let's say you expected the vix could go down to 18. to 18, you have about $2.50 in protections. you can think about how much a portfolio would react in a three percent selloff scenario, and
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you can size your vix trade based on that protection. of portfolioit insurance as we head into 2014. thank you so much for today's option insight. as we get ready to close out 2013, equity markets continuing to move higher. the s&p 500 gaining .3%. up next.ney" is have a happy new year, everyone. ♪
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>> happy new year. indonesia. welcome to a special edition of "lunch money. congress and action. what you should not look or were two in 2014. 2013 the best of aykroyd, buffett, and why you should not take on the selfie. ofswitzerland, the kind security you get with a swiss bank account, not just tax-free money.


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