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tv   In the Loop With Betty Liu  Bloomberg  December 31, 2014 7:00am-10:01am EST

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>> good morning. it is wednesday, december 30 first, the last trading day of 2014. we are live from bloomberg world headquarters with a special three-hour edition of "in the loop." i'm here with brendan greeley and erik schatzker. i'm betty liu. michael wolff, the founder of activated, former board member of yahoo! and former president of mtv networks is joining us. a big surprise in tech and calls we made that turned out not so well. but what about the year on wall street for record fines? elizabeth warren in her fight
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against fat cat bankers. we will break it all down for you. and also bill go an hour contributing editor will be joining us. but first, ending the year in an appropriate fashion, yes falling again. intercept and down almost 2% in new york today, bringing the loss in 2014 to 46% for oil. it has not fallen this much since the financial crisis six years ago. mean time, -- in the meantime and -- >> search crews have recovered more bodies and debris in the java sea from that crash. the airbus a320 crashed on its way from indonesia to singapore. indonesia's president spoke at a
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briefing. >> my deep condolences to the families of the passengers and crew. i am feeling their loss and i am -- and i pray that they are given all of the courage and strength to base this tragedy. like they were 162 people on board -- >> there were 162 people on board. a couple of weeks ago the fbi said it had enough evidence to link the attack on sony to north korea. but every connection it looked that turned out to be a dead-end. at least one former sony employee may have been involved. the fbi for its part does not seem persuaded. saying there is no credible information any other individual is responsible. the best-performing stock market this year was china. the shanghai composite rose 2% to finish the year of 350%.
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china has now surpassed japan as the world's second-largest equity market. and if you wanted to be among the first in the world to ring in the new year, new zealand is where you should have been. it is already 2015 in auckland. the year seems to be going great so far. fireworks exploded over the cities sky tower just about an hour ago. >> let's have a look at some of the stories that keep our interest is morning. -- this morning. >> what is on my mind is politics. come next month, which is only a few days away, congress will be in session and there is a lot on the mind of the republicans now control of the chambers. there is a lot of the mind of the president as well. what is he going to do? he has nothing to lose now, no reelection to think about. there are five things he's going to do to mess with republicans. you can see on the list keystone, campaign finance,
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climate change, pardons, and possibly a nuclear deal with iran. i think keystone will be interesting. that will be top of the list with the incoming senate majority leader, mitch mcconnell. he saying he wants to get it done. >> it is more and more of a political issue and less and less of an economic one as the tar sands in canada become less viable as a way to make -- to get oil. if it actually makes the case for the president to say, you know god going to reject the keystone pipeline. i don't think we -- you know, i'm going to reject the keystone pipeline. i don't think we need it. and republicans say goodbye we need jobs and we are creating jobs, and look at where oil is now. -- and republicans say, we need jobs and we are creating jobs, and look at where oil is now. >> the head of the london u.k. team wrote a beautiful piece for the end of the year looking at
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the archives of margaret thatcher that were released. he took a way at her handwriting, the way she underlined things. she had this shorthand that her aides had to understand. if she put a squiggly line it was "i'm not so sure about this" and if she put a straight line under it it meant "yes." it is a beautiful story that you don't really hear about or see until the archives are released. >> i read through some of that is welcome and it is fascinating. especially how some of her aides interacted with her as well and how they had to read the tea leaves. >> hieroglyphics. >> that's right. and sometimes some of the decisions she made she had to reverse as well on the advice of her aides, right? >> and we have this fiscal record of how she thought. at one point she thought she needed a memo and she gave them permission to act on it, but they did not have a copy and it was in her famous and bad. they had to retrieve it so they
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could act on it. >> it is amazing how so many years later the iron lady still resonates. >> and americans would come over and asked for permission to speak, to set the foot of margaret thatcher. she had to decide to not give permission to all of them, or else they all would want to. >> given that bill:, the author of "money and power -- bill c ohen, the author of "money and power" will be our coanchor this hour, we are finding that on average, 121 bankers earned $.72 million. that sounds like a lot of money -- earned $4.72 million. that sounds like a lot of money. but what it really needs is it is good to work for goldman sachs. in the case of bank of america their top 110 employees in the u.k. at earned on average to .5
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million dollars. jpmorgan stanley, 2.4 million. -- $2.4 million. jpmorgan stanley, $2.4 million. quest -- >> it sound like a lot, but it seems low to me vis-a-vis some of the onus is paid here in the u.s. amongst wall street. but given the political outcry -- some of the bonuses paid here in the u.s. among wall street. >> given the political outcry this may be a reflection of how much some firms have had to come back. >> and looking for a note of skepticism. >> and there is a legal constraint, too. >> absolutely, the u.k. has been a leader in trying to constrain wall street bonuses. but at four point whatever
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million that is not sound like a lot of constraint to me. you have to parse this. you have wall street guys you're not putting up any of their own money and it's no wonder they can attract the best and the brightest. but some of the hedge fund managers who are putting up some of their own money, but david tepper and it's a billion dollars. >> hang on a second. david tepper is mostly playing with other people's money. most hedge fund managers are playing with limited partners money. >> but they do have their own money in the game. >> because they are forced to eat their own cooking. in the case of goldman sachs, and a reading from a bloomberg news, $106 million. of the total $483 million to beat up among the 121 employees
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106 million with cash and 320 million was stock. some of the they cannot divest for several years. they are eating their own cooking. with that is true, they are reading goldman sachs is cooking. -- >> that is true, they are eating goldman sachs s's cooking. but in the case of david tepper, they have not put money into goldman sachs except what has come to them for years. even when it was a private partnership of until 1999 which is just the this past century, the closest entry to us now, they had to keep their equity capital in the firm as equity capital. >> no matter how this worked out, one thing that has absolutely happen this year is
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cooking, eating, there is less for the hedge funders to eat because they are being expected to -- they are terms are being changed for them. the market is demanding they take less up front. that is an interesting development. what an by the way, they have not been cooking that well this year -- >> and by the way, they have not been cooking that well this year. with -- >> we are going to be good metaphor to death. the hottest of in the kitchen the fed. the fed did not lying down, but stopped buying new bonds. it still has to unwind. we talked to alan greenspan, the former fed chair. he has an idea about what is going to happen next. >> there is nothing in monetary history would suggest that you can create the degree of balances in central banks that we have now without ultimately
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engendering a hiccup in the price level. >> he said there's no way to avoid inflation. how do you see this? >> first, i still marvel that he can still talk fed the -- fed speak even though he's not there anymore. it is hard to parse exactly what he's saying. but we think there is no way that inflation can go of at this point, but with all prices down 40 plus percent, there is obviously deflation in the wake of the fed's decision not to buy the securities. and interest rates, especially high yield rate, have begun to back up into something that resembles normalcy. it does seem for the moment that the fed is able to walk this incredibly fine line. but how it really plays out in 2015 is going to be fascinating. at some point, they will have to raise rates and it is going to potentially curb some of the
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dynamism in our economy at the moment. >> table generation of economists is worried about inflation. you're sticking with us for an hour. >> taking a quick commercial break here on "in the loop." stay with us. ♪
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>> it has been another big year on wall street and who better to talk about highs and lows as we hit into 2015 than our country being editor bill cohan? he has written extensively on wall street. let's begin with the one thing wall street and banks ceos are sure to remember, the record amount of fines and settlements. the attorney general said just visited that the doj had collected on the $25 billion in civil and criminal settlement for this year. >> which began in november, 2013 with jpmorgan.
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i guess if you're the biggest share of in town and have the biggest arsenal of weaponry, -- the biggest sheriff in town and have biggest arsenal of weaponry, you can force wall street to pay these fines. >> and is not over. >> absolutely not over. >> it seems like the year they probably got their guts. they went after the banks and some are saying this is a sea change this year. >> i don't see this as guts. i see this as something that benefits justice -- as some thing that benefits justice, it benefits the banks. one thing we don't ever get is a real trial what we learn things about how the industry works. >> that is exactly right. i completely agree with that. they are able with the settlements to sweep under the rug the real details of what went wrong. and of course, there is no accountability whatsoever. basically, you have shareholders paying these big fines. we know jamie dimon got a big raise in early 2014 after
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settling with the doj in 2013. and the stock has gone up. the stock has generally gone up wall street stocks have gone up so wall street shareholders are saying we can do with this easily. even with all of his coming out of their pockets. >> with deals cooked up in bar -- in dark rooms. >> it is deals cooked up in dark rooms. >> and we did hear about this from the garrett. >> i want to talk about dark pools, the other issue that came up this year with high-frequency trading. you talk to mike lewis after flash voice, right? >> sure, because high-frequency trading is a matter of much debate and it did not take long for stephanie and i to get into it with michael lewis over this allegation he has made in his book and verbally that the stock market is rigged. >> it is rigged only insomuch as -- >> u you so invested in the idea this is fair? wire you even arguing about this?
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>> me? >> you seem to be. it is very clear that people are being front run in the market. >> michael lewis in your face will stop question very clear that -- in your face. >> very clear that people have been front running the market. >> i don't think it is very clear. i think there is some evidence to suggest that there has been something that you might find -- i don't know. you put words to it, bill. >> we can stipulate that michael lewis is absolutely the best at getting attention to an issue on wall street. there is nobody who even compares to it. >> credit where credit is due. >> frontrunning stocks in a big investors -- frontrunning stocks, investors frontrunning stocks, that has been going on for a long time.
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less we can be shocked that there is gambling -- >> we can be shocked that there is gambling going on in the casino, but just because it is going on does not mean it is not in the fiduciary interest of their clients. class i have heard -- >> i have heard michael speak from his book before the council on foreign relations in the fall. and a little before congress when he testified. he is sort of walking back to some of the more outrageous things he said. >> maybe there is pressure on him. >> i'm going to for a moment just quote my coanchor stephanie and say that this strikes me as a place -- a case where you don't hate the player. you made the game. it's all a result of the 2007 read national market system -- regulation national market system that changed trading and
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created dark pools and created the opportunity for high-frequency trading to exist. let's let me just say here though, one person who makes the game, though it's a little -- >> let me just say here, though one person who hates the game is elizabeth warren. and wall street bankers had said she is in jihad against wall street. she took aim throughout the year, but we just heard earlier this month from the senate floor when she lambasted the omnibus bill because it let through or roll back some of the dodd-frank provisions. here's what she said at that time. class wall street is doing very well. ceos are bringing in millions more. -- >> wall street is doing very well. ceos are bringing in millions more. and families across the country are struggling. we have to make this government work for the american people. >> how about we make elizabeth warren senator to president? >>
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what? no. how about we get chuck schumer not too close to elizabeth warren. >> can't we all just get along? it does no good to be so polarizing. the american economy needs wall street to function properly, to be fixed so that what happened in 2007 and 2008 does not happen again, but that does not mean you antagonize everybody who works on wall street. that makes no sense. >> bill, you just said though that -- you just said a few moments ago that the department of justice did nothing and swept everything under the web. >> and that is a fact -- under the rug. >> and that is a fact, and she's right about that. but the undersecretary, just because he has worked on wall street it does not make them evil. >> all right, we will have to leave it here. we will be speaking about
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something very controversial on wall street, pimco. who would have got all of this would have unraveled? ♪
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thanks welcome back. you're watching a special edition of "in the loop" live on bloomberg television. i'm betty liu here with brendan greeley and erik schatzker. >> here is a look at bloomberg top news this hour. disney is ramping up reduction for the next movie in the star wars series. they will produce everything from fashion to games. the movie opens in theaters next december. that is amazing. with only 12 month away. >> -- >> only 12 months away. >> ivm is down almost 15% this
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year. investors are not buying ceo gina remedy's plans to move to cloud mobile technology. and walmart sales in mexico have gone flat. the world's largest retailer is taking a tip from smaller store; over half of sales. -- from smaller stores who have over half of the sales. they have opened bodega stores. >> pimco, the manager of the world's largest bond fund has just suffered the worst performance for that flag ship funds in five years. bill gross was trying to stop investors from fleeing the firm he founded for decades ago. and in january came along. 2014 started with a big wall street banks. or rather, a slant of the door with mohammed leaving pimco.
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-- a slam of the door with mohammed leaving pimco. it surprised almost everybody. gross tried damage control tweeting "pimco is fully engaged , the batteries 100% charged. i'm ready to go for another 40 years. -- 40 years." >> were we disappointed and surprised? yes, i think we still are. >> and mohammed -- >> when you miss these moments in your children's lives, is simple. >> $3 billion in april, $4 billion in june, another $4 billion in august stop 16 straight months of -- and he can't let go of mohammed. >> quite disappointed. i thought i knew him better.
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come on, mohammed, tell us why because the fury -- the fear or in the past few months in terms of the headlines has been quite exaggerated. and in the bombshell, gross walked out on pimco and has to janis. janice shares surge. with built departure and -- >> bills departure. >> they still held onto $1.8 trillion and have a new team in place. what a year. here we are now, more than $85 billion has been turned -- pulled out from the total return fund on top of $140 billion last year. -- bill cohan, our computing editor stays with us.
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-- our contributing editor stays with us. there has been so much drama. they have lost $2 trillion in assets. they still going strong? >> you have such investment and people who really want them to succeed because they have a lot of money with them, but it really comes down to performance. as it always does, but even more so now. they need to be able to show people they are hitting it out of the park and they have people in place and they can function without will, if not -- without ill, if not better. -- without bill is not better. quick they started off that -- >> they started off better. with the -- >> they started out well. > driving record reductions -- record reductions.
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things are slowing, but how much before it really hurts performance? >> who are the big investment brains they are relying on? >> i think everybody has moved away from this one guy model. again i've is in is the top dog -- dan iversen is the top dog. nothing people respected a lot and he has a lot of clout, especially within pimco. -- i think people respect him a lot and he have a lot of clout, especially within pimco. at the think tank time, it is still hypercompetitive -- at the same time, it is still a hypercompetitive place. there is a lot of grandstanding and internal volatility. >> after an experience like this, let's try parallel to wall street. let's say, it's like a bank. if a bank went through an
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experienced something like pimco, how long would we expect them to last? >> let mary is saying is probably great for pimco. there's a lot of energy, a lot of aggressive -- what mary is saying is probably great for pimco. there's a lot of energy, a lot of aggressive up-and-coming guys. both mohammed and bill gross are gone and it will come down, in my thing and, to how the fun performs. money is going to follow the performance. that is not new. but how pimco deals with the post said unwinding timeframe is going to be huge. that is used for debt investors all across the market, but pimco is the leader -- that is huge for debt investors all across the market, but pimco is the leader and need to show how to manage the market. >> mary has done amazing reporting on this. i keep wondering as we are coming back to this thing, are we assessed with them go because of its size in the market, or
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because of the shakespearean quality of the story? you have bill and mohammed hamlet and horatio. >> possibly, just like people are obsessed with blackrock, but in a different way because larry fink does not attract the kind of melodramatic attention that we pay to the story at pimco. with mohammed and bill gone now, and these other guys at the top and it calls down, i suspect it will become boring and we won't cover them. >> then what are we going to do? we will watch bill gross and how he does it at janus. bill, would you put money in with bill gross now? >> but always concerns me is that he does seem to be acting a bit irrationally. his behavior is not what i would want necessarily. as proven at his track record
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is, his behavior lately have not been comparable. >> i think he just said no. >> i would counter that i think of how different is that from historic bill gross? >> exactly. >> when performance is great, everything is great, but suddenly you have cracked the armor and you say, oh, no, he's acting crazy. but that has always been part of his shtick. it's like saying warren buffett seems kind of folksy. that annoys me. >> it comes back to the question of, are his best investing days behind him? the guys in his 70's. >> him as an investor, or the bull market that enabled his style of investing? >> exactly. >> and beyond that, you have pimco with this huge fleet behind him, supporting his ideas
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and saying, this is a good idea. i don't like commodities, but this seems interesting, and he was able to extract ideas from that. it is just him now. he is alone in that newport beach building. he is really on his own. it will be a test, and is unconstrained strategy, so it will be even more for him to come up with something. >> one month of performance with the genus unconstrained bond fund, -- with the janus unconstrained bond fund, and it is down. >> i will point out that against other unconstrained he was out performing 65% of peers. >> from reading your story, that would be considered a failure in bill gross's eyes. >> yes, he is very competitive and wants to be number one. >> exactly.
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i guess we will have to see. this is actually a once-in-a-lifetime opportunity to be able to go back to an investor who is now not managing this huge portfolio, but something quite smaller to see what he can deliver again. thank you so much for joining us, mary child. and bill cohan is staying with us as bloomberg contributing editor. >> we have much more coming up as we look back at 2014. and of course, a few predictions for 2015. and we will catch up with michael wolff, the ceo of activate and former member of the board at yahoo! on the big year ahead. ♪
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>> on new year's eve, we are already asking ourselves, how can this new year be even better? we bring you the most important economic numbers we saw in 2014. peter coy has put together a
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list. thanks for coming in so early. what are we looking at this year? >> my forecasting is not perfect, but luckily, i was able to stop by the port authority bus terminal -- >> [laughter] i love them. put it on. ui now obligated to keep those on -- you are now obligated to keep those on. >> i am a monkey. i think my symbols for the people. >> ok, your first number, peter $53,380 is the median income? >> the median household income as captured by sentient research which provides an more updated number than we have been able to get from the census bureau, and that is up from 2011, which is the low point, but still down 6%
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from the year 2000. we feel like we have come up from the trough, and we have but we still have a long way to go to get back to prosperity in this country. >> and the economic indicators that matter, we talk about the employment numbers, but when it comes down to it what people really worry about they are worried how much they brought in this year. >> that is right. the reason to expect good news in 2015 on the median household income number is, of course that jobs are coming back and we are starting to see some pay increases as well which you would expect as the labor market tightens up. employers have to offer more to get the people he need. >> is this too distracting? are you going to wear them now? >> i'm going to relieve you of
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your torture. >> why would you call that torture? once we -- >> we are already seeing fed watchers say we got to raise rates again. >> there is no question that a lot of people are feeling very good at the end of this year about how much money they have made, and a lot of people are not feeling so good. i think peter's numbers point this out. that is the big challenge. we talk about what obama can do in the next two years -- obama can be obama, finally. fixing that problem is a big concern and he's got to focus on it. >> i wanted it to the numbers. 287.2 million barrels of oil. >> that is the amount of the most recent measure in the u.s. government for how much it has in stock in the u.s., not including strategic petroleum reserves. that number is the highest for this time of year since cia -- the eia began tracking in 1982.
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that tells you that supply continues to exceed demand. which is a reason we had a big drop in oil prices yesterday. there is downward pressure on oil. people focus on the market price . if you want to look at the way to market prices going, take a look at stocks. >> and 5% was implement rate in november, but that is only one month. what is the key jobless rate to look for in 2015? >> what the federal reserve does every quarter they update their economic projections. one of the things in there is long-term outlook for unemployed rate. when they say long-term, they mean a stable rate the lowest unemployment rate can get before you start getting in nation kicking in. and the range among the voting members and non-voting members is 5% to 5.8%. that is the lowest we can get before you have to start
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worrying about inflation. as we move down the fed board is going to say, ok, we've hit the threshold and it's time to start cranking up the federal funds rate. >> that 5.8%, how do we factor in the people who have just given up looking for work? >> there are a lot of those people. and that is a huge debate. there are some who say most people will come back in because of the attraction of higher wages. others say well, no, people who have gone off on disability, for example, might never come back. that's the history of this argument, once unemployment gets high and people get pushed out, that's a permanent condition. it's a huge debate and every fed meeting to discuss exactly the question you're asking. we do not know. >> peter coy, economics editor, thank you for coming in. when i was editor, i treated peter as my yoda. everything got checked by peter.
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>> thank you for the economic data. jobless claims will be out in the next hour. they are hovering near their lowest level in more than a decade. and ringing in the new year by a doctor the euro. could this -- by adopting the euro. could this change the country's economy around in lithuania? ♪
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>> tomorrow, lithuania ditches is currency in favor of the euro. lithuania becomes the 19th country to share europe's comic-con -- common currency. after latvia's adoption last year and estonia in 20 oh 11 -- 2011, willem marx visits there. as we look to lithuania membership we have to ask how the euro is going to be better for lithuania than having the
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lead tough -- having the litas. >> is such a tiny country and think they are saying, without this, we will be struggling. they have paid their currency to the dollar, and into the euro for the last 20 years. they have never had any say in monetary policy. finally, by joining the european council they will have a voice, their level is saying this is what we want. they will be a very small voice compared to the u.k. and germany but a voice. >> a tiny country, but one by membership in the eurozone inherits a lot of big problems. >> this is also true. from that perspective, they have had a couple of banking crises in the past couple of years. one thing they're looking forward to is the bank resolution fund, which is of the day have not been worried about. from their perspective, that is an advantage. but you are right, across the eurozone there has been a host
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of problems. >> and they follow other countries who have recently gone to the euro, right? >> one of the handful that have joined in the last few years that it will be different for the next two years. romania is still looking at 2019, but other big countries, hungary, the czech republic poland, they have stayed with their currency and it is a tool they can use and they have dipped into it in the last few years. this is something eurozone numbers do not have access to. >> and you have others tsonga we are thinking about the euro. look at what holland has been able to do. they have been dropping their rate. other eastern european economies have followed them down. but they have this for stability. the problem is the treaty to the euro demands at some point you have to. >> yes, you have to post a man
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you want to delay it as much as possible. >> bill, you were just in a country -- >> ireland. >> that also adopted the euro. how did it feel to you? >> ireland is also still feeling the aftereffects of the great economic expansion they had in 2007 and 2008. it was raining every day, and people did seem a bit glum in dublin. and the economy seems like it was not going to investors -- going gangbusters either. i think they are still absorbing some of the problems that the rest of the euro -- >> well, one of the huge problems you run into it and opting common currency, maybe not so much with lithuania because of what you just ask lane, having pegged their currency -- that you just explained, having pegged their currency to the dollar or the euro over the years. but you can't do value your way out of the crisis. >> that is what brennan is saying -- brendan is saying.
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>> i went to estonia two years ago to look at the same story, estonia's adoption of the euro. they said, you don't understand. we are so small. even if we say we have a responsible currency board and we act responsibly, nobody believes us. nobody trusts responsible ministers in a small country. even sophisticated traders in london don't know where estonia is. they have to be part of this union in order for people to take them seriously. >> and in the case of lithuania, one thing that has worried a lot of lithuanians is what has been happening with russia and ukraine. lithuania try to join the eurozone in 2006 and its inflation was too high. back then, 30 1% wanted to join. now it is 53%. they have russia just across the border. quite that is not a lot, 53%. -- >> that is not a lot, 53%.
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>> no, it's not, but it is a big jump. and i think it's due in part to what is going on ukraine. >> and in europe, we look at it as this disaster, but to live they when he and, it is one more sign they are members of the west. -- but to lithuania, it is one more sign they are members of the west. >> being closer to the west than the east has got to be a good thing for them. >> willem marx. and we also thank our guest host for the hour, could you reading editor bill -- contributing editor bill cohan. >> coming up, new map behind alimony fight between harold hand and his ex-wife. -- new math behind alimony fight between harold hamm and his ex-wife. ♪
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>> today's big number, one billion dollars. that is the amount the court ruled that harold hand -- harold hamm would have to pay his ex-wife.
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she appealed and said when billion dollars is not enough. now he is arguing it is too much. since the divorce trial ended in november, oil hit a five-year low. his net worth has fallen by one third to only $11 billion. >> he's got a point. i just think, look, $1 billion, that's a fair deal. >> it seems like a little much in a divorce, to mark to market. these are not ordinary people. but i love that he got to keep his horses. it humanizes him so beautifully. here is a man who can have the world, but he will not give up his horses. >> it sort of the equivalent of not giving up your lawn chair. >> if i had a horse, i would keep it forever. >> michael lewis is a former board member of yahoo! and
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warmer president of mtv networks. we will talk about the biggest surprises of the year.
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. .
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>> there they are. yes. 3, 2 1 -- all right. they are celebrating 2015 in sydney, australia. always beautiful to see their fireworks display. >> it seems like things are going well in 2015. >> it does. we will be celebrating in what seems like an eternity, getting down to midnight. you are watching a special edition of "in the loop" live on bloomberg television, streaming on mobile, and bloomberg tv --
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and bloomberg.com. here are our top stories. oil has not had a year this bad since the financial crisis of 2008. teachers have fallen as much as 2 -- futures have fallen as much as 2%. u.s. oil stockpiles i-83-decade high. >> some of that drop is being blamed on news from saudi arabia. king abdullah has been admitted to the hospital. the benchmark index is down as much as 5%. bad weather is slowing up the search for victims and wreckage of the air asia crash. wreckage has been found in 75 feet of water. indonesia's president spoke.
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>> my deep consultants is go out to the families of the passengers and crew. i hope they are given the courage and strength to face this tragedy. >> there were 150 people on board. >> currency traders have not had a streak like this in decades. as recently as september traders were facing losses because of low volatility. >> in 2014, 15 million people became refugees or were displaced from south sudan iraq ukraine, 11 million from syria alone. for a sense of comparison on black friday, which was mediocre, americans spent $50 billion. the former secretary of the night kingdom and now president
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-- united kingdom and now president of an agency that response to significant humanitarian crises -- $19 billion, where did it come from? clocks mainly governments. -- >> mainly governments. the western governments are responsible for about 80% of aid. it goes to organizations that spend it, or it goes to nongovernmental organizations that have the ability to reach people that are sometimes cut off from official aid. >> do you find you are having more success with companies, or is the dynamic that the government is paying for it. >> the government is paying for it but the political instability that causes refugee flows, in turn of this point, it is -- internal displacement, it is bad for business. secondly corporate social
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responsibility -- i am sure you have heard those words one million times. people realize you have to do more than mouth the words. there is a new frontier that is more about how to align serious engagement and investment with employees in these countries and the committees we are investing in as well as the charitable and --end . >> is there a danger, david, where companies might use aid or charity to cover up some of the bigger ills in the country? >> the truth is, in some of the countries we are working in, jordan, lebanon, turkey, iraq -- they are big countries, big economies, important economies if not all big, there are 1.6 million refugees in turkey. if you go to istanbul, they are refugees there. you think about the ebola
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outbreak. you have to be concerned about the humanitarian pillar as well as the economic and formal politics. >> one thing that has changed, we're talking about how to help turkey. in past crises, europe has been willing to take in refugees. that is harder to do now. things have changed right? >> is a much chillier atmosphere -- it is a much chillier atmosphere. in turkey, 1.6 million syrians would get status. certainly europe is a much chillier climate, but europe is still the biggest international humanitarian aid provider. of course africa, the long-term british and french links mean there is a significant presence.
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the african story, the renaissance of africa, is not as well understood in the u.s.. now, the bad side is ebola, real levels of poverty, but there are also 300 million people in the middle class in africa and they are joined together side-by-side. >> this might sign -- sound like a crass question, so forgive me, but is an important for you to get rich people to care more about the crises the ir is trying to addressx, and the reason i ask the question, you know the role wealthy philanthropist play for example david tepper. without their dough, so much let's would get done. clocks -- >> they could add an increment of what we do. it allows us to do innovations
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in aid delivery that governments will always be risk-averse. it allows me to say we have a match on our website. every dollar people give will be matched. we want to incentivize giving because we know even though we are managing a portfolio of $500 million, the private, philanthropic income is about $60 million, and that allows us to pioneer technology to make sure medical equipment going into syria is getting into the right hands. it allows us to experiment with ways of getting vaccination to kids. it is that private investment that has a place not only because it comes from an individual or general tax base, but it has the freedom and flexibility and innovative drive that is so important. >> you said activity was chilly
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in europe. that was the word you used. there is the rise of the u.k. independence party. i know the u.k. is not your problem. it is david cameron's problem right now. what you do, what do you say to voters in the u.k. to make them understand this problem? >> there is no bridge to a better yesterday when you have to bridge a -- build a bridge to a better tomorrow. if you say we're going to prosper by cutting ourselves off from the people with the ideas that are changing the world, i am afraid that is false. in the u.s. -- in the u.k., the figures have, -- there was this drama, we would be flooded with romanians and bulgarians, but the numbers have been much lower than people predicted. you have to hold onto the facts while people are getting worked
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up about their opinions. the u.s. has historically been very generous about half of the refugees that get resettled. about 150,000 a year get resettled. half of them come to the u.s.. in the syrian case, it is less than 300. it is a global problem. it is about how to deal with people that are being expelled from their own country, one every four seconds. that is an incredible statistic. >> speaking of philanthropist bill gates is one of the biggest of them all and he works in a lot of these developing and emerging countries. he wrote this annual letter earlier this year where he said there is a big misconception that aid does not make a huge difference in many countries and that it aids corruption in some of these countries. is that a big reason why others, his fellow colleagues, will not donate to the extent he does? what is your pitch to them when
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you talk these from oedipus and other donors? >> we say study the impact and look at the fact. when bill gates says it is a misconception, he has the fact. i can show you the lives that are being changed. there is a challenge for bill gates and people like him. over the last 10 years, they have made tremendous strides in development, and when he started, about 10% of the world's poor live in conflict straight. now, 50% live in conflict states like syria, south sudan. getting basic means of survival to those in the middle of conflict is that much more difficult than stable settings. he and i have a challenge -- proof in the pudding, to show $.92 of every dollar that we get goes to the front line, and we have to show it is not just efficient, but it is having a big intact, and that is what we want to do, show people the
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outcomes we are achieving. >> david miliband you are doing the lords work. thank you for coming in. >> by the way, while we were having this serious conversation, the australians have continued to celebrate 2015. you can see the fireworks. these are live pictures, by the way. still going on celebrating 2015. david, by the way, will be pushing the button. >> you are dropping the ball. >> that is maybe an unfortunate phrase. [laughter] i have been practicing. >> practice well. all right, the whole country is counting on you, david. will be back in two minutes on -- we will be back in two minutes on "in the loop." ♪
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>> it is new year's eve, and we're going to take a moment to
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reflect and confess there are trends that have defied critics and naysayers. before we make new year's resolutions, let's clear the air with what we learned about media and technology in 2014. joining us is our cohost michael wolf former yahoo! board member and former president of enemy -- mtv networks. peter let me -- michael, let me confess what i got first. not that i doubted netflix's growth, but i had people telling me you have to watch this show "house of cards," "orange is the new black," and i never took to netflix until this year but once i got on it, i cannot get off of netflix now. it tells me, the whole idea of
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this trend where consumers will become distribution or platform agnostic, netflix has ushered that in. >> you just were way behind the curve. you did not get it wrong. >> let me know when you get to "friday night lights," and we will sit down and talk. >> that was me. i was late to the party. what about you guys? who wants to go next? >> i will go next. i have always been wrong about apple. i always thought apple had to make cheaper phones to complete -- compete, and i finally realize they are smarter than i am because they refused to drop the price of their phone everyone who has dropped the price has been outcompeted. apple has remained a luxury brand. it is a target acquisition for any merging middle-class all over the world and i did not get it.
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i get it now. >> it is aspirational for people. >> it is and by the way, it is still a small percentage of the world's cell phones and -- >> but a large percentage of cell phone profits. >> exactly, and of those people that can spend the most. >> there are numbers now that the ipad is so well made and updated that they are having a hard time having consumers buy new ones. >> that is a risk, that people will not refresh. >> the product recycling has become more like pcs. it is not that they have got to be good, but they maintain their currency. >> but the iphone 6 has become the mother of refresh cycles. >> michael, you fess up.
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>> i was surprised by the skyhigh valuations of privately held tech companies and the companies that were acquired. when you look at $45 billion this week, $40 billion for lyft -- uber and i do not think this will end. to a large extent it reflects the fact that with an almost zero interest rate big hedge funds and sovereign wealth funds need to invest. big tex companies need to keep buying the next wave of innovation and growth, and finally, there is tremendous investor excitement about his assistant continue to grow and the blackberry going to grow toward the sky. >> michael you pointed out something that is a little bit of a red flag.
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once interest rates go up isn't there a domino effect? all of the money is pouring in and i can already reversed right? it can come back the other way. >> what will influence it the most is when growth slows down in these companies. everyone knows and believes there is so much runway ahead they see their only reaching a small percentage of the base users they are going to get. twitter is a good example -- estimate the market thinks twitter's growth is slowing down going into reverse, everybody runs away. >> yeah. >> well i am a similar confession to make. i, too, have an issue with valuations, i have had it all year long, but mainly for me it is with social media. i share your fascination with the $40 million for -- $40 billion for uber people feel
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there is an imminent run ahead of it. >> one is much larger than the other. >> clearly, but that is the effect of advertising companies. google has one-third of the global digital ad spend. facebook has 8%, but facebook's market cap is 60% that of google , so the market is expecting facebook to triple its share of the digital ad market. is that going to happen? maybe. it is not that facebook is a bad company. perhaps it is a great company. i continue to get it wrong because i say that is not a bet i willing to make. >> facebook -- if google can keep expanding their universe the more people are on the internet, the more searches people do -- facebook they have
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not had a wall, but the growth will slow down. if you look at the profitability that google takes out of the internet world, it is a major multiple. what you are raising as a concern is realistic. >> do you know what has turned out to be one of the smartest that's by facebook? -- bets by facebook? instagram. >> $1 billion over the course of a weekend, and it has really eclipsed facebook and anything else as a photo-sharing application. >> it absolutely has. we will have much more. we have all confessed. do we feel better? >> i do. absolution, probably not. >> you are still on it. >> i remain a skeptic. >> more careful this year. >> right, exactly. michael wolf stays with us through the hour. much more ahead. >> the internet of things -- will it make our homes smarter? there could be a downside.
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we'll talk about that. also, get your cameras ready. snapchat will help you ring in the new year. ♪
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>> welcome back. you are watching a special edition of "in the loop," live on bloomberg television, streaming on mobile and bloomberg.com. i am with erik schatzker and brendan turley. a new twist into the investigations as to whether banks rate for currency markets. bp has investigated its own foreign trading operation. they have not said what the investigation has turned up. snapchat has taken part in the new year's eve celebration. they will post photos and videos from celebrations around the world in real time.
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that is, as long as you just give them permission. they will also send pictures to video screens in new york's time square, and 24 hours later, it will disappear. a big margin in china -- the train makers -- the two biggest -- have a great to combine. shares soared in hong kong trade. also talk of mergers here among train makers here in the u.s.. it is 26 minutes past the hour. bloomberg tv is on the markets. we still have economic numbers that will be out shortly. initial jobless claims that 290,000. that is economist estimates. we seem to be ending the markets on a high note, possibly a record for the s&p in a year where the bull market has been the best we have seen in decades. we're on the markets again in 30 minutes.
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>> just 41 points to go, and the dow will close out the year at 18,000. it is the last trading day of 2014. here to wrap up the winners, losers, and the drama, mia saini, and guest host for the hour michael wolf is still here. >> i like the word drama because that is what 2014 was. we had moments where we thought we would be an a depression state all october -- like october, and that we saw a recovery essentially up 10% 13%. if you look at asset classes, commodities, no surprise here if you have been following the market. they had the biggest annual losses the financial crisis in 2008. you are looking at crude. accrued commenced the 50% -- food commenced the 50% -- crude commenced the 50% drop.
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analysts i have been speaking to say expect 2015 to see oil prices continue to plummet. it was not just oil. corn, steel, iron ore, all suffered because of political tensions in the middle east, russia. >> you spend a lot of time reporting on this story from hong kong -- the slowdown in construction, building and home sales in china. >> it is interesting because china is the biggest buyer of coal, iron or, as well as pure commodities like gold and silver. you saw gold and silver do better than iron ore, etc., but that is the point -- most of the buyers are in australia, and what has happened with australia has hurt china. >> what about the winners? >> when it comes to commodities arabica coffee.
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nickel rose the most among metals. utilities did the best. >> boring, old utilities? >> yes, a lot of it was consolidation at the top and with a lot of these company's putting cash to work, many of them thought with a low interest rate environment, you were getting dividend yields from these companies. if you look at the names -- if we going to the actual names of the s&p, southwest ea, life sciences, allergan -- that is a name >> -- name -- >> that is a special case. >> if it goes through and clears the regulatory hurdles, it will create one of the largest pharmaceutical companies in the world. the worst transocean, jen worth suffered the most. >> southwest sticks out. they have become the luxury
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carriers of the budget carriers. >> we did not have it up there, but american airlines, up 124% leading the nasdaq 100. they are having a moment, the airlines. >> cheap jet fuel. >> and the pricing. as airlines have consolidated they can raise the prices. we have nowhere else to go. >> we heard analysts say we hope airlines can maintain prices even though the present oil goes down. that sounds like mild cartel behavior. some call it price discipline. some call it price-fixing. >> mia saini, thanks so much. >> happy new year, guys. >> happy new year as well. >> quickly, breaking news on the economy -- initial jobless claims are out at 298,000
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rising 17,000. not good news. the estimate was for tour 90,000. these are the latest -- four 290,000. these are latest jobless claims numbers. >> for six weeks we have had jobless claims numbers under 300,000, and looks to me there was only one month since -- wow can you believe that, when weeks since september fifth that we have been above 300,000. >> we are about one hour away from the opening bell. we will see how that effects trade today. much more ahead. we will talk about the internet of things -- automating and linking up appliances, even your car, but with that comes in concerns including hack attacks. find out how companies are protecting your data in the cloud. ♪
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>> this year, the internet of things proved to be more than just a catchphrase. you might say it to the consumer world by storm. in january the consumer electronics show was buzzing for shiny gadgets for a "smart world" and more gadgets are likely to steal the show next month. we have been thinking about these things. it is not just a refrigerator reminding you to restock your milk carton. there will be 50 billion devices designed to be lay it -- in part -- to relay information over the internet. we have the founder of link labs, a company building a global network of things, and still with us the guest host for the hour michael wolf of activate. >> in the internet of things you are gathering all of this data from internet devices, and
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business and consumer focus is on privacy and security. the internet of things is not a new thing. it was called machine to machine, which is about driving value from the data you can gather from different sensors. i look at the internet of things as a four-tiered pyramid of value. >> what is the top? >> i would say autonomy, where you can make measurements -- war machines can make measurements decisions, and changes. if you look at the nest thermostat, which works with their smoke and carbon monoxide detector -- if the, monoxide detector goes off, it it can send a signal to the thurman stand -- thermostat to shut off
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the radiator. >> you are talking about turning the rest of the world into a factory. >> exactly. the challenge the internet of things is facing as it moves into the consumer market is where is the value? for consumers that are beyond the tinkerers -- being able to change your thermostat from your phone is interesting, but is there enough there to capture a market? it is to be determined. >> it goes beyond the price you pay for the thing, like the nest , but it is the implicit trade-off between privacy, convenience, and ease-of-use. >> exactly. >> with people feel the same way about the internet of things that they feel about facebook, for example -- do i want to give my personal things to facebook? >> the reason why people are spending millions marketing the
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internet of things is not because there is value for consumers -- >> it is because there is value for cisco. >> right it is for businesses. the leap, the chasm the internet of things really has to cross is proving to consumers there is value there for them. >> i am glad you raise that. erik schatzker, you mention the consumer electronics show. that is starting next week. bmw is unveiling their i3 car called active assist. you can park the car through your smartwatch. >> [laughter] >> which all sounds great, and as a company, it is impressive for bmw to unveil this but who will want to use this? >> and is it legal to operate your car from your wristwatch? >> there you go. >> it is adjusting.
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it is an example of sensors and processes working to make that happen, but it comes to the value. it is a marketing thing. >> it is a marketing thing. >> the value in that is being able to go to a party and say open court -- "oh, my god, you have to see this." >> the turnover is much eager than your cell phone. this is the concept of future-proofing. i will always have the latest phone, and it will be able to control my car. >> that to future-proofing cars it is a great example of the internet of things. cars like the tesla and the bmw can get updates over a network so that it is basically continuing to be upgraded. it shortens time to market. there might be less testing, but there is more maintenance data flowing back to the manufacturer
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then you might know about. is getting a call from the dealership because your check engine light is on and you did not even know it -- what right does the consumer have to know about the data leaving their devices with or without their knowledge question mark >> i have always suspected the check engine light is automatically steered. >> when profits drop, volkswagen turns it on. >> one item that is not going to be on display at the consumer electronics show is security. the ability that we will be able to control privacy is a fallacy. the toothpaste is out of the tube. everyone has been hacked already or is going to get hacked. >> michael. >> we have been talking about the nest in your home, when the networks get wider, tracking
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people around the world, it becomes a bigger problem. >> each of us will leave a stream of data around us. >> anyone worried about privacy it is too late. >> give it up. >> these are issues we will have to wrestle with as the internet grows and the amount of data balloons. >> do us a favor -- come up with a better name for this business than the internet of things. >> please. >> john chambers says the internet of everything. >> at least it is better than m to m. >> let's all agree not to call it iot. >> thank you very much, brian ray. michael wolf will still be with us. >> coming up, it is taylor swift's other breakup -- find out more about why her crusade against spotify and others has
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put her in the lead. you have spent all years racking points up on your card. it is time to use those air miles before they are worth nothing. we speak with the points guy brian kelly, on how to maximize your travel. ♪
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>> first. bloomberg. >> it has been quite a year for the music business. a gi azalea got "fancy," and taylor swift "shook it off." she also led a campaign against spotify because they do not generate enough profits for artists and staying -- think -- sting agreed. >> it was good. people need to talk about this -- what is good for music -- music is important to our
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society and it must not die out because it is a vibrant part of society. >> for more on the new economics of the music business, i want to bring back our cohost, the former president of mtv networks, michael wolf. you were saying in music it seemed like it was the year of women women artists, and women exerting their power in music and taylor swift is a perfect example of that. >> taylor swift is an example. megan trainor, the fact that her song "all about race" folk -- "all about bass" focused on empowerment. at the same time, for anyone that has seen the movie "the interview," even though taylor swift is not in it, her son plays a critical role -- her song plays a critical role. >> i am sorry.
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it was katy perry. i had to jump in there. it was an amazing moment. i do not know how to say this, but they worked in katy perry in an artful way. taylor swift, when she pulls her music out of spotify, is that her leading the service, or is there a new windowing where you release it, make money and then get on to the streaming sites? >> the pop artists are concerned not just about their sales, but there music being lost. it might be windowing but at the same time using these kingmakers for another service. there is no reason every top artist has to be on every server. >> will you see free music, or effectively free music because i think it was either taylor swift wore her manager that said she would be happy to set -- or her manager that said she would be happy to stay with spotify
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providing her music was only available on the premium service. >> it is not just spotify and pandora. >> let's not forget about apple. >> apple, of course, and so many artists doing their own. will there be a shakeup? and object -- inevitably, there will have to be a shakeup. >> a lot of them give it to you free, and eventually you start paying. it is not clear they will be able to transition that many users into a paying mode especially since there is so much music out there available including on youtube. >> i have to take an issue with something sting said to you, a sentence i love saying, by the way. it is not about saving music. before we had sheet music, people played music. no matter what happens, music will be just fine. >> s is not worriedting.
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>> but he does not get to -- sting is not worried. >> but he does not get to speak for music. he speaks for sting. >> what he is saying is for those that are below, they are going to suffer. >> some of the artists doing the best this past year are the djs -- electronic dance music djs. the top 10 djs made over $250 million last year. calvin harris, over $60 million and exclusively featured in las vegas. these are not even on people's radar screens. >> again, people stretched animal skins overlong and made music, and they were just fine with it. >> as michael was saying, you will find the music some way and youtube is a perfect platform -- perfect platform.
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>> people's involvement and use of music has gone up. the economics might go down. >> we will take a look at the top photos of this year. we will start with the families of those aboard airasia flight 4501. indonesian officials are caring coffins of passengers confirmed to be on the aircraft. families did give their dna to assist authorities. >> just tragic. so many of the families saw in real-time graphic footage of the bodies floating in the water. >> at the very least, this discovery brings closure to a situation that for a period of three days distressingly seen the killer be another mh370. >> after a 50 foot wall collapsed at the salt plant in
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chicago yesterday -- this was a salt plant. the acura dealership was next door. 11 cars were told. that is table salt we are looking at. i do not even know what to say about that. >> let's repurpose it as road salt. >> that is what it is now. >> thank you for joining us on this new year's. michael wolff, the founder of activate --michael wolf, the founder of activate. >> michael wolf is celebrating the new year by going for a run at midnight. >> fireworks. >> central park. >> i will be going to bed. >> it is the do in play-doh. why parents are getting bent out of shape i one of the toys they found by play-doh.
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>> it is almost 56 minutes past the hour, which means bloomberg television is on the markets on this last trading day of 2014. it looks like markets are pretty quiet, but s&p futures are up 2 percent. we saw a slight pickup, up 17,000, in jobless claims. we are still below the 300,000-level, and we have had one of the best runs in the equity markets in the last several years, and the bull market continues. one of the best since the 1990's. we will see if this continues in about half an hour. we are on the markets again in 30 minutes. and much more ahead. we will be joined by a lana weinstein. she will break down bonuses on wall street to see how big bank checks matchup against hedge fund managers. frustrated with how and why you can use your points for travel.
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we will check in with brian kelly, who once purchased a $10,000 plane ticket for just $90. we will learn his tricks to the trade when "in the loop" continues. ♪
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>> welcome back to "in the loop ." we are now 30 minutes away from the opening bell. you are watching a special edition of "in the loop," live on bloomberg television, and streaming on mobile and bloomberg.com. futures indicate stocks will open slightly higher on this last trading day of the year. for the first time in five weeks, more americans filed for unemployment benefits. the typical year-and swing could make them tough to interpret. oil prices are falling again. oil prices are down as much as 2% in new york. prices close to a five-year low.
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for the year, oil has fallen 46%. it is not fallen that much since the financial crisis in 2008. >> the mystery of what happened to the airasia flight might lie in 75 feet of water in the java sea. voice recorders might give a clue as to why the flight crashed from indonesia to civil -- singapore. here is the head of indonesia's search-and-rescue agency. >> the airplane fuselage has not been found yet. we have recovered seven bodies, which includes four mail bodies, three female bodies. >> there were 162 people on board that plane. at this point, very little chance of survivors. >> the best-performing stock market of this year was china. the shanghai composite rose 2% this year and is the year up
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50%, the best year for the index since 2009 heard it has surpassed japan as the world's second-largest market. an index of foreign exchange returns has risen for the past six, the longest stretch since 2005 -- six months, the longest stretch since 2005. as recently as september, they were facing losses because of low viability. >> we are less than 30 minutes away from the opening bell. let's get you the top headlines for we had the bell. joining us is brian kelly, and airline blogger known as the points guy. he is helping us out. >> where is the champagne. >> that is the question. >> number 10, chinese stocks ending the year on a high note as you mentioned, the shanghai composite index up 52% in 2014, the best annual performance by a
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major stock market this year. we had michael holland on yesterday, who has been really prescient on the chinese markets, and he had said it is a by it has gone down, but it is cheap and it is a butyy. >> we are still looking at retail investors. you do not have institutional investors in china just yet, so we are seeing just a piece of what it could be. >> just a small piece. >> his argument was for valuations. you are paying just nine times earnings for chinese stocks which he considers to be a bargain given the fact that while china might feel it is in a recession, it is still 6% plus in theory. >> the caveat there is he believes china's leadership can bring it in for a soft landing, so if you are a soft landing guy, valuations look good. >> number 9 -- member this, the korean air's chairman's daughter
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who threw a fit over peanuts. she was arrested. she had them bring back the plane. is this overkill, arresting the daughter? >> they are throwing the book at her. this is more of an outcry over the dynastic korean companies. unfortunate, she is falling on the sword, but she was probably wrong to be rate -- berate. >> having flown korean air, i have to say i was impressed with the service. >> do you remember the flight? >> it was a long service. >> many asian airlines are good. >> they are all competing for the superpremium traveler. even the u.s. airlines, they are
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focusing on the business traveler or business class. i expect we will see more focus on business travelers. >> i imagine that. number eight another fellow airline blogger, the founder of skiplegger is being sued. he helps people instead of flying to the destination flying to a connection, and that ticket price could be cheaper. is this guy right or wrong? >> he is playing by their rules. if you travel on a business route like new york, atlanta, but you tack on a flight to orlando, and the price drops dramatically. >> it is also a case of the airline confusing the arbitrary rules with the law. if you creatively interpret their roles, all you are doing is creatively interpreting this is our regime they forced upon us. >> they should fix the loophole
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instead of trying to sue a poor blogger. >> or maybe make pricing transparent. >> it makes no sense to me. let's say you are traveling to mexico city -- why it would be cheaper. the pricing does not make sense to me. to your point, it should be more transparent. another viral story -- number seven, parents are outraged at hasbro play-doh after one of the companies toys closely resembles, i cannot even say it -- what does that look like? >> that is not an adam's apple. >> ok. >> that is ridiculous and obscene, but seriously parents if this is your biggest problem, it looks like something else -- if this is something to be outraged about, have more children. that is a problem. >> i would agree with you,
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except -- >> encouraging you to have more children. >> yes. >> i would agree, but have you seen the mommy brigade? they are a powerful force. i am serious. mcdonald's has been dealing with mommy bloggers who complain about what is in the happy meal chicken nuggets, and they get invited to companies like mcdonald's to appease them. >> i am glad the consumer gets empowered overall. i think it is a good dynamic that you could hold companies to account. i'm having trouble feeling the outrage. i have little kids that play with play-doh. >> and he usually has no problem with outrage. >> you are so right. >> snapchat finding -- planning to document the final moments of 2014. a team of curators will stitch together photos and videos from
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app users. it will be seen in real time, and then disappear in 24 hours. >> i thought they were supposed to be private. >> you have to have consented. >> it is all about the story. i started using it. >> how do you like it? loc. cit. is unique. it is a good platform. i like sharing -- >> it is unique. it is a good platform. >> i was with my nephew skiing, and my sister is on facebook, my nephew is on snapchat. facebook is old school to him. >> that is something i got wrong. i did not get snapchat. there are things that are valuable that are flammable.
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>> two years ago, facebook was the thing and now snapchat -- two years from now, what will it be? >> you are right about that. >> coming up, 2014 was the year of airlines devaluing your precious miles. we will find out how to get the best deals in the year ahead from your points guy. he knows about deals. he got a $10,000 flight for $90. how do you do it? you'll find out in a couple of minutes. ♪
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>> we continue to count down to the opening bell. we are halfway through, and that means it is time for a deep dive for it airline points -- -- dies. -- deep dive. airline points -- southwest
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offers awards based on ticket prices. american is the only u.s. carrier that awards points on miles flown. brian kelly is with us. is a master of points arbitrage. in this inflationary environment, which miles are we to buy? what's the most are starwood preferred guest points. they are not airline miles. you can use them for hotels and cool experiences like courtside new york knicks seats and it is all about diversifying -- getting points you can transfer to a number of different partners. do not over-expose yourself to delta, which has cut back. >> are they the worst? >> worst is a strong word, but they have scaled back in terms of the value. >> egregious. >> what is so egregious about it? >> delta will not allow you to reading for international first-class like their partners. whether you go round way -- one way or round-trip committed the same price.
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it basically means more miles for the same flights. >> what is driving the value of starwood points? is it because they are competing with the airline? >> it is about the cobranded card. american express is charging merchants 3% on each transaction or more depending cap they are continue back value. -- depending, and they are continuing to kick back value. they say we having giving away the bang for too long, why are we doing that question booklet slice away because it helps the bottom line -- that? let's slice away because it helps the bottom line. >> why can we not go back to serial bankruptcy for airlines?
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>> willies's miles go away? >> the -- will the miles go away? >> you just have to learn how to leverage them. leveraging the u.s. airways frequent fires program, it is 110,000 miles round trip to australia. it is all about arbitrage, understanding which is the best and reading them for their sweet spot redemptions. >> you should be trading credit derivatives not points. >> you shouldn't. i feel like i do not track points because it feels like it is too much work. >> we do that for you. we will take up the valuation of certain currencies based on new promotions and new ways to reading. >> what is the craziest thing you have ball with your points? >> i'll most always reading for travel but for my dads birthday i got a luxury box at msg.
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you feel like a rock star. >> that is one of the best things about the starwood points. when you pay, it costs you nothing more -- use your points, you walk up to check out, and the bill is zero. >> that is a mastercard moment -- open bar with your dad. it is a priceless moment. >> priceless exactly, making up for the teenaged years. >> what are you looking at when it comes to price and -- points and the program? >> it is about the credit cards. they are lucrative and there are sign-up bonuses at the chase sapphire preferred gives double points on all travel, all dining, but then there are cards that offer perks. you have to look to your travel schedule and see which credit cards will work the best for you.
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you can have multiple cards as long as you're getting more value from them. >> are the premium cars like the amex platinum worth -- >> it is 400 $50. >> i was going to save $395. >> you get access to delta lounges -- it is a no-brainer if you use the benefits a couple of times, but if you're looking for points, get a lower fee card. >> i never pay attention to this -- my eyes have been opened. i will check this out. brian kelly, the points guy, stay with us. >> and much more ahead "the next star wars" movie will not open for another year but disney will make sure you do not forget about it, and we will tell you why the heck attack was good news for blackberry. ♪
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>> welcome back to "in the loop ." let's get back to bring you the most important stories you need to know before the opening bell. brian kelly, the airline blogger known as the point sky, helping us out. number cointreau, disney studios has been enlisted to create short form online shows to everything about "star wars" fashion" to games. >> i am excited about this. "star wars" is already part of my childhood. i am locked in. you have generations of people that did not have that experience or if they did they experienced a terrible "star wars" movie. i was curious about the story. i looked at one of the videos, and she left me kind of cold but i am not the target
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audience. >> no, you are not the target audience and my kids got some "star wars" toys for christmas, but they looked at it with blank faces because they are not "the star wars" generation. this is a good move because what do they watch -- they are on youtube. i do not even know the characters. >> exactly. >> i am not the target audience. there was this one guy who was this weird science think. number three, the white house standing by the assessment that north korea was behind the sony hack. they dug up the old blackberry handset. one for blackberry. >> they have done an amazing job of turning themselves around. john chen realized it could not be something they did not have
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come one thing they had, security. what we know so far about who committed the attack -- i'm actually less convinced by the evidence that it is not north korea. >> so you still believe it is north korea. >> the best circumstantial evidence we have says it is north korea. >> i wish i was more familiar with more of the evidence to feel so confident about it. look it will make me sound like a conspiracy theorist, but i think politically to pin the blame on north korea it is very convenient, and there is good reason to suspect that somebody who perhaps used to work at sony was involved. how else would north korea again, have known the names of individual servers etc.? it is hard to know how kim jong-un could come to that information. >> number two -- currency traders starting 2015 on their hardest -- hottest win streak in
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a decade. we have been talking about hedge fund traders another commodity traders that suffered this year. a currency traders have not done too bad. >> i really glad the ruble play i made in july paid off. >> or the bitcoin trade, right? there you go. >> currency trading, as we learned in the fx manipulation scandal, is a low-margin business, so these guys need the help they can get. >> that is true. all right, brian, great for you to join us. brian kelly, the points guy. we near the opening bell on bloomberg television, and, again, it is the last trading day of the year. are we going to end on a high note? features have -- futures are up ahead of the opening bell. >> the dow closed at $17983 in
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cash trading yesterday. it is hard to draw a straight line but we could open at record levels and close the year at record levels. these numbers have meaning. >> the top story and the opening bell next ♪. ♪-- next. ♪
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>> welcome back to "in the loop ." let's get back to bring you the most important stories you need to know before the opening bell. joe, let's talk about oil number one, headed for its biggest slump since the 2008 financial crisis. there were clubs, guys -- you can imagine, men's only clubs, where membership was at $25,000 a year. those are slowly, or actually, rapidly going out of business. >> if you know anything about the balkan, this is quite often
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the only place in town where you could get a shower. it was, during the go-go years, or the go-go months, because it was not that long ago, right? it was so thick with people that the man cap said we were talking about yesterday would shift on a 12-hour basis. people would share beds there were so few beds available. >> i am a little sad that we're going to see class of walk and sale, a face group -- balkan fail, a facebook group that takes pictures of rigs. >> you see the statistics from different states, the percentage of the workforce that is in sprung up like because we are talking about here it is legal and not so legal. >> stock begins trading on this final day.
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you are all over the market. what are you working on for 2015. >> i am fascinated by what will happen this year. january will be a fantastic story. the question of whether a new party emerges, a leadership that threatens the existing austerity reform. >> you believe greece will be a major factor in the global markets? >> no, i would not predict that but that is an important story. not necessarily because greece itself is a big deal, but because -- >> i admire you. i am still suffering from eurozone fatigue. >> i miss it. i thought that was really good. >> all sourced up in greece and now we can go back and talk about it again. it is great. it would be interesting to see what if it would actually work
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and they renegotiate the agreement and they get angela merkel to crack a little bit on austerity, maybe we would see a little different europe. it might work. >> he would push back against austerity and then that would start to turn the tide. in italy, also similar noises. so far, those people are much more closely aligned and would seem to have more influence. >> earlier, we were talking about our predictions that would not come true in 2014. joe, i will put you on the spot. did you make a prediction or a call that did not come true? >> i really thought there would be more wage growth and inflation. the difference -- here is the difference. it was not something based on fed printing or anything.
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i really thought we were getting closer to full employment and workers would begin to have bargaining power. i actually thought it would be a good thing. even though i flocked with that in 2014 >> you have got the fed now. >> the pressures are building. >> a whole generation of economists who have instinctively learned to worry about inflation? >> i think so. a lot of this is going on. they came of age professionally in the late 70's. then you have a lot of people
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who look at these extraordinary measures the fed has taken and of course they naturally think it will be crazy because it is unusual. i do think that will be the thing. and look. maybe it did not in the sense that it did not produce the recovery has not been that impressive. at best, it has been -- better than no recovery at all. much better. when you compare the situation to the entire world, you have to be pretty happy. >> we always talk about market forecasters. the end of the year many laid waste to what they got wrong. next year, what is the wildest or most stick your neck out there forecast you have heard? >> i have not seen the consensus. once again, everyone thinks that
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long-term interest rates will move higher even though they've basically been wrong in a prediction for 30 years. everyone sees higher rates, almost no bears on wall street in terms of u.s. equities at the moment. everyone is bullish on the dollar. >> when people come in to talk to us about the market oil caught so many people unaware, i feel a lot of people are hedging their traditions and press their senses with, predicting is a fools game, but. >> the strategist estimates for the s&p 500 we collect here in bloomberg, not one is predicting a decline in the s&p 500 next year. the lowest is 2100. >> whoever does will get fired from their firm. on the investors have also by the way, they say in 2015 that this will be the year we see the bond markets crash.
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>> they have been saying that for ever. we will probably see a fed rate hike this year. all those things traditionally would be a good argument. >> a strict sluggish economy, low participation rates, which may lead some people back to the labor force stepping down pressure on wage growth. >> it is exactly right. 2014 was the year the economy improved, the market brought forward its state when it predicted the rate hike. you would think the factors that would lead to a higher rate would brew this year. >> thank you as always. >> thank you. >> managing editor of bloomberg markets. >> coming up, the year of the hedge fund slump. will it continue through 2015? plus, why some companies are cutting back on your special day. just a few minutes in the session, stay in the loop.
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>> stocks are open on this last day of 2014, closing the books on a not so great year for traders. a group that probably will not get fast checks, hedge fund managers. most hedge funds underperformed if not outright return negative this year. many will close 461 funds in the first half alone, including one -- what does this mean for compensation hedge funds? focusing on hedge funds and investment banking, welcome. macro funds in particular had a terrible year, and continue whether it is a bad call on oil or bad call on interest rates bond yields and such, it is not just confined to macro. >> it was definitely a more
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difficult year than last year. a good year for a lot of the more fundamentally german funds. 80% over last year's performance. i think this is actually an interesting year for hedge funds. most funds were buoyed by a rising market. this is a year that will be divisive. the second show it can make money in a volatile environment is where capital will go. those that cannot will not raise money. it will be inferior in terms of the winners and losers in who they are. >> given the dismal performance we have seen from the hedge funds out there, there have not been more investors who followed out the door saying we want fees lower, we want to pay for your performance and pay appropriately. >> it was kind of a special situation. they managed $350 billion.
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4 million went to that hedge fund. it was not worth the effort here and what does happen is not a withdrawal from hedge fund allocation. it just gets more, should -- competition and differentiated today. i think it will go even more this way. the hedge fund managers manage $3 trillion. $1 trillion of it is managed by the top hedge fund. >> the bigger continue to get better -- bigger. >> so long as they continue to perform. it has been a big environment for merging managers to come onto the scene. if you are the cio of a pension fund, you will not get to allocate for a hedge fund -- exactly. however, this year, some of those big guys, if they are not doing so well and a newer guy comes on the scene and has shown he could navigate the environment, i think that is -- there is a chance. >> it feels to me that many of
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the decisions being made to allocate money to the larger and larger hedge fund platforms is because it is easy for the chief investment officer at the small state pension plan to say, hey take 500 million dollars from me and diversify it across a range of strategies as opposed to picking and choosing best managers from individual firms across a range of strategies. >> a great example a fund that scaled by 220% in two years. one billion in 12 and 3.2 billion now. the reason the institutional clients allocate to that is that hedge funds have to fall into one of two categories. either they will go directionally long in inequities and then they have to be prepared -- compared because they are in a similar strategy
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or, they say we will give the return with less volatility, we will be in all different kinds of strategies. it is now likely have to make money in credit so you are hedged in that way as well, and we will protect your downside. hedge funds have to fall into one of those categories. if not, i do not care how big they are. they will not survive. >> are you going to see from some of the smaller hedge funds may the competition on terms? >> it is such an efficient market. to my point on emerging managers, there is another overlay to that. you also have to be successful enough where you can withstand the cost of starting a hedge fund. it takes a wild to break even. you have to be able to fund before you start to generate revenue. the guys who do it are super successful at their funds, and they do not need to give you -- maybe in the early days, they give you a little bit.
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but they really do not. you are allocating to them because they were so successful it was a fun they were at or maybe the fund they came from is closed and the founder says, we are close, and that is a way to access the dna of the founder. they do not really need to if they're that good. >> in 2015, will we see many more close to down? a super efficient market. they will ask lewdly shutter. we are closed. that is also why there is not necessarily, it is such a cost -- competition market. that is where the money wants to go. you do not want to secede rank to a guy who is not as good as
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the rest of them out there. >> we have other stuff to do. >> earlier, we had an initial jobless claims. more data is breaking right now. the comfort index at 42.7. >> economic expansion the consumer, is finally over. we are also seeing benefits that was first 43.1 in the previously. they calculate this on a week to week asus. i also mention in a separate report coming in at 58.3 coming
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below. it seems like we are seeing weakness. we saw that with the jobless claims 42.7 versus 43.1. >> thank you so much at the breaking news desk. we are talking more next. ♪
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>> we are back in two talking about hedge funds and the way they are can't and traded at the top. one thing i'm curious about is where they're going right now. like banks, they're heading west and they want some of that money. >> they sure do. equity, hedge funds, who has the
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tech flees. it remains to be seen how that does. hedge fund guys in market to market guys, and guys who have a five-year plan and outlook their value add to check on spinners tends to be to make connections, help strategically. it is a very different outlook. >> i do not think we're talking about hedge funds becoming angel investors. we are talking about hedge funds going into later rounds. >> not necessarily. they are early-stage investors. that is another point. >> it was a whole different set of skills. i wonder about this with the banks as well. you have got to know how to do that. >> the valuations of ipo tech
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companies are so high, the last thing you want to do is be the dumb money in the room with the deepest rockets. the average tech is for julian dollars, and those big hedge funds are north of 200 billion. they can really fund those enterprises. what is interesting to the hedge fund world is, in addition to it being a potential revenue and return stream is this endless quests for informational edge. you cannot really access the silicon valley anymore. what do you do? you fund really smart tech entrepreneurs and it is a cabal of guys who all fit on the same boards, all see what technologies are emerging, who is likely to launch with what, and then those trends have applicability into the public side as well. if it does not really matter.
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>> skeptical but, if there are synergies, let's put it this way, of course it matters here it even if it did not, there are other benefits to being part of that universe. >> all right. >> thank you and happy new year. >> to all of our bloomberg tv viewers thank you so much. >> happy new year. >> happy new year and thank you for watching and for staying with us here. thank you, brendan and eric were joining me. thank you as well. >> producers have been throwing together this three-hour show for a week.
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>> ok. 2015 is right around the corner and we will be right back. ♪
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>> in this 56 minutes past the hour. bloomberg television is on the markets. take a look at the boards. being hire.
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utilities were the best index on the major benchmarks. for stocks, the currencies and the contrast past toward height. the eurozone and japan road to records. other currencies all the way. let's just start with the winners. who were they? >> all 31 of its major counterparts, which has not happened since 1989. particularly interesting against the euro and the yen. that will set up the scene for next year with regard to monetary policies. as he mentions u.s. moves toward price interest rate. bank of japan is at its
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stimulus. >> let's talk about the end. i have been fascinated by the movements. where is it headed? >> that is a good question as to how low they can go. we're looking at the end of next year, a forecast suggesting 125. however, it could weaken beyond that. >> i heard 140. >> a lot will depend on how he is perceived new mandates a couple of weeks go to arms to japan has slipped into a recession. if they come out with significant easing measures, that should weaken the yen further. we may see a shift down the on that level. >> what about the other ones that have done the worst? >> a lot of the performers have been connected to the oil markets. oil exporting nations such as norway and russia have seen their currency suffer.
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18% this year, the russian ruble is down out 45%. that is related to oil sliding at its lowest level text is 45 years. losses regained if oil prices do rise. >> they pretty must forecast the fact that you continue oil prices. what are they forecasting? >> the dollar strength is continuing. more steady rates than we have seen this year. >> a reversal of the strength? >> right. a lot is dependent on whether they do come in for the moment. in the first half of the year they made moderations in the second half. very little idea of exactly when the fed will come out.
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april, june, september. we do not know exactly what that point will be. gains it will make, but exactly when and how far as the basis. >> any currency that surprised you this year? >> i think norway was a bit of a hiccup for people. allen actually depreciating at the end of last year. >> good stuff. happy new year. good to see appeared we're on the markets again and 30. -- in 30. ♪
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>> this is a bloomberg news update. i am scarlet fu. we begin with breaking news and the november pending home sales upstate numbers. let's review those numbers right now. let's show you what we have. in terms of pending home sales up. 8/10 of 1% for the

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