tv Bloomberg Surveillance Bloomberg October 23, 2014 6:00am-8:01am EDT
terror attack on parliament. markets recalibrate for global this inflation. the price of oil declines. debate on airbag safety. good morning. this is "bloomberg surveillance." we are live from our world headquarters in new york. it is thursday, october 23. joining me, scarlet fu and brendan greeley. an interesting set of top headlines. canada's prime minister says the country will not be intimidated by the attack. a gunman killed a soldier at the war memorial and opened fire inside the parliament building. police shot and killed the gunman. sentackdrop here, canada warplanes to take part in attacks on islamic states. a radical jihadist ran over two canadian soldier south of montreal. global airbag recall getting bigger.
the vehicles are equipped with the same airbag that have been and hondafour deaths cars. more than 7.5 million vehicles recalled because of the problems. the insulators can now function, shooting shrapnel -- the lators can -- the inf malfunction, shooting shrapnel into passengers. >> earnings fell. there was a surge in investment banking revenue. we talked about the impact of volatility. >> from some point, it benefits our businesses. more volume, more volatility. the macro for business. that is clearly a benefit. volatility,oo much that impacts people's longer-term view, confidence around the market. that is not so good.
>> like other banks, credit squeeze has reduced in size. has reduced ine size. yelp posted fourth-quarter sales that fell short of estimate. home, it is facing more competition for local advertising. >> no one is watching. the world series, low ratings. the royals, they dominate 33-one odds. they beat the san francisco, 7-2. they traveled to san francisco today, game three is tomorrow night. opening game, the lowest rated games since pumps he green played. >> a lot of people are watching and on unconventional devices,
like tablets. they have a problem. --eball has >> you only care about baseball if there is baseball and your market. my family in omaha has been made miserable by the royals for decades. they care. >> those are the top headlines. >> data check. amazing market after what we saw yes today afternoon. up we go. 79. getting near the 80.66. , 17 .87. the lead news today, the oil le to awrubel, -- rub
41.65. this shows percentage change. we have an accelerated weaker ruble. >> they do not care. we came -- we keep waiting for there to be reaction. russia does not work that way. >> you wonder when this catches up. >> it is quiet in terms of what russia has been doing. there is a summary that may have been potted in the seas near sweden. has been quiet, at least in the popular press. >> looking for a boat in the harbors of sweden. >> the behavior is bizarre. just poking. ruble.k
tipping point. >> we would like to know where using the russian ruble becomes a challenge. the markets. cross asset volatility. seeing well into an earlier year end market. is everyone wrapping up in trying to get to 12/31? >> this is going back to normal. at two years, when volatility was below average, you are getting closer to the said point. this is the market going back to what it used to be. this is the environment we are going to be in. >> how that is the carnage?
i cannot get an answer. the media loves it. hedge funds doing? >> it has been a tough few months for global macro hedge funds. if you have been betting on oil, the dollar, they had gone against you. this is some of the volatility we saw last week. the moves on wednesday. moves onthat -- big wednesday. very deep, liquid markets are not going to see a big price gap. >> it was unprecedented, seeing those points in one day. it was not an economic event. havings hedge funds investors having to change their positions quickly. >> you mentioned the one way trade.d c has that changed? >> most people believe rates
will rise. the short answer is yes. weakeningalysis flag expectations in the u.s. are you panicking? it iso not think deflation, not in the u.s.. japan is struggling. what you have in the u.s. could be characterized as disinflation. it appears to be benign. environment where real inflation is low. when that happens, you expect low rates. movementis an academic to have the fed look at nominal gdp instead of real gdp. this that makes sense? -- does that make sense? >> if you go back and look at the long-term history, the best correlation you will find for nominal rates is nominal gdp.
carl icahn was talking to stephanie ruhle and he was saying high-yield credit is in a bubble. you do not necessarily need to get nervous about it today or tomorrow. at some point, everyone will try to get out. say and while we did get more constructive, you have a net slide a bit. treasury yields collapsed. you're getting a high-yield at better50 basis points than it was three or four months ago. default rates are staying. the holistic call here, coca-cola headlined it, panic over nominal gdp linked into revenue growth. there is a blanket over the animal spirit. do you have a window of when that ends?
>> different parts of the economy, different times. you are right. if you have an environment with nominal gdp, there is a limit to how much the average company will row their revenue. -- will grow their revenue. >> when did we stop calling it high risk and start calling it high yield? >> are we allowed to do philosophy? >> we should be making calls within high-yield. there is good high-yield and bad high-yield. >> think about this in perspective of an individual investor. you have an asset class producing marginal yield with low default rates. not necessarily a home run, but a source of carried over the next 12 to 18 months.
center. i guess that is outside expense to the accounting statement. mr. stevens will comment on that in the industry. -- and the industry as well. scarlet fu is leaving on a jet plane. >> not until november. four big airlines reporting earnings in the next hour and a half. southwest, american, united, and jetblue. we are also finding out that the international routes are not as profitable because there is so much added capacity, particularly from middle eastern and asian carriers. they are making their money. we hear capacity, can't we say, edition -- can't we say competition? >> not for passengers.
>> what did i say about the holiday season? we are coming into that. what is going to be a big question is the falling oil prices. and ebola. we had the incident of a passenger being taken from the flight to the hospital in newark. we saw the airlines --. american airlines stock is down. the revenue trend has not improved. >> scarlet mentions hedging. with us.terich airlines do better, but they bet up top that oil will not go down. 100 to protect themselves. they do not get the full benefit of the drop in oil, do they?
>> it depends on the airline. why is oil going down in the first place? there is a growth scare. people are worried about the speed of global economy. if you have less travel, that will counteract whatever benefit you have. may be the airline industry needs a oil price hike. demand that rather than a supply shock. >> airline stocks are positively correlated with stocks. stock prices surge, the dividend and buybacks paid off. broader market. you had a lot of buybacks. the second quarter was strong. you go into 2015, you will keep the momentum. that may be a bigger question. i am new to reading reports.
i feel like i read them the wrong way. some of delta posco pass the ads have triggered responses. ads havef delta's triggered responses. it is important for them not to forget how they got here and playing well in the sandbox is a major point. there should be competition. this is the problem you normally have. is there capacity? we see this over and over. >> this is the heart of the matter. the airline industry feels like he gets to play by its own rule book. it has been that way since world war ii. is, given where that that planes are jammed. when did we have a comfortable, normal domestic flight? i cannot inc. of a single flight. >> i will accept diminished capacity in exchange for
transparent pricing. >> it is the most difficult industry in terms of pricing. people except smaller seats for lower price. that has been the trade-off most consumers make. prices or prices that do not go up as much. >> for a discount price, however you define it. >> hattie 60 airline industry? fix the airline industry? >> tweet us. , united,, american jetblue, recording in the next -- reporting any next hour and a half. have you flown alaska air? no. a few people have alaskan air credit cards. a guy loves their frequent flyer package.
-- in ae different different air. there we are in airlines. coming up, important conversation. you know her for her housing call. we will talk to her about your housing market and a talk to michelle meyer about where the income and wage growth is. stay with us. this is "bloomberg surveillance ," worldwide this morning. ♪
currencies on the move. we will have them for you through the show. morning must read. kirkpatrick. david new freedoms and tunisia drives support for isis. what is scary now is that even though it is a success story of the arab spring, it is sending recruits to iraq and syria. a trueamic state is caliphate, a system, fair and you do not have to follow someone's orders because he is rich or powerful. it will topple the whole game. >> there is a believer. after the attack in ottawa, you have to ask the difference between a lone gunman who is crazy and a lone gunman who is crazy and follows an ideology. there is no direct linkage of .his
>> we know he converted to islam. >> what i was shocked about is how powerful the idea is. we know what is wrong, but if you on the outside looking in, it looks like maybe there is a better deal. the basic idea is the demographics of the middle east. single, younggry, men. >> it is a failed capitalism. >> the reason the arab spring started is because there was no economic growth. bin laden was not popular in tunisia. plummeted because he had no program to offer. what we are learning is that is wrong, butt they have something better than the gulf states.
>> i wonder what the appeal is for people. writing of your and on the future for opec the focus in saudi arabia? >> i do not think there is an opec call. i think it is going to matter. we have had our last several years surge in north america energy productions. that will continue, but it will decelerate. you think about the call and energy markets over the next five and six years, interestingly, a lot of it is expected to come from iraq. 60% of the opec oil production is supposed to come from iraq. >> this is the marginal call, tunisia andack to libya, which is at the margin, not getting it done. libya has been bailing out in
the russian economy. a few months ago -- >> this is important. >> libya is one of the reason we are at $80 right now. if you go back three or four months, production was at 2000 barrels a day, everyone was writing it off. production is back to 800,000 barrels a day. the gulf states have been trying to diversify their economies. do you see any non-energy stock worth looking at over there? >> it is mostly energy driven. if you broaden out the definition, you look at other frontier markets, places in africa. there are interesting stories, less so in the gulf states. oil economies forever, no matter how many universities they build. >> these are primarily driven by oil. this is what the economy revolves around. >> futures are up nine. dow futures up 80.
what an odd market. i left the building and it was ok. welcome to normal volatility. >> it is a thursday slap. we are going to keep this discussion going. a major seen through all of "bloomberg surveillance" is global disinflation. it is coming up. russ koesterich on the linkage of a challenge global economy with ablooming -- booming u.s.. stay with us. it is "bloomberg surveillance." ♪
morning. a gorgeous new york city this morning. scarlet fu has made it is asian she will go as lundquist of the new york rangers for halloween. a gorgeous october day. a little bit of rain in new york city seems to be fading away. we say good morning. brendan greeley is with me, scarlet fu as well. west.h of the bloomberg >> price wars taking their toll on at&t. they missed profit estimates and cut sales forecast. they have been under pressure to match price cuts by rivals. they are trying to offset slower growth by pushing things like
security and a internet service for cars. third-quarter results. strong words from an annoyed apple after a victory in court. the tech giant called the company a patent troll after a jury rejected claims for damages. several apple products, including the -- infringed its patent. >> it is a fascinating time of year. ibm, coca-cola, mcdonald's, we talked about the hamburgers. the price competition could not have happened to a better company. >> you must be an at&t customer. >> i am a proud t-mobile
customer. >> i thought proctoring bramble -- i thought procter and gamble announcement was one of the true business books i adore. they have shown the door to one of his parents, a top candidate. melanie is out. year wheretime of announcements are made. i am watching jpmorgan more than anyone to see of mr. dimon .eally makes some choices >> he has set up his bench. it is clear he has. >> it is that kind of year. >> that is why people say october 10 will be volatile for markets. is a lack of inflation. disinflation could be a path to deflation.
yesterday. that is possibly less robust global growth. links it toich economics for blackrock. he suggests the american locomotive is a challenge. how big is the linkage between the u.s. and struggling other economies. the export losing engine to the rest of the world. the rest of the world is growing more slowly. for much of the last 20 years, consumers have been an engine of growth. that is what you rely on when nothing works. is doing ok,umer but we are in an environment of slow wage growth, barely high debt levels, and that is constraining consumption. is there something different coming out of the crisis? rebalancing.ou see
it involves more consumption in key emerging markets like china. it involves more investment in several developed markets. >> brandon has and in great job on this. this idea that there is no investment, i do not buy. back to the go consumer. it is a problem, the what is the fix? how do you raise wages and start spending? >> it is a hard thing to fix. it will affect a small portion of the population. this is not just a function of the recession. you go back and you look when men.ages peaked for 1974. it has been downhill since. savings rate declined, you're out of the tricks. the challenge is, how do you get households to spend more? >> are you worried about decline
and participation? women are not entering at the same rates as they used to. thet is the growth in workforce plus productivity. if the workforce slows as it has been and less productivity rises, this be limit for the economy will be slow. >> the consumer is hanging in there. is the industrial sector picking up the slack? >> they are doing well. you see some increase in consumer and industrial loans. back to the conversation on high yields. , unlike individuals, they are very profitable. cash rich. >> the weekend is coming. i have to do with my 101 k. >> i think you remain low on equities. better entry points means he is not buying monday. he wants me to buy monday, but i
am not buyin -- but he is not buying on monday. stocksvaluation for looks better than the valuations for bonds, particularly if you go out to international markets. >> what do you do to get companies to spend cash? they are to some extent. we have seen capital spending. they are not really going to spend until they see a pickup. >> this goes back to the work on lbj. he would have done an investment tax policy out of washington and said apple, if you do this, we will save you this much in tax. >> i will see your reference and raise you another. he passed things in the senate. he figured out how to get the west to agree with the south. we are sitting here spinning in the wind about policy changes. we cannot get them done because there is no lbj to get us back.
investment credit programs could spur or initiate -- >> that would involve congress, the house, and the president talking to each other. tothe solution is not likely come from washington. depending upon the outcome of the midterms, it may not come for a couple of years. how do investors start rewarding companies to spend their money instead of dividends? >> when you look at the polls, they are interesting. investors would like to see more capital spending and less buybacks. you are seeing a shift in what investors look for. >> who leads that? >> institutional investors who would like to see capital spending raising. the chinese new group. apple doubled china's stores in two years. i typically say malaysia, i am
just suggesting there is new globalization. >> look at what is working. you see in the u.s., in the energy sector. one place the u.s. has an advantage, anything that takes advantage of the cheap energy and natural gas. saw that with a buyer of germany the other day in the show. >> i am reading your analysis. if say it remains to be seen it will survive growth. quantitative easing is unlikely to come. >> you read his research notes? >> i like to read it. that that is not going to happen. there are political barriers in europe. is europe without weapons? >> europe has weapons, but are they going to use them? this.e spoken about
you cannot rely on monetary easing. there needs to be fiscal >> action. >> do we continue to see transnational transactions? i think we do. is somewhat the new globalization. scarlet. is on whatbest chart technical indicators are signaling in the u.s. equity market. we will be right back with that. it is smoke and mirrors, incense. >> until it works. ♪
>> good morning, everyone. how can we fix the airline industry with the 4712 responses , all of them are angry. -- i cannot say that on the air. mine would be on luggage. how can we fix it? this is "bloomberg surveillance." futures up 32. we say good morning. have a technical chart. >> the s&p 500 index recovered from the turbulence of last week. the chart is from an investment
group and shows the percentage of overbought stocks. 53% are oversold. 10% are overbought. the chart suggests a widening diversion. , how do youich judge when prices have fallen too far too fast? do use a technical specific out a rhythm? >> the short-term is going to be incredibly different -- difficult to call the bottom long-term. you look at valuation. we saw valuations, if not get back to cheap, at least to a more reasonable level during the lows last week. that creates opportunity, particularly in sectors like energy, where you saw huge declines over a period of time. in oilaw declines
companies that sold high-yield debt or junk bonds. that was a concern. people wonder whether that will lead to a string of default. >> we have seen the companies have big issues of high yield. when you go back to default rates and high yield, actual antics , they are close to expected. i want to go to a pro-level. , this is you showed us a chart showing the vibrations of the market. i know that by enjoining losing money, this is a license to lose money. the way you make money is on a trend. you have the up and down, but within the trend, do you and blackrock perceive a rising trend for market participants? >> we do. this is an important point.
think about what has worked in the market the last few years. trade has been effective. momentum works. it works best in a low volatility environment. the volatility rises, efficacy of the approach may be less than that was a year ag o. >> this goes back to montmartre route. munros goes back to trout. it is harder to do that given volatility. >> i do not think you right off the small cap sector. it has benefited from momentum. if it is less effective going forward, it suggests they have to go back to other things. did that without talking about difference equations. speak those of you who
english, volatile and unpredictable. stock photos, this is a picture of chairs with portraits of missing students during a march demanding justice. authorities mexican served an arrest warrant to the mayor. they were charged with masterminding an attack that left six dead and 43 students missing. they still remain missing. it is a hard story to understand. they were protesting a speech by the mayor's wife and he asked the police to handle it. he is on the run and linked to drug gangs in the heroin market. performed before onguins after the shooting parliament hill. there were games in canada that were canceled. >> on the ice, sidney crosby, iconic.
jeff jimerson, the singer absolutely nailed this. it was emotional. you can see the players were totally involved. they hate each other. >> more than half of the teams are made up of canadians. >> this was so well done by nbc. >> the last photo, a video. mark zuckerberg wants to expand his company's influence in china. years heen saying for has been learning chinese. he did it. he answered questions for about 30 minutes at a forum. >> 30 minutes is a long time. >> listen to this. >> it is a little bit hard to hear, but he said he is glad to come to beijing. my chinese is poor, but i will
try to speak it. while you were busy looking at facebook, mark zuckerberg was learning chinese. >> this changes the landscape. >> china has been so clear. they have been waiting to make sure their own domestic up beforeons pick anyone else comes in. it is a rocksolid market. >> how hard is it? >> where does he find the time to do this. >> this is not like learning french.
>> it is hard. you need to be able to practice. >> mark zuckerberg has been taking employees and have them to speak tos office him. very cool. airbags, they are going to recall every single car manufactured in north america since 1923. we are going to go to detroit on the latest millions of recalls. on video, onu, bloomberg.com, and on television. it is "bloomberg surveillance." good morning. ♪
at 41.63. ruble stuns alex clement will join us. will seek to him about the crumbling foreign exchange of russia and the relationship with ukraine. on television and radio, 7:30. we say good morning. and the, scarlet fu brendan greeley. we start with the largest mortgage provider in britain, eliminating 9000 jobs.
announce layoffs next week. more customer shift to online services. the bank will announce earnings on tuesday. toppingy profits analyst estimates. they're getting a boost from the mercedes-benz brand. slowing increases in western europe and a plunge in russia. nissan expanding a global recall using takata airbags. they will recall vehicles worldwide, including more than 100,000 in japan. an investigation is being made madeether takata misleading statements about airbag regulators. in takata shrank. would you let your kids ride in a honda? >> sure.
live in a -- i do let them ride in a honda. this is not a high humidity zone, it is not like indonesia or panama. all of the indications are these are perfectly safe. ata has messed up and there are millions of vehicles that are going to need airbags replaced. not good for them. it has been slow developing. if you call up the longer-term have beenrt, they building up to this. it has only been in the last week where the shares have taken the pounding. i have to focus on this with the gm recall. it is about humidity. i am in new york and the kids go down to florida for spring break. are you kidding me? i would never let them in a
honda. how clumsy do they have to be before every car is recalled? record almost every year. every presidential election year, they keep going up and up. cars keep getting safer and safer. we are very aware of the flaws .nd the defects it is not to minimize four people being killed in this really grew some way by an instrument that should be protecting them, but so many people are saved by airbags. ones, they doa not all shoot shrapnel into people in the front seat. you are not kidding. almost every car is going to get recalled at some point in your ownership. maybe two or three times. cases, it is an annoyance,
but it should not be that surprising and it is not as devastating as it used to be. >> what is the timeline? moreshould they have been aggressive about this? a year, two years? >> it is hard for me to know. there will be a lot of investigations looking into that and when they should have. a lot of it is doing regional efforts instead of nationwide are global. i think that is where they will come into a lot of criticism and second-guessing about the timing. -- we willdoes continue this discussion. thank you. greatly appreciated. thank you. terrific perspective on global disinflation. forex report, brazil elections, 2.49, weakening. weak russian ruble this morning. coming up later this morning, 8:00 a.m., "in the loop."
>> can coalition forces recaptured territory from the islamic state? as canadae question reels from a terror attack on parliament. the price of oil declines. and planes are packed. good morning, everyone. this is "bloomberg for surveillance" live from our headquarters in new york. i'm tom king and joining me scarlet fu and brendan greeley. >> we started in canada, where as -- where investigators want to know if the gun man who went on a rampage had any accomplices. he has been described as a convert to islam with a criminal record. prime minister stephen harper says canada real -- will redouble efforts to fight terrorism. >> in the days to come, we will
learn more about the terrorist and any accomplices he may have had. this weeks events are a grim reminder that canada is not immune to the types of terrorist attacks we've seen elsewhere around the world. >> the backdrop year, canada had just sent warplanes to take heart in attacks on islamic state. earlier this week, a man described as a radical jihadist ran over to sit -- ran over to soldiers. nissan expands its airbag recall. in the last two years, nearly 8 million cars have been recalled in the u.s.. taking their are toll on at&t, the nation's second-largest wireless carrier. it has missed profit estimates and cut its forecast. the company is trying to offset slower growth in mobile wireless
by actually pushing into areas like home security and mobile internet service for cars. third-quarter profit more than doubled in switzerland second-largest bank, credit suisse. there was a surge in investment banking. >> from some point of view, it benefits some of our businesses. as you mentioned, seymour volatility is actually good for some of the trading businesses, good for the macro business. from some point of view, that is a benefit. but too much volatility, that impacts people's long-term view and confident around the markets. that is not so good. >> like other banks, credit suisse has reduced the size of some of its businesses in the last year to reduce risk. >> turning to baseball and the world series, one game each. big deal, nobody's watching, i guess. san franciscoeat 7-2. the royals have called it a must
win game. that is my cliché for the day. they migrate to san francisco today for game three tomorrow night. are miserable. go out just want to there on a must win game, play the team, get more want -- more runs than the other guys. >> you've got family in omaha. they care. >> they care deeply, and their hearts have been broken for years on end. this is a 50 year event for them. >> and in the bay area, we say good morning to all that are watching. >> i think a lot of people are watching it on their mobile devices. >> levy do a quick data check this morning. current user on the move. i would watch crude.
-- currency is on the move. i would watch crude. down at the bottom, brent 84. the ruble is weaker. that is a headline today. we will talk with alex client with eurasia group. russiawatch, clement on and ukraine later in this hour. ethan harris at bank of america merrill lynch, they nailed the reluctant recovery call for the u.s. economy. now with do follow, great uncertainty about how central banks will act. oil declines, wages are flat. it is grim out there. dr. harris suggests all eyes should be on a lack of inflation. good morning. >> good morning. different with a disinflation now versus the disinflation of fourth of july? between nowchanged and then is what happening commodity prices. we've seen a sharp drop in commodity prices. we've seen some movement in the exchange rate.
i would argue that the recent plans for inflation have been soft. the past few months for cpi have been extremely pain. two months in a row and changed? -- unchanged? issue wherea core under 2%, which is the guideline -- how long can we sustain under 2%? the link under 2% is just as important, right? >> it is. the longer we see under 2%, get slack diminished in the economy, it's puzzling. it questions the relations between the market and underlying inflation. either you get close to estimateood or what we that to be. we should start to see inflation pickup. >> it's the classic jargon. this is not my nehru jacket.
that was in the 1990's. nehru is the optimal inflation. >> you got it. a plus, a plus. >> it's not just the strict unemployment rate. it's people who are underemployed. it is people who are disgusted with looking and have left and are discouraged. is this a problem that the fed can fix, or is the fed out of ammo? raise two really good points. the first, how are we measuring the labor market and are we thinking about it properly? is the standard and implement rate the correct gauge? i think you could argue that is imperfect. hint slack a lot of in the broader market when you look at these labor merge these -- labor measures. that suggests that the labor market is not as tight as the
unemployment rate would suggest. >> we have 100 words for what we used to have one word for. but there are different ways of looking at unemployment, then should there be more -- >> if there are different ways of looking at unemployment, then ways tohere be more deal with the? >> some people or otherd and shelter core things. >> explain for once and all -- once and for all white people like you would ignore the grocery bill? >> that is something that is very frustrating to our clients. the reason you would take out food and energy is when you think about what the fed can actually influence, it is hard to influence food and energy prices. these are global issues. when you think about what the fed can actually target, the core is more reasonable.
because that should be much more responsive to the underlying dynamics in the economy. >> except when you're pushing on a string like we are right now. >> i interrupted you a second ago. you are moving onto the most important part, which is whether the fed can fix this. >> can the fed fix the challenges? they are trying. that theou could argue amount they've put into the economy so far has been supportive of growth. thein the camp that counterfactual would have been a lot worse if you did not have this amount of monetary support. going forward how much more ammunition do they have? i think that is somewhat debatable. there are went to try, though. as long as inflation is low, interest rates are going to remain accommodative. >> it doesn't look like they wages.ch they can do on
that is the problem, getting wages to rise. >> yes and no. if you stimulate enough underlying demand and lower barro in costs and get businesses to invest not only in capital, but also in labor, that does pass through in terms of higher wage growth and that generates consumer spending. the mechanisms that the tech best that the fed -- that the there.ically uses are >> we will continue this discussion. the american economy, and michelle meyer on housing as well. there are some pretty good earnings. >> for the good earnings, and by ang analyst estimates few cents. with cable bills falling short of estimates. >> they continue the share buyback. >> the share buyback that we are seeing for a lot of companies the season. >> that's the idea. to your expertise, michelle, corporate profits continue to
move forward. >> which is why we are waiting for. corporation -- why we are waiting for capex. the key question is, why have they not invested more you come >> one thing that could start -- sparked demand is oil prices. -- gameld be a jane changer. >> we don't seem to be able to fix unemployment. we have a twitter question of the day to fix something else that seems unfixable -- how can we fix the airline industry? 140 characters or less, fix it. tweet us. ♪
flex good morning, everyone. bloomberg surveillance. i'm tom king. michelle meyer of bank of america, merrill lynch always focused on housing. recovery echorue what about getting back to what we loved and remembered? where are we in that continuum? >> we are healing. it's taking a while. this is not a normal housing market. the progress we've made is reducing the foreclosure pipeline, the cleaning out.
in.here institutions came >> yes, that was a huge step toward a more normalized housing market. the next part of the process has to be getting primary homebuyers -- homebuyers back into the market. >> everyone is focused on your research. what is the single thing in the housing market? >> i think credit commissions is -- and i >> absolutely. can anybody get a mortgage? >> yes, but you have to have extremely good credit and it's selective. it's a very tight environment. >> i want to put you on the spot. 10 people in 2006 all got mortgages, and all you had to do was be able to breathe. many today? >> two or three out of 10. >> a correlation of income growth and are good feeling of it, that is not there as well.
are seeing job creation. jobs are running at 245,000 per month. people should feel like they have a bit more job security in that environment. that is the positive. the concern is over ways growth and disposable income per capita. that has been quite stagnant. you might feel confident that you'll have your job tomorrow, we've not seen much in wage growth. it makes it difficult to afford the down payment and be able to take that leap from renting to owning. >> and on the supply side, part of that is construction workers. that was the boom part of the last decade. that is not there, is it? >> it is interesting how much for gender is in home -- it is interesting how much friction there is in home building right now. you want more, but the availability of labor is a problem. even construction prices. that speaks to me that the
matt, you were in a helicopter in the gulf last week. did you actually get a look at that crude? >> end of september, yes. this thing has been out there for three months, the smiths group -- this mysterious crude tanker to stop it is filled with one million barrels of kurdish oil. we took a helicopter out there to get eyes on it. we try to raise the captain on the radio as we were flying over. he was very suspicious of us and said, you cannot land. and we said, how are you doing? and he said, you've got to talk to our officials on land. and we said, we understand, but how are you doing? and he said, we are fine and have everything we need, thank you very much, goodbye. we took a photo. it looks like it's sitting low in the water. there is a lot of question about whether they had secretly unloaded some of that oil. from my perspective, it it
seemed they were filled with not -- if not all of it, most of the crude. >> this is not just about money, but politics, right? >> exactly. the group in baghdad says they have to sell every drop of oil through the state will in -- oil ministry and in return, they get 70% of the total revenues. the kurds say, no, no, this is our oil and we can do with it what we choose. they have been pumping it out of turkey and sending tankers out into the mediterranean for about three months now. when they get out into the mediterranean, because it clear that the iraqis are suing everywhere and nobody wants the instead of doing is above board and taking you directly to a port and creating a public record of the shipment, it turns the transponder off in the middle of the mediterranean, and they go dark for a duties -- for a few days. a second ship will come up and transfer the oil in secret.
when the transponder comes back on a few days later, it's sitting much higher in the water, which means it's a lot higher -- a lot lighter. and they are basically laundering this oil all over the world. >> who in the gulf of mexico are there buyers? is one of the independent oil companies that president bush was so supportive of in texas, are they the buyers of the soil? but we don't know that there are buyers -- of this oil? >> we don't know that there are buyers. the iraqis amended it is month to add a third defendant "john doe buyer." >> he was on the show three weeks ago. >> john doe? >> yes. >> [laughter] right. we will never know until the income support and has to file papers. the iraqis think that the kurds no longer hold title to the soil. that is certainly possible, where you could have sold it
without actually unloading it off of the ship. the kurds themselves, i talked to an official here in d.c. was with the kurdistan regional government. he suggested to me that they have unloaded some, maybe 100,000 barrels, he said. it's hard to tell by eyeballing it from the sky whether this thing has a million barrels or 900,000 barrels. but we will never really know until this thing go support whether there is a buyer right now or not. >> when you talked to the kurdish official in d.c., he offered to sell you some oil, right? >> yes, that's the first thing he said to me. i walked in a little late. he said, i'm so sorry for being i'm so sorry for being late. and he joked and said, would you like to buy some oil? and he did not even know i was there to talk to him about oil. >> matt, quick question to wrap things up -- what has been the response of the obama administration?
>> they have been cagey on this and it put them in an awkward could -- awkward position. when this thing first came into the gulf in july, they said, our position has not changed. all of it -- of iraqi oil blogs to all of iraq's people but which is totally vague. -- belongs to all of iraq's people, which is totally vague. they are working to keep a united government in baghdad. hand, the kurds and the peshmerga are the only thing on the ground between isis and kurdistan. they've sold about a billion dollars worth. they say they're only way to make money and buy weapons. it's an awkward position for us. >> thanks, matt. michelle, you say the big story right now is falling oil prices. is that what we should be focused on right now? >> there are a lot of big stories.
i would say that is one of the dramatic changes we've seen in the last two weeks, the fact that oil prices have fallen so sharply. the question is, why? what does it tell us about the global economy? our strategists believe it's mostly a supply story. additional supply into the market -- >> let's just call it about six to 12 months out. we figure baseline prices coming back up to about $100. >> that much, 20 dollars? >> yes, but the risk scenario is that you do see oil prices hover at this level for a while. washe way we were yesterday frightening. it was something to see. >> but the decline that we are seeing in all prices this week is a lot different. now it's kind of an acceptance, resignation. michelle meyer is with us for the entire hour. coming up later on, economist mohamed el-erian answers questions and will be joining
>> this is bloomberg surveillance. i'm brendan greeley with tom keene, who has been talking about market movement all morning, and scarlet fu, who has company news. emerald ridge provider has illuminated about 5000 jobs. has mortgage provider eliminated about 5000 jobs. dime is quarterly profit topping analyst -- daimler's quarterly profit topping analyst estimates. but it cut its forecast for the global auto market due to slowing growth in europe and a plunge in russia. calling back about 250,000 vehicles worldwide because of problems with air bags.
that is the latest in company news. we will stick with transportation. the holiday travel season, believe it or not, is upon us. and there are already long lines at the airport that are about to get even longer. there is even discussion of peak scheduling to cut costs. shelby is here to explain to us exactly what peak scheduling means. >> it used to be popular and now they are bringing it back. it means that airlines are cramming flights into certain peak hours of the day, and then that is followed by a lull where there are very few flights. if you look at the american airlines graphic out of the miami hub, there is a white line that shows what the schedule used to look like. it's a little smoother. it's called a rolling hub. the yellow line shows these peaks and valleys. the peaks and valleys are what airlines are starting to trend two. >> the peak scheduling is an
airline euphemism. it means increasing your misery and delays. this is a nice way of saying they are you off with delays. >> the airlines would actually say they are increasing itinerary possibilities. they are allowing you to make faster flight connections and travel in less time. it's supposed to be convenient for the passenger. but when one plane gets off course or there is bad weather in chicago, you see the big ripple effect. all going tot's happen the way supposed to, -- presuming it's all going to happen the way it's supposed to, in what way do they cut costs? >> it's interesting, because you do not actually cut costs. because you have to handle more volume and add more employees. but it is the revenue they are getting from added passengers. delta send me an e-mail yesterday and they said, we've seen if we can offer the shortest travel times, -- customers care about cost, but they care more about travel times.
if they can offer the trusted -- the fastest travel times, they will take that flight. we have bloomberg surveillance air travel expert, michelle meyer. >> [laughter] at reagan or at o'hare when you're stacked up. it doesn't work. >> it doesn't work. but i do think that for business travel, the shorter flight, the , it has antimes effect. by the time you're in the delayed line, you have already bought the ticket. >> the airline has already made that money. the -- you might be miserable. >> i have a weakness for delta, because they've always kept their hub in monroe, louisiana. they are there to this day. when you talk about the moves they are making, is really because they have the better market position. they can get away with it. >> absolutely. a lot of airlines were blamed
for delayed -- for delays limited peak scheduling about a decade ago. and they stopped doing it, because they actually admitted they were causing delays. but now there are only three. this -- only three full-service carriers. they can do whatever they want. >> they have more maneuvering room. how much can this add to the bottom line? >> american said in an earnings year about 400is million dollars in revenue. >> it does have an impact. >> and they say so far that in miami, which they introduced in august, it's been going well. but in miami, there are no snowstorms. we will see what happens over the winter. >> there it is. our twitter question of the day -- how can we fix the airline industry? one of our themes this morning non-bookableed the wednesday before thanksgiving ticket as well.
let's do a quick data check. what i'm really watching, the russian ruble. it's dramatically weaker today. our theme, coming up with out client. stay with us. -- with alex clement. stay with us. >> it is the rare businessman who jumped headfirst into the geopolitical debate to defend russia, but hours before -- before dying in a plane crash in prime ministere - d u.s. sanctions were unproductive and unfair. alex, welcome back. how unique is total among oil companies, or french companies for that matter? >> a lot of french companies have had a good run of it in russia in the last 15 years.
total is one of the leaders in that respect. extracting oilis and filling it. their interest is not so much geopolitical, but economic. that has been underlying this entire crisis. it's not surprising that the big mustache, as he was called, is supportive of repealing the sanctions. ultimately, europeans in general, and the germans in particular, disagree. and even went to one of those conferences that was held in russia when everyone else declined going because of all of the political pressure from aggression in ukraine. he actually had plans to reenter russia as soon as political conditions allowed. historically, do businesses serve as intermediaries? times the russian influence over russian companies is decried in the west. in a situation like this, now it seems a lot of people are
demanding a similar kind of pressure from western governments on their own companies, and it does not quite work like that. speaks, howington naïve do we look to europeans and to the french? >> it depends on what we are speaking about. i think everyone has been a little naïve on the sanctions front. if the belief was that sanctions would have an immediate effect on the kremlin's calculations in ukraine, as we have seen it hasn't. willingt putin has been to suffer a tremendous amount of economic cost and pain to pursue political and geopolitical objectives. the mistake throughout this crisis from observers has been to assume that at some point, rational economic action would recover. >> what has been the big problem for the kremlin, falling oil prices or sanctions? >> actually, both. the sanctions are exacerbating what is already an investment crisis in russia, even before
the ukraine crisis. one of the things that was driving the russian economy into stagnation was investment. risk.ere is geopolitical and in the night of ireland, oil is lower as well. environment, oil is lower as well. it's a longer-term issue. >> you're not worried, like moody's is, that they are spending their forex reserves. that doesn't bother you? look, they can continue this for some time. willis an economy that collapse over the next six months, year, it two years? probably not, but the fundamentals are getting weaker from a pretty strong standing point. -- pretty strong starting point. has toorning must-read do with the fact that the co of
total was traveling all over russia. there is some great context in the wall street journal, which quoted a gale professor at the management school saying that they are like doctors that work 50 hours a week. they are supposed to be operating at peak capacity. that does not really happen, does it? >> i thought indians really capital -- captured -- i thought jenkins really captured the reality of the new globalization. >> this interplay between geopolitical and economic interests in the interests of corporations and governments, yes, i think that is certainly what is going on. >> we will speak of russia and ukraine, and coming up, much
day -- how can we fix the airline industry? tweet us. that will be a challenge in 140 characters. in the google world, we are all depending on each other -- in world, we are all depending on each other for goods and services. mohamed el-erian says peer-to-peer lending will disrupt services. he joins us today with betty liu. >> if you lending money to bill gross? -- if he lending money to bill gross? >> i don't think bill gross actually need any money. another does mohammed. -- and neither does mohammed. this is getting so hot that wall street veterans are getting into this game. that is how you -- >> that is how you know it has peaked. >> at would be your benchmark. -- that would be your benchmark. there are peer-to-peer lender's
joining this orchid platform. mohamed el-erian is a board member and a leader for this company called pay off. they are essentially the same thing. they gather together funds and they lend to others who need help at lower interest rates. they are trying to get people out of debt around the country. >> is it the same thing? >> it is essentially the same thing, but lending club started off by you and me, moms around the country, just the average person who wanted to get into this game. i've got a little extra money and i will pool it with other people and we will take that money and lend it to others. now you have institutional investors getting into this game. and then you have been talking about pooling loans together and make securitized debt. people are getting a bit of a nightmare scenario, thinking, is --s going to be another essentially, a tool that will
allow banks to gain the market and get even more money? >> and get us into trouble. >> when i hear the words "it's ,n uber world" i shudder because there is something so obnoxious about the way they disrupt, and they are so proud of their disruption with no heed to regulation whatsoever. michelle meyer, these companies -- airbnb, uber -- are they headed for problem one regulation kicks in and they have to lay -- pay higher costs? you could argue that they are a new form of efficiency and they are enhancing our use of travel. >> i have to say, though, -- i use uber now, but i'm still very skeptical myself of using airbnb and actually staying at somebody's home. that's a little bit weird to me. >> i've done it, and i have a good friend with a property in
new orleans and that's how he makes his money on this property , by renting it out. but i think they are riding roughshod over relation. >> i think uber has created efficiencies in an area where it orjust too hard to get a cab a call for service. >> it has ruffled a lot of feathers in the process. thank you for joining us. starts in 15 minutes. we will be right back. ♪
>> good morning, everyone. arend his half-brother stirring up french politics. we will talk investment with olivier sarkozy. that is coming up tomorrow at 7:00 a.m., here exclusively. that is a massive exclusive. tomorrow morning on "bloomberg surveillance." a ton of earnings right now. let's get the top headlines. >> here's a company that reported earnings yesterday. shares of yellow down as much as 15% in the premarket. down. quarter sales are
faces morelp competition for local advertising. it is getting more expensive to live in a playground. sales of homes in the hamptons fell in the third quarter. 13% in the third quarter. indicate that republicans may win enough seats the member for to take control of the senate. ted cruz was interviewed on bloomberg's "with all due respect." here is what he said. >> there are a total of seven democratic seats that are up in states that mitt romney carried. 42% or less for barack obama. those are west virginia,
louisiana, and alaska. >> republicans need to get 60% to windows. us withlle meyer with bank of america merrill lynch, well withliment as blackrock. ukraine is a mass of referendum here. this has crept, up on me. how big is this election for ukraine? things. are two one, what is the effect of the election as far as consolidating the new ukrainian politics post-revolution? will there be a representative parliament that gives a fair representation of ukraine as it stands now in terms of politics in popular demand? i think there is a pretty good chance it will, with the exception of the parts of
ukraine that are still under separatist control and will not be participating, which is the second issue. does this election get us closer to a peaceful solution of the conflict? and that would be an emphatic no. they are still fundamentally at odds. and we will see more fighting and probably another round of sanctions. >> snow in kiev tomorrow? do you see europe as having any role in this whatsoever? the talks are all about gas, not solutions. >> the areas of ukraine under separatist control will remain under control unless there is a military solution. and a military solution means you've got to get nato involved, and no one is willing to fight a war with russia over ukraine. >> and mr. putin is aware of what you just said. >> yes, demonstrably aware. >> he might be listening right now.
>> those regions in ukraine are stuck.oming but that is right. we've been saying -- >> that is right. we been saying that for a while. feeling question is whether he could get them through negotiation or violence. the answer is violence. michelle, this translates right over to our american viewers. i don't care what anybody says. how do you poll -- pull mr.kliment's world over to your? >> is the global economy and it matters, obviously. it matters in terms of trade and amex, but i would argue there is
a confidence affect. when there are geopolitical concerns, business owners are more worried. they are not sure how it will impact them on a day to day aces, but there is concern. >> also, as far as what happens with the neighboring countries around russia better casting a worrisome eye. >> there are countries that have ande russian speaking ethnic minorities. they are worried about what russia's intentions are. from russia's perspective, two of the key national security goals for putin over the last 10 years arguably were, prevent popular revolution anywhere in the soviet union -- former soviet union, and make sure that ukraine never leaves russia's sphere of influence. >> this is important. i misspelled belorussia.
i even know where it is. but it's because it doesn't exist. alex, you don't work for black bar -- for blackrock, but you do speak portuguese. there is an assumption among wins,ors that if this everything will be magical and everything will take off. is that valid? >> first off, he's not going to win. the advantages of being an incumbent are numerous. look-alike -- the lula like team. than been less lula like we would expect. but there is an overly negative assumption about how things will .lay out either way, whoever wins will have a very weak mandate and not be able to move on some of these
big structural reform issues that brazil needs to get back on track, growth wise. what -- >> if oil prices stay where they are, that will be one of brazil's biggest issues to overcome, no matter who is in office. >> i will point out we seen a massive depreciation in brazil going back to 2011. does i continue with this brazilian victory? wins,ecess -- rousseff you will see a run in the days after that. but it remains to be seen how that will work going forward. but there is this wide range of expectations that are overly negative an overly positive with the two candidates. >> does it matter who is in office if oil prices continue to stagnate and commodities are under pressure? in the longer term
might hurt brazil, because it makes it less profitable for them to presell oil reserves. they are aiming to be a main exporter in the next five years. that hurts them in the longer term. >> are they part of opec echo can i ask -- are they part of opec? and a half be dumb question of the day? >> many countries are not. just fuel prices has been a big issue. -- jet fuel prices have been a big issue. of the day question -- how can we fix the airline industry? here are some of the answers. more common composite fuel-efficient smaller airplanes that fly lower. the dreamliner, you can fit about a billion people in there. >> with the dreamliner, what i want is fewer batteries on fire. >> that would be good. >> boeing is doing better than good. still selling the same old 737.
>> i made a mistake. .t is the a 380 second answer, more efficient planes, lower fares, better service, more pure -- more perks lead to more passengers. >> in your dreams. analystss not what the are asking for. they are asking for the opposite of all of that. >> make more money. -- how canher answer you fix something that does not want to be fixed or is not willing to be fixed? kind of a philosophical answer. >> i think the frequent fliers thing is the greatest scam going. frequent flyer miles is a total joke. >> it should theoretically create some sense of loyalty. >> they don't work. >> i have benefited somewhat from frequent flyer miles. i finally got gold, which is a big deal. >> alex, what is your international carrier of choice? >> i am a delta guy.
buber is now headed to banking. so says the chief economic advisor. he will be joining me in the studio in moments and explain why he is putting big money behind it very -- it. over incomedebate inequality. joining me as an work on hard and elise gould. onard and elise gould. >> in canada, a gunman killed a soldier at the war memorial and then he opened fire inside the parliament building. police eventually shot and killed him. he's described as a convert to islam with a criminal record.