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tv   Bloomberg Markets Americas  Bloomberg  December 21, 2016 12:00pm-3:31pm EST

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from bloomberg world headquarters in new york, we are covering stories from aleppo to madrid this hour. we speak with the barclays capital in u.s. equity strategies about his 2017 outlook. blackstone closes its advisories fund after he lost 24% in 2016. state ofook at the private equity and hedge funds. we hear from el universities stephen roach on the state of the american consumer and how the chinese view the trumpet ministration. just returned from a trip to china. abigail doolittle joins us to look at the markets. looking at are modest declines for the dow, s&p 500, and nasdaq trade close to record, but no record so far today. the big story over the last few days has been whether or not the dow can hit that psychologically. this is an intraday chart. the dow came very close to soing dow 20,000 but not
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much, meandering down as the day goes down. if the dow could make 1000 today or the next couple of days, would be the fastest 1000 point gain. we take a look at the previous 1000 point gain. in 1999 it took the dow 35 days to achieve 11,000. from now we are day 29 19,000. it could happen today and it would be the fastest, or over the next couple of days. interesting accompanying these all-time highs for stocks is complacency. we take a look at the vix, the of from the beginning november, we see this big decline down out of the election. into the election, there has been quite a bit of uncertainty. after the election, the fear gauge has come down, right down towards record levels. will close at levels last seen in july of 2014.
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but there is reason to think something is off with this fix in terms of stocks being at all-time highs. we go to the bloomberg and look at g #btv. this is a fabulous chart. we have the vix trading of these all time lows. we have an economic uncertainty measure. we see prior to the fed's extraordinary policy action and the extraordinary action of the world central bank that these two have tracked each other pretty closely. after the central banks have intervened, we see they start to depart. real world uncertainty is much higher than the financial market uncertainty. perhaps investors finding some comfort knowing the central banks areperhaps investors finde comfort knowing the central banks are there, supporting the financial markets to some degree, even if it's not directly or explicitly. we now also see this mass divergence, real-world uncertainty at a high. vix at close to all-time low,
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perhaps adjusts there could be some volatility ahead for the financial markets. david: thank you very much. let's check in on the bloomberg first word news this afternoon, emma chandra has more from our newsroom g. emma: the european arrest warrant from germany indicates a man has at times used six different aliases and three different nationalities. lists multiple aliases, many of them variants on his name, as well as egyptian and lebanese citizenship. german authorities say they rejected the man's asylum request in july. syrian tv says aleppo evacuations will allow rebels to begin final withdrawal from the city. opposition forces agreed to surrender their last foothold in the city to the government last week. some 20,000 civilians and fighters to be bust out of
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war-torn aleppo. the former texas comptroller is being considered for agriculture section kerry -- secretary in the trunk cabinet. -- trump cabinet. miller and bunch auto -- which auto are also under consideration. the percentage of people who said they skipped going to the doctor because of cost fell from 16% in 2013 to 13% in 2015. in some states like kentucky, the gains were even larger. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: stocks might be slightly lower today. towardsjones marches
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20,000. how important is that psychological milestone abigail mentioned and how long can the upward trend last? let's start with dow 20,000. much people have been talking about it. but with the significance be in that year? foro significance at all us. we can focus on the s&p 500, a much broader group of companies, giving better context for what is going on in the overall market. dow,0 companies in the it's not broad enough for us. doesn't really matter for us when we think about the overall market. >> remind us of your target for 2016. 2200? >> we are a little bit above it. we might have come out low this year, but not too bad. david: let's move ahead to 2017. what factors might lead to that number? >> we came out with a price target for 2017, saying we think
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of site for stocks next year is around 7%, adding dividends you probably get to 9%. the way we approach conveying that outlook to our clients was through a series of predictions. we made a prediction for the way we think earnings will go next year. we made a prediction around where dividends are going to go. we think they keep going up. we made a prediction around theacks, a big driver of markets this year, and then we set our price target and made a production around the sectors. when we put all those pieces together, you think we do have good upside over the course of next year. this is one of the more bullish price targets we have set. we think 2400 is the right target for getting into next year. we have been talking for the the lack of about earnings growth for the s&p 500. we think those days are over. there's a few drivers behind it. we think you are going to get a rebound in sales growth, which has been a missing ingredient
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for 2 years within the market. you have better growth here domestically, also getting better growth abroad. we think that will allow companies to push their revenue, their top line above where it has been. we think you get nice topline growth. there's a few offsets that drag it down, things like a strong u.s. dollar and higher wage costs, which are hurting company profit. overall our baseline assumption is that you get earnings per 127e that reach around dollars next year, which would be the best result we've seen in over 2 years. we think there's actually upside to that number. >david: how many chapters are left in the story of the stronger dollar? >> that plays into this upside that i see for earnings. we think the baseline is you have earnings growth around 7% next year, but if the tax cuts that president-elect donald trump have been talking about
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come through, we think the upside is quite a bit higher. you could actually see earnings-per-share growth next year, upwards of 12%. something we have not seen in a long time in the market, if you get the tax reductions set we have been talking about. if you think about upside for earnings, you can't just take the tax cuts without some of the more negatives that may come. president-elect donald trump has also talked about tariffs. couldnk some of these -- lead to significant dollar strengthening over the course of the next year. we think there's more to go in terms of the dollar strengthening. here's how to look at it. everyone percent increase in the dollar reduces earnings per share for the s&p 500 by about 1%. we are seeing in our model, you might get 8% dollar strength next year which will hurt eps growth by 8%, net the tax cuts
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are even bigger. you could expect potentially quite a bit of upside for earnings. david: how does repatriation for areholiday figure into your buyback? >> we debated this a lot. when i look at buybacks, i say they are not going to go up from here. the reason we feel that way is because leverage has gotten so high. over the last four years have been buying back more stocks than they can afford, and they have been able to do that by borrowing more and more money. now we think they have gone to the point where they simply can't continue to borrow money. we should see a plateauing of this buyback activity. the potential for a repatriation holiday is the estimate. a 2005, last time we hadholiday repatriation holiday, you could see significant increase in buybacks. we are at a point in the business cycle when conditions were improving. if you have a repatriation holiday again, which is on the able,
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repatriation holiday, you could see significant increase in yout companies have more financial flexibility. often they take that and they to approach as shares. i would say our estimate for buybacks is their flat next year but potentially biased upwards if you do get that repatriation holiday. david: to approach as shares. i would say our estimate for buybacks you have highlighted health care is one you are particularly optimistic about. it strikes me that it has become a sector that might be hard to navigate. what gives you such optimism in the health care sector? >> is also the worst performing sector in 2016, which we think set the table for it to potentially be one of the better performing sectors in 2017. in our report we highlighted health care as our pick for the best sector over the course of the next year. a couple things to think about there, it's under a lot of political pressure because of drug pricing. challenges around the affordable care act will also come into play.
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but all of that in our view is already in-priced. when we look at evaluation for the health care sector, it is against justk low about every other sector, including the other defensive sectors like staples and utilities. on top of that, there are actually some very good fundamentals right now for the health care sector. have been things we talking about is a great cash flow profile of the sector. we are looking for sectors that can boost dividends, buyback more stock. most sectors can't do that because they borrow too much money. healthcare has a really good cash flow dynamic right now. and we think that is the sector to be in, going into 2017. david: thank you very much. happy new year as well. coming up, blackstone sees a rare step back the winds down its big hedge fund bets. this is bloomberg. ♪
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david: blackstone is winding down as a hedge fund settled the -- suffered double-digit losses this year. down 24% they stood from wrong way bets. here to talk about what this means for the broader hedge fund industry is jason kelly, or hedge fund reporter, kathy burton, who wrote this story. of all the aware challenges hedge funds have faced over the last year. what happened with this one in
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particular? >> blackstone a few years ago had this great idea that they would start the first in-house hedge fund that made up teams of people trading stocks. and they did very well last year. this year, they just got caught in some bad market moves at the beginning of the year, and they cannot get their way out of it and after the election it just got worse. david: what type of fund was this? >> all different stocks, different stocks sectors. it is so interesting. this came at a time when blackstone, carlisle and kkr, apollo, all the private big equity names have been looking to really expand beyond private equity. blackstone very interestingly has been wildly successful as kathy has documented well in the fund of hedge funds business. it is fighting other managers
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and giving them money. this is a big deal because they were going to start investing directly. there were high hopes. it's a pretty rare step. i think you would agree, kathy. they built this business essentially from nothing in 2000, into by far the world's biggest in terms of fund of hedge funds. there's a lot of hope riding on this. >> always enticing about getting into this space -- what was enticing about getting into this space? >> a lot of hedge funds have not been doing so well. this is a way we can get future caners in-house, and we give them $30 billion, maybe. it would take up a lot of capacity we needed to fill. >> server going to this broader point, they were not alone in doing this. one of the well-established private equity names, has gone pretty deeply into hedge funds, or had, until
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this week, as kathy wrote a separate story about. they fully got out of their hedge fund to say they had bought three different hedge funds. again, with the same bet of direct investing, hedge funds are a nice complement in terms gathering assets. another product to offer investors. it's interesting to see this -- see these big names who have done so well for investors and for themselves in private equity, kind of stumbled when he comes to the more liquid assets. why is there an interest in doing it, knowing full well there will be challenges associated with running the fund? >> it is and it's really finding the talent. that is very difficult. we have seen people in the insurance company bought a big stake in folger hill and they have been having a horrible time trying to find teams to make money. same thing with blackstone,
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clearly. >> one of the interesting dynamics here is that as these publiclye become traded, blackstone went public 10 years ago in 2007, and one of the cases they make to investors or they need to make to investors is that they have a predictable revenue and profit stream. private equity is a lumpy busin ess. looks at anestor income statement and says, you did this quarter, the next quarter wasn't so good because private equity you can time over years. hedge funds and real estate funds give you some continuity in terms of -- if you can demonstrate that predictable stream to investors, you will drop a bigger investment base. steve schwarzman, david gura and others have lamented publicly their stock prices, and a feeling they have not been able to make that case. one of the things public investors come back and say is,
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i can't critically your profit is going to be year over year. what is the legacy of 2016 going to be going forward? there is so much discussion about the fee structures earlier in the year. do you expect that will persist? >> absolutely. we've already seen a lot of institutions, public pension funds in particular, and some endowments say they will cut their exposure. most people i speak with seem to think that is going to continue, the more people are going to cut. be under definitely pressure. it will probably go back to the way it was before, maybe wealthy families will invest. people seem to think, including blackstone, that the industry will be 10% to 25% smaller. >> also interesting to see you and your teammates on the hedge fund desk of cover this so well, these wild swings in performance. i have seen it be a great example.
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year, just such a wild swing and performance. it's amazing. >> even as recently as july, tony james of blackstone said, it's going to be very volatile, we are making big bets and make a loose money but they are definitely going to be able to make money, and they didn't. david: kathy, thank you, as well as jason kelly. ahead, president-elect presiding over a recession during his time in office. we will bring you that analysis next. this is bloomberg. ♪
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david: chu political turmoil
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aside, there's another scary prospect for president-elect donald trump. every republican since world war ii has presided over one recession. and goes global economic advisor join bloomberg tv earlier today to talk about just how well positioned trump is compared to his predecessors. imbalancese no big in the economy. in that sense, trump is in a better position than ronald reagan was, richard nixon was, or the bushes were, because he's not inheriting and overheating economy. in that sense, it has further to run. david: more insight with rich miller a bloomberg who wrote about the phenomenon. rich, help us with the history. why has this affected republicans more than democrats? >> that's a good question. there are economists who have pored over this. they got dealt a bad hand. some of it was bad luck. then there is the overall question of just how much
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influence the president can have over the economy. arguably, the fed chairman or chairwoman who has more influence over this sort of ups and downs of the economy, cyclical ups and downs, then the president -- david: you highlight research by the former vice chair. what is their take on this? >> what they discovered was that it really has nothing to do with monetary or fiscal policy. what it has to do with is -- as i said, some of it was luck. shocks were less during the democratic administration. technological advances seem to be more pronounced during the democratic presidencies. but that could have been something that predated their time in office. that was ato say large part of luck and maybe a
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little policy. david: what is your sense from your reporting of what to be president donald trump could do to avoid this? are there any steps that could be taken here to forestall a recession? >> there are some steps he could not take. if he decides to give up a little bit on some of the heated rhetoric he had done on trade and not set off a trade war, that would be something to help avoid a recession. most economists say we have gotten into a real tit for tat trade war. opportunity in 2018 to appoint a fed chair. as i just mentioned, the fed chairs have more influence over the economy than maybe the president. he could have some impact through who he decides to pick for that post. david: you look at the history and wonder how predictive it is.
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this has been the case, but who knows what it will be going forward? >> right. also, past performance is no predictor of future results, right? but, you know, if i was donald trump, i'd be a little cautious and take a little heat. david: thank you very much. joining us from our bureau in washington, d.c. stephen roach from the chairman of morgan stanley asia if the u.s. is still in a balance sheet recession as opposed to how china is doing. that is next. this is bloomberg. ♪ . . .
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the shootergesting who killed russia's investor to turkey acted alone. killed at an was art exhibition in ankara. foreign officials to turkey are taking part in the probe. new report from the united ofions finds that nearly 3/4 human trafficking victims are women and girls. children complies -- comprise almost 1/3 of trafficking victims worldwide. law -- the house and senate began meeting this morning but when it's a recess. governor patrick recalled a session after the law expanded not dissemination ordinance, inch led to hb2's passage
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march. vice president joe biden will be working at the university of pennsylvania according to politico. biden has hinted he would like the university to be the center of his post government work. is forcing tens of thousands of people to flee the country. those who are staying are forced to wear masks because of suffocating small. beijing is under a red alert for the fifth straight day. the heavy smog has closed airports, schools, and wrotes -- roads. global news 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. i am emma chandra. this is bloomberg. david: looking at major indexes, not much movement p are we see the dow hovering around the 20,000 mark. all the major indexes barely changed. points, anddown 2
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he nasdaq down 6. let's go to abigail doolittle. averageswe have major down due to the financial sector, one of the biggest ,aggards is bank of america despite the fact that we have an upgrade of these stocks over at atlantic equities. believeseler says he the momentum in the sox could continue into 2017, especially if rates rise. the reason they may be hovering below even today is the fact that we do have rates down slightly, could be pressuring those stocks. as of chris wheeler's point, this is a chart out of the election, g#btv, very colorful. right up top, we see the financials, up 17%. right in the middle of the s&p 500, up about 5%. this is the trunk trade lagging,
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the merrill in yellow. the question is not whether or not these will continue in this manner into 2017, interestingly, rich ross over it ever core -- at evercore did say at a panel that they expect technology to be one of the best sectors next year. as for the trump trade itself, talks continuing to the new year, a great chart that suggests it may continue and may not stall as soon as people may think. looking at the bull market, lots of green measuring the movement in the first quarter, the fourth quarter. among those quarters, only one was down, the fourth quarter of 2012 down 1%. the big gains are clearly at the beginning of the bull market.
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we are looking at more moderate games. quarters,big fourth small fourth quarter xoma we had gains also in the fourth quarter, so this chart may suggest that the trump trade is likely to continue right into 2017 at least in that first quarter for perhaps small gains. david: abigail doolittle, thank you so much. stephen roach, senior fellow at yale university, says consumers have remained unwilling to really spend money. the pattern has not allowed the economy to recover fully since the 2008 financial crisis. he was asked if the american consumer is still struggling. stephen: there was a balance sheet recession that left devastating short consumers in a horrific hole, and they are digging out. the debt to income ratios are down, the savings rate is still low, but it is higher than it
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was during there is more work to do, so the key is to focus on balance sheet repair in the quarters and years ahead in the new administration. >> stephen, will donald trump make the american middle class great again? he wouldwell, guy, certainly like to, but it will take more than a politician to transform the rough dynamics that are bearing down on the american middle class. the president-elect is focusing, to his credit, on jobs. but to get jobs growing again, it is going to take more than a back call to bring workers from offshore. we have had fundamental problems that have been bearing down on the manufacturing sector and other sources of job creation for a long, long time. administration that wants to
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now be muscular in using trade policy to bring jobs back home, that could really backfire the term protectionist at a time when our budget deficits are going to get larger and our trade deficit for macroeconomic purposes are likely to get bigger, that is a big disconnect that could have significant applications for the u.s. guy: do you get a sense that the policies being talked about as far are regressive, progressive, what is the mix in terms of income distribution during the next four years? stephen: income distribution is not an active consideration by the incoming trump administration. that was characterized, rightly or wrongly, as one of the flaws in the obama administration. going back to classic trickle-down supply-side economics with tax cuts
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skewed more to those with job creation. tom: what is your experience with trickle-down? what is the efficacy of trickle-down theory? stephen: a lot smaller than we thought, tom. enough tod, but not make a big difference to the median worker, whose real wages did not grow at all. want to talk about china, and i want to talk about this almost as a domestic issue. you have got a great quote, "a bilateral approach to a problem."al is our president elect is a dealmaker -- he loves to do deals, i think we can all agree on that -- a dealmaker does not do multilateral, do they? onehen: a dealmaker does transaction at a time, one partner at a time, and does not have a big appreciation of the big picture. the big picture is what is hurting in the world economy. tom: let's bring up a chart, dr.
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-- e, the editing of gdp dr. roach, the ebbing of gdp. you have been a critic of the hard landing, that is not a hard landing, moving down to 67%. that is not a hard landing, is it? is part of theis effort of china to balance a way for hypergrowth and manufacturing-led x boards and investments -- exports and investments during the early stages of this transition. if they are successful, and i remain hopeful that they will, growth will slow further, but it will be more sustainable, we can grow more balanced, and set them up for a more stronger economy in the years and decades ahead. om: what is the gloom crew get wrong about china? stephen: they are looking at china through the western lens.
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japan.crisis a la they have been on a huge debt binge. they need to wean themselves from a debt intensive growth. they oh their debt to themselves, and the key challenge for china is to make certain that the loan quality in the inking system gets addressed, and that they progress ahead and then managing this transition. tom: jonathan spence of yale university, china is a consonant, the mass and the scale. what is the art titian of pacific rim china from the rest of china? ofwhat is the partition pacific rim china from the rest of china? is it forever apart? stephen: i've seen a lot of growth and development concerned in eastern, coastal china, but they happened spreading development out into central china, especially in
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gigantic cities. tom: twice the size of new york. stephen: exactly. and growth is taking advantage of cheaper labor and greater connectivity. you have infrastructure that connects central china to coastal title that we would die for in this country, having just suffered whiplash coming on eastside drive to see you this morning. [laughter] does the next generation of politicians see the same china as the current generation of politicians? stephen: the next generation, guy, in china? guy: yes. next year will be a political event for the chinese. stephen: the next generation of politicians and china is the current generation. xi jinping is not going anywhere. he will bring in a new leadership team, but there tightly aligned with his
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thinking on the rebalancing toward the services and consumer-led economy. i do not look for any fundamental shifts in policy in the next party congress. tom: 20 seconds. should mr. trump travel to beijing? he needs to get a deeper and more personal appreciation of the challenges. i would welcome the chance to have the president-elect make a trip to china and see what is going on elsewhere in asia. david: stephen roach, senior fellow of yale university, on "bloomberg surveillance" earlier today. negotiations with johnson & johnson. we bring you the latest next. this is bloomberg. ♪
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julie: you are watching bloomberg. mark: both economy is showing signs, look at rising growth in the country. julie: then, coca-cola is trying to separate itself from ab inbev in africa. how to the civil war start, and where is it headed now in syria? the economy probably maintained brought by resilient internal demand and intense job creation, estimating to people shown increase of about .7% in
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the fourth quarter unchanged from the prior three-month period. julie: elian's chief economic advisor mohamed el-erian says it is not just about implementing domestic policy. he says the u.s. has a better chance of entering if trump can embrace other nations. el-erian also cautioned looking to global markets. inamed: we have priced low market accidents, and we have ignored all political issues. you know, part of the reason the iskets are reacting so well because we get in a political disruption in the u.s. that seems to be positive because we are going to unleash congressional action, but you are also getting political disruption elsewhere that are not so positive. inbevuser-busch-an
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selling for a price of $3.2 billion to coca-cola in several african and central american nations. coca-cola is planning to hold those territories until they can be refranchised to other partners. julie: time now for our bloomberg quick pic where we provide context and background on issues of interest. syrian rebels said they have reached an agreement with the government to complete the withdrawal from aleppo. it is the most significant victory for president bashar al-assad since the uprising swept the country in 2011. here is how it unfold and where the conflict is headed. >> has a decade of uninterrupted violence, 450,000 deaths, at least 11 million people displaced from their homes. that is like the entire state of ohio. even if the syrian government recaptures aleppo, there is no end insight. here is the situation -- since
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1966, the alawite minority and its offshoot shiite islam has been in power in syria, despite the fact that alawites represents 12% of the population. the current president, bashar al-assad, took over in 2000 after the death of his father. spring.011 and the arab the world watched as uprisings in tunisia and egypt quickly toppled their respective dictators. inspired by these events, syrians took to the streets to protest bashar al-assad. instead of stepping down, assad violently crush the protesters using tanks. sectarianct took on a nature. sunnis from the other areas through their backing. honest -- the to
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of the islamic state attacked both sides. then there are superpowers like the u.s. and russia, both frequently at odds over the war. simply put, the u.s. is against assad, and russia supports him. both countries are actively fighting inside syria against islamic state, an al qaeda spinoff, in the name of combating terror. russia claims they have bombed other groups supporting assad. forcesassisted assad's in retaking aleppo, the biggest victory in six years of civil war. andstated i fighting disruption, syrians are fleeing by the millions into neighboring countries, stranding resources and create a global human tyrian refugee crisis. russia says it wants to keep syria sovereign and independent by backing assad. for years, the u.s. has insisted
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assad must go but has since softened its stance on the dictator. for the donald trump presidency, that stance may soften further. he suggested partnering with russia should take place over supporting the syrian rebels. julie: you can read more about syria and all of our quickfix on the bloomberg. that is your global business report. head to bloomberg.com for more stories. ♪
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♪ david: this is "bloomberg markets." i'm david gura. exclusiveays it is in
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talks with former suitor johnson & johnson. has only been a week since they ended negotiations. what gives? here is more on the story with max mason. what gives? what do you think is going on? max: i am pretty surprised. usually when you end talks, they are over. ,e do not really know for sure although the fact that actelion says it says it is an exclusive talks, one thing that might have happened is johnson & johnson has a much bigger cash pile. they are much bigger and likely to use a cash transaction. they have no contingent value in casehich is a step actelion's research pipeline pays out.
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decided they wanted a bigger cash component, that might have made johnson & johnson look at a more attractive partner. david: what does the ceo want out of the deal? he says as it fell apart, this was not a deal about money. what is he looking for? generally he does not need money himself -- he built the company from scratch. you have to take into account that there are other stakeholders, other shareholders. this is a deal that has such an enormous premium, as much as $30 billion, the highest reported level. it was closer to $16 billion before. i think that just might be what is happening. david: what sense do we have white conversations fell apart the first time? max: i look at evaluation, money. johnson & johnson said they
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could not arrive at a deal that looked attractive for shareholders. the question is why they look more attractive now. it is really difficult to tell. we will find out more in the coming days. david: what is actelion's bread-and-butter? what is the company make, and why is it interesting to johnson & johnson? max: two significant on broad market, are for the cardiovascular disease, ph, and they have more than one billion dollars in revenue now, and they are acted to grow in the future -- expected to grow in the future. there are not that many companies with that level of cells with -- sales with rejected growth. they have a diabetes drug with no competition. johnson & johnson has pressure on its lead. so a potential tacking on a couple billion dollars currently in drugs from really attractive franchise is not something you
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see too often. david: help us put this into perspective here. we see potential dealmaking with this company. what is this a more largely? max: it has been quietish, especially when you take into account the last two years, which have been real blockbuster. nothing really fundamental has changed about the sector. new drugs, new drug candidates, but what has changed is the sentiment around it. potential big premium for a company that has resisted in the past to show that m&a might be back. that is something they're looking at really positively. david: some questions that are still unanswered to, what are you looking for the coming days? max: how much is johnson & johnson going to the out -- to pay out? there still a cbr components, or is it all cash they will be
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paying, cash for the pipeline in addition to the drugs that are already on market? and will it be a clean transaction, or is it going to be some kind of mixed deal where johnson & johnson gets the onketed drugs and leaves the marketed drugs under clozel's control. onid: for more, go to gadf the bloomberg. we will speak with jeffrey scott next on bloomberg. this is bloomberg. ♪
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david: it is 1:00 p.m. in new york and 2:00 a.m. in hong kong. i'm david gura. welcome to "bloomberg markets." ♪
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scarlet: from bloomberg world headquarters in new york, we are covering stories in san francisco and london this hour. david: monte dei paschi says liquidity is going low. we will sit with new york & company ceo gregory scott on what the retail business is doing when donald trump takes office in january. president obama bans offshore drilling in 100 acres in the arctic an oceans. we get the latest from toronto. still not at doubt 20,000. julie: not any closer today. in fact, a little bit further. we are really not seeing much movement overall in the u.s. averages. volume is down want again as a
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lot of people have left offices for the holiday. the nasdaq down the most of the day come a but it is only a 10th of 1%. imap onsee it on the the bloomberg. you have energy and materials doing well, but health care is the big drag. financials and tech are also in the red. you can see it is pretty split the between green and red. individually, the biggest drags our health care stocks with one exception. merck, pfizer, and celgene are lower, but so is the consultant giant. that company coming out with earnings and revenues that missed estimates. company is seeing slowing growth and financial services, specifically in north america. that is according to bloomberg intelligence. we have this developing story that david was just talking about, having to do with actel ion.
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it is an exclusive talks with johnson & johnson on a deal. j and j shares lower after that statement came out. actelion shares are higher. the swiss drugmaker up 10%. sanofi shares are up -- shares are up higher. they had been in talks with actelion. this j and j and actelion announcement seems to exclude any deal with sanofi. the other story is in commodities within the energy complex specifically. we saw crude oil inventories on a weekly basis unexpectedly rise. natural gas on the flipside is going higher. lift really helping to energy stocks. chevron and exxon mobil are also getting a bit, although exxon mobil is just barely today.
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this is a reason that energy is a better performer and balancing out what is going on in health care t today. david: let's check in on the bloomberg first word news. emma chandra has more. are: german authorities offering a reward for the arrest of a tunisian man involved in the fatal attack on a christmas market in berlin. described him of average height and weight with black hair and brown eyes. in a public notice issued earlier today, they won the suspect could be dangerous and armed and urged members of the public to notify police if they see him. syrian tv says aleppo evacuations have begun, allowing rebels to withdraw from the city . opposition forces were asked to surrender their foothold to the government last week, but dispute had delayed the final round of evacuations. thousands of civilians are due to be bustout of the war-torn
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city. authorities in mexico have not said what may have caused an explosion at the fireworks market that killed at least 31 people and hospitalized more than 50. 11 people are reported missing. the market was bustling the shoppers when a powerful chain reaction explosion ripped through its stores. the u.s. population grew this year at the slowest rate since the great depression. that is according to the 2016 u.s. census report. utah is the fastest-growing state with a rate of 2%. illinois lost more people than any other state. news 24 hours a day howard by more than 2600 journalists and analysts in more than 120 countries, i'm emma chandra. david: thank you very much. it has not been a great day for european banks. the italian banking sector continues to struggle. billions of euros are needed to .lean up bank balance sheets that comes amid concerns monte
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dei paschi will not succeed in its efforts to attract 5 billion euros of private sector funds. the bank stock trading at record lows. in spain, investors are also getting hit. europe's top court ruled against them in a mortgage payment case, which means customers could be entitled in billions of euros in compensation. -- creditase is suisse is also cutting jobs. joining us now is bloomberg gadfly columnist li na from london. we know the bank has a laminated the limited of jobs this year. -- you limited the jobs this year. this seems to be what the company said was want to happen. >> credit suisse is in the middle of a new turnaround under the new ceo. they really want to focus more on wealth management and less on the rank-and-file investment banking revenues that have proven tough to earn recently.
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this seems to be on track with its bid to cut costs and essentially sell this was part of the business. -- the swiss part of the business. i'm skeptical of the impact of cost cuts. we have seen other banks struggle to protect revenues went to cut costs. credits lease think they can grow -- credit squeeze thing uisseing go -- credit s still think they can grow. david: what about how he intends to right the ship? how close is he to doing that? lionel: the issue is how much time he is going to be given by the shareholders. this is the first year that they are closing with a really big radical overhaul, and it has been very painful and a tough year for the bank. the optimist would say that actually the worst has gone in terms of pain and now that markets are picking up again, they could try to reap the benefits next year. this is a very tough environment
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to be shrinking, especially if you are a brand like credit suisse. next year is going to be quite critical. it will be quite critical. david: let's move to spain. what is the take away from the news of this court ruling. ? we have banks try to get back on firm footing. how much does this set them back? lionel: it's a bit of a mixed bag. and itbviously unwelcome comes at a critical juncture for the spanish banks. the quality and the competition in the banking market was slowly starting to get better and now it seems they are going to have to pay a big fine as a result of this ruling. it hurts some banks more than others. i would think that this is a one-off that the market can absorb. this is not a crisis on the italian level.
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david: you brought it up. monte dei paschi trying to raise and are worried about liquidity being less than forecast. i thought the sovereign wealth fund was going to come and save the day. what is that fund waiting for? is that the last hope for this bank? lionel: that's a very good question. it was supposed to be a white night for a lot of the banks. it has yet to make that move. the sovereign wealth fund has been burnt by european banks in the past. all the reports suggest they would not be a white night and that this would be the end of planoad at least for the that monte dei paschi was trying to get done before the end of the year. we come to the very heart of the discussion of what happens now if this bank has money to bailout its banks. 20 billion euros can get you a lot of monte dei paschis.
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it's a very idio idiosyncratic part of the italian banking system and it will probably take more than 20 billion to control its problems. david: from bloomberg gadfly, joining us from london. the opposite story happening in the u.s. were banks are on a tear since the election. is there room left to run in financials? brendan hawken joins us now from the ubs trading floor. since thethusiasm election. you could argue before then as well. is there more room to run? >> we certainly think so. good afternoon to you. say thatuld generally especially with a large banks, we have seen a great deal of expansion, but we have not seen consensus sentiments move up. we raised our estimates shortly andr the election marginally better capital markets activity.
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we started to see it play out in the volumes and the data that we can track. if you look at the consensus 12 month estimate versus our 2017, he almost lost an entire turn off of the pe multiple. correcting the consensus outlook for just a few of the metrics already reduces how expensive the banks look on that side. and then you have got the whole idea of less intense regulatory scrutiny. that's not even talking about a dodd-frank rollback or any changes to existing laws. instead, you're talking about a less intense or less rigorous or less punitive enforcement environment, which could allow for better revenue opportunity and really increase the revenue philosophy. david: that is something i spoke about with anthony of sky ridge capital.
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i asked him what he envisions when it comes to regulatory reform. let's hear what he had to say. >> they should be lower now. not to given over to dissertation, but they want to 34 to one on the leverage and ratcheted it back to 15 the one. we seem to do best where you have some banking failures but no systemic risk. david: he is talking about capital ratios. as he begins to forecast what howsector looks like, confident are you in the contours of what new regulation is going to look like under a donald trump presidency? brennan: the confidence level in the specificity is low. we don't know. we have seen the cabinet take shape, right? it shows us that there seems to be a bias to folks who are established executives, people within business. when you take a look at generally the people that are successful in business and established executives, they are
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not lovers of regulation. they would rather have business operate more freely and a more libertarian type of approach as far as a lighter regulatory perspective. i know that anthony has spoken specifically about the being shareable in the past and that this is a rule that needs to be retooled. when you look at the asset managers and how much those stocks have bounced, that is starting to get priced in. i do not think it is all the way priced in yet. we have to see a 100 day plan and what they plan to do with that rule. rolling back regulations seems to be a clear focus of the trump team. the president-elect himself in his video laid out that he wants to reduce two pieces of andulation proposal of a single one. there is an overarching principle that they want to reduce this burden and it is no doubt that it has hurt financial
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services companies, especially the large investment banks ability to generate returns over the last five years. david: starting with t. rowe price. they have seen a lot of growth since the election. what does that say about donald trump and the prospect for active management under a trump administration? brennan: it really comes down to that department of labor fiduciary rule. the way that was originally structured, the enforcement mechanism was the trial bar. it opened up the wealth management firms, which are the distribution mechanisms for ifet management, to be sued they fail the customer from a fiduciary perspective. the expectation going forward is not that the rule or the principles of the rule get eliminated, but rather the enforcement mechanism changes. no need to have the trial bar in there. you can use arbitration instead. that is a far less frightening prospect. it means the extent of the
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active management as a solution being complete losers is much lower. in the case of franklin, they have $6 billion in offshore cash . if we had repatriation, that is going to make for a very compelling capital return story for shareholders. i think that had a lot to do with franklin's move postelection. david: brennan joining us from the trading floor in york. by last-minute holiday shoppers will have trouble finding amazon's voice activated echo speakers. this is bloomberg. ♪
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david: this is "bloomberg markets." i am david gura.
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last-minute holiday shoppers will not be able to purchase amazon echo. thiey are sold out according to holiday listings, which opens the door to google home, which is somewhat to echo, and available for delivery. cory johnson joins us now from san francisco with more. how is amazon caught unawares here? cory: i would not say they are caught unawares. it was one of the top three or four selling devices on the amazon marketplace. it was number one on amazon prime day in electronics. they have known that this is a big seller and have been rushing to fill demand. demand has just been even greater. it's interesting this device. it's an out-of-the-box creation for amazon. google is following up and tries to mimic what the amazon echo has done. it's from the perspective of big amazon. jeff bezos has written about the three pillars of amazon -- the
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marketplace, amazon prime, and amazon web services are the three big pillars. they're searching for a fourth. there is a suggestion that may beecho and alexa that fourth pillar of amazon that could already be a billion dollars in annual sales and on its way to something bigger. david: you have seen these devices. how does it compare to the google home device? cory: the difference in the performance of the device itself. the devices are essentially empty shells that connect through the cloud to him assuring -- to machine learning artificial intelligence. what's interesting from amazon perspective is what happens behind the scenes and what consumers do with this behavior. this ingestion is that amazon might be selling this like amazon does with virtually no margin, but the notion that it will drive consumer demand. consumers will be interacting with amazon more, there are some studies, where they have found amazon customers who have the echo device in their home use it
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to spend a little more on amazon. those are metal sales on the margin when you're talking about a billion of dollars in devices can turn a lot more sales for the amazon platform. just as interestingly, they've opened up the development of this to all kinds of developers out there who can write for this thing. it is the same way that the app store works for the iphone. skill sets developed by programmers outside of amazon for the echo are driving for the possibilities of the echo and you could see big sales. david: how competitive do you think the space is going to become? you have these two big players. could we see a more crowded field than it is right now? cory: we have reported that apple is looking at developing a device. apple develops a lot of devices streets.r hit the what is important is not just having the device, but what happens when the devices being used. amazon has tremendous use cases for what it could be. if you look at what android did
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for google, you might look at the amazon alexa platform and say could do the same thing for amazon. david: that is cory johnson. you can hear more from cory johnson where he will be joined by carole marsh or for bloomberg markets on bluebird radio. bernie madoff be locked up in north carolina, but his wine selection is still at large. we take a look at what a criminal drinks. this is bloomberg. ♪
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david: this is "bloomberg markets." i'm david gura. wine educator got his hands on wine that once belonged to bernie madoff. as he opened up prize bottles. >> i have bottles from the
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bernie madoff collection. ♪ you know, my tagline is to drink bravely or drink richly. with his wine, i say drink feloniously. i called the auction house. there was one photo with a u.s. marshall seizure tag. before bidding, i called the auction house and i said, i just want to make sure the wine i'm bidding on comes with their own shoote seizure tags. it is nothing without seizure tags. it's like capone's guns. they assured me almost reluctantly. you could tell they had mixed feelings about auctioning such a dastardly person's wine, but all the proceeds went to madoff .ictims, so it was fine
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he had the source of winds, great bordeaux, for example, that you would expect. it's almost like great art. he was not a true collector, but he had good bottles. i heard through the grapevine that some of the bottles were actually gifts from his clients and potential victims. in a strange way, i'm drinking his wine. returning theke wine to its rightful place, or at least preventing him from drinking it. it was once some of these victims's property. it's a strange circle. ♪ have the here we labels. the color looks good. ♪ bottle is old and red
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and started relatively big, after about 10 years, you probably want a decanter. the color is still good and that's a good thing. wow, you do not get the smell from most american one. wine. that is bordeaux. doing this, i hope somehow he sees this video. sitting in prison, thinking to himself, i would've liked to draw that. instead, we are doing this for the victims. cheers. was, iorable as madoff think you do feel like you are taking an artifact of criminal history. for that reason and knowing that the proceeds went to victims, that aside, it is pretty
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exciting. if anyone who has ever tasted wine on vacation tries the same one backs at home and cannot understand why it doesn't taste -- taste as good, it is so contextual. it's the way human beings work. david: that was mark drinking feloniously, speaking with bloomberg pursuits. check out pursuits -- the finest destination for things in life. just had to pursuits go on bloomberg. what a trump presidency will mean for retail. we speak to ceo gregory scott. this is bloomberg. ♪
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live from bloomberg world headquarters in new york, i am david gura. emma chandra has more from the
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newsroom. emma: chancellor angela merkel is trying to get german result over the brexit ahead of the u.k.'s departure from the eu. according to two people who attended a meeting with german lawmakers, merkel said political leaders should oppose them. the u.s. will likely start easing sanctions against russia according to 55% of economists surveyed in a bloomberg poll, up from 10% in an october poll. president-elect donald trump has said repeatedly he wants to mend ties with russia. sanctions were imposed in 2014 over the violence in ukraine. president-elect donald trump's controversial first campaign manager is starting a political consulting firm and will not be joining the trump administration. firm will be located about a block from the white house. lewandowski led the initial
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campaign but was later fired. fewer people miss doctor visits because of costs under the of what will correct, according to a study from the commonwealth fund. the percentage of people who say they skipped going to the doctor because across fell to 13% in 2015. in some states like kentucky, the gains were even larger. global news 24 hours a day powered by more than 2600 journalists and analysts in over 120 countries. i am emma chandra. this is bloomberg. david: thanks so much. following donald trump's victory in the presidential election, retailers are watching to see policieshis will become law. joining us with his perspective is gregory scott, ceo of new york & company. great to have you here. i'm sure you have been listening, as we all have, to
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what the president was saying, candidate trump was saying while campaigning. what most greatly affects you in your line of work? gregory: we are watching, we are waiting. importantly, we are looking at what is going to happen in terms of foreign trade. as we import all of our goods, it is important for us to understandunderstand what is goo happen with new tariffs. for us, we are very limber in terms of weekend go from china to vietnam -- we can go from china to vietnam. we will wait and see what happens. we are excited if our consumer has more disposable income. it is a great thing for the consumer and business. there could be an upside to a good -- to it. david: so much of clothing manufacturing has shifted overseas. if you had an audience with the president-elect, what would you say? bush he is making is to bring it
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back to the states. greg: i would be thrilled if he could do that. i grew up with a company based in los angeles and we did a lot of domestic production. what is amazing about domestic production is its speed. you make less mistakes and you employ american workers. i would be fully supportive of it. there are still companies, factories in brooklyn here, where we can do that as well. i actually really support it if we can get the industry to a place where we can get the raw materials here at the right price. i think that is something that all american retailers with celebrate because it would make us more competitive with international retailers like h&,m which are fast to market. david: there could be trade sheriffs how do you plan -- trade tariffs. how do you plan for that x factor? greg: it is all about preparing
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for how we manufactured goods. it won't happen in six months, nine months. it will be a year, two years, three years. we are trying to figure out what the best place to make the product is for the best price, and for the speed. all about today -- it is funny, because the world has changed. speed to market is the most important thing today. old days, weeks used to buy things in iraq. today, if i can get it three months out, better. companiesking for that are fast and nimble and if we can get manufacturing back to the united states, it is a great thing for our company. david: do you see this changing how you interface with government? are you trying more actively to get points like that are clustered those -- points like that across to those in government? greg: i think we as a company are focused on our own business, and i think we are not highly political, and i think we really focus on what is best for our
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company and our consumer. david: the state of retail in general -- your company has retooled. you are looking more at e-commerce. what is the state of the u.s. consumer today and how do you cater? greg: so much better than it was in 2009 and 2010, i can tell you that. what i say to our customers and employees is if the product is right, the customer is going to buy it. we see unemployment numbers down. we see our customer, she has a little more disposable income. and for me, she wants things that are unique and she will pay the price for it. it is not about the lowest price. what is exciting about this environment is the on the channel. our business in 2010, 40 million online. today we do 200 million online. it has really shifted. the thing is, she still shops and stores as well. david: we hear story after story about the future of department stores, how long they are going to be around, the purpose they
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serve. how long are they going to be here? how long will bricks and mortar pkd or business? -- bt to your business-- be key to your business? greg: our brick-and-mortar stores are shrinking. however, i still believe there is a place for them. consumer still like to shop in stores. it is just they need to be smaller, place for customers can engage with an associate and try the goods on and get to know the brand. to shoply encourage her both ways. that is the future for us. david: i mentioned to trade policy and you look at immigration as well. what do you expect to happen there and what would you like to see happen when it comes to immigration policy in the u.s.? greg: i think as the ceo of a public company for women, i would like to stay neutral on the topic. i will say, though, we have a very diverse customer. we have a customer that really
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symbolizes america. and i am happy the way she is today. and i think we will support what the government is going to do. david: thank you for coming in. appreciate it. up next, two of the world's biggest oil producers, the u.s. and canada, have been offered just really in the arctic could this sure -- banned new offshore drilling in the arctic. and unattractive stocks outside the u.s. this is bloomberg. ♪
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david: this is "bloomberg markets." i am david gura in new york. let's go to julie hyman for charts of the day. are talking about sentiment as we head towards the end of the year and the sentiment seems to be overwhelmingly going in a single direction -- that is up. we have seen optimism in the stock market with stocks near record highs. this is a measure of the outlook for stocks. this is our survey of strategists that we do on a monthly basis. we update every time the strategist updates the forecast. this looks of the past several years and the gap between the highest and lowest forecast of folks we survey on wall street. i should point out, first of all, that all the strategists are looking at the s&p 500 to be higher year. the gap between the highest and the lowest is only 200 points. we have been doing this since
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2007. that is the smallest to get we have seen in the history of doing this survey, or compiling the survey numbers into a forecast. the average forecast for next year, 2356. the highest way 500 from jonathan called. the lowest is 2300, from a number of different forecasters. a different way of looking at the sentiment, coming to us from bank of america-merrill lynch. this is the global fund managers survey. in measures the percentage of global fund managers who think we will see global growth in the economy over the next 12 months. over the past year we have seen a bounce and we are now close to 60%. thee is one sector of market, or a couple, i should say, that are not quite as universally positive on where we are going. one possible signal of this, and that has to do with volatility. stock volatility is measured by the blue line, way down. the lowest it has been since mid
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last year. at the same time, we are seeing relatively elevated volatility in bonds and currencies as measured by the purple and white lines. that divergence between stock volatility and currency and bond volatility shows us there is still some trepidation priced into the bond and currency markets. and so we will see going into the new year, as we start to see more divergence of estimates when it comes to equity investors, or if there's a little more dispersion going forward as the nervousness, perhaps, in boston currency catches up the split happens, or if we could see the pattern persists. david: julie hyman with her charts of the day. not all markets have participated in the recent run-up. it has been a rough couple of months for emerging markets. this morning, david westin and asked the ubs head of emerging market strategy for his thoughts on the rotation
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back into asked the ubs head em. >> it has been rough since the u.s. election. i was just checking the data this morning. we have underperformed the developed markets by 900 basis points, 9%, if you like, since the u.s. election. most of that occurred in the weeks immediately after that. we argued to investors that they should think about getting back .o em we think that is the right call to make. very hards it will be for the new administration to really get the u.s. economy growing strongly in the near term. we think there could be some disappointments there. we have not raised the u.s. growth forecast postelection it that translates him in our view, to a bond market where the yields don't go up anymore from your and trend a little lower. all of those are decent liquidity conditions for emerging markets. it is not really a growth story in em, frankly. maybe everyone has gotten
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carried away with the excitement about the u.s. economy and, therefore, too worried about the bond markets and bullish about the dollar. david w.: you went there, the dollar. how critical is a weakening dollar to your approach? we have a piece on bloomberg today that says around the world there is an optimistic view on the markets in the developed world but not so much emerging markets. you project that to turn around. geoffrey: that is correct. it is a long-standing relationship with you typically do well when the dollar is weak and badly when the dollar is strong. when you have the weak dollar from money tends to look for a yield and goes towards emerging markets, risky assets come in reverse when the dollar's strengthened. if the dollar-euro goes to 1.13 clearly atof 2017 -- the moment the trend is a little bit against us, but we think that is going to be the case because of the european current-account surplus and our sense that the long-term equilibrium value is never to the 1.20 level. that is a critical part of our
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view on emerging markets. that is a very important ascension, for short. -- assumption, for sure. dennis that was geoffrey this morning. offshorencement that drilling in the arctic will be banned will provoke a fight between congress and president donald trump, and canadian prime minister justin trudeau will be left to deal with the fallout. pamela ritchie joins us with more. we will talk to canada little bit in the second but what are oddsmakers saying about donald trump's ability to overturn what happened today? itela: it looks like, david, could be rescinded, but the 1953 statute that mr. obama has invoked to get this agreement to the floor doesn't include minnesota the explicit provision for a reversal of what has been announced and what has been
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enacted. it boils down to does this could be held up in courts for years and years and years to make some sort of decision. that is the most amount of clarity we can get out of it for now the prime minister of canada, justin trudeau, has committed to making sure any new offshore leases to arctic waters handed out, there is a freeze on that now and that will not be handed out going forward. that will be reviewed every five years in canada by decided agreement. -- this side of the agreement. where the agreement is framed as something to safeguard -- 31 ecologically precious areas, precious waters and so on. it will in fact be a victory for environmental lobbyists, who have been pushing for this for some time to answer to 2.8 million acres -- it adds up to 2.8 million acres off the shore of u.s. land that will be protected. any discoveries already announced or drilling activity in existence will not be affected from the u.s. side of things.
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justin trudeau, for the canadian waters, has not been so specific about whether existing leases by canadian arms of companies like bp as well as exxon may be affected one way or the other. we don't have more clarity on that. david: there are shipping channels, i understand it, in the canadian arctic and u.s. arctic. what happens to those under this new law? pamela: part of the agreement is to listen the environmental impact -- lesson the environmental impact on arctic waters. you don't know how to shake detail on this one. there is some form of melting in the arctic, whether you want to call it climate change or whatever form you want to pin that on, and that opens up new passageways. part of the agreement is to have the shipping going through using less of what they call bunker fuel. it creates a black soot which melts more ice. there is that commitment to le ssen the omissions in that area.
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mr. trudeau, it is important to climate, is playing to policy in that he has made much of the fact that he is trying to rein in commissions to globally accepted levels. pipelines sooved 2 he is in the position of making everyone a little cross right now. david: very quickly, what this means for people who live in the arctic, and there are people who live there. what happens to them under these new guidelines? article,art of this which you can look at on the terminal, includes comments by people living in the arctic who were a bit blindsided by this, caught by surprise. they had an been consulted on this agreed as they had not been consulted on this agreement. some of those oil jobs or potential future jobs of drilling could be very high-paying jobs and some of the populations might have liked to have been consulted on that. david:,, thank you very much.
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pamelarg tv canada's ritchie, joining us from toronto. a biopharmaceutical company has entered into exclusive talks with u.s. drugmaker giant johnson & johnson on a potential strategic transaction. that is a surprise move that comes only a week after the 2 companies ended earlier negotiations. did not say more, saying it does not plan on commenting further until "inappropriate or formal deal is reached." nokia is is suing apple for patent infringement in germany. it says the tech giant has declined offers to license additional patents used by apple products. are 32 patentse in this recovery technologies including display, interface, software, and video coding. top officials from suckers english premier league met with u.s.-based owners in new york last month to discuss ways to tighten agents in the sport.
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owners are worried about a lack theegulation over agents, amounts paid out in fees, and media reports about malfeasance in the industry. flash" your "business update. breaking news moments ago -- president-elect, spoke to reporters in florida and said that his comments about tariffs were proven right based on events in ankara, and yes not spoken to president obama about the business market attack in germany. president-elect donald trump speaking to reporters unexpectedly just moments ago. more "bloomberg markets" ahead. this is bloomberg. ♪
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david: this is "bloomberg markets." i'm david guerrero. building a potential tree mall in new jersey is a potential
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uphill battle. carol massar and oliver renick spoke to the business behind the mall and the family behind it. carol: -- >> right now construction is underway. it has been stalled for a while. financing is not entirely in place will stop they will take billions more to finish. it has taken $2 billion to get to where we are now where people in new jersey no where we are and have been for quite a while, and opening-day is autumn 2018. a step back, because it sounds like third time is the charm. the third of who is trying to retail andga entertainment complex in the meadowlands. it is supposed to be a huge development but it has had a lot of problems. >> it started in 2004. it was called xanadu. it was meant to be, like you say, shopping and entertainment will stop -- shopping and entertainment.
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the big picture was an indoor ski slope, which you can see from the turnpike. not complete, but you can see the frame for a. that was kind of the main feature, and then the group developing it ran into financial trouble. they walked away from the project. another developer came in. they ran into the recession hit they also had to walk away from the project. and there it is at. of alope, kind of hulk structure in the meadowlands with hundreds of millions cars driving by every year. no one could finance it. finally, governor chris christie, who probably, if you live in new jersey, once called it the ugliest damn building in new jersey, maybe america. one thing everybody could agree about that christie said. when he came into office, he looked at it and said, you know what, these developers have already put $2 billion into this
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. if we can get it going, we can create a lot of jobs. there are promises of big economic benefits to the region. carol: it is a good location. it is right outside new york city. susan: it is convenient. and there was a trained link that goes to the stadium -- i mean, not direct, but it will go to the stadium and goes there on game days. it seems like a good idea to try to revive it. so he brought in a third developer, a group based in canada, owned by a family who also runs a little shopping center you might've heard of, all of america -- mall of america, and the west edmonton mall, in their hometown. they have been working on this project since 2011. they have greatly expanded what was already huge to include an amusement park and a water park and they are redoing the inside and adding all kinds of things. david: you can read her story in
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the latest issue of "bloomberg business week" and hear more from the magazine's reporters and editors every saturday and sunday on bloomberg told mission and radio. -- bloomberg television and radio. , perspective and outlook for the new year. this is bloomberg. ♪
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scarlet: 2:00 p.m. in new york, some :00 p.m. in london. i am scarlet fu. oliver: i'm oliver renick. welcome to "bloomberg markets."
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scarlet: we are live at bloomberg world headquarters in new york the next hour and covering stories out of washington, berlin, and beijing the dow industrials still trying to get to 20,000. a rally in the dollar. as traders get ready -- faltering as traders get ready for the long holiday weekend. president-elect donald trump be facing an economic downturn. when history tells us about republicans and recessions. and a look at how a huge american retailer ignore the internet and one. -- won. let's look on where stocks are trading with julie hyman. we are moving farther away from 20,000. julie: we are. stocks were little changed earlier and have taken a little bit of a letdown. at least when it comes to the s&p 500. as we see the doldrums as we head into the holidays, at least for trading,
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point continues to be low. looking at the dow the last seven trading sessions, i look back to, since it was within the 200-point striking distance of 2000, seeing what we have here. here is the dow, the range it has traded in over that period of time. the next grid up is 50 points. there is no guarantee we are going to get there anytime soon, depending on what happens over the next couple of weeks. this gives a little perspective on the movement we have seen. we have been doing a tally on how long it has been and how long it is going to take to get to the next 1000-point increment . this is a chart we have showing frequently for the shortest 1000-point jump, 35-calendar day period. now we are at 29 calendar days at this point. the dow, if you look at the
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winners we have seen since we hit 19,000 -- i just realized i forgot to call it up on my bloomberg so i cannot show that to you right now. i will come back a little later and show it to you then. scarlet: all right, julie, we look for to it eventually. oliver: cliffhanger there. let's check on "first word" news this afternoon. courtney collins has more from the newsroom. courtney: donald trump came outside unexpectedly and his beach,ago estate in palm florida from our short time ago to speak with reporters. he said his comments about terrorism has been proven right and that he has not spoken to president obama about the attack in germany. we will have more on the comments coming up. meanwhile, germany says a suspect in the truck attack was under covert surveillance for several months. this as authorities offer a reward of $105,000 for the arrest of the tunisian man suspected of involvement in the fatal attack in berlin.
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federal prosecutors described the 24-year-old as of average height and weight with black hair and brown eyes. in a public notice issued earlier today, prosecutors warned that the suspect could be armed and dangerous and urged members of the public to notify police if they see him. a spokesman for russian president vladimir putin suggesting that moscow doesn't believe the man who killed russia's ambassador to turkey acted on his own. but he refused to offer theories behind the assassination. andre karlov was killed monday in front of stunned onlookers at a photo exhibition in ankara. russia flew a team of 18 investigators and officials to turkey to take part in the probe. they plan to return home with karlov's body and his family treasury secretary nominee stephen mnuchin is facing growing pressure from senate democrats to account for his shoddy for college
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or practices. ohio democrat sherrod brown sent a letter asking mnuchin to detail his views on issues including fair lending laws and foreclosure prevention programs. and covering the world may be getting safer for journalists. the committee to protect journalists reports that 48 reporters were killed on the job this year, down from 72 in 2015. syria was the deadliest country for journalists for a fifth year in a row go at least 14 journalists were killed there this year. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i am courtney collins. this is bloomberg. oliver: thank you, courtney. turning to america's largest pension fund, calpers. they voted to drop the assumed return to 7% over the next three years from 7.5%. the change will affect the budgets of california courts and agencies and influence of the
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public pension funds because of calpers' big size. it is the biggest pension fund. joining us is jeffrey snyder, an insider and leading voice at a firm. it is in the news today, calpers' big pension fund. if you look at where they are protecting the returns to be, they are not there. what is this tell you about the shape the industry is in? calpers is the biggest pension fund in the united states but we are seeing it with the other pension funds where they lower the assumed interest rate. everyone has to manage it. it is not only define pension plans like calpers. it is the defined contribution plans as well. it runs the gamut --i'm sorry. oliver: it doesn't seem like a lot, but when you think of what they have under them, is that a big deal? jeffrey: oh, certainly. it forces them to recalibrate
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and look at their portfolio and alternative asset classes. they were in the news earlier in the year for hedge funds and moving away from hedge funds. there are other asset classes they are most likely considering and it has been written about, real assets in particular. scarlet: going down to 7% from 7.5% is a step in the right direction. it is acknowledging the reality that is out there. what is the risk that it is still too lofty given the low rate environment we are stuck in? jeffrey: it certainly is a risk and when you look at the unfunded status of not only calpers but around the country, this is a significant issue. this is not just at the state level. this is at the local municipal level. there are many funds around the country that have an underfunded situation. there are lots of ways to come at the issue, but at the end of the day, there is a lot of compromise that is going to have to happen. oliver: the compromise does not come from a your expectations in terms of return. where does it come from? a more temporary solution? what are the ideas these pension
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funds can go to? jeffrey: number one, make more contributions. that seems unlikely given the current fiscal state of many municipalities and state governments. alternatively, we see some pension funds moving to riskier investment like hedge funds and private equity. alternatively, taxation, but as we all know, that was a major issue in the election, and we know that the new administration will look to cut taxes. that is one way. lastly -- almost lastly, floating the pension obligation bond. that kind of kicks the can down the road. one alternative that is less popular is the defining, cushion -- defined contribution alternative. scarlet: if rates pick up in a big way, can deficits be reversed dramatically? it ist possible jeffrey:
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possible but we're looking at the long-term. when they are looking at calpers and other organizations, looking at their allocations, they are going to look at fixed income but also rotating cyclically to equities to make up the difference potentially. oliver: you talk about moving into different types of asset classes to get the returns they need. pension funds have a ton of capital under them. when you think of pension funds, you don't think of them taking risks, but it sounds like they are typically riskier areas. is this setting us up for a situation that is less than ideal to some extent as the markets go down? jeffrey: this is certainly an issue that has been written about, talked about. there are states around the country coming municipalities that have gone riskier and not gotten the performance. additionally, there is a fees associated with these investments. thirdly, illiquidity. being able to liquidate if you have to. there are things that prevent
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you from moving out of these real asset classes. all these are things that, if you are working with a client, you have to embrace and educate so that the client can make the appropriate position. these are thoughtful decisions that are made over a period of time. scarlet: what kind of moment in producing towards alternative assets like hedge funds? stoppedat being dead in his tracks because the regime change we have now? jeffrey: i mentioned calpers earlier backing off of hedge funds. there are others who are going more risky. you have to look state-by-state. north carolina is an example where they backed off riskier assets. when you are managing a pension fund, you are managing a defined contribution plan, you have a look at not only the investment returns but see the impact to participants and portfolio. that is something the board is
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considering. oliver: what is the worst-case scenario? we talked last month, you and i, about the pension plan where it is not one of the biggest but it is sizable and they had a run. is that the type of thing that will crack up? jeffrey: i think what is challenging, and why there are defined-benefit plans is it is an attractive benefit, and something you can use to retain employees. for police and firefighters, they have a shorter time horizon to retire. they usually retire in the 50's. this is a very, very attractive benefit. what you want to do is you don't want to just incentivize police and firefighter -- dis incentivize police and firefighters who are doing very important work on behalf of their citizens. in the case of dallas, people resign and move on to different jobs. scarlet: of course, you have the changing regulatory landscape. there is a department of labor role with a lot more transparency.
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oliver: just quickly, jeff what is the status of that right now? that is supposed to happen at the start of 2017 but we have a new and administration. jeffrey: we have a new administration january 20. the effective date of the rule is april. we don't know. most importantly, the labor secretary confirmed. we know there is a lot of work to be done with the current department of labor. there is a need to ensure that participants in a police are getting the best advice possible and the people who are making the advice are doing it for the right reason. we have yet to see whether or not this will be a rule that is delayed. all bets are off. we will wait and see. oliver: some transparency, ideally. great insight. we will be sure to bring you back when we are talking about that. jeffrey snyder, thank so much. scarlet: coming up, blackstone sees step back. from new york, this is bloomberg. ♪
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scarlet: this is "bloomberg markets." i am scarlet fu. oliver: and i am oliver renick. blackstone shutdown 1.8 early dollar fund, which allocated money on among 11 portfolio managers. andier today, jason kelly our hedge fund reporter kathy burton spoke about what this means for the broader hedge fund industry. jason: blackstone has been fund ofuccessful in the hedge funds. finding managers and giving them money. they were going to start
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investing directly and there were high hopes and just didn't go that way. it is a pretty rare misstep to a degree in this market, especially because they had built this business essentially from nothing in 2004 so into by far the largest hedge fund. why did they get into it in the first place? kathy: they have $70 billion now to put to work and a lot of hedge funds, as we know them haven't been doing so well. they thought, well, this is a way we can get traders and house and give them $30 billion, maybe , and it would take a lot of capacity they needed to fill. jeffrey: and what it -- not jason: -- jason: and what is interesting, they weren't alone in doing this . carlisle, one of the well-established private equity names, also has gone pretty deeply into hedge funds, or had until this week, as cap he wrote separates -- as kathy wrote a
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separate story about. they got out of their hedge fund business. 3 different hedge funds. ofin, the same bet direct investing. another product to offer investors. it is interesting to see these big names who have done so well for investors in for themselves, candidly, and private equity stumble when it comes to the more liquid assets. david: how challenging is it to start a fund like this in-house? why is there an interest in doing it knowing that there is challenges with running the fund itself? kathy: it is finding the talent that is very, very difficult. we have seen people like the insurance company that bought a big state in full journal and they have been having a horrible time finding teams to make money. same thing with blackstone, clearly. jason: and one of the interesting dynamics here,
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david, is that as these firms have become publicly traded -- blackstone went public about 10 years ago, 2000 seven. one of the cases they need to investors, or need to make to investors, is that they have a predictable revenue and profit stream. private equity is, to use the wall street argot, a lumpy business. when a public investor looks at an income statement and says, well, you did this this quarter, the next quarter wasn't so good because private equity you can time over a year, hedge funds and other real estate funds give you some continuity in terms of the stream. if you can dedicate that protectable -- protectable -- predictable fee stream to publicly -- some have limited stock prices and feel they have not been able to make that case, and one of the things that public investors come back and say, i can't predict what your profit is going to be year-to-year so it is not a good
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growth stock. david: what is the legacy of 2016 going to be going forward? you expect it will persist? kathy: i do, absolutely. ofhave already seen a lot institutions, public pension funds in particular, some endowments, say they are going to cut their exposure. -- i speak with say that is going to continue, that more people are going to cut. fees will be under pressure. it will go back a little bit to the way was before. maybe wealthy families will invest in niche strategies. people seem to think, including blackstone, that the industry will be 10 to 20% smaller. oliver: that was kathy burton and jason kelly earlier today. this is bloomberg. ♪
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oliver: this is "bloomberg markets."
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i'm oliver renick. scarlet: i am scarlet fu. donald trump good have a major impact on the federal reserve, according to david kotok of cumberland advisors. he says he could name up to 5 that governors. -- fred governors. fed governors. david: it looks like there's two vacancies so he can fill those you look at janet yellen. it is unlikely she stays. stan fisher will be 75. and daniel tarullo, resident the erstwhile regulator -- who has been the erstwhile regulator, were probably have someone else take that seat. people stay on to finish the term after they held the positions? usually not donald trump will name most of the federer maybe all of them depending on
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the others. >> what is a donald trump fed look like? what do they do, if anything? david: if you take the fed and say the model was academics, people who published textbooks and have expertise in monetary policy, and you move to businessmen, financial people, bankers, which for the unusual minority, do you change the outlook and the composition of policy? the answer is probably yes. julie: but how do you change it? david: i don't think we know. it is unfolding in real time and it will be real fun to watch. during the campaign he was accused of keeping interest rates too low for too long and being political that way. as a real estate guy he benefited from low interest rates. will the changes tune in office?
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david: i don't know what he is going to do. we will probably learned through a tweet. this is not a way to run monetary policy. but monetary policy will have to grapple with expanding deficit, or pressure on interest rates and the federal budget, and possibly the outcome of this very strong dollar, which is great for domestic industries but is going to start to translate into things in business worldwide. missing pieceer here, and that is the repatriation issue. we move one trillion into the u.s. how is it deployed? how do companies spend it? how much of that is going to coalesce into monetary policy? there are so many moving parts now. it is remarkable. it is going to give journalists busy. julie: it is going to keep you really busy, obviously, because you have to navigate is with investment decisions.
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when you look at all those variables, moving parts, when you go into next year, what is your highest conviction call when you look at the u.s. market? caps: you know that's all domesticcaps, mid-caps, has been on a tear and that is likely to continue. there is a bias with the energy sector with this group. you see it in the financials again today. interest rates have an upward path, which means utilities have a heading. you can get themes today. other month or two or three before we can get details around that. ofrlet: that was david kotok cumberland advisors. joining me now is joe weisenthal. that conversation got me thinking, just how important it will really be to have the fed be determining asset price direction when donald trump is determined to change the
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trajectory of the economy. will monetary policy have that much influence? joe: it is a really good question, especially -- i keep going back to, what was it, monday or tuesday, janet yellen gave a commencement speech. i think it was monday. it was not a very specific commencement speech. it wasn't really monetary policy speech. scarlet: not the labor market. joe: overview, not that groundbreaking. but yields jumped after that conversation. they don't typically move on commencement speeches. what is interesting is how the market seems to be a different -- taking a different two from the fed than it used to be. it is to be that the pitcher would come out, whether it is janet yellen or bernanke, and they would calm the markets. now it seems like every time they talk it induces a little risk come even though there was not a lot of news made in the speech. a feels like the fed was pushing things, or the winds were
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blowing in one direction for a long time, and maybe they are going in the other direction where they will not be so conducive to risk. oliver: it is pretty incredible. is there any possibility that yellen saw the trump administration in office that doesn't like her and says i need to get one out the door here? get this thing started? joe: i don't think so. i don't think they're particularly political. after they talk about political developments and how that affects the economy. but i think that would be no matter who won. scarlet: we will see joe later on on "what'd you miss" when we speak with the chief investment strategist at citi private bank. oliver: still ahead can we talk will prices with michael cohen. this is bloomberg. ♪
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scarlet: from bloomberg world headquarters in midtown manhattan, this is "bloomberg markets." i am scarlet fu. commodity markets are closing in new york so let's get a check on where things stand.
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cotton is heading for the biggest rally in two months. some speculation that a recent price slide and the weaker dollar may boost demand for cotton from the u.s., the world's top exporter. you can see that futures are up a bit better than 8.5%. investments in a new export projects have now fallen to the lowest since 1999. that follows a supply glut that had been pushing prices lower in recent years. and a check on crude oil, below $53 a barrel. $52.56 right now after a government report showed u.s. crude stockpiles increased for the first time in five weeks. up by 2.20 6 million barrels, according to the energy information administration let's stick with oil here. look at the chart with bloomberg. what you see is crude oil's relative performance in the commodities index. bar goes up, crude oil is
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outperforming relative to the bloomberg commodities index. that is the case for 2016. this marks the first time since 2013 that u.s. crude is set to perform the benchmark index and doing so for the most going all the way back to 2009. pretty notable outperformance. oil prices haven't helped this year. the recent deal among opec countries and non-opec members to reduce output. oliver: oil futures hit their highest in five months with cuts from opec and non-opec members priced in the market. the citigroup global head of commodities research says the cuts are not exactly as they appear. >> i think there is going to be around one million barrels a day out of the 1.8 million that has been committed in terms of real enforcement. remember that a significant 1.8 million,s the source of the doubts about compliance, is what they are calling in a funny phrase "managed to climb. -- managed decline."
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countries like mexico are contributing something that is already taking place. the cuts are something considerably less than it appears to be on paper. oliver: on "bloomberg daybreak americas," michael cohen was asked what effect adjustments to oil supply and inventory will have on prices. michael: we think prices are likely to average $57 next year for brunch. prices are likely to be on average higher in the first half and in higher in the first half and in the second half. i think that what we are going to see is that in the first half of the year you are going to see refinery runs increase. demand for crude is going to increase the crude supply is going to remain pretty level. you will have this big bump up in demand and the level supply that is going to result in a decline in in for a. and arguably there will be places around the world, whether it is in asia where we are
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already seeing, or the u.s., where the inventory draws will be quite severe and lead to tightness. >> the floor for the moment is the opec deal. ift is the guide for 2017 you don't have access to the bloomberg and cannot monitor ships coming in and out of ports? what is the guide to understand whether they are being compliant with the cuts? user,l: if you are a lay dragging a bottle of water out of a plastic cup, you will not see much of a change for your bottle of water. as a retail user of gasoline, you go and fill up your tank at the pump and will see a retail price of, not only because of what is going on for gasoline, but we are going to be facing for the winter than normal compared -- facing a colder winter than normal compared to last year. heating oil, all of that is
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going to show up. the increase we're talking about, the tightness we are talking about, it also going to show up in disposable income. where the disposable income ends up, because the prices are going to be higher. jon: saudi arabia is considering increasing retail gasoline and diesel prices for the second year in a row. what is the signal that comes out of move like that? michael: to me it is part of the broader story and the reason the saudis came back to the table. they have believed that prices it of supply was going to adjust much more quickly. and now finally after two years they saw it did not adjust as quickly as we thought. we have a problem in yemen, we have problems all over the middle east. we have a vision we want to implement. we have concerns with social unrest. and they took measures last year to increase retail or decrease fuel subsidies. this is another step along the path of reducing the burden of
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the government to actually pay for this social contract that they have with the people. david: is $57 enough to accomplish what the saudis needed to accomplish? is it enough to trigger more shell production from this country? michael: these are the important questions. in saudi arabia they believe that 50 or something more certain -- they are more comfortable with that prices fluctuating between the mid-30's and high 40's. from their perspective, it does help. they do have a lot of different measures at their disposal that some of the more at risk opec members do not have. on the other side, it is a big risk that they face because the prices to move into the high 50's or into the low 60's, as we project in q2, that could lead to a much more robust u.s. shell response than what opec's bargaining for. that is the risk, that by doing
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this they are cutting off the market share retention or their ability to retain market share down the long-term. jon: we have had this from bank of america-merrill lynch, the credit survey. worries about populism the biggest concern for the investors. what is the biggest concern for next year? michael: there is a couple of things. china is obviously front and center. the other risk is the issues concerning demand generally. as macroeconomic concerns related to china have a domino effect in the rest of the world, have an effect on trade, the protectionist policy of a trumpet administration could conceivably lead to less demand for fuel and trade and have long-term implications for global macroeconomic growth, as economists have highlighted. i think the demand side is the real that's one of the biggest concerns that we have. the other concern for the oil
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market is the fact that you have some disruptive supply right now in the neutral zone. that is half a million barrels a day of oil that is off-line and could come back. libyan production that is on the verge of coming back. we don't think it is necessarily sustainable. but that is the real risk, that we get this influx of half a million to 800,000 barrels a day of supply that completely negates all of this opec cut rhetoric that we are seeing from those countries. scarlet: that was michael cohen. let's get the headlines with "first word" news this hour. courtney collins has more. courtney: authorities in mexico are not sure what caused an explosion at a fireworks market that killed 31 people and sent another 50 to the hospital. 12 people are reported missing. the market was bustling with shoppers when the powerful chain reaction explosion ripped through its stall.
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the former texas comptroller and agriculture commissioner is being considered for agriculture secretary in the trunk administration. desktop administration. that is according -- in the trumpet administration. that is a going to political. she met with vice president mike pence yesterday. the idaho governor is also in the running. meanwhile, former utah governor jon huntsman is considered for the position of ambassador to japan, according to a report by "the new york times." the former presidential candidate is reportedly backed by chief strategist steve bennett -- bannon. he served as an investor to china in the obama administration. apocalypse isr forcing thousands of people to flee the country. beijing and dozens of other cities in china were under a red alert for a fifth straight day. the heavy smog has closed
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airports, schools, and roads. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. i'm courtney collins. this is bloomberg. oliver: thank you. coming up, white history predicts there is likely to be a recession in the next four years. this is bloomberg. ♪
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oliver: this is "bloomberg markets." i'm oliver renick. scarlet: i am scarlet fu. is suing apple for patent infringement in the u.s. and germany. it says since it reached a patent license agreement with apple, apple has declined offers for additional patents.
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nokia says there are 32 patents covering technologies including display, user interface, and video coding. exxon mobil has sweetened its bid for into oil by almost $4 billion. but the founder's sour on the deal, saying exxon is not offering. you for reserves in public new guinea. -- offering full value for reserves in top one to get a shoppingor the holiday season has delivered $80 billion in online sales, an increase from last year, this according to adobe digital insights. growth rates are higher than expected since december 15, suggesting consumers are shopping later in the season to take advantage of lower shipping costs. and because they procrastinate. usiness your "b flash" update. oliver: s&p vacillating a little bit. not a whole and going on today.
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thin, thin in europe and said here. -- thin here. scarlet: all right, let's check in with abigail doolittle for more color on the moves. abigail: one market that is on fire today, natural gas. natural gas is up 8.5%, its best day in about two months, this ahead of a government report tomorrow that expect to show a drop in inventory. analysts estimate that there will be a drop of 200 billion cubic feet versus the five-year average of a drop of 101 billion cubic feet. natural gas is surging on those expectations. let's hope they are right. today, on the strength, we have lots of the emt companies trading sharply higher. southwestern energy, chesapeake energy, these are among the top percentage performers in the s&p 500, and relative to whether or not the analysts are correct or not, whether we see natural gas pulled back, lots of volatility
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recently could we go to the bloomberg, and this chart is pretty bullish. a five-year chart of natural gas. back in 2012, natural gas but in the bullish holding one of the 50-day moving average moved up and it sticks a lot to the interest and momentum. this past summer suggesting big gains could be ahead for natural gas. the last time we saw one of these, natural gas more than doubled. scarlet: thank you so much, abigail. oliver: during his campaign, donald trump said his plans for the economy would result in 3.5% annual growth, will about the current pace of expansion. advisor toldmco bloomberg he's worried about trumps policies. there is worry about the actual policies we will see from trunk, and it is interesting that the trump recession is actually quite possible over the next four
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years because every republican president since world war ii has presided over at least one recession in his term. oliver: for more on the history of republicans and recessions we are joined by richard miller in washington. it seems like this is a pretty clear-cut case. is it as clear as it looks like, where republicans have presided over for economies -- poor economies? no disputing the fact that every republican president since world war ii has presided over recession. with democrats there were 2 long stretches where democratic presidents -- lbj in the 1960's and bill clinton in the 1990's -- didn't have her session. if you dig a little deeper and say why do they have recessions, then the picture gets murkier. scarlet: but surely that has got
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to be some common threads as to why they were recessions under republicans. what did you come up with in terms of the large big picture explanations? rich: there was a paper that alan blinder did. people may say he is a little biased -- he served in the clinton white house. pretty rigorous in their analysis and they said, well, they admitted it was not because the democrats were following better fiscal budget policies or that the monetary policy would be better. it was oil shocks were not as bad during the democratic presidencies, and productivity advances through technology, p -- arguably overlong over long periods of time was better under democrats. oliver: i remember a similar cap a study on the stock market -- similar type of study on the stock market, and basically they found the democrat and republican, it was the stock
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market, basically a coin toss. i'm wondering from the economists' perspective how difficult it is to tie causality to policies, knowing whether or not they presided over certain markets, but was it because of what they were doing? rich: for example, ronald reagan came in and when he came in, jimmy carter inflation rate was over 10%, and paul volcker was a fed chair, and he was determined to get the inflation rate down. he drove interest rates up to 20%. you could argue that no matter what reagan did, and he cut taxes a lot initially, we would have had a recession. point here,roader too, that shut leaders have more -- fed leaders have more say or power or influence over the cyclical ups and downs of the economy and whether we go through recessions then-president stupid -- then presidents do. scarlet: there is an inherent
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limitation on how much impact presidents have on the economy . office with a bull market raging since the depths of the 2009 bottom. rich: honestly, hopes -- obviously, hopes or expectations are that he will come in with a pro business-friendly policies. guess the concern might be that may be investors are getting a little bit ahead of themselves, and he is going to have to work with congress to work with what he wants and as mentioned earlier over there are some policies that could be bad for the markets, like if he slaps a lot of tariffs on chinese imports, for example. oliver: i guess it is a question on whether you want to be on the end were beginning of the cycle.
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forget about online shopping if you go to t.j. maxx, because it is holding on to its brick-and-mortar words and shoppers looking for the real life experience are flocking to its stores. this is bloomberg. ♪
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oliver: we have some breaking news here as it pertains to the trump white house. "financial times" is reporting that peter navarro is going to be meeting the international trade council. of course, the university of california-irvine public policy economic professor. a little more news there. we see how he will build out the economic team. scarlet: peter navarro to join
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the international trade council. there has been a lot of talk this holiday season about the dominance of online shopping but one regional or has all but ignored the internet and seen sales soar the last five years. joining us with a look at how t.j. maxx is banking on the real retail experience is shannon pettypiece. we were just talking about t.j. maxx and he has been to a t.j. shirts.formance dress oliver: i was going to say for her birthday shopping. scarlet: thank you, thank you. he went there to find restaurants but has not gone back since. oliver: always different every time you go. shannon: it depends on the type of shopper you are. some shoppers love consistency. there is a sector of shoppers who love the treasure hunt. they love going into a store and never knowing what it is going to be there. stop in and see what is at t.j. maxx. they wonder the store and it is also like a hobby. the exactne who likes
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same thing every time, would be a perfect online shopper. you know the dress shirt you like, you know the size you are. but for other people, that is why these brick-and-mortar stores have value because there is that type of consumer out there who loves the adventure. oliver: not just t.j. maxx, marshalls, all this stuff, do they really have a choice? the reason why i went back is you never know what is going to be there. how would they put it online? shannon: right, and there is a bit of an issue, to come that they get these great prices, and the brands selling to them might not want those online because that will drive down the price of goods they are selling on other websites. part of the deal is we give you these great prices but that means you sell them in the stores and when they are gone, they are gone. that is kind of the question now -- how long can he's retailers fight the trend?
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the vast majority of consuming is still done in brick-and-mortar stores. we act like the whole world is online, but brick-and-mortar stores is where the bread and butter is. but the trend is heading online. can the stores resist the momentum and continued drawing shoppers, or eventually will shoppers say, oh, you know, i love going into t.j. maxx but i'm just too pressed for time. i will just order it online and do something else on saturday. scarlet: other retailers are taking a page out of t.j. maxx's playbook and following them with off-price units. but the difference there is there are not stocking brand-name goods. a lot of times they are stocking the in-house brands. shannon: you still have to have -- the retail experience -- the store has to be an experience. it has to be clean, well-stocked, good customer service, the type of place you want to go, or it has to have such a great deal that you are willing to put up with the chaos, clutter, no customer
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service, because you have such an amazing deal. there still has to be the trade-off. if you don't have a great product and a messy, disorganized store, people don't want to go regardless of what you do. if you have a great product and good experience, they can lure that in. one thing i want to point out -- went retailers sell things online, they lose money on the shipping costs. it is not profitable endeavor at this point. maybe if they did not have brick-and-mortar stores they were trying to carry -- the brick-and-mortar stores and selling everything online when you are losing money. it is not a great endeavor. they have to figure this out, and either you are really going to focus on your stores and put online a site or have it on the back burner, or you will try to play both games if you try to play both games, you got to be really smart online and really competitive in order to make a profit. oliver: maybe the takeaway lesson is not kill online but at
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least clean up the retail space. shannon: have a great store that people want to go to. oliver: this is a little more systematic of the idea that -- symptomatic of, listen, something is lost without brick-and-mortar. shannon: there is still a place for brick-and-mortar stores. consumers like shopping there. it is just getting more competitive. scarlet: thank you, shannon pettypiece. of course, oliver is going to go to t.j. maxx -- oliver: i will get in the christmas. . why we might be headed for a recession. this is bloomberg. ♪
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oliver: it is 8:00 p.m. in london. scarlet: welcome to "bloomberg markets." ♪
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oliver: we live from bloomberg world headquarters and -- in new york for the next hour. we will cover -- cover stories in washington, majority, and here's what we're watching. oil and dollar also pulling back as well in light trading ahead of the holidays. the advance of european stocks are coming to a halt. a time ranks weighing on the broader indexes. spanish banks could get back billions of euros. -- a swissect drugmaker in exclusive talks with johnson & johnson, leaving out in the cold. we're an hour away from the close of trading. let's check on the markets. every day, we are a little closer, little further. 20,000 might eventually come.
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it is a question of how long it will take but the three major averages are very little changed . i thought we would look at some of the best and the worst performers. let's start with up warmers today. tilted toward gas. and -- energy, all getting a boost. is master beverage. optimistic about a new business and driven by some products that have come out. this is a company that gets most profits from the u.s.. it should be a good beneficiary on the downside, on the flip side, in terms of worse movers, it is a mixed bag.
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the exception is the consulting giant they came out with revenue mixing estimates and slowing particularly in financial services in north america. the other here, trip advisor, not seeing specific stories that are driving them lower. the marsh of the end of the year. various tax reasons as we close out the year. the promised graphic i forgot to load last time, the dow movers 19,000, 19,000, since november, these are the best and worst performers. these are the only two laggards here. this is one we have talked about a lot. the most heavily weighted in the dow because of its price.
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,.p. morgan chase travelers disney, verizon, chevron, they have driven the move almost 1000 points here. oliver: great implementation of the function. i love it. scarlet: looking at the financials, it was one after another. in any case, courtney collins has more of the newsroom. >> a suspect in the berlin truck attack, surveillance for several months. they wanted notice for a suspect is the man should be noted armed and dangerous. the arrest warrant indicates he has six different aliases and three different nationalities. german authorities rejected on an asylum request in july. 105,000 dollars has been offered for capture.
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president-elect donald trump came outside in palm beach florida to speak with reporters. here is what he had to say to speak in germany. mr. trump said his comments about terrorism and his idea about a muslim registry has been proven right. president-elect trump has chosen ther navarro to lead national trade council according to the financial times. advisor and aomic professor of economics. plans -- industry policy. the north carolina legislature dabbled to consider repealing lgbt protections.
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it began this morning but went into recess. governor patrick curry called the election after the council gutted its ordinance. that led to the hb2 passage back in march. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: thank you. climate, itt-rate raises questions about demand for mortgages. rose 2.5%,shows they marking the first increase since the 18th. what does it tell us about home sales in the new year? at rates, we look rising and the mortgage rate climbing, it might propel people to do something rather than sit and wait. today, weekly
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mortgage application reports, folks said the jump in mortgage rates, 4.4%, the highest in two point five years, seems odd to call that -- it is definitely causing people to get off the fence. i think the data will be heavily scrutinized going forward. housing is a huge part of the economy. an early warning sign peaking before the stock market and i think people will keep paying close attention to this. the data came soak mostly that it is too early to say. an interesting note i read, michael is not too worried about rising mortgage rates because the demand is overshadowing inventory right now. it showed inventories dropping
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for like 18 straight months. bottleneck of demand that should not be crushed too much by higher interest rates. everyone should be salivating by the high interest margin. we should keep a close eye on home sales. new home sales are even more in written obviously. every new home bill adds about three jobs. it is a very important part of the economy. oliver: people are trying to take advantage of a current system before we see the rates moving upward. whereas refinancing the bonds had low rate. with -- what happens if they get ahead of themselves? >> a good question. for banks, the big boom has been, one of the bright spots was refi?
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they were up in the latest report but as rates continue to go higher, it makes you wonder how much is left. scarlet: we have got to mention down 20,000. you need the hat. it is quiet. can they get there with quiet trading? >> how client is it? a piece of trivia. 4.5 points in 2.5 years. so very quiet. i think we will get therapy or i would not bet against the dow hitting 20,000 before the new year. the bigger question is what is the significance. the holidays, will it matter, will it have a psychological , that round numbers tend to have been big headlines about the market have. it will be a good question. scarlet: you can read all of
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mike's work online. he covers the markets here for us. thank you so much. hearr: coming up, we will from the pimco global economic advisor. what he is forecasting for the economy next year under the policies of president-elect donald trump here this is bloomberg. ♪
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scarlet: from new york, this is bloomberg markets. oliver: a strategic transaction. joining us, managing editor jeff mccracken. previously we were having discussions off and on.
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>> a quick rundown. we were locked enough to break the chain and we were in talks. it was last week, monday, tuesday, wednesday, it was reported we are done, we are walking away. it was outized, there. we reported friday of last week they were offering $2.75 per share roughly. it is a payment where you have goals, the drug test to do certain things and hit certain revenues and get certain fda approvals to get the payment. j&j in the last couple of days said listen, if you will bump up a couple of dollars and get north of 260 per share, we are willing to enter into talks with you. that is how we get together. billions of dollars in offshore cash they can tap in europe. that is why we're back here.
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scarlet: what is the urgency? >> it is not so much urgency. disease orot a rare franchise if you well, that other companies would like to have. it appeals to j&j, and there are a lot of companies out there. i am not a doctor. i want to make sure i mention that to everybody. they made a run earlier this year. for august, and oncology company, they lost on pfizer. they might be 0-2.
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>> -- >> my sense is j&j is close to a deal. perhaps early next week. perhaps it will not affect the share price as well. long-term, a lot of drugs are expiring and a lot of revenue we will lose over the next couple years. >> if it gets snapped up by santa fe, who else gets it? >> the other companies you want to keep an eye on, alexi on was one i mentioned. i have said it before and i will say it again. after about six months, the
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world will realize it is much , big toy get deals makers, companies will could -- quit worrying. we will do these deals and no one will problem with brought -- bucket. >> bloomberg's global m&a manager. -- it is ever been. the markets are really only focusing on the right tail,
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which has become better. for the also left tail outcome next year. a lot of uncertainty we will see. interesting to trump recession is not possible for the next four years. at least one recession in his term. again, how far away do you think that is? missing.ents are give us a sense of how long economic cycle is? >> it will soon be the third-largest -- longest as world war ii. next march, it will be the third-largest. -- trump is in a better
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position than ronald reagan or rich and does recognition or the -- or bush. sense, it has further to run. overplays thet he card and really gets tough not a -- not just on mesko but china. , andecond recession risk this may be the end of the first term. policyhat is the fiscal overheats the economy in 2008 and 2019. then the fed might have to raise rates aggressively and could create a recession in 2020 at election.f the next >> help me with trump reflation and negative rates. his optimism and confidence to the rescue, i do not buy it for a minute. german two-year in the yellow.
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london, it is really simple. negative rates, 2014. worse, worse, worse. do you assume the negative rates go away? >> i do not think negative rates in europe go away anytime soon. rateimplemented a stealth cut and removed the deposit floor for the bond purchases of the central bank. yield lessds that than 45 basis points. to the we're back currency war. it has the effect of being depreciated. tom: i will be using the phrase, cold currency work. itn i look at it, part of
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was the risk you were talking about earlier. rightody focuses on my now, instead of negative doom and gloom. on the leftplay out side? what is the path into thousand 17 for the distortion of the bond market? all, if you look at the u.s. side of the equation, the fed will probably raise interest rates faster than last year. put furtherend to observed pressure. 2.5 rate hikes, it may start to price in more. more upward pressure on the dollar, more downward on the end. on the other side of the elected, you will also see higher bond yields in the u.s.
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dragging out on the yields in europe at the longer end of the curve. bank is buying at the short and intermediate end. you will continue to see negative interest rates. the effect is the yield curve will steepen. oliver: still ahead, micron, the chipmaker is reporting results after the bell. the stock has been on a tear of about 45% on the year. this is bloomberg. ♪
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scarlet: it is not times for -- time for options insight with julie hyman. , he is out in me
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chicago. great to see you. we have got the vix bumping along the lows. it tends to be a low volatility cut -- time of year. do you expect it to bounce back up in january or do you think it will take something to get the volatility back up? clubs it will take something to put the volatility one way or the other. august 2015, shortly thereafter we had a chinese situation that caused a huge spike for the market selloff. it will be unknowns for the future. right now, santa claus rally. not much in the way of event
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risk in the short term. >> if it bumps on the levels, we dell, 20,000. even just talking about further records in stocks, do you expect us to continue to make further records as the vix continues on the lower level? >> typically, if you were going to see a reversal, you see the market -- the market do a quick reversal and come down. i think this is a sign of a slower accumulation. when we finally break in a direction, it will be to the upside. us out, iti help will be great with a lot of room to run. >> one earnings report in particular. we have had semiconductors performed pretty well here. almost everything has performed well since the election.
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>> this stock traded up a couple of years ago and came down as prices came crashing down. it is pre-much a commodity like anything else. you do not think of it when you think of c-suite been an corn and oil. in oneces tend to trend direction for an extended time. acquisitionrecent of the third quarter. you have all of that plus the better margins. it is bullish. a $22 long call spread on micron in the hopes it can rally after the earnings report in january. >> we will be watching that. more generally, it seems stocks are pricing in a good earnings season. a bounceback and earnings. do you think it will live up to expectations?
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it will for a couple of reasons. we projected 3.2% earnings growth on the s&p 500. if you only look at the energy sector, we are forecasting only 29% growth on the energy sector. factor that in the grand scheme of things, you see a gain in an oil stock and the market will end up rally. >> great to see you. back to you guys. scarlet: thank you. joined.ead, we are ♪
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courtney: germany now says the suspect in the berlin attack was under surveillance for several months this year. this as authorities offer a reward of $125,000 for the
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arrest of a tunisian man it acted -- suspected in involvement on the attack in berlin. described asld was of average height and weight with black hair and brown eyes. prosecutors warned that the suspect could be armed and ofgerous and urged members the public to notify police if they see him. vladimir putin is suggesting moscow does not believe the man who killed pressure's ambassador to turkey after -- acted on his own but he refused to off their theories. killed monday in front of .tunned onlookers russia flew a team of 18 investigators and foreign it administration officials in turkey to take part in the probe. treasury secretary nominee steve nugent is fate -- facing growing pressure from democrats

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