tv Bloomberg Best Bloomberg December 25, 2016 5:00pm-6:01pm EST
david: coming up on "bloomberg best," the stories that shaped the year in business in the americas. >> if i do not get donald trump with change, i'm going to get hillary clinton. >> he has not been able to control himself when he is this close to the presidency. david: a presidential race like none other with a business leader in the white house. the markets wait for the fed to move, and not always patiently. >> janet, get off of this fixation of lower interest rates providing economic growth. david: plenty of reaction to the
biggest deals. >> this checks all the boxes. >> oracle is making a desperation move to boost their cloud revenue. david: where did money move this year, and why? >> etf's are sharpening volatility. >> i think what we see is a play to quality. we are in a low return world. those are the three most important words to remember. >> i am not predicting calamity but i am sitting on a lot of cash. david: a look back at 2016 straight ahead on "bloomberg best." ♪ david: hello, i am david westin. welcome to a special edition of bloomberg best. we will review the most important business announcements and interviews for the united states and the americas in 2016. one of the most globally significant events was the u.s. presidential election.
this kicks off our year in review. >> let's turn to the race for the white house and the results of super tuesday. hillary clinton jumped out to a big lead in the delegate count after winning seven states compared to four states for bernie sanders. donald trump taking seven states as well, and taking a lead. the question is, how do the strategies change now? we are headed into a winner take all zone. >> the strategies change radically and this is why. we expected donald trump to do well and he did, and marco rubio to have a difficult night. they are now left with his option of, do we start to think about getting behind donald trump or do we have sitting lawmakers and governors saying, this is not what the republican
party represents? mark: how beneficial is it that hillary clinton can probably now sit back and start to plan ahead to november, is that to her advantage? >> it is beneficial in that she can try out a lot more strategies. mark: trump one in mississippi and michigan. does this stress the ability of him to win across very different areas across distinctly different demographics? >> he has one in all areas of the u.s. that is the thing about donald trump, he has built this broad coalition of support. >> what are your key takeaways from last night? >> there is only one key take away, it is obviously clear. even after cruz decided to drop out, trump was on a glide path. >> how does donald trump go about healing these rifts in the
republican party among the donors and the elite? >> with great difficulty. i think the people around him recognize that there is a lot of mending to do. david: you have been pretty outspoken about donald trump. don't we need to know what he is going to change to? has he told us what he is going to take us to? >> i heard the question and i too also have some doubts, but i know that if i do not get donald trump with change, i'm going to get hillary clinton. she has already told you, i want to shut down all coal mines and get off fossil fuels. it is the most stupid statement on energy i have ever heard. david: hillary clinton declared victor, becoming the first woman to run for the presidential race for a major party. >> she is now the candidate that the democratic party is going to
have to rally around. on the donald trump side, we saw a different donald trump last night. we saw donald trump on teleprompter, scripted donald trump, a man on the leash and making perhaps an olive branch to the republican establishment in a campaign cycle that we look to be a vicious cycle. >> do you think donald trump is good for the republican party? >> obviously i wish he would stop talking about judges in indiana. anyone could beat hillary clinton. mr. trump: i humbly and gratefully accept your nomination for the presidency of the united states. >> what should he do about want to take it easing?
what should he do about the tax code, the federal debt? >> you need to ask and specifically but what he needs to do is shatter the old system. you cannot effect a bureaucracy unless you crack it because the bureaucracy will tell you that you need them and you will move slowly. ms. clinton: when there are no ceilings, the sky is the limit. >> i think the democratic party in 2016 has done a very good job of trying to get to the actual concerns of broad-based american people. mr. trump: upon taking office i will issue a temporary moratorium on new agency regulations. >> trump would lower the top individual tax rate to 33%, cut corporate taxes from 35% to 15%. david: are we going to get
numbers that say, this is how much this will cost and this is how we will pay for it? >> i am skeptical about how accurate that scoring can be because you do not know how dynamic the economy can be. i think we are way underestimating america because we have been so many years in slow growth. you will get more business investment, tax revenues. it will make it easier to do the spending reforms. ms. clinton: starting on day one, we will work with both parties to pass the biggest investment in new good thing jobs since world war ii. >> hillary clinton's is one of a more robust governments that can get its hands dirty and the economy. is there a redistributional aspect to her proposal? >> yes, to provide more benefits to the middle and lower class but what she is also doing is investing in america and that is a pro growth agenda. jonathan: the first of three presidential debates, donald trump was not shy to touch on
yellen's fed. mr. trump: the fed is doing, by keeping these interest rates at this level. >> the fed by design was a nontransparent entity and was designed to be that way. the real issue to me is not as a great person like janet yellen, political. she is doing the best job she can. the process is not opaque or transparent and that makes it difficult to understand. emily: how do you think trump versus clinton would impact the growth? >> when you have a president -- let's say trump wins -- and you do not know what he will say next, he has not been able to control himself this close to the presidency he is not going to change. david: some of the last polls show hillary clinton maintaining a moderate lead over donald trump.
>> u.s. stocks over 2% with every major interest group and the s&p 500 up. this is the best one-day performance since march 1. >> financial markets are making it clear -- they do not want to see a president trump. >> bloomberg news saying donald trump is poised to become the next president of the united states. >> we are actually looking at a possibility tonight that is even more extraordinary, he wins pennsylvania but he might also win wisconsin and michigan. >> trump stuns the world. wisconsin has been called for donald trump, taking him north of the 270 that is required by the electoral college, that effectively leaves him as the only candidate standing. david: we will return to the trump transition later in the program, and look back at an important battle between government and business
let's look back at a fascinating 12 months of u.s. monetary policy. >> the rate remains unchanged. the fed would like you to know they are watching things, they see what you see, and everyone can take a deep breath and stop freaking out. here is the key language, we are closely monitoring local economic -- and for the balance of risks. tom: take us inside the debate at the fed of the how, how do you determine through 2016 the when of those rate increases? >> it is not, we are going to do it four times. do not have to make that decision. we say, the results will depend on the development of the economy and it will be data dependent. >> no interest rate change, but equally important is the dot plot. the fed scales back its plan for rate hikes throughout the year and policymakers expect to raise the fed funds by one half of 1%.
>> it is a more dovish fed. it seems to me that stan fischer has been overruled to some extent by chair yellen in terms of the forward policy. >> all of your extraordinary policy, much of which is still in place -- are they still effective? >> i think we are providing a very accommodative policy with our zero interest rate. i think if you want to be edging closer and closer to something of a more normal setting so you do not get stuck in this zero rate environment the way japan did.
>> the federal open market committee drafted a statement with a somewhat hawkish tone. gone is the reference to risks posed by global, economic and federal -- which the fed used to not make a change in march. >> did you learn anything about what the fed is going to do? >> much ado about nothing. they did downgrade the global condition and they did mention june. that is giving heart to the long bond in the u.s. by two or three basis points, but we will learn more of the next months as long as global and equity markets are stabilized. >> what does john williams have to see in june to say, i am on board for the rate hike? >> i think we need to see a continuation of that progress we have not seen over the past year. see inflation move generally up towards 2%, and continued job
gains. >> no change in interest rates. the fed, in a unanimous decision is holding at a quarter percentage point. what is more important of course is the outlook for rate increases, the dots. there, another shift by the fed to lower for longer. i repeat, lower for longer. scarlet: is this an admission that this business cycle we are in is different than what we have seen in the past and interest rates will not return to what we think of as normal? >> that is absolutely the case and this is an enormous acknowledgment by the fed. when they started the dots, it was at 4.25 and now it is at three. this is what we call the new neutral. scarlet: we are minutes away from the fomc's july decision.
let's go to michael mckee. michael: no change in policy or rates, a few changes in the economic assessment. no mention of economic activity overseas or the dollar, and no timeframe for future action. if you are feeling hawkish, there is a statement noting that near-term risks to the economic outlook have diminished. tom: it is a pretty good american and yet she is central banker to this troubled world. what would be your counsel to her for september and in the next year? >> i would say get off of this fixation of lower interest rates providing a push for economic growth. >> wall street, janet yellen has a message. she says the economic data have improved and "the case for an increase in the federal funds rate has strengthened in recent
months." >> when i look at where we are with the job market and inflation and our forecast for that, i think it is time to move. >> i do not think the committee is risking a lot by being cautious and gradual. i do not think we are behind the curve in terms of inflation or risking a big financial instability event. erik: no change in interest rates, but a strong suggestions there will be a quarter-point hike before the end of the year. you can see it in the dots, 14 of 17 fed officials expect a benchmark rate of 50 points for the first time since 2014. three policymakers dissented from the majority. michael: you take right now almost a pledge from janet yellen they will raise rates if nothing untoward happens? >> i did not think anything is a pledge from janet yellen anymore. it is all confusing.
there is hawks and there is doves and perhaps a few chickens. david: the more you buy, the more the bonds go up. is this sustainable in the long term? >> no. people with capital are enjoying this environment and people who are saving every day to help them build a nest egg for retirement, or a nest egg to build enough to buy a house, or a nest egg for their children's future, they are being harmed. we are seeing a real division. >> if the outcome does not change, will you argue for a rate hike in november? >> if the data comes in consistent with what we have
been saying, yes, i think it will remain a compelling case. >> he would vote for a rate hike? >> i would see. michael: no change in rates and no explicit signal that any rate increase is imminent. there were two dissents. >> what is the big take away? >> they did not want to make any waves six days before an election and they did not. michael: did the election come up in the discussions at all? >> we work very hard to remove political considerations from our decision-making. michael: no surprise, the target range moves up a quarter of a percentage point to a range between 50 and 75 basis points, that unanimous. the appropriate projected policy path next year is 1.4%, which would mean three rate hikes in 2017, not two.
tom: do you buy into three rate increases? >> i would doubt the fed would raise interest rates three times a year. >> i think the fed took a small step the on just being data dependent. if you walk back this notion of high pressure, this is a fed that could be tighter than we think and that is what moved the market. david: straight ahead on "bloomberg best," on of the years most significant showdowns, apple versus the united states government. in the dispute over privacy, did anybody win? this is bloomberg. ♪
david: uber is taking a big step forward in self driving cars. they will allow riders from pittsburgh to hail self driving cars. >> to have embarked on this crazy research that they thought would take decades, and it is very exciting and leaps them ahead of google and tesla, even though google is seen as the leader in terms of technology. david: you are watching the "bloomberg best 2016: america's year in review." i am david westin. apple remains the world's most profitable technology company but for a few weeks in 2016 it was the most controversial after it refused to comply with a court order to give the government access to data from an iphone linked to a terrorist attack.
>> apple and the fbi have been testifying on capitol hill. >> you see it in isil's efforts to task people to kill innocent people in the united states. that is a huge feature of our national security work and an impediment to our counterterrorism work. >> the inability of law enforcement to access devices or a judge has determined there is evidence that may relate to a crime, is having a big impact on our ability to do our job, to protect our constituents, and i think is having an overall negative impact on public safety. emily: there is no middle ground that does not put everybody at risk, it is not just about one phone it is about every phone and the future.
how do you respond? >> we have seen how we do in fact balance privacy and security everyday. until recently, apple was able to comply with our requests, and they have some of the strongest security out there. >> there has to be some discussion about how to solve this problem if there is, but you cannot conscript a private company such as apple to do something that changes products. we have civil rights that prevent that sort of thing. david: the u.s. said it may not need apple's help in unlocking the iphone in the san bernardino attack. a judge has postponed a court hearing at the 11th hour before the oral arguments. the government said, we do not need you after all. if that is true, does that substantially undermine apple's position that these phones are not as protected as we thought? >> i think apple can and has done things in places like china that we might not want to talk about publicly.
>> the department of justice withdrawing legal action against apple after they bypassed the phone without apple's help. >> it looks like the fbi is dropping its request to have apple write additional codes to circumvent security features. >> folks on the apple side will present this as a win but it is not a win to find out it is so insecure that people are lining up to say, i could provide you with access. i am not sure this works in anyone's favor. iphones are not particularly secure. david: still ahead, how some of the world's most respected investors coped with market volatility. >> we have amped up our caution. david: a roundup of the biggest mergers. >> you are truly out from the left field.
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then why settle for slow internet? comcast business. built for speed. built for business. >> once again, the company is urged to make changes. shot at thehe first proxy fight. >> they are selling the assets. >> would you view this as a personal failure? is. would say that it >> there is only so much they they cannot get the
cable company and the regulators will not allow them to. somewhatrobably appealing. >> verizon is buying yahoos business. merger that we knew would happen and it finally did. gives this scale. us >>is a right start for i have two priorities. seeing the transaction to the close, but also watching over the value of our asian assets and equity stakes that we have there. moving forward, we will ultimately figure it out. david: welcome back to the "bloomberg best," 2016, america's year in review.
i am david weston. 2016 saw the pace picking up as the year went on. here's a look back at the against and most interesting deals. >> ehealth and pharma deals a came out today. abbott laboratories buying st. jude medical at a deal valued at $25 billion. abbvie acquired stem centrex for $520 million. >> the year started with the equity market up and down. that slowed a lot of deals. in january and february, the deals were one that we were working on last year. and then he got slow. today is a busy day and health care is leading the way. that is not surprise, with obamacare and the push for consolidation, you're going to see consolidation.
>> comcast tried to buy dreamcast. >> one thing that makes it appealing is the theme park action. >> kung fu panda and shrek are going to be at universal studios. >> their sequels and a very clear tie-in between kids movies and the theme parks that was appealing to comcast. >> a blockbuster deal would create the world's biggest supplier of farm chemicals. it represented 20% premium to monsanto's last close. it would be the biggest takeover ever by a german company. if monsanto actually rejects your offer, are you ready, or do you have the capacity to increase the offer? >> we're totally convinced about the attractiveness of our offer. >> they are open to a deal with bayer, but the current offer is inadequate.
the current proposals immediately undervalues our company and does not adequately address or provide reinsurance for potential financing and regulatory execution risks related to this acquisition. >> do we intimate they would sell at a price? >> that is affairs luncheon. i have rarely seen such a friendly rejection from the target company. >> microsoft buying linkedin, valued at $26.2 billion, $196 a share, a 50% premium to linkedin's friday closing price. >> i wouldn't have expected that. >> what will the process be like and how you make sure it doesn't turn out like nokia or to some extent, even skype? >> when i think about acquisitions, i think is this
something that's going to be expanding the market opportunities? is this at the core of microsoft? is this something we can differentiate? this checks all those boxes. david: oracle will by netsuite at a deal valued at $900 billion. oracle really wanted to move into cloud. netsuite is like the original cloud company. >> netsuite is a truly cloud business, almost a side project for larry ellison run by zach nelson. it is going to be curious to see their other biddings. >> he basically said i want that. >> walmart agreed to vietjet.com for $3 billion in cash, giving the world's largest retailer
stronger online presence. >> it's a desperate move by walmart. the here and a half ago, the market cap was double that of amazon. now they flipped, they are at $230 billion roughly. >> bayer and monsanto, is third time the charm? the number that they are has to hit to acquire monsanto is $135 a share. they are talking about a breakup fee and a potential price. >> a step closer, how much closer? >> mayor has offered $1.5 billion in a termination fee. we are going to want more because a lot of revelatory issues that are going to come up, and price always matters. >> bayer increased their offer. they seem to want even more.
it's a five dollar pickup from the last -- the original bid. share prices dropped, it's more attractive. what's to stop monsanto from saying we accept? >> they have been clear from early on that they are not going to negotiate anything less than a number starting with the three. they want $130 minimum to try get a proper deal done. >> bayer announces a deal to take over monsanto, the largest foreign takeover by a german company. >> you feel confident you are able to do whatever is needed? >> we are blessed because this combination is one that is highly complementary and has caught for the size of this transaction, a very low overhead. >> to the big deal everyone is talking about. at&t buys time warner for $85.4 billion u.s.
>> at&t really is betting on content, we are going for some and it's very aggressive that has a decent chance of regular push back. but this is a game changing transaction. >> g combining oil and gas is this with baker hughes how many $32 billion deal. >> ge gets most of the senior positions, the chairmanship and the ceo position and baker hughes gets the vice chairmanship. it should be noted that baker hughes shareholders get a great cash payout as well. $7.5 billion. if you look to the shares this morning in premarket trading, at the moment, it looks like the baker hughes shareholders are much happier than ge shareholders.
>> what is going on? you would think the election would make people be concerned, but it doesn't seem like that had any impact at all. >> the election would have mattered if election -- of equity prices would have been more volatile. it's incredibly stable equity prices, for very large companies. a lot of these big deals typically involve some equity. but the fundamental factors -- they are very strong. low growth, which is bad for most things but good for m&a, that's how you get growth and very common in capital markets. david: coming up on "bloomberg best," america's year in review, on the whole, 2016 was not the best of time for hedge funds. it's a matter of perspective. >> is there too much money? >> $3 trillion isn't what $3 trillion was 10 years ago. david: this is bloomberg. ♪
david: you are watching the "bloomberg best," 2016, america's year in review. i'm david westin. time to revisit some of 2016's most compelling conversation with investors, financial leaders, and economist. market volatility was a theme throughout the year, especially in january as a global selloff raised fears of a recession. it was the topic of much discussion of the world economic forum in davos. >> it feels a little like 2009. >> will countries that are growing keep growing and sustain that growth versus commodities downdraft -- and the expectation is china won't grow as fast. >> you make it sound sensible.
>> it is always sensible. at the end of the day, companies like ours just have to keep driving the consumers america's continue, the question is how it plays out. >> i would say that we are in an environment in which is very important to have a well diversified -- that will include assets like gold in your portfolio. try to achieve balance in various ways. that is a whole subject about how to do it. i think gold at 5% of your portfolio, 5% or 10% of your portfolio -- under the circumstances, would be a prudent thing to do. prudence is the important thing to do. the reason i'm referring to that is win situation where debt is money. we have a fiat monetary system. we are having problems as central banks operate. think of it as another form of cash. when cash has 0% interest rates are less, think of it as one of those possibilities in terms of how you create diversification? >> the first quarter for the hedge fund business has really
been a very unfavorable period, in large part because when you hedge equity positions, for example, and markets turn and they go up, sometimes everything goes out and you are short. and it goes up. and then what compounded that were too few really interesting opportunities that many people were in. when they recovered their positions, stocks went up 100%. 200%, 300%, just for technical reasons. but sitting back from it, the rates of return to in the hedge fund business and the fee structure has discourage some investors, so it's highly probable that the asset class will shrink a bit. >> we will find out. >> the hedge fund industry has grown to a gigantic industry, more than $3 trillion. it's gone from a modest sized to this gigantic industry. probably about the same size as the private equity industry.
people are investing, and people think it hedge funds, you can get better rates of return. some of these hedge funds have had problems. macro. people realize you have very smart people, highly motivated come investing their own money aside investors and is likely they're going to do it well over a longer time. >> is $3 trillion to much money? >> a lot of the money is being invested outside the united states, not just in the united states. $3 trillion is not what $3 trillion was 10 years ago. it isn't that big in this context. >> the market can no longer look to banks to make markets. institutions have turned to etf's. it's the easy way to add beta and -- or take risk off. paradoxically, etf's are 3% of the market. we don't have any objective evidence of how much trading activity they provide in the market.
but say it's 10%. what we're hearing. an etf flows on a daily basis do move the market notably one direction or another. you have the advent of institutional investors who are trying to deal with market volatility using etf's and etf's archly sharpening volatility somewhat. i think that's a lot of detail. but what translate to is you need more and more portfolio managers have to set their course and stay on their course. >> what's happening in the bond market versus the domestic u.s. economy?
>> what you say is certainly right. i think what we see is a flight to quality. after the brexit shock, people are going for sovereign debt of the strongest countries. the feeling of risk aversion is very high and they say take me to the safest asset, those happen to be the sovereign debt of japan and germany, the united states. even with interesting is the u.k. yields going down and the pound dropped 10%. you didn't do well in u.k. bonds
if you were a non-sterling investor. the demand for high-quality liquidity has been the story of the last two or three years. >> it's very challenging today, in a low return part. and how do you do your business in a low return world? you can settle for low return with characteristic safety, or you can pursue a high return. how you get a high return in the low return world? you have to take significant risks. >> are you comfortable taking that risk? >> i'm a professional. don't try this at home. i have been doing this for 38 years. we know how to do it and what we've done in the last five years, we've operated under a mantra, move forward, but with caution. why say with caution for oaktree, oaktree is a cautious investor. that means more caution than usual. we amped up our caution, amped
up our selectivity and skepticism, all the things i said earlier were in short supply, we have increased. >> i think the negative rates completely stop saving, because you are not only rewarded for saving -- not rewarding for saving, but penalized for saving. i don't think that's good. i also think that it has caused a huge bubble in the bond market because people have nowhere else to put their money unless they buy a beautiful piece of art like our ceiling, or some pictures or something of that nature. tom: where would you put your money now? if negative rates have distorted the markets in central banks have distorted the markets, how would you be exposed today into the end of the year?
>> i think the only game in town are equities. and we have to play in that theater. >> you are cautious, almost as cautious as you have been at any point in your career. why? >> i am not uber-bearish. i'm not forgetting calamity, but my portfolio, i'm sitting a lot of cash right now. almost 60% cash. there are a few reasons for it. number one, just going about my day-to-day business of trying to find good stocks to buy and a handful of stocks to shore, and
finding very few belongings and a lot of shorts. that bottoms up tells me something i think about the markets. from the top down, i see all the major indices at or near all-time highs, complacency at very low levels. a very uncertain world with a wide range of outcomes. i predict not calamity, but am quite certain is going to be a lot more volatility in the world. as a stock picker i welcome that. that's how i make money. ♪ >> argentina's big win in court
>> argentina's big win in court today. the country contact the international credit markets for the first time since 2001 and payback holdout creditors from its default. >> lifting the injunction allow them to issue enough debt to pay off the vast majority of the judgments against them. they can tap the market and pay off the guys with the sharpest teeth, star reintegrated with the international capital market. >> today could be the last day in office for president dilma rousseff. the senate is scheduled to hold a vote that may force rounded into impeachment trials that she looks unlikely to win.
>> brazilian local debt is up 30% this year, that's the best return anywhere in the world. investors are betting we had five months of uncertainty and five months of not knowing where rousseff. the senate is scheduled to hold a vote that may force rounded into impeachment trials that she looks unlikely to win. >> brazilian local debt is up 30% this year, that's the best return anywhere in the world. investors are betting we had five months of uncertainty and five months of not knowing where brazil is going. let's get this behind us and let's move on. we can take it from there. >> the vice president is now active president, inheriting the worst economy brazil has seen in decades. david: welcome back to the "bloomberg best," 2016, america's year in review. i'm david weston. from's victory in the u.s. presidential election was largely unexpected and the president-elect transition has been under close scrutiny as the business community looks ahead to the new and administration. >> it's going to be a very business friendly administration. i want to say it's going to be a christmas tree, but business is going to be down. in the short run, all of this is probably good for business. in the longer run, $5.8 trillion in tax cut is probably not so great for business because of inflation, just rates, and so on.
>> you are just like everyone else in your industry, and for that matter, all of finance. all of industry is trying to figure out what a trump presidency means to your business. >> it is a sea change. republican senate, republican house, and a president who wants to do things like infrastructure spending to get it done. we are moving to a faster growing economy. the pace will determine interest rates. david: the president-elect's cabinet is coming together. what does that appointment tell us about the treasury? >> it tells us that goldman has a lock on the treasury. he is a loyalist and he will be someone who is definitely following the lead from the white house, maybe not so much for him of his own, but following some. david: president-elect trump is close to naming secretary of state and the front runner comes from the world of oil.
he tweeted rex tillerson is a world-class player and dealmaker. stay tuned. >> rex tillerson is a very foundation of the trump administers and makes them shake and quake. >> we saw michael jordan go from basketball to baseball. you can be great in one area and not necessarily great in another, somewhat related area. david: trump's cabinet is looking more like a board room than a cabinet. have you seen anything like this injection of senior business leadership into washington? what would likely lead to? >> there are very successful business people. being successful in business does not mean you will be successful in government. david: rick perry, considered from the to the oil industry, will be nominated as energy secretary. >> big oil is dominating this cabinet. whether it is deliberate strategy or just coincidence,
it's anybody's guess. that is pretty amazing how many people from the energy sector are going to run this government. >> if you are going to be president, you should have the best people sitting around the table. but think it's a mistake to be told if you work for an oil company were a bank, that that makes you bad. you want the best team. i think it's a good thing, because a lot of these people are very qualified people who want to help the country. they are not going to try and help their former company. these are people with deep knowledge that hopefully will do a great job. ♪ david: that wraps up the special edition of "bloomberg best," the 2016 america's year in review. find more stories, interviews, and analysis from 2016 at bloomberg.com, along with all the latest business news, 24 hours a day. thank you for watching. i'm david weston, this is bloomberg. ♪