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tv   Bloomberg Best Americas 2016  Bloomberg  December 31, 2016 8:00am-9:01am EST

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♪ 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. he is not going to change. david: a presidential race like none in history with a business leader in the white house. >> it is going to be a very business friendly administration. the markets wait for the fed to move, and not always patiently. >> janet, get off of this fixation of lower interest rates
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providing economic growth. david: plenty of reaction to the biggest deals. >> this is a game changing transaction. 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? we revisit reflections from investment insiders. >> 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 sitting on a lot of am cash. david: join us for a look back at 2016 straight ahead on "bloomberg best." ♪ david: hello, i am david westin. welcome to a special edition of "bloomberg best." on this program, we will review the most important business announcements and interviews for
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the united states and the americas in 2016 without a doubt, 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. on the democratic side, 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. ted cruz only 13 states. states.won three the question is, how do the strategies change now? >> marco rubio really had a tough night. they thought he was going to sweep virginia and have a stronger night. ey are now left with this option about it we get behind
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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. she now has a lot more breathing room. mark: trump won in mississippi and michigan. does this stress the ability of him to win across very different areas -- across distinctly different demographics? >> he has won in all areas of the u.s. that is the thing about donald trump. he has built this broad coalition of support. >> let's turn back to donald trump, and the last night surprised of ted cruz bowing out at the race. what are your key takeaways from last night? >> there is only one key take away, it is obviously clear. even before cruz decided to drop
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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. >> 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 understand the question, and i too also have some doubts, but i know that if i do not get donald trump with change -- not knowing what that change is -- 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
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herself that there in the democratic nomination race. becoming the first woman to run for the presidential race for a major party. >> a historic night for hillary clinton and for the u.s. 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 and brutal cycle with deeply personal attacks against each other. >> do you think donald trump is good for the republican party? >> obviously, i wish he would speak less about things like judges in indiana. i wish he would not layout these -- anyone could beat hillary clinton. that we are try not to. mr. trump: i humbly and gratefully accept your
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nomination for the presidency of the united states. >> what should he do about quantitative easing? what should he do about the tax code, the federal debt? these are the issues you identify. >> you need to ask and specifically about 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 slly. 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. >> on top of halting new regulations, donald trump would lower the top individual tax rate to 33%, cut corporate taxes
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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? >> down the line there will be scoring, but 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. if you speed up the growth, you will get more business investments and tax revenues. it will make it easier to do the spending reforms you need to get done. ms. clinton: starting on day one, we will work with both parties to pass the biggest investment in new, good paying jobs since world war ii. >> hillary clinton's is one of a more robust government that can get its hands dirty in 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
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investing in america. and that is a pro growth agenda. jonathan: the first of three presidential debates before the big day started last night. -- of the topics on a trump topics donald trump was not shy to touch on yellen's fed. mr. trump: the fed is doing political 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 -- is not if a great person like janet yellen is 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 in general? >>hen you have a president -- let's say trump wi -- and you do not know what he will say next, that is the ultimate uncertainty. he has not been able to control himself this close to the presidency, he is not going to
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change. david: some of the last polls show hillary clinton maintaining a moderate lead over donald trump. >> the dow gained 350 points. u.s. stocks overall gaining 2% with every major interest group and the s&p 500 up. for the s&p 500 and the doubt, 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. >> donald trump has won the state of pennsylvania. he is extending his u.s. world vote lead. -- hiselect world vote electoral vote lead. 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
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trump transition later in the program, and we will look back at an important battle between government and busess in 2016, apple's dispute with the fbi over data privacy. i'm -- up next, the federal reserve was under the microscope for the past year. still, it was often hard to tell the hawks from the doves. >> there is hawks and doves and perhaps a few chickens. david: this is bloomberg. ♪
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♪ david: welcome back to "bloomberg best" and our 2016 america's year in review. i am david westin. call it the great rate debate. throughout the year, economists and investors argued whether the u.s. economy was strong enough reservefy a federal
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rate hike, and the fomc became increasingly divided on the issue. 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 to address everyone's concerns -- we are closely monitoring local -- global economic conditions and assessing 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 creases? >> it is not, we are going to do four times. we 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 change in interest rates.
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clearly that is what is most important, but equally important is the dot plot. the fed scales back its plan for rate hikes through to the end of the year. policymakers expect to raise the 0.5%.nds by i don't need to tell youis that a big change from where we were in december. >> 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, still contributing to growth. are they still effective? >> i think we are providing a very accommodative policy with our zero interest rate. but i do think you want to be edging closer d closer to something of a more normal setting soou do not get stuck in this zero rate ronment the way japan did. >> the federal open market
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committee drafted a statement with a somewhat hawkish tone. that is a surprise. gone is the reference to risks posed by global, economic and financial developments which the fed used to not make a change in march. >> did you learn anything about what the fed is going to do? >> to me, much ado about nothing. they did downgrade the global condition, and they did mention june. that has given heart to the long bond in the u.s. by two or three basis points, but we will learn more over the next month or two as long as global and equity -- global equity markets and risk 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 been seeing over the past year.
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see inflation move generally up towards 2%, and continued job gains. continued signs of the economy as it builds momentum. >> no change in interest rates. i repeat, no change in interest rates. the fed, in a unanimous decision, is holding at a 0.25% 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
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three. this is what we call the new neutral of monetary policy. scarlet: we are minutes away from the fomc's july decision. the federal reserve is expected to leave interest rates unchanged. let's go to michael mckee. michael: no changen policy or rates. only 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 this inserted into the second paragraph. a statement noting that near-term risks to the economic outlook have diminished. tom: it is a pretty good america , 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, janet, get off this fixation of lower interest rates providing a push for economic growth. >> wall street, janet yellen has a message for you. she says the economic data have
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improved and quote, "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 even risking a big financial instability event. erik: no change in interest rates. no change. but a strong suggestion 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 at the end 2016 of 50 points for the first time since december of 2014. we are talking it almost two years, three policymakers dissented from the majority. michael: you take right now
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almost a pledge from janet yellen they will raise rates if nothing untoward happens? >> no, i do not think anything is a pledge from janet yellen anymore. it is all confusing. there are hawks, and there are and perhaps a few chickens. david: the more you buy, the more the bonds go up. is this sustainable in the long term? >> no. david: 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. so, we are seeing a real division. >> if the outlook does not change, will you argue for a rate hike in november? >> if the data comes in consistent with what we have
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been seeing, then yes. i think it will remain a compelling case. >> you would vote for a rate hike? >> we will see limited to the meeting, but the case will be compelling i think. michael: no change in rates and no explicit signal that any rate increase is imminent. there were two dissents in a statement. >> what is the big take away? thate big take away is 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. the one context where i think it is appropriate to consider political considerations as if they affect underlying economic conditions. michael: no surprise, the target range moves up 0.25 percentage point to a range between 50 and
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75 basis points, that unanimous. the real news is the movement in the dot plot. 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 ability of a central bank, and the global central bank, the fed would raise interest rates three times a year. >> i think the fed took a small step beyond being just data dependent. she walked 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," one of the year's most significant showdowns. apple versus the united states government. in the dispute over privacy, did anybody win? >> i'm not sure this really works in anyone's favor. david: this is bloomberg. ♪
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♪ david: uber is taking a big step forward in self driving cars. starting later this month, the ride-sharing company will allow riders from pittsburgh to hail self driving vehicles from their smartphones. >> they have embarked on this crazy research that they thought would take decades, and it i veryxciting 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 goment access to data from
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an iphone linked to a terrorist attack. emily: apple and the fbi have been testifying on capitol hill. >> we see it in isil's efforts to reach into this country and using mobile applications that are end to end encrypted task -- encrypted, and they 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 -- where 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?
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>> i think that in the present 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. we have not seen that parade of ensue in those-- cases either. >> 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 used by a terrorist in the san bernardino attack. the news has caused a judge to postpone 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 in the sense that these phones are not as protected as we thought?
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>> i do not think they needed to do it, but 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 law on the iphone without apple's help. >> as of now, 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. it puts off the legal day of reckoning and demonstrates iphones are not particularly secure in the first place. david: still ahead, how some of the world's most respected investors coped with market volatility in 2016. >> we have amped up our caution. david: a roundup of the biggest
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mergers, from deals that seemed to take forever to those that took the market by surprise. >> this is truly out from the left field. david: this is bloomberg. ♪
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>> is it time for yahoo! and ceo marissa mayer to face the music? activist shareholder star board value urging the company to make changes, specifically in its leadership. >> the entire board comes up for reelection this summer. this is the first shot on the way to a proxy fight. >> new leadership is a proxy for selling the core asset. >> overall, on the board, management and the board are very aligned. >> if you sell the core business, would you view that as a personal failure? would you view that as a failure? >> i would say that what is good for yahoo! is good for me, and vice versa. >> at&t and verizon are both at
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the point where there's only so much they can do, at least u.s.-wise, from an m&a standpoint. they can't buy another wireless network, regulators won't allow them to. they cannot buy a cable company, regulators will not allow them to. so these digital assets or content like yahoo! is probably somewhat appealing. >> verizon is buying yahoo!'s operating business for $4.83 billion in cash. guys, this is like the merger we knew was going to happen for like seven months. it finally happened. jonathan: identify the assets verizon has that can make a job of yahoo! that others could not. >> yahoo! gives us scale that takes us out of the millions and into the billions. so combining those two is already the right start for us. >> what role do you envision for yourself in this new entity? >> immediately i have got two priorities. one is seeing the transaction to the close, but also watching over the value of our asian assets and equity stakes that we have there. and then moving forward, we will ultimately figure it out.
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david: welcome back to the "bloomberg bes2016, america's year in review." i am david westin. 2015 was a record year for mergers and acquisitions. although mergers and acquisitions slowed in the first quarter of 2016, the pace picked up as the year went on. here's a look back at the biggest and most interesting deals. >> there are some big health and pharma deals that came out today. abbott laboratories buying st. jude medical at a deal valued at $25 billion. in the meantime, abbvie acquired stem centrex for $5.8 billion. >> we are starting to see of deals happen again. >> the year started with the equity market up and down. that slowed a lot of deals. january and february, the deals were ones that we were working on last year, and then we got slow. today is a busy day and health care is leading the way.
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health care is leading the way. that is not a surprise. with obamacare and the push for consolidation, you're going to see more companies, whether pharmaceutical companies or health care companies, you will see a lot of consolidation going on. dreamworks animation at about a 50% premium over dreamworks' last close. >> this thing is a huge multiple for this company. one thing that makes it appealing is the theme park connection. >> kung fu panda and shrek are going to be at universal studios. >> exactly. they also make, you know, "how to train your dragon" and their sequels can go along with these things. there is a very clear tie-in between kids movies and the theme parks that was appealing to comcast. >> buyers proposing a blockbuster deal would create the world's biggest supplier of farm chemicals and genetically modified seeds. bayer wants to buy monsanto's for $52 billion in cash, it represents a 20% premium to monsanto's last close. it would be the biggest takeover ever by a german company.
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>> 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. >> monsanto said today they are open to a deal with bayer, but the current offer of $122 a share is inadequate. a statement out today said, the current proposal significantly 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 from that that they would sell at a price, and is bayer prepared to pay that price? >> i have rarely seen such a friendly rejection from the target company. >> the big deal, microsoft buying linkedin, valued at $26.2 billion. that is $196 a share, a 50% premium to linkedin's friday closing price. >> one would have thought they would go on after salesforce, workday, but this is truly out of left field and i wouldn't have expected that.
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>> i see innovation. what will the process be like and how do 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. this is riding the technology wave of the future? anything at the core of microsoft is something we can differentiate. this checks all those boxes. david: oracle will by netsuite in a deal valued at $9.3 billion. >> it is the least surprising acquisition in the history. >> as i understand, oracle really wanted to move into cloud. netsuite is like the original cloud company. >> founded by larry ellison. >> netsuite is a truly cloud business, almost a side project for larry ellison run by zach lson. it is going to be curious to see
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if there are other bidders. >> they are making a desperation move. he basically said i want that. >> walmart agreed to buy for $3 billion in cash, giving the world's largest retailer a stronger online presence. >> this is bit of a desperate move by walmart. walmart, one year ana half ago, there market cap was double that of amazon. now, they have flipped. they are at $230 billion roughly. amazon is $360 billion. >> bayer and monsanto, is third time the charm? sanford bernstein saying the number they have to hit to acquire monsanto is $135 a share. they are talking about a breakup fee and a potential price. jonathan: a step closer, how much closer? >> i believe right now, bayer has offered $1.5 billion in a termination fee. they are going to want more at monsanto because lot of regulatory issues will come up, and price always matters. alix: bayer increased their
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offer. a second time. that would be $127.50 a share. and while it is well above their current share price, they seem to want even more. it is about a five dollar pickup from the original bid. >> from the original. >> the share price has dropped, so it's more attractive. what's to stop monsanto from saying we accept? >> monsanto has 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 to get to the table and get a proper deal done. vonnie: bayer announces a deal to take ov monsanto. the deal is buried at $66 billion, the biggest merger this merger this year and also 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 for the size of this transaction, a
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very, very low overlap. vonnie: to the big deal everyone is talking about. at&t buys time warner for $85.4 billion. >> at&t really is betting on content, we are going for something that is very aggressive that has a decent chance of regulator push back. but this is a game-changing transaction. >> ge agreeing to combine its oil and gas business with baker hughes in a $32 billion deal. >> ge gets most of the senior positions, the chairmanship and the ceo position a baker hughes gets the vice chairmanship. but it should be noted that baker hughes shareholders get a great cash payout as well. a one-off special dividend, $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? i would think that an election would make people slow down, be
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concerned, but it doesn't seem like that had any impact at all. >> the election would have mattered if equity prices would have been more volatile. one of this things about the last quarter or so is that it has been incredibly stable equity prices, at least for very large companies. a lot of these big deals typically involve some equity. but the fundamental factors -- you know, they are very strong. low growth, which is bad for most things, but good for m&a, because that's how you get growth, and very accommodating capital markets. david: coming up on "bloomberg best, america's year in review," on the whole, 2016 was not the best of times for hedge funds. but then again, it's a matter of perspective. >> is there too much money? >> $3 trillion isn't what $3 trillion was 10 years ago or 20 years ago. david: this is bloomberg. ♪
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david: you are watching the "bloomberg best 2016, america's year in review." i'm david westin. time now to revisit some of 2016's most compelling conversations with investors, financial leaders, and economists. 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 at the world economic forum in davos. >> once again, we are in the midst of a selloff. it kind of feels a little like 2009. i hope not. what does it feel like to you? >> i think it reflects the tug-of-war about the countries that are growing, countries that and will keep growing, and the expectation is china won't grow as fast. a
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>> you make it sound sensible. >> it is always sensible. in retrospect. but i think at the end of the day, companies like ours just have to keep driving, the consumer in america continues to spend. the question is how it plays out. >> i would say that we are in an environment in which it's 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. also, 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 we have a situation where debt is money. in other words, we have a fiat monetary system too, so we are having problems as central banks operate. think of it as another form of cash. when cash has 0% interest rates or less, think of it as one of those possibilities in terms of how do you create diversification?
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>> 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 up and you are short. and it goes up. and then what compounded that were too few really interesting opportunities that many people were in so when they tried to recover their positions, stocks went up 100%. 200%, 300%, just for technical reasons. but stepping back from it, the rates of return in the hedge fund business and the fee structure has discouraged some investors. so, it is highly probable that the asset class will shrink a bit.
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>> what is 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. it is probably about the same size as the private equity industry, maybe slightly bigger. people are investing because they want higher rates of return. people think that in hedge funds, you can get better rates of return. some of these hedge funds have had problems. typically the macro funds this year, but i do think that people will realize you have very smart people, highly mobile, investing their own money aside investors, and is likely they're going to do it well over a longer time. >> is $3 trillion too much money? is there simply just too much money chasing the same set of opportunities? >> well remember, 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 or 20 years ago. you have about $75 trillion in assets under management around the world.
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so, $3 trillion is not much in that context. >> the market can no longer look to banks to make markets. so, you actually have to have a much of a buyer and seller. what do institutions do? they have turned to etf's. it's the easy way to add beta or take risk off. paradoxically, etf's are 3% of the market. if you want to look at the size of those etf's, they are 3% of the market. we don't have any objective evidence of how much trading activity they provide in the market, but let's say it is 10%, what we are hearing, and etf flows on a daily basis do move the market notably one direction or other, so you have the advent of institutional investors who are trying to deal with market volatility using etf's and etf's are actually sharpening volatility somewhat.
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so what i think, that's a lot of detail. >> where does it leave you? >> what it translates to is you need to, 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. what you see is a flight to quality.
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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. and even what is interesting is that the u.k. yields going down and the pound dropped 10%. you did do well in u.k. bonds if you were a non-sterling investor, but the demand for high-quality liquidity has been the story of the last two or three years. >> it's very challenging today. we are in a low return world. those are the three most important words to remember, 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 do you get a high return in a low return world? the answer is that you have to take significant risks. >> are you comfortable taking that risk? >> well, 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
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mantra, move forward, but with caution. and when i say with caution for oaktree, oaktree is a cautious investor, that means more caution than usual. so we have 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 that the negative rates completely stopped saving, -- i think that the negative rates completely stopped saving, because you are not only not rewarded 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.
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tom: where would you put your money now? we will get to the hedge funds later. if negative rates have distorted the markets, if 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. so, i am not predicting calamity. but my portfolio, i'm sitting a lot of cash right now. almost 60% cash. and 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 short, i am finding very few longs 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. yet, a very uncertain world with a wide range of outcomes.
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so, i predict not calamity, but i am quite certain there is going to be a lot more volatility in the world, and as a stock picker, i welcome that. that's how i make money. ♪
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>> argentina's big win in court today. the country can now tap the international credit markets for the first time since 2001 and payback its holdout creditors from its default. >> lifting the injunction allows them to issue enough debt to pay off the vast majority of the noisiest judgments against them. they can tap the market and pay off the guys with the sharpest teeth and start reintegrating with the international capital markets. >> today could be the last day in office for president dilma rousseff. brazil's senate is scheduled to hold a vote that may force her out and into impeachment trials that she looks unlikely to win.
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>> brazilian local debt is up 30% this year. that is the best return anywhere in the world. investors are betting, you know, we have had five months of uncertainty, 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 acting president he is 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 westin. donald trump's victory in the u.s. presidential election was largely unexpected and the president-elect's transition has been under close scrutiny as the business community looks ahead to the new administration. >> it's going to be a very business-friendly administration. and i don't want to say it is going to be a christmas tree, but business is going to be down there getting the kind of regulatory relief they want.
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in the short run, all of this is probably good for business. longer run, $5.8 trillion in tax cut is probably not so great for business because of inflation, inrest rates, and so on. >> you are just like everyone else in your industry, and for that matter, all of finance, and perhaps 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 and will get it done. we are moving to a faster growing economy. it is the pace that we question. the pace will determine interest rates. david: breaking news now, the president-elect's cabinet is coming together. steven mnuchin and wilbur ross confirmed. what does that appointment tell us about the treasury? >> i think one thing it tells us is that goldman really 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 policy of his own, but definitely following some.
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david: president-elect trump is close to naming his secretary of state, and the front runner comes from the world of oil. yesterday he tweeted, "whether i chose him or not for state, rex tin is a world-class player and dealmaker. stay tuned." >> rex tillerson is at the very foundation. the council on foreign relations shake and quake. >> he is a very impressive guy but when we saw michael jordan go from basketball to baseball. >> i witnessed that personally. it was very ugly. >> you can be great in one area and not necessarily great in another, even somewhat related, area, so we will have to see. 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 do you make of it? what will it likely lead to? >> i do know many of these people. they are obviously very successful business people. being successful in business does not mean you will be successful in government. david: former texas governor rick perry, one time presidential candidate considered friendly to the oil industry, will be nominated as energy secretary.
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>> big oil is dominating this cabinet. whether it is deliberate strategy or just coincidence, it's anybody's guess. it is pretty amazing how many people from the energy sector are going to run this government. >> i think if you are going to be president, you should have the best people sitting around the table. i think it is a mistake for the american public to constantly be told if you work for an oil company, work for a bank, work for this, that that makes you bad. you want the best team. i honestly think it's a good thing, because a lot of these people areery qualified people or patriots who want tlp the country. they are not going to try and help their former company. that is not what they are going to try to do. these are people with deep knowledge that hopefully will do a great job. david: that wraps up the special edition of "bloomberg best 2016, america's year in review." you can find more stories, interviews, and analysis from 2016 at, along with all the latest business news, 24 hours a day.
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thank you for watching. 'm vid westin. this is bloomberg. ♪
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>> coming up on "bloomberg best" the stories that shaped the year in business in europe, the middle east, and africa. the brexit referendum took center stage. >> markets are pricing in we are staying in. >> prospects for u.k. outside the e.u. are incredibly bright. >> people understand that the decision with seismic consequences. francine: and the still uncertain aftermath. >> how can you regret taking back control of your own life?


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