scarlet: from bloomberg world headquarters, good afternoon. i am betty liu. stocks are getting off to a strong start in november as the u.s. builds on its global rally. manufacturing in the u.s. remains pretty soft. you have shire, treehouse foods, visa among those making marketes uruguay the m&a may be poised for even better times ahead. and aig opens its books in about one hour. will it boost carl icahn's case that the company should be broken up? carl icahn is said to be about 2%, making him among the largest shareholders. are about one hour away from the close on this monday. i want to head to the markets desk where julie hyman has the latest on this rally.

julie: yes, hovering around the highs of the session today for the three major averages, even as volume pulls back a little bit from where it has been over the past 10 days. stocks rising to the highs of the session. the nasdaq is did the best-performing of the major three indices today. the s&p the highest since august 10. the dow the highest since july 22. the dow the highest since august 5. this is despite somewhat tepid data on manufacturing earlier today. but it seems as though traders are keeping steady with their bets that the fed is going to potentially raise rates in decent appeared we see the odds now at 50/50. the fed funds future has been holding steady come up from 33%, where it was before the fed statement that let folks to believe it was opening the door to that increase. the treasury market is also reflecting that notion. treasury yields rising to 2.19%,

a five-week high for that yield today. that is playing into this idea that the fed could raise rates. betty: that is right. other things are on the move. you have bonds down because of the fact it also am a gold. julie: gold prices are also taking a temple. they are not down that much today, but it has been a trend, gold at eight four-week low. if the fed does raise rates, there does not seem to be much inflation out there. commodities broadly trading lower. so the need for an inflation hedge like gold seems to be relatively low. i want to point out the movement in the euro. it is up for a third today, extending its longest winning streak since september. mario draghi said he is going to put more stimulus out there, but he gave an interview to an italian tv channel over the weekend, saying the need for the

quantitative easing program for the ecb is an open question and it is too early to pass judgment on lowering the deposit rate. the euro trading higher on that comment. betty: thank you so much. now it's check the headlines. mark crumpton has more from our news--. mark: the u.s.-germany-brooklyn have had so-called oversight sinaigs in place for the peninsula, where a russian passenger plane went down over the weekend, killing all 224 people on board. airlines have been advised to avoid flying over the sinai below 26,000 feet or the warnings cited the use of antiaircraft weapons. in airplane's flight data and cockpit waste recorders were recovered from the crash site, which spreads out over six square miles. president obama has designed a bipartisan budget bill suspending the death -- the debt limit. he averted a fiscal crisis last

you week. it suspends the debt limit through march of 20 17. health officials expect the number of people sickened by an e. coli outbreak linked to chipotle restaurants in washington state and oregon to rise. three people in the portland area and 19 people in western washington state have gotten sick from e. coli, 17 had recently even at age of public restaurant or disapproving supreme -- 17 had recently even added chipotle restaurant. the lower court ruled love marley'sused midget to sell clothing without getting her from his children. that is a look at the headlines. you can find the latest news on bloomberg.com. betty: thank you. day fors been a huge mergers and acquisitions, headlined by visa's $23.4 billion purchase of visa europe.

and shire's $5.9 billion takeover of a rival biotech company. this is much more than a one-day trend. just a month into the fourth quarter, m&a volume is nearly $1 trillion. this year has already seen almost $4 trillion in m&a action. this morning, goldman sachs geomet of global m&a, gregg guest were another on bloomberg go to talk about m&a. pipeline continues to be strong. we have seen it record volumes through 10 months of the year. if you ended the are today, you would have the second-biggest m&a year on record. we are on pace to double her we were in 2007. >> we're seeing big strategic deals join gerbert's large transactions. shareholders will be receiving

these deals quite well. the logic makes a lot of sense. companies tend to be at the table with these kind of deals. we are encouraged about activity going forward. how many big transactions were there? >> i think there were 10 over $1 billion. a good morning. >> there is a lot of competition though. as it so often is, is at the top, but you have plenty of competition. a hairstanley is just behind you are jpmorgan is there. andorgan stanley is there jpmorgan is there. it is a good business for the banks, and everyone is quite focused on it. it is a high profile business. there are additional businesses like securities. it tends to be the core with the investment banking part of these firms. the 10g is on seven of deals, and more to come.

>> let's -- [indiscernible] the reason is simply because the leverage that they used to have any cells in trading business is longer.nd going any that was always the jewel franchise. ofrepresents less than 5% goldman sachs' balance sheets. >> uh-oh. >> it is an accompaniment for him. >> what you are saying is that jewel of a committee, yes, it is a positive for gregg, the for the overall company, they will not necessarily get back. >> you say that things come along with m&a. is that still as much of an advantage for goldman sachs, say, over a boutique? >> i think it is. m&a advisory comes down to who

is giving advice. people have experience, and you want their advice. a lot of the firms of high-quality bankers. the nature of m&a activity in this market, big deals between corporate's, they are reliant on reaction, which plays extraordinarily well to our strengths. there is the ability to understand how deals get finance. full service with much broader capability. >> i could not agree more weird my money is on this trade to it 5, 6 years ago, you saw some of the best bankers leaving the large goldman sachs and morgan stanley because of the liability. rather the regulatory pendulum has finally swung all the way through and we have a stable stacks --morgan morgan sexson goldman stanley -- more -- they can fight back.

[indiscernible] you need the full service here at equity, financing. 100% debt-financed. need appens, you combination of the three divisions. that is why firms like goldman hundred ofhey have cash, they trait 110. i say these remain very good investments. the regulation now has basically gone over its course. as of this morning, they speak for themselves. >> it is good to be number one and a growing market, and m&a is a growing market. what would cause it to collapse now. >> a number of things gives some anxiety. corgi dishes are in place or low interest rates and lots of available capital. -- core interest rates. can slow it down,

general market volatility. a friend ofs not m&a at some geopolitical or macro shock to the system will slow things down. when you walk away from the deal table, the gestation period is so long for these deals to get going. the deals have gotten bigger and bigger, and a challenge is regulatory. there may the one or two trades left to happen and not much beyond that. you will see the regulatory framework play a bigger part of the deal. from thist was morning on bloomberg go. much more ahead in the next 20 minutes of bloomberg markets. says he has seen this act before -- find out which companies warren buffet's longtime partner is comparing valiant pharmaceuticals to. and $27 billion fund is reportedly down 3.8 percent and september. energy and health care leading

the losses. aig reports earnings after the bell today, just days after carl icahn's call for its breakup. will the result help or hurt carl icahn's case? ♪

betty: welcome back to bloomberg markets. it is time for the business flash, a look as some of the biggest business stories in the news. the morgan stanley ceo has been elected to the board of the new york federal reserve. he will serve a three having your term beginning january 1. he was elected a class a director. the u.s. government said volkswagen cheated the second time on emissions tests.

hadaca says the automaker about 10,000 cars was with -- with larger engines that would he meant more emissions while driving. the tests are from the 2014 to 2016 model years with six cylinder diesel engines. volkswagen and eyes the claims, saying there was no manipulation software used in the v6 diesel engines. and trekkies, cbs is drinking back -- is bringing back "star trek" on a streaming service to it only a preview episode will be aired free of charge on the broadcast network. the new series comes more than 10 years after "star trek enterprise," the last tv series, was canceled. you can always get more business news at bloomberg.com. citroen may not have made any

claims against val jan and its report today, but others are not holding back on their view of the pharmaceutical company. richard had wii's vice chairman charlie munger made statements about valiant put the practices, calling them deeply immoral. he said the business practices remind him of the excesses of the 1960 president gauck grit -- time glom rent -- congo on rent range. our reporter joining us from seattle. what does charlie munger say valeant?lea >> he spoke a lot about valeant's practice of getting the treatments and raising prices. in addition to being the vice chairman of berkshire hathaway and one of warren buffet's longtime business partners and friends, he is also the chairman of hospital in los angeles, where he lives. he said he had seen up front what he called price gouging valeant by -- price gouging by

valeant. for him, what that signaled was a littles that maybe long term would not be sustainable. he really is not a fan of their practices and thought that they used -- the word he used was gamesmanship -- to help boost their profit. he just wanted no part of it. betty: he wants no part of it. itt come- valeant's back to life. it was not moral the first time, and the second time it is not better. he says i am holding my nose. >> that was actually a comment he made back in march. he has been critical of this company for quite some time. that was at a meeting he held with investors in los angeles back in march.

that is actually the reason that i called him up this past week and we actually spoke on saturday. betty: and he reiterated that to you? >> exactly. this is something he has been thinking about for a while. it predates the short seller report and the plans in valeant 's share price. something he has been watching for a while. betty: charlie munger is clearly someone who does not hold back his opinions, even when sometimes his opinions differ from his partner, warren buffet. berkshirefet in hathaway, they are reporting results later this week. you wrote a story about how foraps the saving grace warren buffett was his big bet on kraft heinz, because his other big bets of not panned out so far, right? it comescertainly when to berkshire's stock holdings, kraft heinz has been a big winner. some of the other big holdings in the equity portfolio have struggled.

andmentioned ibm, amx, walmart, which have been laggards. when we look at earnings and numberlue, which is a that a lot of berkshire investors track closely, kraft heinz, the game on that will outweigh things. betty: is anyone saying to you -- ibm was one of his latest beds, and it is something outside of his prairie view, right? for warrensual buffett. is anyone saying to you, oh, dear, maybe warren buffett should have stayed out of technology after all? to lobainly, it is easy and criticisms from the sidelines, but yes, that is definitely something that people have pointed out. they really wonder how that investment is going to end up. some people the point out that out a lot of cash over the last years that berkshire has owned it.

warren buffett himself has talked about the buybacks they have done. so the history books are far from written on that investment. betty: and warren buffet has had some other wins, some smaller ones in his portfolio. >> exactly. it is a testament to how big berkshire is these days. lifened all most 20% of a insurance company that is being purchased now for almost $4 billion, you know, at a premium, so there will be a game there. anhad a large stake in insurance companies, which he cut a little bit in the third quarter, and it looks like he might have made some money there. commentary ona how big berkshire is, because it you can have these things that, for any other investor would be great and might influence the results for the quarter, but

when you are dealing with sums the size of warren buffett and you do a deal, like kraft heinz, a $7 billion game, it can outweigh everything else. that he goes thank you so much for joining us from seattle -- eddie co. thank you so much for joining us. still ahead, a rough time for value-focused hedge funds. from david einhorn to says down.n, they're which investments are not paying off. ♪

betty: we have new numbers on the performance of hedge funds. barry rosenstein saw his two rebound in october after four months of losses. jana partners fund up 2.7%. this is according to an investor letter.

both funds are still down for the year, 5.9% and 4.1% respectively. saying with hedge funds, it is a bad year for value investors, and you know that when seth klarman is losing money. his hedge fund declined about 3.8 percent in september, according to a person with knowledge. was heard by losses in energy and health care stocks. joining us now in austin is sabrina willmer, who wrote the story about seth klarman's losses per they took the heaviest hits on health care and energy, right? sabrina: that is direct. mostly, the biggest holding of the u.s. equity holding was should near energy -- was shaneer energy. a lot of hedge funds piled into it, and that lost 30% during the third quarter. losses.ves some of the

betty: right. and then? sabrina: and that is actually the energy part of the portfolio, which has rebounded a little bit in october, and so have biotechnology stocks. you are starting to see a little bit of a turnaround. this is still disappointing for known for making consistently strong returns each year. two losingnly had years in their history since 1982. if they do not turn things around, this could be their third losing year. betty: ok, would this be their worst years of far? >> i do not think it would be their worst year. i think 2008 was probably the worst year. it is still pretty unusual. they are known as a value investor. they hold a lot of cash, and they're pretty conservative.

but they have had a lot of trouble finding bargains in this environment because of the fed's easy money policy, which has inflated asset prices, so they cannot buy a lot of assets on the cheap. so they went to energy earlier this year thinking they can make some money, but that has not materialized yet. thank you so much, sabrina raleigwillmer. the gloves are off. tom keene of bloomberg surveillance asked joseph stiglitz about this this morning. >> the fundamental problem, though the federal cannot lower interest rates below zero. they have been at zero for very long time. if only we could have the negative interest rates, the economy would recover.

i think that is basically wrong. rates -2% real interest because zero is been the nominal interest rate. we have had slow inflation, 1% to 2%. it has never -- it has not helped a lot. if we went two -4%, minus five present, would it make a difference? it would make a little difference but not a big difference to the real problem is people do not have income. so they do not expand. that we are in. that was joe stiglitz. much more ahead, including aig -- should it break up? ♪

. . .

betty: live from bloomberg's world headquarters in mid-noun -- midtown manhattan, i am betty liu.

this is "bloomberg market day." crumpton liverk at the bloomberg news desk. good afternoon, mark. jet: a russian error crashed in egypt yesterday, and the cause of the crash is under investigation. u.s. officials say that terrorism cannot be ruled out. navy investigators have positively identified the u.s. carrier alfaro -- el faro. with 32 sank last month people on board. no survivors have been found. and the chinese government of agrees that an environmental pact should have countries were in new every five years. this is ahead of a meet in paris. president obama has signed that

bipartisan budget phil, averting a fiscal crisis. it increases discretionary spending by $112 billion over the next two years. and former president jimmy carter promised he would lighten his work schedule after his cancer diagnosis, but he admits that hasn't happened. the reason is mr. carter says he feels just fine. the 91-year-old was diagnosed with cancer in august. you can always find the latest news on bloomberg.com. betty? betty: mark, thank you. that was mark crumpton at the news desk. and julie hyman has a check of the market movers. it is market monday, so there are a lot of movers there. so far we are on track to have the best year

globally for m&a. the company is buying visa going tod the deal is be as much as $23 billion in value. it has been eight years since the two have been separate companies, but the shares are down today a hit. -- a bit. riggedalso looking at a deal in the food industry, tree house is going to buy conagra. treehousee those shares and conagra has really been struggling and investors and analysts are asking if treehouse has the ability to turn it around. and of course we cannot have another week without another drug deal.

dyaks -- dyax proposes to buy and rexall to -- axalta has been spurring -- shire's shires' -- bids. assets -- medassets is going to combine its earnings with pamplona. for intraday, amsurg raises the bid for team health. team health has already said it

has rejected the offer on friday. share's shares are up. talk about mergers, what about splits? the insurance giant aig expects a split after the market close today. the stock is marginally higher carl icahn is and one of the largest shareholders. today, bloomberg has learned stake could fuel the call. nowre joined by our guest others could

go to $100 if it's blitz. the you think that is a good idea? any split conceptually is a good idea. we put out a note last week saying it breaking up is hard to do. this could said that appear a spin, so we are looking for tomorrow to see if there is any kind of information there. carl icahn is what we're looking and aref they respond ,ut in a hot m&a environment right now we are assuming there inside aig. betty: if they stay inside aig, does the stock still go up? randy: we don't think so. of mark tolot market items and the expenses of

aig are structurally high and that is another piece of the carl icahn plan. management has been trying to fix it and that requires money. we are not sure how realistic that is and we are looking at aig and listening to what management says about taxes. if that can be preserved, then you could unlock value in a spin off. that is just not the way we are looking at it currently. betty: explain exactly what you mean by preserving it in a split up. nol, a nets a operating losses in that they do not pay taxes. it is the single most powerful asset at the aig. a lot of times when there is a

spin or a change in the organizational structure, in this case, the nol may help them lose the ability to take this business in a spin. this is not a new issue and we have talked about this in a lot of conference calls. icahnss is that the carl plan is the issue. if you get this out of the way, you could evaluate what these businesses are worth outside of aig rather than inside of aig. betty: aside from this nonoperating loss, what are the parts of aig that you think could really garner a premium? randy: sure, so roughly, rough numbers are about half, but within property, they have a seee u.s., difficult to business, and they have a lot of

good global brands. have been some companies that have been a leader and some of these good brands and distribution platforms are worth a lot. pieces thatobably you could put into the runoff as well. you can get your focus off of those and focus on the better brands. so there are good brands within aig. it is just a question of whether and theere they reside key thing here is that there is a lot of headwind for insurers because interest rates are low. the flipside of that is there has been a lot of consolidation particularly from asia. have been better buyers and if you expose some of these properties to that kind of process, you get a higher moto -- higher multiple than what north americans would pay. betty: we will hear more from aig today and tomorrow. arlington,r from

virginia on aig. we have some breaking news right now, this again involves m&a. julie hyman has more. julie: fairchild semi conductor, which bloomberg news reports it itself,ng into selling now we hear that a german nfineon is looking to buy fairchild semi. -- companies are still interested, but again, this is all according to people talks. close to the you can see what fairchild's shares did when these news -- when these headlines came out. i am seeing it up by nearly 3%

here. let's get a check on the terminal while we are at it. the company was apparently in the running and those shares are still hanging on to the gain. to bring up another headline breaking in the past few moments because it involves something we were just talking about. there is a withdrawal of a proposal to purchase team health. is withdrawing his proposal to merge with team health. right, thank you, julie. that is julie hyman at the bloomberg market dust with the withing news -- desk breaking news. our central banks behind the rising u.s. outflows of money? are askingtraders

corporations to be more conservative with their balance sheets, and that includes cutting back on those buyback programs. ♪

betty: good afternoon and welcome back to the "bloomberg market day." new york times publisher arthur sulzberger says that a successor will be chosen within the next two years. management board and discussing the choice of a deputy manager. he has been in charge of the new york times since 1992. his great-grandfather took over the times in 1896.

there has been a general report on the central bank probe back in 2012 and janet yellen says she will provide the house andittee with materials that includes a report commissioned by then chairman ben bernanke. in annel has been locked oversight discussion with the feds for the past six months. seaworld, tickets will cost more and they will cost $94 for children over 10. the increase comes several months after an increase in ticket prices at walt disney world and universal studios orlando. ad a company announced connection today with a telecommunications company in cuba.

u.s.t is the latest company to capitalize on a diplomatic relation with the island nation. you can always get more business news at bloomberg.com. money is flowing out of stocks in the united states and the european union. outflows have picked up this billionthe tune of $250 as quantitative easing programs are too powerful for investors to ignore. joining us now is joe weisenthal. joe, do we know how much money is headed out the door? think that our estimates, but i think the real story is, in the u.s., we know that quantitative easing is over and there is a good chance we could see a rate hike. betty: at some point, yeah. joe: the eurozone looks like it could accelerate with quantitative easing. engagingincreasing and

in quantitative easing, so the money may be chasing where it is easing. i know that's some of my colleagues have been talking about this a lot this year. one thing that we have a pretty could idea -- pretty good idea is that quantitative easing works. have: all right, so many been easing for a while, so has anything changed? the policyg thing is diversions and the fact that the u.s. really does seem to be getting close to a hike has been getting to be a topic that is getting a lot of interest. there is a lot of talk about divergence and the possibility that in december, we could have an ecb rate cut and the u.s. could have a rate hike at the same time. betty: just bring it all home. joe: the last time there was an equivalent was in may of 1994,

so you will have to go back a long time where you would see that sharp of a divergence. betty: what about money coming back? if it is all going that way, when will it come back? is: the one thing that interesting is that when money is general, it is flowing into these markets. while it is true that there is more money flowing into the thezone and japan, all of markets look really good and that has been going on since 2013. lot thiseen going on a year about the pain of emerging markets, but that has been going on for a while with equity and bond funds. betty: so it goes both ways? it doesn't always work great for predicting market movements. we had a couple of days at this rate and if you just look at predict it you can't

and it is never going to be that simple. you, good tohank see you. joe weisenthal, cohost of "what'd you miss?" much more ahead on the "bloomberg markets." look at how stocks reported with earnings of this morning with trading. ♪

betty: welcome back to "bloomberg markets." i am betty liu. markets are closing at the top of the hour and it looks like we are going to be closing nearly at the top. julie: the s&p 500 is breaking above the 2500 mark for the first time and it looks like it is going to hold their through the close and as that he said, near the highs for the session.

the individualat best performers over the course of the day. consol energy, the coal mining company, is up 17%. there is actually no news headlines on consol energy today, so kind of a mysterious rally, if you will. if you take a look at my bloomberg terminal, you can see how well that console has done -- consol has done. it looks like people are coming in and buying here. other bestome of the performers, hp, yes, hp is one of them. even though hewlett-packard enterprises is not doing so well. makes storage devices and services, so it looks like at least, for now, investors are voting for hp. meg whitman, who had been the

ceo of the combined company, said that she expected some volatility in the next several weeks. diamond offshore drilling, interesting here, we see information about an oil earningscompany, the were beating estimates. the company also announced a new in order totrobras add work, but it looks like that strategy is proving successful. and estee lauder stock is up after it has been introducing some new products. it had some strong sales of luxury products. betty: thank you, julie. julie hyman at the bloomberg market desk. and no matter where you look around the world, they are seeing the same ominous signs. joining us now with her perspective with bloomberg news

is bond reporter lisa abramowicz. she noticed there is all of this outflow out of the united states because of quantitative easing, what that same quantitative easing may be the same reason that you are seeing a warning signs with the bond market? lisa: what the warning signs have been is this incredible safety for such a long time and a lot of these safe haven government debts have come down dramatically. seen 3% ofyou were more than $6 trillion of euro turningted debt negative, having a negative yield. that means that people are piling into the stop and saying, we are ok with actually paying to lend to these governments in order to save house our catch. -- cash. it is not good.

so some people would say, maybe this is just a symptom of quantitative easing, maybe this is just the result of what has happened? are seeingat you right now goes a little bit beyond that. perhaps, it is definitely a symptom, but in the u.s., a lot of people are scratching their heads and the aret understand while bonds staying around 2%. whether or not to raise rates this year, so this is what people are looking at and they are trying to figure out, should we -- betty: what is going on? lisa: that's right, and if we look at the corporate debt market -- betty: maybe people he to take a drink and get a little happier then -- need to take a drink and get a little happier then? maybe they need to take a happy pill? you: maybe they do, but if

look at other markets, you see similar signs. even though there was a rally last month, it looks hard to imagine that it looks like it is going to continue. it does not look steady. if you look at the past year, or the last 16 months, you will see a rapid deterioration of corporate credit. the amount of net debt that these companies have relative to you haveome coming seen it increasing pretty significantly, and yes, investors are still buying this stuff, but because of this low rate in wired med, it is not that they don't believe in these companies as they once did, so you are seeing cracked's. betty: well what will happen, lisa, when rates rise? be scum is be able to get away with it because these rates are so low right now -- will these companies be able to get away with it because these rates are so low right now?

lisa: it may be something else that will cause little pockets of companies. look at valeant. billionhas almost $20 in debt and suddenly their whole business model is being called into question, yet they have managed to pile on all of this leverage. when more capital structures are called into question and you get company by company just sort of running into trouble, this is something we to look at. betty: thank you so much, and that wraps up this monday edition of "bloomberg markets." is up next.miss?" ♪

scarlet: we are moments away from the closing bell. i am scarlet fu. .oe: i am joe weisenthal

alix: and i am alix steel. ♪ alix: the stocks are closing higher for the first time since august 18. joe: the question is, "what'd you miss?" we will have aig earnings out in just minutes. predicted investors information on our show on halloween and now they have a new prediction about natural gas. visa'snd we talked to cfo later this hour. course: but we began, of , with the markets. you can't really say it is positive, it is just in a lurch right now.