i am joe weisenthal. alix steel is off today. ♪ [bell rings] scarlet: u.s. stocks closing lower with the s&p 500 clinging to a tiny advance for the month of november. joe: but the question is, "what'd you miss?" scarlet: we break it all down for you. joh: and as we go into the final month of 2015, what are the banks predicting? and the reserve currency basket. we dig in and what it means for global markets. but we begin, of course, with the markets on the final trading day of november. we see that stocks are due to and the month with these smallest, the slimmest of gains, only be nasdaq finishing up more than 1%, so everything was solved 1%. seen volume down

in the last couple of days before thanksgiving, but as we tight of, there are a market moving items on the calendar this week. : yes, short-term edging up just a tiny amount, but it is a huge week because we have tons of economic data coming out. we have the opec decision, the ecb decision, and the opec -- the jobs report. a lot of exciting stuff for the end of the week. scarlet: and a lot of surprise, especially if mario draghi does -- i will tell you which segment of the treasury market has seen supply dwindle. u.s.is as a percentage of total government debt, and what you will see is a comes down to less than 10% from as high as 34% in late 2008, and one reason is that the government is

locking in record low long-term isrowing costs, so the time longer now. as far as the overall issue for the treasury declining as the economy has gotten better, so tax revenues are higher, so there is less of a shortfall, and this will actually dropped 27% next year, according to some. : it seems to be exacerbating another issue. the government will be borrowing less, and with all of the debt out there that the fed has bought over the years, there is the state asset shortage and that there is not just as much government debt out there, ironically, that people would like. scarlet: and they say that bond well. might be lower, as joe: right, and i want to dive into the terminal to talk about some of the data we got. we got some of these regional manufacturing report, and they

are kind of ugly. milwaukee. we want to know what is going on with the milwaukee economy, really week, and in chicago, this was also an unexpected decline. it fell below 50. going back to the beginning of this year, a steady decline, and look. every guest we have on is manufacturing is not that big of a part of our economy. we know it is week, but it does not look like we are seeing a bottom yet in manufacturing. regional data is not good, and anything before a fed rate hike is not good. if you are so sure that the that is going to hike the rate, then every bit of negative data makes it look like a mistake, so this will contribute to it. it looks like second-guessing, and at least it has stabilized. : so far, it is not clear it is going on. scarlet: you can see these

charts on our twitter handle, and our first guest is with a newsletter focused on the stock market. joe: thank you for coming in. the best time of the year, and everyone is coming out with their forecast. so far, no one is particularly bullish going into next year, and we had morgan stanley come out and saying there are not going to be any good returns anywhere. you are sort of a market history buff. this how long we have seen rally go on and where we are in the fed cycle, what does 2016 look like to you? guest: i would not make any specific predictions, but breaking down the map benefits equity investors. just looking at the very low return of bond yields and the very decent returns of dividends great we are going to get about another 10% increase in pay out this year. you talked about the morgan report, which i thought was really interesting, because you

cannot even get better returns, you cannot buy better returns by taking on more volatility. that is what is interesting gamee that could be a big changer, but we also need to remember that the volatility and returned is a great idea in theory. in practice over the years, it has not worked out so well. if you were to look at all of the predictions for next year, saying that people are ambivalent, what about the lack of exuberance and the market? : the best atmosphere is to be a bit skeptical so you can get some of the upside surprise. there is a good chance that disaster is off in the wings and that it does not come, and that does not act confidence to investors. atrlet: and the market, look the advance we have seen since the bottom of the market in

march 2 thousand nine, up 831%. what are the characteristics of a mature bull market, and how many of these signs are we exhibiting? think we aret there yet. you will see more explosive valuations in some of the tech was see the really insane ipo's, when it becomes people are buying because they expect it to go up, it goes up, and then people buy more. with valuations. something else i always look out for is the yield spread, the yield curve, and particularly the two and the 10, a pretty good indicator. it is still pretty wide, and that is why i think we are still a long way away from trouble. you mentioned watching for valuation, but there is concern about the overreliance of stocks,s on the famous

the facebook and amazon. without those stocks in your portfolio, it would have been a much worse year. if you look at the equal weight measure of the s&p that does not overweight a few of these highfliers, it is not nearly as good. what does that tell you? can the market still rally being so dependent on a few names like this? eddy: lake will be gone. wobegone. be reliant on to those big names. i think the early part of the rally we saw a lot of maller names, so it is not necessarily. withoutertainly rally amazon and netflix dominating. here is the thing. by next year at this time or even earlier next year, the

collapse in oil prices, in particular, will not be much of a shot. you cannot expect ceo's to keep talking about it because we are still familiar with it, so what kind of impact does that have on -- onprices and markeddy: share prices? : there will be much more favorable comps, and i think there is consensus for the s&p 500 that is about $126. that is an adjusted number. that is a pretty good valuation. there is nothing excessive about that. i think overall, that bodes well for 2016. joe: can valuations expand from here, especially with the fed tightening? ddy: it is great difficult to predict valuations, where that will go. it certainly can go higher from here.

at ther, if you look futures, saying what the fed will do, we are probably going to get -- this is what they think. is a one and a cause, maybe 18 two and a's, maybe at the november meeting, before the election. they still see this pulling, and it in real terms, it will still be negative, and that is a year from now. very loose conditions. i want to switch to another big theme that has been prominent this year, the lack of liquidity in the credit markets. a lot of people come on and talk about that, and some that say equities, likell some you've mentioned, which have been such good performers. eddy: the bad news is that we are running out of bonds? in my view, that is good news. more money for equity.

and what is worse, what is the problem ahead? that is good news. i think our fiscal situation is much better, and i do not see that as a problem at all or the equity market. eddy, you are staying with us, and we will discuss a possibility, next. ♪

♪ scarlet: coming up on bloomberg will be on dan senor at 5:30 p.m. eastern time, and he is going to talk about the road ahead for the candidates as we get ever closer to the

election. joe: yes, it is going to be fun. lore: the president was in paris today at a global warming conference, and he spoke there. president obama: so our task here in paris is to turn these achievements into an enduring framework for human progress. solution, but a long-term strategy that gives the world confidence in our low-carbon future. laura: and president obama met with russian president vladimir putin, urging him to dial back tensions with turkey following the shootdown of a russian jet, and the university of illinois at chicago says there has been an arrest in

connection with threats against the university of chicago, and it is said to be in response to the shooting of a black teenager in 2018. and for safety, the school canceled all classes and activities today. democratic presidential candidate burning seniors -- bernie sanders is undergoing a hernia surgery. it was a surgery that is being described as elective, and he will go back to senate duty tomorrow. and you can get these and more breaking news stories 24 hours a day at the new bloomberg.com. i am laura keller. back to you. with eddy, are back and we are just about two weeks away from the fed decision. what about raising rates?

: we will have another jobs report, and i think another cpi report, and all i can think about is something extremely unusual in overseas markets, but right now, i think the fed will almost certainly raise rates. joe: what is the big debate going on as we get closer to ?his rate some people think they are going to do with too soon or too slowly. and some think they should not be in the basis of raising rates lower, and that it is way than people think, and that any rate hike would be a disaster. there is a lot of discussion at the fed about where the neutral rate of interest is. what do you think? eddy: that is a really good question. at the latest fed minutes, that we got the friday before last,

they talk about the natural rate of interest, a pretty abstruse statement. century,from the 19th closely associated with an economist in the early 20th century, so there is the sort of phantom interest rate that hangs over the world. we cannot see it. we cannot touch it. it is not printed in the newspaper, but it is there. joe cole and this is a rate of interest that would bring everything down? eddy: the first is whether or not it even exists, and then the other is what is it, and the president of the san francisco and it was said that it was likely that the rate went negative and is still very low, so we can take from it that basically anything you do with interest rates except going

negative is not helping the economy whatsoever, so the problem is we cannot see -- we do not know what the natural rate does, but we can only look at it effects. scarlet: so what does that mean for what the fed can do? what is within the fed power and authority and ability to influence? y: not very much, except with like the operation qe and twist. monetary policy itself, and they would say you would have to kick the can over to fiscal policy. thing we have an looking at is gold, which is on a pretty terrible run, its lowest level in six years, and a chart you're looking at specifically is the dow versus gold, and we had the bubble, the doubt was massive, and gold was really low, and all briefly, that reversed going into the market crash, and everybody wanted rocks, because they thought that would be a better

store of value, and that is reversing. could be ratios -- could the ?atio return several years of the stock market outperforming gold? eddy: it has already tripled, and granted, that is all of a low race, but as long as you have a real short-term interest rate, that is very difficult for any commodity. that really puts the pressure on gold. generally speaking, this is a large generality, but gold and big, commodities move in big dramatic spikes and then long, slow deflation. done some writings about how to model gold based on the interest rates. what is it? : it goes back to the natural rate of interest and we cannot see what this natural rate is, but if it is low, that

means that the real rate are very low, and that is draining money out of gold, so basically all things being equal, the natural rate at 2%, that means with real interest rates, the natural rate, gold stays perfectly flat. that, and you get lower real rates, then gold will rally. flip it around, and gold falls, and that is what we have seen over the last four years. scarlet: what about the rate? investors are anticipating, what, 1.3% inflation over the next three years question or is there a relationship between gold and other hard assets? think it is within stocks preview see about 2.4% significantly above where we are now. comes, where the danger because if the long-term bonds are the stronger competition, and the short-term rates are stronger competition, and it generally is how that

relationship breaks out. let's say the natural rate of interest is much lower than people think, and the fed attempts to hide. when would we start to see the wheels coming off the economy? very quickly? ddy: i do not think we will see the wheels come off, but i think the low rate that we will see in the bond market could last for a long time. we would see greater stressed placed on the fiscal and of the policy, trying to get the economy going, and i think just generally we would experience much lower interest rates than we have in the past. thiset: so to sum all of up, the u.s. looking to lift off, to raise interest rates are the first time in, what, nine years, and the rest of the world on an using path, and when you go back and look at the data,

what tends to happen and that that area? ddy: back to be a situation for bubbles because you have a mismatch, but what you are getting at is your getting out of sync with the u.s. and the rest of the world, and then china i would say with the rest of the world at the other end, a magnitude of two or three, and you can look at on your prices dropping, copper prices at six-year lows, that is the kind of thing you get when things are out of sync at that level. : all right, thank you for coming on and talking to us. scarlet: we are in the midst of a huge week ahead. we will highlight three events that you need to know about. that is coming up, next. ♪

♪ i am scarlet fu. ♪ scarlet: "what'd you miss?" '" editorg markets joins us now. a policy announcement on thursday, and looking at cutting rates even further, so looking at more easing, and when you look at options, investors have more since october when mario draghi began priming rate thatnd it is a banks charge one another for loans. of course, we know that economists are pretty much unanimous in their view. halfwaynly less than through the ecb, and this is what is remarkable about this.

are right and we're going to get more easing from the ecb, and we are also widely expected to get the federal reserve rate hours for in fact, 25 financial markets, starting on thursday. joe: there is basically no chance they will not hike, and the blow to their credibility would be pretty huge. and then the next day after that ecb meeting, we get the final jobs report before the possible fed hike. some economists are looking for the unemployment rate to stay flat, 200,000 new jobs. if we get another hot wage and this is the year over year. you can see it kind of broke out over the last few months on this chart. if we get another spike up, closer to 2.6, are we going to see more hikes next year?

it will really surge. on the other hand, if it is a disastrous job report, that will be really exciting also. i do not think one data point. scarlet: it would have to be pretty catastrophic, yes? >> yes. scarlet: and the surprise is with the ecb because mario draghi, as you mention, as a history of doing pretty much what the market wants. he has never under delivered, and whenever 2012? >> don't forget, there is selling that happens in between the ecb and the jobs report, and that is janet yellen speaking. that tiny little thing. fed is absolutely major for speak. peoples a plethora of

talking. including the outgoing minneapolis fed president, who we all know and love and who is extremely dovish and who has recused himself from voting at the upcoming meeting, so that is interesting. joe: it is amazing that that is not going to be after the jobs report. scarlet: do they have any inkling what is to come? joe: i have read about this before. i think maybe the president gets it one day in advance, but they do not get it earlier in the week. scarlet: ok. the rate hike is probably going to happen next month, and what people will be looking at is what clues about the rate hike, so pace is the new financial market buzzword. be the- scarlet: it will most anticipated, and that does it in terms of what we are looking ahead for next week.

another item on the agenda is the opec meeting. with prices stagnating, who are the winners and losers of the collapse? ♪

scarlet: i am scarlet fu. "what'd you miss?" let's get to laura keller. man accused of killing three people including a police officer are at a planned parenthood clinic in colorado springs, and there is a search warrant. public willing this jeopardize the ongoing conversation. and the u.k. prime minister david cameron says the parliament will focus on whether britain should launch airstrikes against militant in theory. theaid he would not take matter to parliament unless he

knew it would be a success. the obama administration wants to add new rules and screening requirements for people coming to the u.s. carry this happens after the terror attacks in paris. he says he will also work with lawmakers who are opposing restrictions. a-free travelhese for about 20 million people, and an mba retirement, leaving with five championships, 17 all-star appearances, and the number three spot on the all-time scoring list. cannot make that decision based on outside circumstances. be an internal decision, and then finally, i just had to accept the fact that i do not want to do this, and i am ok with that. : ticket prices higher in the secondary market. home finale ine

april will set you back more than $500, and you can get more on these and other breaking stories on the new bloomberg.com. i am laura keller. much,t: thank you very laura keller. looking at how markets closed, a sag at the end of the month, but a gain, the s&p 500 up for the month. today, it edged lower by 10 points. joe, financials rose, utilities climbing almost 3%, and that shows you how investors are pricing in or starting to price in that increase. the two-year yield was inching up again. today, we got a little cell up on some weak economic data. of course, it makes people nervous. if the fed does hike, that would be a mistake if the data does not justify . scarlet: and the big day will be

friday when that jobs number comes out. joe: right. and we talk about libor, and this is the version in saudi areia, and interbank costs at their highest level in five years. there is so much talk about the collapse of oil have much of a stress there is on the economy and government finances. will they have to de-peg? said, people should not freak out, because if you blow up this chart and make it longer, it can seem extremely low based on where it has been, so while it is creeping up, it certainly has been higher in the past. it is just starting to creep in deep., oilt: for my prices, there is no change in demand so far in the lead up to the opec meeting, and here is how wti close out the month. shows the wti average each month, so even the

west texas and intermediate started and ended august right here above $50, the average price of that month was sub $43 and about $45 september, $46 and thenchange in october, and $42.92. that struggle for oil to break out. joe: it is just not happening yet. scarlet: just not happening. and what about oil rebounding in 2016? ballots, il far from should say, in the energy market. there is an energy analyst who has handicapped the winners and losers, and, doug, before we get to that, what is your projection for next year? are: the opec policies clearly working. supply and demand are on a divergent path. the market probably begins to discount by march or april or may of next year, so we think it

will be methodical. so the outlook for the energy stocks is improving, and we think the point average is $55 this year and $65 next year. when you say the opec policy is clearly working, i think that is a surprise to most people, because opec is impotent to do anything right now, and they do not have any policies that work. where is the evidence of that? doug: share versus price. when you think about the demand-side this year, even the loyal oil prices -- the lower oil prices, we have seen 11 consecutive positive changes, a whopping of 60%, and 1.9 million barrels. lower prices are having an report impact on the demand-side. thought the non-opec supply

would be resilient this year, but it really has not been. about 2.5 million barrels per day last year. be lucky toc will only decline by a certain amount next year. demand growth, a half a million barrel per day decline. opec will have to increase production next year by 2 million barrels per day, and they do not have it. it will affect fundamentals and price. talking when we are about non-opec production, we are talking about north america. this has really taken people by surprise, including those in the industry. enough so that we have reached peak productivity? scarlet, that is our point. productivity decline production per rig, and i found that curious, and the reason why is that the industry is doing its

best prospects with its best personnel, and it appears to be flattening out. when the industry expands, and after we go through another six months of hell, so we think we are pretty close on productivity. joe: the counter argument that people say is that sure, the north american supply is starting to roll over, that as soon as prices go back up, that supply can go on my very fast to that it is there a easy turn that switch. what do you say about that? doug: we think it is going to be more difficult, and the reason that there is a lot of really talented personnel in the industry that are exiting, and we also think it is important to remember that even if the oil price recovers $265 or $70 a barrel, it will have to stay there for a while, and then to go back in and to drill again, again, that is assuming we do not have consolidation, which we

think is nearing. scarlet: are there big questions? think that there are, and if you go back to the pp keeper in the last prophet cycle between 2009 and 20 before the decline -- even if you go back period in the last profit , the companies are trading at multi-decade valuations, in a and we thinkhigh, investors are responding. at the same time, we think these companies will see greater value creation. there will be consolidation and new is this models that we see in not too bad. scarlet: perhaps getting smaller? doug: we think both can happen, but we also think there will be

mergers pretty similar to what unfolded in the late 1990's, with the super majors. we haven't opec meeting coming up. anything in particular you will doug: we think? they have some important issues, and the most is about providing a production quota for iran, and we do not know how much iran is going to be able to produce a next year. we do not think that there are going to be any meaningful effects on production related to this meeting. but by the middle of next year, that could be different, and at that time, quite friendly, we think they will need more oil, not less. scarlet: and, of course, indonesia is back in. what is the significance of that question will it have a material effect?

indonesia is not even an exporter, which you think would be a requirement. scarlet: apparently not. doug: apparently not. maybe 30 or 31 million barrels per day. we do not think there will be any meaningful effects related to this. it is really not that meaningful to the market. scarlet: ok, doug, thank you. u.s. productivity may have peaked. thank you so much. coming up, the international monetary fund approving adding the yuan to the reserve currency basket. we breakdown that decision, next. ♪

scarlet: i am scarlet fu. "what'd you miss?"

it is time for a look at some of the biggest business stories. it will givesaid 20 weeks of paid leave to u.s. employees who act as a primary caregiver following a new birth or adoption. they are trying to retain and obtain employees, and target is struggling to handle a surge of online traffic for cyber monday. some shoppers so i message that told them to please hold tight. customers were placed in a line as they experienced a spike in a mass of fixed income job cuts that could be as much as 25% of the firm's personnel worldwide at morgan stanley, and they say the reduction could come in the next two weeks. it fell in the third quarter by more than 30%. and that is your bloomberg business flash.

and the ecb approved the use of as a reserve currency, with only a few currencies including the dollar and the pound in that same position. joe: thank you for joining us. it is not much of a change that that has happened, but the we in the basket was a little lower, about 10%, and some worse in 14%. is that significant, that it was not as big as some people thought? guest: i do not think so. it is symbolically important for china because it is an official thersement in terms of financial market liberalization, and also a formal recognition that is sort of a very important role played by china in terms of global trade. ighting, i ame

pretty sure that is taking into consideration that the chinese currency is not yet freely there are still capital controls in place. this is an encouraging first step. i do not think this is anything to me that sounds like it is disappointing. the former head of the imf china team was quoted as saying he thought the imf bench uan,s of including the y that they stretch the criteria because it is not one of the freely traded currencies for a big currency. do you agree? i agree. the imf has spent to the chinese demand. on the other hand, we have to be realistic. china is the second largest economy in the world, the biggest trading nation in the world, and i think it is very not in absurd that it is

the basket, so i think they basically faced up to the reality. the reality is that this is a very important trading nation, and it will become very important in terms of global finance, so if you do not have it in the basket, it will have a long-term problem going forward. joe: so everybody basically says that this particular recognition is kind of symbolic, but in terms of hard steps that china needs to take on the reform front to make itself an international destination, to open up its accounts, to liberalize the currency, what are the key things we should be watching for? n: well, they have to remove a lot of capital control. right now, if you are a chinese citizen come you can only bring out so many dollars, and if you are a foreign investment company, you are facing a lot of restrictions of putting money in. buying chinese shares, buying chinese bonds, it so there are a

lot of restrictions, and the currency is not really freely tradable at all, so there is a lot of work to be done, and i decision imf with this is really an encouragement for the chinese government to continue on the path of free market capitalism and liberalization, and also i will emphasize that by joining this basket, the chinese government has also made an implicit commitment that they will liberalize their financial system, so i think probably five years down the road, the story will be very different. i think the chinese currency could be much more widely used and much more freely tradable, but right now, we still have a lot of work to be done. scarlet: so in the intervening bank,how does the central the people's bank, will it need to be more transparent, like the fed, the ecb?

chen: i think they would like to do that, but right now, they are facing what is all the impossible trinity. the chinese economy is slowing, and they are deflating. urgent need toy devalue the currency, but at the same time, they would not be able to do that because the chinese president, xi jinping, already promised that china would not devalue, so they basically have a positive trend. , free capitaltal mobility, and you cannot control your foreign exchange rates. right now, if you want to control interest rate and foreign exchange rates, you have to slow down your move towards d decontrolled capital accounts, but i do not think right now the easy compromise is to slow down the

capital account liberalization, because right now, the urgent need is to stop the weakening momentum of the economy by stimulating the supply, and at the same time, without very much devaluing the currency. scarlet: lots of hard compromises. ok, you are sticking with us, and we will be discussing this further, including efforts to fight back against the chinese economic slowdown. ♪

scarlet: coming up on bloomberg television, a managing partner .t kleiner do not miss that conversation.

i am scarlet fu. "what'd you miss?" co-of global a macro research. another headline from this month, they would add a number of u.s.-traded chinese stocks to and this is very symbolic but not as significant for investors. chen: that is correct, and some people have asked us about whether that inclusion would increase the demand for chinese shares, and i do not think so. if you look at history, that kind of decision has really produced a lasting impact at all. the company fundamental, macro policy, risk perception. ,hose are the kinds of things not necessarily the decision to include in the benchmark. i do not think it is going to be

a significant impact at all. joe: looking ahead to next year, there is still a lot of anxiety .bout the hard landing question if you look at manufacturing versus services, you can see the services side of the economy is and it isch hotter, historically more manufacturing base and is historically weaker. china isink successfully handing the football off to a different part of its economy? n: i think there are two of things to keep in mind green there is a natural decline of the growth rate. the chinese gdp is about $8,500. it will take some time to double that level. you know, 20 years ago, we were talking about $800 per capita gdp. that is why you have a natural decline in growth rate. that is one thing you have to keep in mind. another thing is that they have pursued a very bad economic money, andy tight

extremely overvalued currency. isview of the currency probably overvalued at 10 or 15%, and they are backing off from that policy. rate andthe interest are cutting the reserve requirement, and they cannot move the currency because it become a political issue, because the chinese president has already made promises, and they cannot back away from it. that is why i think they are still lacking. that is why i think they have to do a lot more. the compensation is that you have a very overvalued currency, you have to dramatically increased stimulus. they are beginning to do that, but they are still lagging. growth iny i see stocks. next year, we are going to see a transition from weakening growth to a stabilization, and eventually, we will probably see some up term. -- upturned. they are changing policy.

scarlet: so what do you see is the biggest risk for china in 2016? chen: i think the bait -- biggest risk comes from the united states, if they start raising recklessly. that will bring up the remember -- currency. have a $1 overshift, that will create major trouble for the chinese manufacturing bases, so if you ask me the risk factor, i would say that the dollar is the biggest risk for the chinese economy today. joe: thanks for coming on. scarlet: coming up, what you need to know to get ready for tomorrow's trading day, when we come back. ♪

scarlet: i am scarlet fu. "what'd you miss?" tomorrow, manufacturing numbers coming out, and this is the weak part of the economy, and we will show you how some point to some softness, and right now, we are looking at a read of the .1 -- no, 50.5, which is not that great. joe: expansion mode, just barely. people still watch this closely, also tonight, some central-bank decisions to watch from australia and india, and australia, worse, very sensitive to china. at that this month, kind of decent performer, and there is some hope of some stabilization in china, so we will watch this rba decision, and i expect there will be some fun moves in the aussie.

a huge week. scarlet on the ecb on thursday, right? all right, that is all for "what'd you miss?" thank you for watching the and we will

halperin --rk vadon rodham halperin. and with all due respect to the new york times, if you are going to drop it, we're going to pick it up. on today's show, obama plays deal or no deal and we play .eopardy but first, the blame game. barack obama, hillary clinton, and many other immigrants of reacted to the planned parenthood shooting but for tighter gun control laws. planned