the ceo mark tells us how he is trying to do it. and brazil's incredibly shrinking economy. expected, are than drop-off in demand and a corruption scandal that caused political gridlock. ♪ stephanie: welcome. it's tuesday morning. we are in new york city, you are watching "bloomberg go." i'm stephanie ruhle. david: we want to welcome jim tisch, the president and ceo of lows. stephanie: no tie? business casual jim tisch. casual, suit,ess dress shirt, just no time. stephanie: kind of like a tech

approach. how about some first word news from vonnie quinn. president obama urging turkey and russia to put aside their disagreements and focus on defeating the islamic state. the president met with turkey's later today. the diplomatic crisis arrested after turkey shot down the russian war plan last week. it's threatening to undermine president obama's efforts to expand the us-led coalition fighting islamic state. now, than 90 minutes from the president will hold a news conference in paris. you can watch that right here on bloomberg tv beginning at 8:25 eastern. commonsn, the house of is excited to vote tomorrow on islamic state. cameronnister david called the vote, he wants british warplanes to begin bombing islamic state forces in syria. this led to a split in the opposition labor party. opposes theader attack. other senior labor party members are in favor. and the u.s. is making it

tougher to enter the country. the government adding new screening requirements to program that lets people from 38 countries come to the u.s. without a visa. the white house says that is aimed at radicalized europeans who have traveled places such as syria, and then could make their way to the u.s.. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. markets now with matt miller. matt: driving to work, i remembered santa claus is coming to town. you can see that in futures. across the board as we enter the month of december, up eight 72nts on the s&p many of on the dow. in november, we actually eat down again. i think it was .05% for the month. the worst november since 2012. it was the second month of gains, the fourth november in a row with gains. so november hasn't proven horrible. and we are up about 11% in

change since the august 25 lows. you can see about 10% since the august 25 lows. i want to take you into the bloomberg and show you what a seasonally adjusted, or what you should expect from months going across here in the rose. i've got years and columns are months. you can see here, november has been pretty good for the last few years. this is a five-year look, the top row is just the average. if i go in change this to 28, he gets to be so many years, you can make a lot of sense of it. you can see in december that we've only had five periods of sincees in december, 1988. it typically is a pretty good month for stocks, and we call that a santa claus rally. which is why i say santa claus is coming to town. i don't mean that literally. stephanie: excuse me.

he is coming to town, december 25. remember. kids watch "bloomberg go," too. we expect a decision on qe from the european central bank, the fed weighs dropped it out this friday, and most analysts are expecting the fed to raise rates this month. jim, you are a former member of the new york fed, what is your outlook? jim: my guess is interest rates are going to go up. i'm talking tenure and 30 year bonds. i think the fed has been woefully behind the curve in waiting to raise rates. i think it should have been done years ago. in a funny way, i think it doesn't matter. ,hey have been talking so much they've been saying nothing. they are the focus of attention, but the world is going on without them. david: apart from whether they raise rates, what about the outward curve?what happens

next year? jim: we've had 2% growth for the past five years. my guess is that where we continue, about 2% growth. velocity, at liftoff like you sometimes get in a recovery. 2%, enough that we are not in a recession, but not enough to make everyone happy. stephanie: do you think any yellen is doing a poor job? -- janet yellen is doing a poor job? jim: i think the whole fed, going back to bernanke, got on this quantitative easing kick. interest rates are too low, that causes misallocation of capital. that's why we've seen certain sectors of the markets just sore. -- soar.

it's why i think oil shale got to be so big. money was very cheap. the markets were willing to lend it to the shill producers -- shale producers. and they produce more oil than the world needed. stephanie: did it actually helped the economy? jim: initially it did, after that it was just low rates for the sake of low rates. it also told the world and the united states and businesspeople that there's a problem with the economy. david: what about the possible effect on currency? that can affect imports, including high-end hotels. jim: with respect to the europeans, their problems, in my opinion, is that they are trying to use their central bank in lieu of a lot of the policy changes it needs to take place of the legislative level. doing it at the

legislative level. they got to do something to try and stimulate the economy. the problem is, when you look at the history of quantitative easing, it really doesn't produce great results. growingpean economy is at 1% or so, the united states at 2% with quantitative easing. opinion, the economies would do better without so much quantitative easing by the central banks. monetary policy isn't really working, do need fiscal policy changes? jim: i think we need a ,ormalization of interest rates and i think, ironically, that the rising interest rates will actually help the economy. remember, low interest rates penalize a lot of people. people who live on fixed incomes , they are afraid to spend because their money is not earning money.

it drives people out of the risk curve. downside to easy money. stephanie: how bad is that downside? do you think we are facing asset levels in the credit markets, where so many investors who are nontraditional players move their money because of the low yields? i think there are pockets that are overpriced. look right here in new york city. it's real estate. you got retail real estate that $2000, rents per foot of 3000 dollars, $4000 a foot. selling those buildings on a 1% were 2% cap rate. it's crazy. stephanie: so what do you do? how do you react and invest around those crazy numbers? jim: you stay away from it.

in a way, with respect to new york real estate, that's what you can do. you just a away from it. the other thing we have in new york city is loss of 100 story residential buildings going up, each one looking to sell $100 million apartments. i wonder how many people are out there looking to buy $100 million apartments? that's something that is going on in the markets that i think it is there can be. the only thing to do, you can't short real estate. the only thing you can do is just a away from it. let's talk about your investment approach. you are responsible through a lot of money. in this world you've described of middling growth, not great growth, it's the best investment strategy? you have patient capital. jim: we have patient capital. funds are in fixed

incomes, for the insurance company. we have a $40 billion fixed income portfolio. and we have been fighting zero short-term interest rates. while we have been doing is investing our money in the latter. in tenure securities. and just letting it right down. it's a kiss your sister strategy. there's nothing exciting about , especiallyhis time in the fixed income markets, there's nothing really exciting to do. stephanie: when you think rates would go up? we are in environments where there's no inflation, there's a strong dollar. jim: the cpi, excluding food and energy is 1.9 year-over-year. typically, a government 10-year note will trade at 200 basis points over the inflation rate. right now, 10-year note's are to 20.

but rule i just cited indicates they should be almost twice the rate they are currently at. as we normalize interest rates at the short end, the longer and will move up. stephanie: you have a big fixed income portfolio. if there's one place you can ?nvest, where would it be jim: i would start to look at distressed bank debt. there is starting to be indigestion in bank debt markets. is probably a place where i would begin to look carefully. david: you are going to be with us for the entire hour, i'm delighted to say. coming up next, we go to são paulo, brazil falls deeper into depression and we try and fallout -- find out what's going on with their gdp next on "bloomberg go." ♪

stephanie: --vonnie: welcome back to "bloomberg go." the economy is improving in the euro area, but growth may not be fast enough of the european central bank. the ecb may decide to add more stimulus. unemployment kept falling. prices are not rising fast enough for ecb policymakers. david einhorn's main hedge fund is headed for a second losing year in almost two decades. he funded greenlight capital more than 5% last month, is down with 21% this year. the pace of online spending slowdown on cyber monday. according to ibm, web-based sales were up 18% from a year ago, consumers started their

internet shopping over the weekend when sales rose 26%. still, cyber monday remains the biggest online spending day. adobe estimates americans spent nearly $3 million. david: now to global go. we had to latin america, where brazil's gdp figures came in much worse than expected. in economy contracted 1.7% the third quarter, pulling the nation deeper into that recession. us from the são paulo bureau. we got an overview of the numbers. tickets behind them. conditions are worse than anticipated. than 3%, nextmore year, more than 2%. why is that they expect recovery? paula: at this point, it sounds

like optimism, because we are coming to the light of the tunnel. itches getting worse. last year, a brazilian senator was arrested, and he was the one negotiating fiscal measures in brazil. point, we just see the situation worsening. 2017 mightnking that not have a recovery, it might just be optimism. david: paula, thank you. stephanie: you do some business in brazil, you been dealing with petross for 25 years. what is your experience? jim: i'm pleased to say, the checks are still clearing. affecteds is a company not only by with going on in brazil, but also with going on in the worldwide oil markets. in the past year, they have been dramatically reducing the size

and scope of their exploration and production budget. that asthe impact of fewer of our rigs are working for petrobras. stephanie: we talk more about oil. we are going to take a quick break, we are not just one distinct petrobras. in global oil, this guy knows the business. we talk about oil will he come back, and we want to talk about hotels two. jim tisch on "bloomberg go." stick around. ♪

stephanie: jim tisch is with us, you are watching "bloomberg go." we're taking a deep dive into energy. loews corp. owns boardwalk pipelines. track oil.

the slump in oil prices have caught many investors off guard. what has it meant for you? jim: for the natural gas pipeline system, it's been nothing. before the offshore drilling business, things were great two years ago. today, the industry is in the desert. charter,g comes off a there's basically no work for it. utilization has come down dramatically. cash flow has come down dramatically. not just for us, but for the entire industry. david: how much of this to do anticipate? anticipate oil going from $100 a barrel to $40 a barrel. in fact, just this past thanksgiving was just the one year anniversary of the steep decline, when opec had their meeting in 2014, and the saudi's decided not to cut production. and in the bottom fell out.

how far back to the have to come for you to be successful in your exploration properties? oil pricesk that will come back to $65 to $75 a barrel. the world cannot produce enough oil to satisfy demand at prices below that. it's going to happen. in my opinion, it's much easier to forecast oil prices two or three years out than what it's going to do two or three months from now. inevitable that prices will get to that $65, $70 a barrel level in the next two years. because otherwise, the world as a whole will be just short oil. demand is growing by $1 million a day. we are a 95 million barrels. the next will be 96 million barrels.

plus there's depletion that also takes place. that's on the order of 5 million or 6 million barrels a day. just in order to state even in a even accommodate that one million barrels of growth, the world has to find 6 million barrels a day of productive capacity. barrel, that exploration and development work is just not taking place. that's going to be able to satiate the demand to in three years from now. stephanie: clearly there are some distressed rig operators right now. is an opportunity for corporate m&a for these rigs, or potentially down the road would you look for new operators? jim: we are the offshore into the market. drilling rigs there, and you drilling rig cost around $600 million. to date, been no real transactions in those rigs. the big question is just one of

those rigs worth today? stephanie: what are they worth today? jim: there haven't been any transactions. saidr ago, they would've $600 million. now, my guess is the general perception is that those rigs are worth maybe $300 million. i think there's a very good chance that the value of them will yet come down even further. stephanie: matt, let's take a look at diamond offshore. i have the chart up for the last five years compared to the s&p. in the s&p energy sector index. obviously, the s&p is going to mask the performance, the energy sector has been tough. this is the energy sector index, and diamond is really underperforming then. i'm wondering if that's because it's a specific problem to offshore drillers? jim: i don't know exactly what's included and not included in the chart.

2006 toll you from 2014, diamond offshore, which currently trades at $22 or $23 a share, and those nine or 10 years, diamond paid over $40 a share in dividends. , there'sgood times dramatic cash flow. david: this is total return. more to cover.ot it's only 7:26. we have the sky for the whole hour. jim tisch, president and ceo of lows. us the ceo of merkel tell how he is breaking the mold when it comes to employee benefits. ♪

david: welcome back to "bloomberg go." we are joined by jim tisch, president and ceo of lows corporation. get into theur

morning must-read, we're going to get a little first word news. vonnie: president obama is wrapping up his trip to the climate summit in paris. terrorism has pushed global warming to the sidelines. turkey'sdent met with leader to discuss the crisis over turkey shooting down a russian warplane. that incident is threatening to undermine efforts to build a global coalition against the islamic state. less than an hour from now, the president will hold a news conference. you can watch it here on bloomberg tv mechanic at a: 25 eastern. -- 8:25 each him. , $70 million is being pumped into a trust fund to help 1.5 million refugees in turkey, lebanon, jordan, and iraq. turkey is now housing more refugees than any other country in the world. beenck college student has charged with threatening to kill 16 white men at the university of chicago, an online threat led

the university to cancel classes yesterday. the court into a criminal complaint, the 21-year-old made of threat after the release a video showing the chicago police officer shooting a black teenager. more on these and other breaking stories 24 hours a day at the new bloomberg.com. david: tom keene joins us from london this morning. this is the must-read part of the program. stephanie says it's her favorite. what do you have for us? fox writing justin for bloomberg view about apartments. think it's a most adjusting cordova multifamily versus single family dynamics. apartment construction in john -- beforeew york city 1960, the city's population barely grew from a 1950 to 1970. new york city is growing again now, but apartment building is still way below where it was in

the 1960's and early 1970's. this is a fascinating essay in the multifamily dynamics. the answer is, we're are not building enough apartments. stephanie: you were just saying there are $100 million apartments and skies members being building -- being built all over the place. jim: they are building too many of those, not enough of the $1 million apartments that have 1000 square feet. david: the natural consequence of this, i would assume, is the price of renting an apartment goes up. which actually affects consumer spending, going back to black friday and cyber monday and things like that. jim: if you go to places like long island city, all you see are cranes. it's right across the east river from new york over the 59th street bridge. 7, 10 new be 5, apartment buildings that are being built there. there is some building that's going on. james, your staff needs

places to live. how hard is it for you to find people who have stability of housing nationwide? -- the've actually people that work for us don't really come to is looking for places to live. they are already situated in new york, they live here. it's not just a problem. reallywhat does this mean for the economy, the shortage of apartment building going on? tom: that's an important question. the idea is that economics to it, there's mathematics to it. there's the behavior, and we are hardwired still after two or three housing cycles, we're supposed to buy a home. there still a very big difference between how europe behaviorally handles housing, versus the way america handles it. you got to believe that behavior entrenched that there will be another cycle of leveraging to build single-family homes.

but we mayhat now, see it in five years or seven years. stephanie: do you think we could see another subprime situation here? in the near future. i think the crisis of 2007, 2 dozen 8, 2009 was so extraordinary that we clean the slate for a while. for a while. still badere are practices, and over time, those bad practices could get worse, especially with the prodding of easierians to make money to subprime lenders. i just don't think enough time has gone on for it to be the pressure cooker that it was back in 2007. stephanie: tom, thank you. we're going to let you get back. it's late in the day in london, you probably want to head to the public. tom: there's a rumor the seat

warm for me. stephanie: thank you to tom keene. something else i love is good business. joining us as kenneth frazier, chairman and ceo of merck and a member of the american ceo roundtable. there's a lot going on in the pharmaceutical and street right now. i want to talk about good business. you are part of this roundtable, and you say you can prioritize any cause or benefit you want. why are you putting health and wellness on the top of your list? are your employees asking for it? the answer is straightforward. of all of our assets, our people are number one. we are in the business of inventing new drugs, and it takes really smart people do that. we need people who are engaged in productive and want to come to work with full spirit. david: if that is your priority, how do you go about doing it as ceo? kenneth: one of the things we

are found, and i'm part of this american heart association ceo roundtable, where much of ceos come together to talk about these issues. one of the things we realized is that we have to have comprehensive and integrated programs that are employee friendly. imagine in the workplace not having fire exposures, for example. and yet, heart disease kills many more people than fires do every year. but we don't provide employees with a basis to protect themselves from heart disease. stephanie: when i think about who you have to answer to besides your employees, it's your shareholders. haveis roundtable, you ginni rommetty, ibm is having a really tough time. with ans sitting there activist investor knocking on their door. how he makes of them like this a priority when your shareholders, never heard on an investor -- an investor call, how is your heart health?

kenneth: investors are looking for a sustainable business. one of the key things is can you attract and retain the light -- the right cap talent. we find that employees care about these kinds of programs. if employees and their families are healthy, there is less stress, there's more focused, and it leads to greater results for the business. david: you have a heart healthy program, what results of you seen? youeth: it has everything would expect, finney centers, healthy cafés where we subsidize healthy food. putting stairwells where people can access them very easy. but we've seen over the past few years is that if you help employees understand some very simple things like don't smoke, like eat well, like get off the couch and exercise, watch your bmi, control your blood sugar, enjoy your cholesterol, those kind of things, employees will do it. stephanie: is it your job to do that?

when you think about all your responsibilities, is it your job to say that? kenneth: my job is ceos to set a good example. i think our employees want to , we are not coercing them to do it. we are simply saying like we want to make sure we have a safe workplace, we want to give our employees the ability to know how they can live longer, healthier lives. jim: i would guess that the dividend from this is that i would assume these programs more than pay for themselves, because the good health of the employees translates into lower health care costs for the corporation. kenneth: as well as for the employee. it actually translates into cheaper health care costs. but again, the primary purpose here but we want employees to be healthy. the best way we can deal with health care costs in society is to have healthier people.

on the front page of the new york times today, diabetes incidence are going down. people now understand what they should and should not eat. metricsre you putting on this? stephanie makes is where fitbit. she likes to win, it's competitive. are you measuring this over time to see what effect you are having in the workplace? kenneth: absolutely. any program that is an evidence-based and doesn't overtime figure out whether you're having the effect you want is not a good program. it's not enough to install these things, you've to make sure they are having an impact on employee health. stephanie: you hire people that time. when you acquire talent, do they actually care about things like that? fantastic, it's a idea. i would think people who are looking for a job simply want to get paid the most, one good maternity leave or paternity leave, and vacation. jim: that's true.

the once they are there, you want to build a culture. health programs like this are part of a culture, part of why people say i want to work here, and not go somewhere else. nielsen to the survey were they asked employees, do these things matter to you. a does actually make difference to employees. it makes them feel much more in terms of job satisfaction, it makes them feel much more in terms of their ability to contribute. we can't segment off people. if people feel good about coming to work every day, and they have good physical health, they're going to be more productive. thatwhen employees feel senior management truly, genuinely care about their well-being, that just makes the whole organization dramatically more cohesive. have a family

business, i hope you care about your employees. do you have to be a role model is the ceo? jim: of course you do. your every move is watched, every decision is watch. like being on tv, but it's almost like being on tv. kenneth: i agree, 100%. able see what your priorities are. do you spend time with your family? do you spend time exercising? are you eating the right way? if you do those things, people pay attention. stephanie: have you seen the shift in the last 10 years, member, the world you come from, there are many people, 110 hour work weeks on planes, 45 weeks here, do you see a shift in top talent priorities? jim: it's hard to say. i think that when you look at wall street, there has been a shift.

when you see how analysts have to work, how they have to have at least one they off, you see there is more of a focus on life and lifestyle. glacially, but there is a change. i would say in corporate america, it's easier to discern. kenneth: i think with millennials in particular, they are coming to work with a whole different set of attitudes. they want to be treated as people, and they want to have lives were they can interact with their families, with their friends, do things in their community. there's no question in my mind that you are seeing a change with respect to how employees expect to interact in the workplace. david: we can't let you go without asking one question about pharmaceuticals. i hope you will talk about it more. as we look at things like the pfizer allegan -- allegan proposed deal, how does this work with other companies, as

you are competing with someone who is lowering the tax rate substantially. kenneth: it's important for us to focus on. the u.s. tax system is not competitive in a global sense. we have to come up with the tax system that allows u.s. be in competition globally for talents, be in competition for investors, be in competition for ip assets and everything that makes this industry run. deal should be something that serves notice to our policymakers that good american companies feel no choice but to do things like tax inversions in order to remain competitive globally. stephanie: you are 100% right. realistically, we are not going to see policy changes in the next 10 years. you think we will? jim: i think my fearless forecast is that after the presidential election in 2017, you will see a rewrite of the corporate tax code. stephanie: what gives you the confidence?

when we read so much gridlock today? jim: i think the gridlock will pass and be gone after january of 2017. i think congress -- it will be rife for congress to take up that issue two years for the next congressional election. it's all getting queued up for that. kenneth: it's one of those situations where people on both sides of the political spectrum agree we need to do this. there are lots of political obstacles in the way right now, the presidential election being the most significant one. but i'm a big believer in the rationality of americans. do the right thing after we exhaust all other possibilities. i think we are pretty close to exhausting all the other possibilities. david: the one thing i think that draws all the prisoners are candidates together right now is in agreement that something has to be done about tax reform. stephanie: there are number of candidates who are concerned about drug pricing. we have heard hillary clinton

talk about it. what will that do to your business? you're talking about doing the right thing for employees, when their other companies in your industry with serious ethical issues. stephanie: it's in --kenneth: it's important to distinguish that some of those entities are not research-based companies. the reality is as we go forward, it's important for us to be constructive participants in the discussion. we have to have affordable and sustainable health care in this country. we got to find ways to save money where we don't hurt patients. there are ways of saving money. if you look clearly and objectively at pharmaceutical spending, i think you could see that it avoids health spending elsewhere. hospitalizations, for example. we want to be rational about this. frazier, weth really appreciate it. stephanie: i love the optimism. david: it's the most optimistic we have been in a while. staying withu are

us. we're going to get your take on aig, that's next on "bloomberg go." ♪

vonnie: welcome back to "bloomberg go." anadarko petroleum will have to pay $160 million for its role in the 2010 gulf of mexico oil spill. the company was part owner of the will that blew up, killing 11 people. the u.s. government had asked they be fined more than $1 billion. morgan stanley is calling 2016 the year of the yen. the japanese currency will outshine the u.s. dollar, that goes against the forecast of analysts and bloomberg. they say the yen will weaken. the production of recreational vehicles not seen since the great depression. it's up 3.5 percent this year,

sales next year are expected to be the best in a decade, if gas prices stay low. and that's your bloomberg business flash. david. david: we are waiting for president obama to give a press conference in paris about the climate summit. that shortly. we want to get back to jim tisch. insurance is been in the spotlight quite a bit lately. as activist investor carl icahn intensified his move to break up aig. you, of course, have a very big insurance company of your own. does carl icahn have the right plan for energy from where you sit? jim: i haven't studied it carefully, so i don't know. aig is slipping. it is supervised by the fed. board ofi'm on the general electric, i start on the risk committee for a while. i've seen supervision from the fed up close and personal. that's just not a way to run a business. stephanie: insurance should be self related? -- self regulated?

the fed but to have supervising is different than the current regime. was got aig into trouble not its insurance per se, it was financial dealings. stephanie: blame it on wall street. isn't that why one could say the fed should be involved, because it aig's case, if there was more fed oversight, maybe that wouldn't have happened? is, if carl icahn gets his way, and aig is split up into a number of pieces, none of those pieces will presumably be subject to supervision by the said. that will be good -- stephanie: carl icahn is right. jim: on one hand. on the other hand, their businesses the counterbalance other businesses within aig, and that dynamic is actually very

important for the entire aig. david: that's the question. knowing insurance the way you do, one of the costs of getting out from under the fed's thumb? again, the cost of the supervision is enormous. i know i general electric, they had to hire thousands and dousands of people, just to that which the fed wanted them to do. that soon is going to be coming to an end. for aig, i assume they also have to hire a lot of people they really are necessary to operate the day-to-day business. and in terms of the insurance business, like i said, state regulators have done a very good job of regulating the specific insurance companies. week, we satst down with d'angelo, and we talked about insurance companies being designated and the

regulation around it. >> the emphasis has been with respect to metlife and prudential and aig, the extent of their business, whether it's in derivatives, or some other products, where to create runs, that's just a judgment, although a well-documented judgments, about the participation of these firms and activities that are not traditional insurance activities. but better instead activities that connect them with the rest of the system. everyone watching remembers what happened and aig in 2007 and 2008. stephanie: what is your take? jim: i don't know what specific issues he's talking about with respect to metlife. stephanie: should they be? if they are traditional insurance businesses know, banks have a run on the bank risk. insurance companies don't. in an insurance company, you

only pay out on a policy in a life insurance policy when someone dies. and so there isn't that run on the bank risk that could endanger the insurance company. and even if the insurance company didn't get into trouble, there are depositors. so that run on metlife wouldn't cause a run on other financial institutions. carl icahn is clearly taking a run it aig. he is also backing someone who is running for president, donald trump. a new york icon, like you. trump? you think of mr. jim: i would prefer you not be our next president. i think our country needs someone who is a uniter, not a divider. we've been divided for too long. we need someone who can bring us all together. and i just don't see the donald trump is capable of doing that.

never mind is. there are a lot of people who are. but donald trump called john mccain a -- said he wasn't a war hero. , forcibly, 11port million americans. that's not going to unite us in any way. he gives us quick answers to questions, like he is going to build -- he is going to have the mexicans build, their own cost, a wall between mexico and the united states. number one, he's not going to do that. you can't do that. that's not the way tonight the country. stephanie: he is a divider. we are sitting here in political gridlock. we have ceos being attacked by activist every day. what does it take today to be a great leader? it takesakes vision, knowing exactly where you want to go. it takes knowing where you want

to go, what you want to do, and how you are going to get there. ,nd it takes having leadership so the people, not just employees, but all your stakeholders want to follow you to wherever it is you set your eyes on. is there a ceo you think is doing a backup job? jim: yes, but not one comes to mind. they're lots of them out there that are tending to their business, leaving their businesses, growing their businesses. their lots. stephanie: thank you. lowe's corporation and president ceo, jim tisch. we're back with martin gilbert. ♪

david: battered by emerging markets. meet the investor. forward is in the fast lane. this may be the u.s. automakers

best year yet. we will talk to ford's president. and president obama wraps up his trip to the climate summit. we will hear from him any minute, live from paris. welcome to the second hour of "bloomberg ." i am david westin. stephanie: i am stephanie ruhle. we will be taking it to paris where president obama is about to take the stage addressing the audience on climate change. a big initiative for him. many world leaders in paris this week. and theo make changes irony at a time when beijing is reaching critical, almost crisis status in terms of -- david: and they cannot limit

this subject. given what is going on with turkey and russia. stephanie: how about we get you news with vonnie quinn. vonnie: thank you. we will hear from president obama about his trip to paris. he met with other leaders against the fight against islamic states. in a few minutes, president obama will hold a news conference and you can watch it on bloomberg tv. in beijing, the solution of the year where some parents keep their children at home. attendance was optional today. meanwhile, city officials in beijing imposed limits on factory outputs. investigators in indonesia blame the crash of an air asia flight last year on a malfunction and pilot error. airbus a320 crashed in the sea, killing all 162 people on board. they say the pilots wrestled each other for control of the plane as they tried to find out

an electronic system failure. we had these and other breaking stories 24 hours a day at bloomberg.com. david: just to be clear, we have 825 on the full screen, but now we are told the president may be speaking earlier. in the meantime, it has been a tough quarter for one of europe's fund managers. they saw more than $19 billion out close, net outflows. they pulled their money out of emerging markets. the share price slumped yesterday and aberdeen ceo martin gilbert joins us from london. this was a big news, how big is it for aberdeen? martin: i think it is probably to be expected. following the market fall in and i think selling during the quarter. it was really painful for us,

but probably with the benefit of hindsight, probably to be expected. stephanie: let's put it in perspective. you are one of the largest asset managers in terms of emerging-market allocations. in the -- a number of others saw outflows as well. martin: i think so. i think that has been close in the quarter. i think some of the u.s. fund managers have seen outflows and certainly we have. i think it is an industry issue rather than just and aberdeen issue. stephanie: what are you going to do? these are big numbers. are you going to have to downsize? martin: i don't think so. we have to wait for emerging markets and asian equities to come back in fashion, and hopefully, they become so cheap that people sell expensive markets and buy the cheaper ones. and certainly in debt terms, an localmarket that

currency is now significantly cheaper than developed markets. is there andparity also inequities. david: are you saying that outflows taper off? i do keeping up with the same pace? one of the and come for outflows? -- one will be and come for the outflows? martin: we will know at the end of the quarter. outflows tend to come at the end of the corridor, so i have to be cautious and wait until i know in january when they make an announcement at the annual general menu. stephanie: to declare, you cannot quantify the impact this has had on your integral -- has had on you overall? margin: it has been tough -- martin: it has been tough. profits last year were up from the previous year, but i think next year will be the top year

for us. from this year until september next year, but we will see the full effect of those redemptions from our funds. it is going to be a tough year for us. no question. stephanie: how about the effect of oil prices? below $50, what does that mean for you and the investment community? martin: i think it is bad news for those of us who manage large funds for government agencies. certainly, the low oil price has make quite a significant dent to the asset management industry. also to the stocks. we own commodity stocks, oil companies, so it would be great if we saw the price of oil going back up. i think it would really help asset managers and the stocks reinvest. stephanie: what happens if they do not go up? you do have so many government

agencies backing you, when happens of oil keeps going down? martin: it will be a tough year for asset managers. especially for the stocks we invest in. theoretically, it should help some emerging markets because most of them are big importers of oil. in a funny way, it will help the china's and india's of this world for their stock markets and the companies we invested to do better. david: let me go back to aberdeen, what does this put on your list of possible things to consider as you face the disappointed future? ,s there an asset sale entrenchments, what are you considering? martin: i don't think so. i think the key thing in these terms, keep in mind, i have gone through a few of these in my time in the key thing is to do nothing.

it is not to sell your emerging-market stocks you have or try to chase performers, so what i try to do, along with my colleague, we try to persuade the fund managers not to panic. just sit tight and make sure you owned the right stocks and wait for the recovery. that is really what we have to do. the killer for a company like us is to sell at the point of maximum pain or have any kind of style drift and chase growth. stephanie: would you want to get away from emerging markets? if that were the case, where would you invest and would you do it through m&a? mean we havei diversified the business. not through wanting to get away from emerging markets or asian equities because we still think those are the high gross areas of the world to be invested in

over the long-term and even the medium-term. fantastic as the company. baron mind, we came from a 50 million nasa manager to a $500 billion asset manager. on the back of -- 50 million asset manager to $500 billion asset manager. we would like to be bigger in solutions. more and more investors are looking to diversify growth funds, liquid alternatives in these sort of products, so we are working hard to build those. stephanie: how would you build them? would you buy entire portfolios? martin: here's couple we have. we bought a company in new york. are looking at small acquisitions, which is a way to build a business as well as -- stephanie: unfortunately, we have to leave it there because president obama is taking the stage. that is margaret gilbert -- that is martin gilbert. hostingt obama:

hundreds of nations is tremendous responsibility, but to do so after two weeks of a terror attack is remarkable. that is why the first place i visited when i arrived on sunday night was about to climb -- was pay myaclan so i could respects. reminder oferful the awful human toll of those attacks. our hearts continued to got to to the victim's families, but here in paris, we see the resilience of the universal values that we share. [speaking french] based on my discussions with resident francois hollande and other leaders, i confident we can add resources -- i am confident we can add resources

to disrupt plots against americans and our allies and to bring about the political resolution necessary to resolve andsituation in syria relieve the hardships on the syrian people. .his has been a quick visit of course, all visits to paris seem quick. you always want to stay a little bit longer, but we have accomplished a lot and i have high hopes that in the next two weeks, we will accomplish more. would we ask why dedicate some of our focus to combating climate change as we work to protect our people and go after terrorist networks? the reason is because this one friend, climate change, affects this one -- because trend, climate change, affects all trends. it see levels rise as fast as they are and whether patterns keep shifting in more unexpected ways, before long, we are going

to have to devote more and more and more of our economic and military resources, not to growing opportunity for people, but to adapting to the various consequences of the changing planet. this is an economic and security imperative that we have to tackle now. great nations can handle a lot at once. america is already leading on many issues and climate is no different. we have made significant progress at home. increasing production of clean energy, working to reduce emissions while at businesses have kept creating jobs for 68 straight months, and we have been able to lower unemployment rate to 5% in the process. since we have worked with china last year to show that the two largest economies have two on climate,orporate or the 180 countries have

followed her lead in announcing targets. the task that remains in paris is to turn these achievements into an enduring framework for progress that gives the world confidence in the future. what wed yesterday, think is an agreement where progress paves the way for countries to update their emission target on a regular basis, and each nation has the confidence with other nations meeting their commitments. mayeek an agreement that make sure the that they need to skip the dirty phase of development, if they're willing to do their part, and make sure the nation's most -- the nation's most formidable to climate change and adapt to the changes we can no longer afford. we seek an agreement that gives businesses and investors certainly that the global economy is on a firm path to a low carbon future because that will spur the kind of investment that will be vital to combine

reduced emissions with economic growth. that is the goal, not just an agreement to roll back the pollution that threatens our planet, but an agreement that helps our economy grow without condemning the next generation of planet beyond its capacity to repair. hard.ll of this will be getting 200 nations to agree on anything is hard, and i am sure there will be time when progress seems stymied and everyone rushes to the conclusion that we are doomed, but i am convinced he will get big things done. keep in mind, nobody expected that 180 countries which up in paris with climate in hand, nobody expected that the price of clean energy would follow spasticity us what that back in the united states, the solar

industry would be creating jobs 10 times faster than the rest of the economy. nobody expected that more than 150 america's biggest companies would pledge their support to an ambitious paris output. or that the couple of dozens of the wealthiest private citizens would join us to pledge to invest unprecedented resources to bring clean energy technologies to market faster. what gives me confidence is that progress is possible with someone like bill gates, who i was with yesterday, understands that climate change is not just a moral imperative but an opportunity. he said,atting an eye, we will have to invest in new technologies to tackle this challenge. that kind of optimism, that kind of sense that we can do what is necessary is infectious.

you tend to believe somebody like bill when he says we are going to get it done since he has been remarkable things. a successful two weeks care could get the world that same kind of optimism that the future is ours to shape. with that, i will take a few questions and we will start with "ap." of jerome: good morning. thank you. the month you have been asking fromladimir putin shifting defending to attacking isil, it appears your calls have not been heard. what is your strategy moving forward? president obama: well, i am not sure that is true. the fact that the vienna promise is moving forward steadily, not conclusively, but steadily, i think is an indication that mr. vladimir putin recognizes there

is not going to be a military resolution to the situation in syria. the russians have been there for several weeks, over a month. -- and reporters would say that the situation has not changed. in the interim, russia has lost a commercial passenger jet. you have seen another jet shot lossesd there have been in terms of russian personnel. i think mr. vladimir putin understands that with memory, forfresh in in an get bogged down inconclusive and paralyzing civil conflict -- in a

paralyzing civil conflict is not the outcome he is looking for. have an continue to ongoing difference is not on the need for a political cell, it is the issue of whether mr. assad can continue to serve as president while still bringing the civil war to an end. it has been my estimation for five years now that that is not regardless of how you and ibout mr. assad, consider someone who kills hundreds of thousands of his own people the legitimate, but regardless -- his own people illegitimate, but regardless, it is a practical matter, impossible for mr. assad to bring the country together and all the parties to a conclusive

government. it is possible to preserve the syrian state to have been inclusive government in which the interest of the groups inside syria are represented, and as part of the fee and a process, you are going to see the opposition groups -- and as part of the vienna process, you are going to see the opposition groups that exist within syria. some of which, frankly, we do not have a lot in common with, significant --t but to represent significant sides of syria. they will be coming together in order for them to form at least in negotiating unit or process that can move forward. we are going to keep on working at this. my hope and expectation is that the political track will move at the same time as we continue to apply greater and greater questions -- pressures on isil,

and with the contributions that the french have made, the germans have recently announced additional resources to the brits have been aredy partners in iraq and now interested in how they can expand their efforts to deal with isil inside of syria, with not just the cohesion of the coalition that the united states put together, but the increasing of our actions in the air and on is ground, i think it possible within the next several months that we will see a shift in calculation in the russians and recognition that it is time to bring the civil war in syria to a close. it is not going to be easy. ,oo much blood has been shed

too much infrastructure has been destroyed, too many people up and displaced for us to anticipate that it will be a ilooth transition, and is will continue to be a deadly organization because of social media and the resources it has, and the networks of experienced fighters. it is going to continue to be a serious threat for some time to come, but i'm confident that we are on the winning side of this and that, ultimately, pressure will recognize the threat that isil poses to its country, its people. it is the most significant and that they need to align themselves with those who are fighting isil. followess i wanted to

that shift in calculation that you discussed in terms of president vladimir putin. did you receive insurances -- assurances from him or president francois hollande, who said earlier this week that president vladimir putin said he would only target jihadi's and they'll be the focus of russia's military campaign going forward, and i wanted to ask about climate -- the outstanding issue ,eems to be whether republicans who have voiced opposition to your agenda, could somehow block funding for the green climate plan? andwould you prevent that if you're concerned about what sir mcconnell said earlier today that a republican president couldn't do it you are trying to accomplish share? onsident obama: first of all

president vladimir putin, i do not expect you are going to see a 180 turn on the strategy over the next several weeks. they have invested for years now and keeping us -- keeping assad in power. their presence is predicated on propping him up, so that is going to take some time for them to change the way they think about the issue. as they are aligned with , a lot of russian resources are going to be groupsd at opposition that ultimately are going to end up the part of the inclusive orernment that we support other members of the coalition support, and are fighting the at the samesil

time, so i do think we should be under illusions that russia is getting only isil targets. that is not happening now, it never happened and it will not happen in the next weeks. what can happen is that the political process that john kerry has meticulously stitched russia, in concert with if that works in the end, then it is possible -- if that works givennna, it is possible the accord the parties have agreed to, we start seeing at least pockets of cease-fires in and around syria. that may mean that certain opposition groups no longer find themselves subject to either syrian or russian bombing. they are then in a conversation slowly wetics, and

are then able to get everybody's attention to where it needs to be and that is going after isil in the system adequate. with respect to climate and what has taken place, i do not want to get ahead of ourselves. we still need a paris agreement, so my main focus is making sure in united states as a leader bringing a successful agreement home to paris. i want to repeat so that everybody understands what we severalsider success itks from now -- number one, is an ambitious target that carbon level economy over the course of this century. that means that they have put

forth specific targets and although they are subject to although they are self generated, there is a mechanism in which they are presenting to the world confirmation that they are working on those targets, meeting on those targets, so there is a single transparency mechanism that all countries are at hearing to, and that those countries arel adhering to and they are legally binding. there are periodic reviews so as signs changes and technology changes five years from now, 15 years from now, each cycle, countries can update the pledges they have made. fund thate a climate helps developing countries to not only adapt and mitigate that

overrog -- but leapfrog dirty power generation in favor of clean energy. targets, then we will have been successful. not because, by the way, the pledges alone will meet the necessary targets for us to prevent catastrophic climate change, but because we will have built the architecture that is needed. we will have established a global consensus of how we are going to approach the problem, and the weekend and of the dials -- and then we can turn up the dials as new sources of energy become available, as the cost for something like solar or improving battery technology to make it easier for us to meet

even higher targets, and systematically, we can drive down carbon emissions over the course of several decades. this becausehasize i know that in some of the reporting, if you add up all of the pledges and they were all but right now, we would be at an centigrade.7 increase in temperature. that is too high, and we want to get to centigrade score lower than that. centigrade or lower than that. if we had these periodic reviews built-in, what will happen is that by sending that signal to researchers and scientists and ,ot to partners and investors we will actually hit the targets faster than expected, and we can be more ambitious. when you look at the cumulative

targets that may exist 10 years from now, we may well be within , and% centigrade increase by the way, that is not just for optimism.olish when you look at the experience of the united states, for example, i came into office and prioritized clean energy and i said we would double clean energy production through the recovery act. we recognized that making these big investments were also good for the economy and helping us get out of recession and creating jobs, so he made a big out weent and it turned met our goals a lot quicker than expected. if you had asked me when i first came into office my expectations for the price of solar generated power versus

traditional coal or other fossil phil generated power, -- or other fossil fuel generated that solaruld say would still require substantial subsidies in order to be economical. faster of solar has than any of us would've predicted five years ago, so the much fasterone down than any of us would have predicted five years ago, so the key is it is happening around the world slowly. it is happening. we are not turning back. ingenuityabout human -- i was going to say american ingenuity, but there are other smart folks around, too, a lot , but the thing about human ingenuity is it response when it gets a strong signal about what needs to be done.

with thexpression necessity of the mother of invention, well, this is necessary and as getting a strong, high ambition agreement in place, even if it does not meet all the goals we ultimately need, it sends a signal. that will spur on the innovations that will help us. thank you, mr. president. one follow-up on climate change issues, are you confident that you can hold the u.s. to its commitments under the existing treaty? plannedly on parenthood, i wondered if you could share your thoughts on the ofoting and any thoughts "rhetoric?

obama: i apologize that i did not address that, but is on the issue of the engage fund, we already in adaptation, mitigation, sharing technologies that can help them meet their energy so this the clean way, is not just one slug of funding that happens in one year. these are multiyear commitments that in many cases are already embedded in a whole range of programs that we have around the world. my expectation is that we will absolutely be able to meet our commitments. this is part of american literature, by the way. this is part of the debate that

we have to have in the united furtively. for some reason, too often in washington, american leadership by whether or not we are sending troops somewhere, and that this the sole definition of leadership. part of what i have been trying to describe during the course of my presidency is that where we and, by thet impact way, where we strengthen our relationships and includes the most is when we are helping to organize the world around goal.ular because we are the largest country and we have the most mostul military -- the powerful military, we should

welcome the fact that we will do more and often times he will do it first, so during the ebola response, other countries could not respond until we had set up the infrastructure to allow other countries to respond. until we have made the call and show that we would make that investment. the same was true with respect to making sure that iran did not get a nuclear weapon. ,e had to leave the way, but ultimately, because we reached that brought our allies and partners together, we were able to achieve goals we could not have achieved by ourselves. the same is true with climate. inn i made the announcement beijing with president xi, i was able to do so partly because we .ad led domestically i could put my money where my mouth was and say, here are the

tough political decisions we are making, now, what are you going to do? once we were able to get china involved, that give confidence to other countries that we are in a position to make a difference as well or that they needed to be involved in the process as well. whether it is organizing the orlition to fight isil dealing with climate change, our on large,nter, but international issues, it will not be sufficient. at least not if they want it to take, to sustain itself. we have got to have partners, and that is the kind of leadership that we should aspire to. with the respective planned parenthood, obviously, my heart goes out to the families of

those impacted. nancy, i say this every time we have one of these mass shootings. there's just does not happen in other countries -- this just doesn't happen in other countries. we are brightly -- we are preventdetermined to terrorist attacks wherever they occur, whether in the united states are with friends and allies like france, and we oteoid -- and we dev enormous resources to rooting out networks and debilitating organizations like isil and maintain the intelligence and improve information sharing and identify those who tried to

and, yet,ent people, in the united states, we have the power to do more to prevent what is just a regular process of gun homicides. by multiple,aled and i think the american people understand that. again, thisat, once spurs the conversation and action, and i will continue to present those things that i can do administratively that at the end of the day, congress, states, local governments will have to act in order to make sure that we are preventing

people who are deranged or have five and tendencies from getting weapons that can magnify the damage that they are doing. with the respective planned i think it is clear, i have said before, they provide health services to women all across the country. they have for generations. in many cases, the only organization that provides health services to impoverished women. i think it is fair to have a legitimate, honest, debate about abortion. i do not think that is something that is beyond the peril of our political discussion. it is a serious amateur dement issue. how we talk about it, making sure we are talking about it actually, accurately -- factually, accurately, and not demonizing religions or

organizations like planned parenthood is important. jeff? jeff: you are, mr. president. to believe that turkey is doing enough to strengthen its northwest border with syria -- do you believe that turkey is doing enough to strengthen its northwest border with syria? how is it that this need the country has not sealed the border and is it something you raised today? to put a finer point on the climate change question, can leaders gather here and believe that the united states will keep its commitment, even after you have left office for republican if a the white house -- republican succeeds you in the white house? just in theama: question with my successor, personnel, i am anticipating a democrat seceded me -- seceding me. i'm confident in the wisdom of

the american people on that front. even if somebody from a different party succeeds me, one of the things you find in this job is you think about it differently when you're running for the job. what you realize is what i mentioned earlier, american leadership involves not just plain -- claim to the constituency back home, but we are now in fact at the center of what happens around the world. credibility and america's ability to influence events depends on taking seriously what other countries care about. the fact of the matter is there

the largestyou have gathering of world leaders .robably in history in paris everybody else is taking climate change really seriously and think it is a really big problem. it spans political parties. you travel around europe and you talk to leaders of government and the opposition, and they are arguing about a whole bunch of things. one thing they do not argue about is whether, the change is real and we have to do something about it. ofever the next president the united states is, if they come in and they suggest somehow , notthat global consensus 99.5% scientists and

experts, but 99% of world leaders think this is really the president of united states wanted to think this is really important, and that is why it is important for us to not project what is being set on the campaign trail, but to do what is right and to make the case. i would note that the american people, in the most recent survey, two thirds of them said america should be a signatory to any agreement that emerges that addresses climate change and a serious way, so the good news is the politics inside the united states is changing as well. fortimes, it may be hard republicans to support something that i do, but that is more a games that washington

plays. that is what i think people should be confident. i havespect to turkey, had repeated conversations with the president about the need to close the border between turkey and syria. progress on serious that front, but there are gaps. -- about 98ometers kilometers that are used as a transit point for foreign fuelers, isil ship enough for sale that helps finance terrorist activities, so we have been having our military's work together to determine how a combination there and turkish ground forces along the border can do a much better job of ceiling the border -- sealing the border and acting president rdogan recognizes that.

i also encourage that president e.u. had it -- and the e.u. had a series of meetings about the border. we have to remind yourself that turkey has taken on a humongous humanitarian effort. there are millions of syrians who are displaced and living inside of turkey, not just refugee camps, but they are now moving into major cities throughout turkey and that puts enormous strains on infrastructure, housing, employment, and turkey has continued to keep those borders son for people in real need, i am proud that the united states is the single largest

contributor of humanitarian aid .or syrian refugees i am glad that the eu is looking to do more to help turkey manage those refugee flows, but i also think the eu rightly wants to processkind of orderly along the turkish-greek border is necessary for europe to be able to regulate the amount of refugees it is absorbing, and to save the lives of refugees were often times taking enormous risks because they are being hurried back and forth by human traffickers who are not operate in the same way they see drug traffickers operating under. without regard for human life.

[indiscernible] we talked about it today, but i guess what i am saying is that this has been an ongoing conversation. we have recognized that this is ilcentral part of our anti-is strategy. we have to choke them off. we have to choke off how they make money, their ability to bring in new fighters because we have taken tens of thousands of their fighters off the battlefield, but if new ones are still coming in, then they continue to maintain a hold over certain populations, so we have got to cut off their source of new fighters. that is also part of the great danger for europe and the united states as well. countries as far-flung as australia to singapore.

if you have foreign fighters coming in that are getting not ory ideologically hardened battle hardened and return to their home countries, they are likely candidates for engaging in this kind of terrorist attacks we saw in paris, so this has been an ongoing concern and we are going to continue to push hard among all our allies to cut off financing, cut off the foreign fighters, improve our intelligence gathering, which has allowed us to accelerate the strength we are taking against isil. a lot of the discussion over the last couple of weeks was the pace of airstrikes -- the pace of airstrikes is not constrained by the amount of planes are missiles that we have. the pace has been dictated by how many affected targets do we

have and our intelligence continues to improve. the better we get at that, the better we will be a going after them. scott? thank you, mr. president. in terms of sending that market signal the talked about today and this week, i wonder if you see any political path back home toward an explicit price? longdent obama: i have believed the most elegant way to drive innovation and reduce carbon emissions is to put a price on it. this is a classic market failure. if you open up a econ 101 a the marketsas are very good about determining

prices and allocating capital toward the most productive use, except for certain finality's or certain things the market does not count or trust, at least not on its own. clean-air is an example, clean the converse, dirty water and dirty air. in this case, the carbon is being sent up and originally, we did not have the science to fully understand but we do now. if that is the case, if you put a price on it, then the entire market will respond. investments and the smartest technologies would begin scrubbing effectively our entire economy carried that it that asrent, so i think

the science around climate change is more acceptable, as people start realizing that even price on the put a damage that climate change is doing -- if you go down to miami and when it is flooding at high tide on a sunny day, the fish is swimming in the middle of the a cost to that. insurance companies are beginning to realize that in terms of how they price risk, and the more the market on its own start putting a price on it because of risks, it may be that the politics around setting up a trade system, for example, shifts as well. obviously, i am not under an illusion that this congress will impose something like that, but

it is worth remembering that it was conservatives and and center-right think tank's that originally figured out this was the smarter way to deal with pollution then command and control system, and it was folks like george h.w. bush and his epa that effectively marshaled this approach to doing with acid rain and we ended up following the --h figured it out fast figured it out faster and cheaper than anyone else. that is the main message i want to send. climate change is a massive problem. it is the generational problem. that byproblem definition is just about the

hardest thing for any political theem to absorb because effects are gradual, their are diffuse,ey people don't feel it immediately, so there is not a lot of pressure on politicians to do something about it right away and it kind of creeps up on you. getting the problem of everybody doing it because one nation is helping but other nations are not doing it and it does not do any good, so you have this huge coronation problem -- this huge gordon nation problem, so on all these dimensions -- these huge coordination problems, so on all these dimensions, it is difficult. despite all of that, the main message i have got is -- i actually think we will solve this thing.

if you had said the people as recently as two years ago that we would have 180 countries showing up in paris with pretty ambitious targets for carbon reduction, those people would have said you are crazy, a pipe dream, get here we are and that has already happened. evene the agreement is signed, that has already happened. as i said earlier, if you had told folks what the cost of generating solar energy would be today relative to what it was five years ago, people would have said, not a chance. with relatively modest inputs, that has happened. imagine if we started to put more dollars into it, which is why the emission innovation announcement was so significant. the biggest countries and the most prosperous countries doubling their money but also you have bill gates and other

extraordinarily wealthy individuals saying we will put our money into this. i am optimistic. i think we will solve it. i think the issue is just going to be the pace and how much damage is done before we are able to fully apply the brakes. in some ways, it is akin to the problem of terrorism and isil. aftermath ofate the terrible attack like in paris, sometimes it is natural for people to despair, but look at paris. you cannot turn out paris -- tear down paris because of the

demented actions of a handful of individuals. the beauty, the joy, the life, the culture, the people, the , that will win out every time, so we have to be steady in applying pressure with the problem and keep on going at it and see what works when something does not work, change , but most of all, we have to push away fear and have confidence that human --ovation are values innovation, our values, our judgment, our solidarity, it will win out. i guess i have been at this long enough. month, one point five months where people were sure that ebola was going to

kill us all? nobody asked me about it anymore. although we still see flickers of it in west africa, we set up an entire global health security agenda, part of american leadership, to deal with not only ebola but the possibility of pandemics. it is not easy, it takes time and when you are in the midst of it, it is frightening, but solvable. with that, i am going to go home. vive la france. thank you very much. [applause] we're back with "bloomberg ." we have been listening to president obama speaking live from paris in a press conference he held. it was on the occasion of the

summit about climate control and he spoke a fair amount about that, although, he was asked about a number of other subjects. it sounded to me like the law professor that i had years ago at michigan. he was thorough, careful, detailed in his analysis and he said they are a compass in a lot of -- they have 180 countries they have brought together, and he was also asked a fair amount about what is going on with isis and the efforts to contain them. he said we need to choke off prices, their money, the supply of new warriors and he was asked about the control and he said how bad the united states is compared to the rest of the world. when we come back, we talk with tim coleman about restructuring on "bloomberg ." ♪

we are 29 minutes and 34 seconds away from the opening of the dollar new york. we are here at "bloomberg ."

i am david weston. stephanie: i am stephanie will we are joined by erik schatzker. erik: and christine, good morning. guess who else? tim coleman. welcome. we will be talking about puerto rico, energy, but we have lots to get to, including a new update from vonnie quinn. vonnie: thank you. president obama issued a challenge to the world and the u.s. senate in the fight to slow global warming. at the u and climate conference, mr. obama said parts of any deal to limit the house gases should be legally binding. some senateuffle republicans. germany's cabinet approved fightg 1200 troops to against islamic states. parliament is excited to get the ok by friday. -- they will be used in

support roles and not combat. the corporal was convicted of killing a filipina woman last year after discovering she was transgendered. he was sentenced from six years to 12 years in prison. you can get more on these and other stories at the new bloomberg.com. i am vonnie quinn. markets now and we have matt miller. matt: thank you. take a look at the index is up across the board. s&p 500 with aff gain of more than 56 points on the dow jones. the s&p 500 in november actually had games but they were tiny. is the of 1%, and it fourth straight month of cash or november, i should say, of gains. the worst november since 2012. we are up about 10% since august low that we had. i guess we had 11.4% since the

close on august 25, so a decent game from there. if you take a look at how we had done typically in november, you can see over the last five years i have 2011 through 2015 and the average is we have done pretty well, typically in november, but the summer has been the best month for stock. in fact, as you go back to 1988, you can see although there are tiny little blocks, only five red blocks in november or december i should say compared to much more red. the santa claus rally really does come to most of the time, at least stephanie: 22 under the last 28 years. thank you. -- 22 under the last 28 years. stephanie: thank you. made anst capital announcement that they will be returning all client money. he will instead focus on managing his own wealth and that

if his partners and employees. i want to bring in the whole team. back three years. blue crest is a 30 $6 billion fund. some say it is on track to be one of the largest hedge funds in the world. it made it one of the larger ones. caroline connan first of all, -- e: personal, stephanie, great skill. it is a sign of the gaining capital markets. from thelatt comes income world and have been hiring some of the people, and things have changed a lot. stephanie: if you think about it, he says the landscape has changed. and investors do not want to pay two and 20 and they do not warrant that with returns. and if you are a big fund, you do not need it.

by doing this, they will be able to take higher premiums to bring on lots of traders and that gold heto say, -- just yesterday, said it is a good thing that they can trade whatever they want. erik: what i am wondering from tim, you are a restructuring guy but you deal with a lot of hedge funds, right? credit opportunity hedge funds, do you perceive among those hedge fund managers the same kinds of anxiety that clearly michael platt is feeling? tim: i cannot say one personal feel this way or that way, but i will say that it is not as popular on wall street, whether it is fixed income or whatever, jpmorgan, goldman sachs, all of these people are stuck in a regulatory find. it is a tough market to be investing and if you have made a lot of money, and i have had friends at you it, i would rather take that money and

invest it the way i want to invest it in not trying to get more money into my fund all of the world and enjoy the active investment to make as much money for themselves. stephanie: if the investors were not on his or any other managers payroll, asking questions, more liquidity, nobody would turn away two and 20 on billions and billions. think that is fantasy. investors want to know you are making money for them and that is what they are looking for, and they are being tough. david: is it possible that we will look back on this five years from now and say we have seen the high watermark or hedge funds as a genre? no, that high watermark is in the rearview mirror. in a world of zero interest rates, think about it this way -- the hedge fund has to deliver it a traditional two and 20 structure and deliver an absolute return or gross return of 2% to did the o.p.s. zero -- the op zero.

erik: right now, with stocks returning what they are returning and with the returns available with challenging returns and the collapse in energy prices, it is difficult to deliver positive gross returns, which is why a lot of hedge funds are in the minus column. christine: also, hedge funds historically with the left regulated, less scrutinized by the investing landscape and as tim mentioned, that they regulate the change, they have to face regulatory constraints. they are the hot, new hedge fund of today. stephanie: i think this is sort of family office/goldman-like partners or partner structure. it is truly an eat what you killed there and you do not have to answer to anybody. when you have that much capital, you do not need to. erik: family and friends. not need to do

invest. you can actually be out of the market if you feel parried a lot of lps are uncomfortable when you are not investing their money. they want to see you invest it, so you might feel this is the wrong time to be there and it is hard when you run one of the funds. stephanie: just yesterday, milton berg said, have the courage to sit in cash and the best funds out there are closed and not taking new investors. christine: i think they will be watching carefully to see if the crest is with bluec an opportunity to go faster or if it is something else. stephanie: we know they have seen massive redemptions and they spun out. christine: phenomenal. stephanie: the question is, are they going to unwind any of the portfolios and are they going to teams?eting if michael comes out and says, i will not take 70% of top traders, i will pay 22%. what does that mean for the top

teams at millennium, citadel? erik: maybe it means for the that itge fund traders means for bond traders since the financial crisis. going forward, you make less money. do well.ys it is how well everybody else does. david: christine, to your point, if you reduce a business by 90% -- christine: it is not a sign of growth. david: you do not hire people. christine: right. there is a reason why these partnerships like goldman became public companies. they reached the point where they said in order to go anymore, we need outside capital. big issue for goldman. they lost a lot of partners, they had to bring in outside money and they were desperate times, so it is not like partnerships are always successful. stephanie: how big do you really need to get? if you are michael platt,

druckenmiller does not say, gosh, i am a family office, how am i going to make rent? true, but a lot of people believe stephen cohen will try to come back and then other people's money. stephanie: that is stephen: trying to rebuild his public reputation -- that is stephen hen trying to rebuild his public reputation. david: why don't they have better opportunity -- votto they have better ideas with smaller opportunities? erik: sometimes they get so big. tim: that's like how are you finding those smart investors that others have not thought about? when you get really big, you have to be in the market and across the market. fidelity is across the market. stephanie: michael platt has is not a long-term investor but a traitor. the first and he does when he enters a position as the for the exit.

think about this. there is less liquidity in the market today than ever, so if you are running 37 billion dollars and you want to change your view on the market, good luck selling. david: but this will not increase liquidity but the other way. erik: maybe in the short-term, tim, you have seen creative destruction on wall street. but out of destruction comes something new. it is reborn like a phoenix every cycle. tim: my new firm is a spinoff. tjt, and we getting out of conference from a larger firm and we are getting out of the -- andts and chewing giving. fisa with no conflicts and we do not have to sit there with the new name when it comes in and think, who asked has it? it gives you a lot of freedom. i think you will see our assets wantjt grow because people

-- ptj grow because people like to be in their own position. stephanie: big-time investors do not want to be hampered by style issues. they do not want to have their investors say, well, david, you and onlyould be macro investing in puerto rico. investors want the flexibility to do whatever they want. christine: the other thing with blue crest, they have, to conflicts where they have their own staff funds, advisers who investors cannot think was a good thing and there seem to be conflict, so there is that. stephanie: the issue was that they were potentially cherry picking. christine: and they were not open with their investors. erik: that was the accusation. stephanie: and now they are saying, we will not just cherry pick but invest in only who we think is the best with their

money. david: what do you think will happen with the debt market? isk: today, michael platt turning his firm into a family office. john did the same, truck and druckenmiller and other hedge funds are returning capital to investors. the institution of pension funds still have to invest it somewhere, but where and will there be as many counterparties for the healthy continue?al market to tim: we're not talking about the new funds that startup and there are tons. spinouts from larger funds. people that have been investing with somebody else, i sat next to somebody less like for dinner who was at salomon brothers for 23 years and they started their own firm, and those firms are starting every day. i don't want to name it. erik: heartbreak.

tim: a little bit. this money is not going away. stephanie: are you talking about mike bloomberg? hmmm. tim: gave go, no, i wasn't but that is my last answer. there is a pile of money and it will give people freedom to invest. maybe you will start lending investment kinds of dollars. you doare free, which is not have a chart of that limits you to, when you are actually able to run your firm in the way you want, you may become an activist tomorrow or become distressed person ago along real estate or whatever you feel like doing. christine: we just had couple of stories at a tokyo saying they are looking to add people in the u.s. they are showing up a fixed

income desk in london, so there are new players coming in all the time. even your founder came out of morgan stanley and that is an example. hearanie: two in 20, we people complain about two and 20 although time. this could be the shift where it is more like 0, 100 for the top, top traders willing to put their money and it got on the line. listen, i knew michael platt really well, a close friend of mine. he is not necessarily the guy in a time like this who wants to deal with investors calling a making demands when he does not need the money. erik: i am trying to figure out but we are going to do next. take everybody to washington to hear from the treasury secretary and we will take a quick break. to be hearing, so two r, christine. tim coleman is staying with us. after we return, the treasury secretary. ♪

stephanie: welcome back. you are watching "bloomberg ." we told minutes away from the market open. i am stephanie ruhle joined by erik schatzker. am devon weston. we heard from president obama and now we're going to hear from jack lew. stephanie: we broke the news on , they're shutting down in terms of having client investment and simply going to be, not a family office, but partner fund. erik: more or less the same thing. stephanie: amounts to the same thing. it is not so much a story about bluecrest but the industry changing. david: now it is time to hand to washington with brendan greeley for an interview with jack lew. brendan: thank you, david.

bloomberg. i'm here with secretary jack lew at the financial inclusion forum. the goal is you have private actors and government agencies as well as working together to get more households into the financial system. start with a basic question, 7.7% of households do not have access to a bank account. but can the federal government to to fix that? here.thank you for being we had a great session this morning and we had them all day on financial inclusion. leaders from governments around the world of finance and the nonprofit sector are coming together to answer that question. for it is a need place we all begin. we know that families that do not have access to financial services have to live in a cash economy, it is risky and they

cannot plan and use their money well or saved for the future, and it is exposed to the kinds of illicit transactions that we all know we need to stop in the world that is increasingly focused on things like terrorism. ofre are all kinds compelling reasons why government and the private sector should solve this problem. one of the things that needs to happen is it needed to be simple and inexpensive for people to get connected to the system. we have heard through the panels -- brendan: open a bank account. check: and to build financial history. there are 26 lead people in the united states with not enough credit history to qualify for a loan. if you get people -- there are 26 million people in the united states with out in the credit history to qualify for a loan. if you get the people to build the credit history, they can get a loan and it is good for the economy and families. it is not something government alone can do. the financial sector has to be abilitynovation and the

to offer services where people are to make this a reality. brendan: you talk about credit, but let's talk about basic checking opening a account, making transfers. when of the problems for that basic service is we see large banks and some regional banks getting out of that business and moving away from deposit taking because it is not as profitable. if the first step is opening a checking account, which lots of people do not do, how do you do that when things want to get out of that business? and morere are more institutions looking to get back into that business and have the relationship with -- jack: there are more and more institutions looking to get back into that business and have relationships with the people if they stay in that system. the question is how do you believe the cost so it is more attractive? as a consumer model, affordable,

and one thing is coming out of this conference is commitment. commitment like the cdf eye-opening new cdf eyes and the mississippi delta, commitments like jpmorgan working with the gates foundation to put millions of dollars into the providing with access toit financial services around the world. initiatives like the people the duke heiko scores coming up with an alternate way to build credit ficoories -- people with scores coming up with an alternate way to build credit histories and determine if people are credit worthy. brendan: what tools do you have figure x basel within the treasury -- what tools do you have at your disposal within the treasury? is a starter retirement account and you can

put as little as you want during . pay period or less if you go to a private marketplace, there are not a lot .f ra's it is important because of people get started, they develop the habit of saving and they see five dollars a week buildup and they can see how they are taking care of savings for their financial future in a way that is not painful in terms of day-to-day life. that is important. all they have to do is go to mra.gyra.gov. now, the median amount to start a checking account is $100. is there anything you can do to make it an expensive, if not free, to get started? i think financial institutions and regulators are looking at how to use new technology either through smart cards or phone services available in a way that is less expensive than traditional bricks and mortar thinking.

-- thinking. i think some of the things discussed here today are exciting in it becoming a reality. i think we have to be clear that there are some rules for government and some roles will be for the private sector and the financial services sector, and nonprofit and philanthropic center. one of the great things about the conversations is this is not a question of finger-pointing but the question how do we do it together? how do we have the clarity of information sharing and what the rules of the road are so we can solve this problem? brendan: one of the things your private actors talk about is the importance of credit. one of the rings you hear development experts talk about is the importance of savings. how do you get that right when the prophet there is is not supplying credit to smaller groups -- when the prophet there

is is not supplying credit to smaller groups? how do you make the compromise? jack: savings and credit coexist and small and large entities and households. you take a low-income household that is saving for retirement. they hit a medical emergency. they should not have to choose between depleting their small retirement savings are going bankrupt or not paying a medical bill. there ought to be a way to have that paid overtime in and of audible way -- in an affordable way that is not creating the kind of risks like things like payday lending create for people. their products available that can do that. there is credit history available that can do that. it is not inconsistent with taking five dollars or $10 out of every paycheck. life as uncertainties out of it. people will have an estate to deal with them or they will have

credit. if you are a small business have to invest in the business to build greater wealth, but to invest requires access to capital. that does not mean you should be saving out of your retirement, so you have to be able to do both in our financial system, and that is one of the things that this financial inclusion is about. brendan: i spoke one month ago to a smaller bank in louisiana, less than $1 billion in assets, and they have said that providing the credits to small businesses, which is the dodd-frank rules meant for larger banks are not working for smaller banks and causing them to spend a lot on their back office in terms of compliance money they do not have. what changes are you willing to contemplate to dodd-frank? : dodd-frank was a response to the worst financial crisis since the great depression. as a result of the implementation of dodd-frank, we have a system that is safer and sounder.

i think we had done an enormous amount to reduce the risk of another financial crisis that caused really almost inestimable damage to the collective economy of the united states and the global economy. one of the things about dodd-frank is one size does not fit all. our regulators have tools to target what they do, how they do their business, so that it is tiered in terms of applying by size ofppropriate institution. we have encouraged regulators to use the regulatory flexibility to the greatest extent that they can so that they can be sensitive to the differences and risk. brendan: some of this requires a statutory change. that they would contemplate, for example, he would support something like that excused banks under $2 billion in assets from the rolls. is that the change she would contemplate? to think ill be any statutory

changes and not just regulatory changes? think the role right now only applies to institutions engage in transactions that are the kind during the financial crisis. it was believed to have more transparency and some of the a desire forlect clarity, which legislation can provide. i think it is important for regulators to use the flexibility that they have to provide the kind of flexibility that is needed. in they worry about legislative debate is the definition of small, it means different things to different people. for example, in terms of certain requirements in dodd-frank, suggestions have been made that a $50 billion threshold can be changed from anywhere from $100 billion to 125 billion dollars as if it is the same thing. it is not the same thing.

they are in office institutions. the truth -- they are enormous institutions. the truth is that we have to be to get into a conversation where we start rolling back some of the core protections that have made our system safer. brendan: we are short on time, but yesterday, the imf said they reserveclude in the basket and with the u.s. treasury contemplate converting any of its holdings in reserves? jack: i think if you look at the u.s. dollar remaining the reserve currency of the world for good reason. we are determined to run the u.s. economy that continues to be strong, safe and secure that makes that the case in the future. the decision made at the imf yesterday reflected loans studied by the imf technical team. we make clear that we thought it was important that china meet all of the standards to be

recognized with currency and the special basket, and they met those requirements and we supported the action. we also had an ongoing discussions with china about the currency practices. they have made us that they will not intervene in ways that are unfair. those are important commitments. they know we will hold on to those two minutes. secretary jack lew, going back to you for both bloomberg tv and radio worldwide. >> to our colleague brendan greeley, thank you for that exclusive interview with secretary lew. flex moving on to puerto rico. the commonwealth has a big bill pier 3 and report -- $354 million in principle interests. this time, legal action may follow if they miss the deadline. firm areand your nbia, one of the

firms holding the bag if they default on their bondholders. what happens if the island misses this payment? erikstephanie: like holding a piñata. >> as we all know, the governor is testifying in front of the judiciary committee. as of the end of september, $875 million in cash. they have been negotiating with creditors. they have offered to bridge this payment. there are lots of options on the table. we are part of those negotiations. a big player in these negotiations. for whatever reason, the governor has decided not to strike a deal. these deals are at hand. i think he thinks it is better to go up to washington and see if he can get a bailout, he is looking for chapter nine. erik: he doesn't currently qualify for it? rico is a territory, like a state. that is state versus federal.

you don't offer a territory a bankruptcy opportunity and thus you offer it to every territory in the country. erik: if congress gives it to puerto rico, who knows? illinois is next? tim: how can they not? rico -- congress can do whatever they want. they are hearing it today. tim: they start at 10:00. the government will make an announcement in that meeting whether or not he will make this ,ayment part of the payment whether he will start this thing called a clawback, a detailed thing. that is going on as we speak. erik: if payments, principal and interest -- does that constitute a default? tim: a complete defaults. you can do a lot of things in loans. when you miss interest payments and principal payments, those are big deals. people react aggressively to those kinds of changes. erik: what is the legal process

that is being set in motion? tim: he defaults, and creditors go after the commonwealth, the gdb, legally. erik: some of them do, others pick up nbia and go to insurance. bia ensures these payments. if the money is not from the government, nbia will pay their bonds, the interest, they will be fined. the insured bonds only: part of it, not all of the three and $55 million, to an 75 million dollars of it. -- $375 million. stephanie: could they hold out? tim: what do you mean? stephanie: when you talk about who needs to get paid, what is nbia's position? are a guarantor.

they provide guaranteed money. you find a position where the bondholders will receive a payment. thoseill step into issues. all of the rest of the bond positions of stay in place. doesn't makeia good on its promise, it's name is mud. >> they are not going to do that. situation, what happens as you go into court, get a judgment, and you go to foreclose. you liquidate assets and get your money back. what do you do when it is the territory of puerto rico? geo-obligations, obligations of the commonwealth. they are first lien positions. that means the assets of puerto rico are available to the holders of those claims, including taxes. collection of taxes. if that happens, nbia and anybody else who finds themselves in this position will

go after the government for collections. >> that would be like a garnish wages against individuals. tim: what is silly is that there doesn't need to happen. there is a deal on the table that bridges this payment. the governor has agreed not to take it. he wants to go out to washington and say i need chapter nine, i can't make my payments, look what i need. stephanie: does the governor actually note -- i have interviewed the governor who says it is impossible for us to default. technically, it is impossible. tim: he can default. stephanie: does he know what he is doing? : it is confusing what he is doing, i would say. it doesn't make sense to put your entire territory into effectively a moratorium. no one will be lending money, no one is helping.

in the hope he gets chapter nine. if you get chapter nine, you still need to pay your debts back. one thing people forget about puerto rico, the bonds in puerto rico, there are hedge funds and they have big additions. a majority of bonds are puerto rican, normal, human, puerto ricans, united states municipal bonds. i'm trying to me not corporations. are triple tax-free bonds. people all over america went into these bonds at their advisors suggestion because guess what, you're not paying any taxes, you make a great return. tim: there is a third alternative, to have the government, congress appoint a federal board to run the state of puerto rico's finances, collect the money. are you in favor of that? >> i am completely in favor of that. they need adult situation -- supervision down there. governor, heo the has never done a restructuring.

that is not what he does for a living. nobody in puerto rico has ever done a restructure. they are, located things to get done. they are complicated things to be done. look at new york, washington, d.c. put together boards controlled by people of great intelligence, experience, financial, legal. they have a lot of control over the situation. puerto rico could use that. , he did ae ridiculously good job. look at new york today. stephanie: the most likely outcome for prep? >> this is a company that is a cash flow positive company. it is the electric company. they are making changes to this company. they are going to build new plants, do a lot of things. prep is ready to go. stephanie: cash flow is positive because the bills puerto ricans have to pay are absolutely out-of-control and their power grid needs to be redone.

>> instead of $.28 four kilowatt hour are below $.20. they are paying less than you are in new york city for your power. those bills are out of control. erik: the problem in any situation like this whether it , thereto rico, detroit isn't enough money to go around. everybody has to take some pain. since you represent a client, is your client prepared to take loss in puerto rico? >> every restructure needs a good business plan. every restructure needs to see the company, city, whatever it is executing on the plan. they hired and krueger, well-known economist. brokend this was a system. you have been borrowing money to make up for your losses. ideas,e them specific all of them talking about getting puerto rico back to becoming a competitive environment. do first.need to we have seen almost none of that in puerto rico. instead, it is give me chapter nine. what you want to see is them

doing self-help. when you see self-help, you are going to see others help you. for one second. they guarantee these bonds. these are 30 years. hey will be here for the next 30 years. they are not selling a leica bondholder can sell out. they have the same incentive, let's see puerto rico turn itself around from an operational standpoint and they will be here to help make sure it works overall. tim: are you willing to take a haircut? >> i don't see any reason anyone has to take a haircut. there needs to be bridging while the changes happen. you can do some pushing, bridging, but you need to see, again. when we are in the debtor side, you lead by example, showing them this is my plan, it is a smart plan. i am going to do the following 25 things to my city, country, company.

follow me. go with me and follow me on this. that is not happening in puerto rico. erik: tim coleman will be with us for the rest of the hour. we are almost 10 minutes into the market trading. board as farss the as major indexes are concerned. the s&p 500 adding or two points, dow jones up more than 100 points, 17,822. big gains, decent gains on the indexes. -- alllook at the industry groups are rising. we had a split trade yesterday. today, we're looking at everything off of financials, utilities, consumer staples leading the way. there are losers today. a look at stocks downgraded at bank of america, merrill lynch, commons is down because the analysts don't think class eight going toes are continue growing. class eight is huge tractor-trailer trucks that way

over 33,000 pounds. joy global is down because analysts say the outlook is bleak for coal, metals, mining. go, ford,carmakers estimates gm missing for sales. fiat chrysler had 3% growth, we were looking for 3.2% growth. growth, looking for 3.2 percent. general motors, 1.5%, looking for 2.9%. they all missed, but gm says it sees 18.2 million for the month of november. that is the third month in a row with more than 18 million. that puts us at the best november of all time. we're looking at a record for the year, as well. the automaker got started early with their december discounting. novemberewer in this than there were in the last november. to abigail doolittle

live from the nasdaq looking at amazon. abigail: let's start december off with one of november's big winners at the nasdaq, amazon shares trading at their record high this morning after the company says it sold three times as many devices this thing giving weekend as last year. saying that millions of devices were sold. the top seller was the amazon fire tv followed by the fire tv stick. speaking of fire, the momentum name is up more than 100% in 2015 with many thinking the strength is likely to continue through the end of the year. erik: abigail, thank you. at the nasdaq. when we come back on bloomberg , a sector in distress. energy, what lies ahead? stay tuned to find out. ♪

stephanie: welcome back to bloomberg go. here is your latest bloomberg business class. puerto rico hayes back three and $50 million for investors or keep the money for essential services. some lenders could sue if they are not paid. they are trained to restructure $70 billion worth of debt. rv's are on a roll. recreational vehicle production they are up 3.5 percent. 2016 cells are expected to be the best in the decade. that is if gas prices stable. tech logs are buzzing about a rumored change about iphones. after they dropped the headphone jack from the new models, they would be replaced with a type that place -- plugs into the lightning jack. you would need an adapter. this is the latest bloomberg business class.

>> taking another look at the energy sector. the industry is feeling the pain after months of low oil prices. it is staring at lower for longer price environments. the question is are we about to see a wave of defaults? tim coleman is still with us. a lot of people have gotten really hurt in the oil universe. others are saying this is the time to buy. what do you say? tim: who knows is the answer. the question is will prices go up? in theho got hurricane summer. a lot of them came in a year ago thinking this was a chance. in in thee came summer because they cut prices were covering. you are making a bet on price recovery. do you have that magic ability to predict when things will change? i think it has been very tough, hedge funds have trouble because they have put a lot of money to work and it is not successful as they would like. erik: as an upstream company coming to you in the shell

patch, what do you tell them? tim: work on your business plan, let's figure out what your business is capable of. x? you positive after cap after some interest? what are you? erik: do you have any cash flow? tim: it is a big dilemma. today, there are companies who are positive but cannot make their big expenditures without dipping into cash. the question is if i don't grow, use these -- these are either maintenance cap x or drilling cap x depending on the company, if you don't make those investments, you are going to hurt your revenues and you won't be able to make your payments. if you don't go forward with that, you're in a problem. erik: for example, sit tight, there is a good chance -- our people think, smart people think , oil will be $60 by the end of next year? assume it will be $45 and any upside is gravy? tim: the first thing we do is

make sure we can get the company to a cash flow after. whether that include -- includes interest or not. that is the logical and smart thing to do. if you can do that, the company is in good shape. a judgmentt, make about how much liquidity you have and how long you can continue to sustain this. is that a long enough period in your mind before something good happens to the industry? you are betting on prices moving when you probably don't have -- not withstanding everybody saying, people saying we're going to $60. take to be clear, if you that approach, you don't take the money now, so to speak, if you take that approach, ride it out, oil prices don't recover, you are done for. stick a fork in it. tim: you are probably visiting the bankruptcy court. a lot of companies we are working with are doing debt exchanges. debt to equity exchanges, debt for debt, slowing down payments, things of that nature. the opportunity,

that prices are low, something is trading at $.30, you strike a deal with somebody at 30 cents, give them a more senior position in the capital structure. they reduce their debt to $.35. erik: they have options, in other words. tim: we are working with a lot of companies on that topic. it is a smart thing to do if you can do it. it obviously depends on parameters of your company. erik: we are taking a quick break. we will continue our conversation with tim coleman, partner and head of restructuring at pgp earners. still ahead, we take you back to conversation brendan greeley just had with jack lew. ♪

erik: earlier this hour, jack lew spent -- talked with burning gritty. one thing he weighed in on was dodd-frank.

jack: as a result of the implantation of dodd-frank, we have a system that is safer and sounder. we have done an enormous amount to reduce the risk of another financial crisis that caused inestimabestimable -- le damage. think wall street is safer, some of those reforms have had a positive impact. a lot of wall street is against those reforms because it is more regulation and more restriction. that is one of the things that flows into my firm, taking people out of those bigger companies and getting them to a point where there are not involved in a massive organization. the boutique business has been an island in the sea of radiation. is there a point where regulation creeps in and affects your business? typically,ects,

investment business more so than advice. the bigger you get, the more you might be subject to. if you're going to grow, it depends on how you grow. if you grow from a straight advisor shop, you are fine. if we start investing in assets, that might be -- that can have an impact. doesn't hurt that more and more companies that need advice are seeking financing that you can provide? tim: i think it helps us. companies would like straight, honest advice without your products. one of the things they come to us -- this is in our strategic advisory side -- they want somebody to say this is how you should be thinking about it. this is what you should be doing. this is an opportunity for you. you should do this financing, don't do that financing. do this with your stock, don't do that. the advice is purely advice. -- as a't lead to consequence, you should buy our three products. i think it helps us a lot. stephanie: 2016, easier year, harder your?

tim: for restructuring, easier, because we have a lot of clients. we are in a funny spot. energy companies are struggling, the rest of the economy is doing ok. it could be a great year for the overall economy. people benefit from low prices, obviously. stephanie: would have to leave it there. we are out of time. it was fantastic having your. what a day we just had. versus the head of restructuring. that will do it for us on bloomberg go. tomorrow, you better come back, i have an excuse of interview with the founder and ceo, the one in old -- only mark benioff. the outlook for the oil industry and funding circle sam hodgins. big day tomorrow, don't miss it. thank you for watching.

betty: welcome to bloomberg markets.

from bloomberg world headquarters and new york, good morning, i'm betty liu. here is what we are watching at this hour. hedge funds are hurting again. blue crest capital is returning billions of dollars to its investors after years of lackluster returns. we will tell you what this says about the overall hedge fund world. how do you make it easier for families to get access to the financial system? we will hear from treasury secretary jack lew. also, from the ceo of paypal. those injuries -- interviews coming up in a few moments. will it be a november to remember? automakers on a verge of a record after they report last month's car sales. some numbers from gm and ford disappoint. we have breaking economic numbers on isn manufacturing.