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.

that she was a contraction. i want to bloomberg's julie hyman with more on numbers. julie: contractions are a negative surprise. economists had estimated 15 and inalf, expansion manufacturing. instead, we got a reading of 40.6, even after we have the market manufacturing number 15 minutes ago that showed an expansion, a better than estimated number. a couple of different readings. prices paid rising less than estimated, a reading of 35.5. at the same time, we got construction spending month over gain that gained 1%, .6% estimated here. overall, it looks like the isn manufacturing report is considerably worse than had been estimated. we have been seeing for some time waning manufacturing numbers. this is the biggest decline since june of 2009 in manufacturing. betty: it is knocking stocks off

the peak. julie: if you look at what is going on with the u.s. averages, let's take a look. we've been seeing a bounce back from yesterday's decline. heading into what is traditionally the strongest month of the year. legks are taking a small lower. let's look at the action to see what is going on with that. i give it a zoom, it is hard to read. after seeing a leg down these numbers came up. more or less hanging on to some of the gains we have seen. in terms of what is doing the best and worst in today's session, financials leading the gains. it is a broad-based advance. all of the 10 main industry groups in the s&p are higher, along with financials, technology and health care rallying as well. utilities coming back today. in terms of financials, big banks are helping relieve some of the gains. banks in europe rallying as a

result of stress tests. stress tests from the federal regulators usually come under fire for being not strong enough. they are coming under that fire once again. rallyingropean banks once again nonetheless in passing those tests. we are seeing the u.s. big banks farewell in today's sessions. a little bit of a come down on a manufacturing, but not much of one. betty: certainly, a big rebound from yesterday. thank you, julie, julie hyman at the markets desk. checking in on bloomberg first word news. vonnie quinn has more from our news that -- desk. vonnie: beginning with president obama issuing a challenge to the fight to slow global warming. at the yuan global climate conference today in paris, mr. obama said any deals to limit greenhouse gas should be legally binding. that could rankle some senate republicans who don't think human activity causes global warming. the president also praised the

efforts of bill gates. president obama: we're not batting an air -- i. we have to invent new technologies to tackle this challenge. that kind of optimism, sense that we can do what is necessary is infectious. you tend to believe somebody like bill what he says we are going to get it done. he has done some remarkable things. the president wraps up his paris trip today. 1200 troopssending to back the fight against islamic states. parliament is expected to give it's ok by friday. the soldiers would be used in support roles, not combat. the eu says they have unveiled new aid packages to use the syrian refugee crisis. $350 million is being pumped into a trust fund. the money will go to help 1.5 million refugees in lebanon, turkey, jordan and iraq. lebanon is helping more refugees than any other kind -- country.

year, asia flight last pilot error. people onall 162 board. investigators say the pilots wrestled each other for control of the plane as they try to fight off an electronic system failure. that is a look at first word news right now. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. i am vonnie quinn. betty: thank you so much, vonnie quinn at the news desk. u.s. secretary jack lew spoke in an exquisite interview with bloomberg television a moment ago saying the dollar remains the world's world reserve currency for good reason. he says our banking system needs to be cheaper and simpler to access. jack: one of the things that needs to happen is a needs to be simple and inexpensive for people to get connected to the system. we have heard through the panels to open a bank account and get access to financial services. to build a financial history.

we have 26 million people who don't have enough time into credit history to qualify or a loan. betty: brendan greeley interviewed jack lew and joins us now with more. brendan, what does the treasury secretary say he is what to do about this? brendan: that is the question. financial inclusion, getting more people access to bank accounts, is one of the areas where we can learn a lot from the developing world. other people at this conference room tenure, for example, an incredibly successful program allows people to make transfers on their cell phones. that is technology where we are behind the developing world. what is happening at this forum is mostly the treasury secretary, when i pressed him on this, said we want to give private actors a chance to come forward with their solutions. jp morgann is here, announced it will work with a peer-to-peer lender. essentially, the job of government right now, as secretary lew put it, is to do

more research, look at this, make sure it is important, and then ask private companies to come forward with solutions to make it easier and cheaper for families to get access to bank accounts. betty: it is not just about access, but also making consumers feel more confident in the financial system. i know you spoke with him about dodd-frank, regulation to ensure that when you put your money in a bank, it is safe. i asked him -- one of the things we have seen since the recession is it is a smaller -- the smaller regional banks during the small business lending. we talk about the importance of small business to the u.s. economy. they are the ones providing the credit. i asked him whether he was the federal reserve has suggested whether he was willing to contemplate some changes to the dodd-frank for smaller banks, exhorting them vocal role, for example. jack: as a result of the

implementation of dodd-frank, we have a safer in sounder system. we have done an enormous amount to reduce the risk of another financial crisis that caused in estimable damage to the global economy in the united states. brendan: i really dug on the question. is there something that the and ministration is willing to contemplate in terms of changing dodd-frank? the best i could get from him was the possibility of a clarification of lang which. the answer i took from there was no. -- clarification of language. [laughter] betty: he is not willing to touch it. didn't mean to interrupt you, but i know you also talked to him about the reserve currency, the dollar, particularly in light of the move by the imf yesterday to include the -- brendan: i asked him straightforward -- the idea of theimf including that in special drawing rights basket is to encourage other central banks to consider adding it to their

own foreign currency reserves. euro, and theng, yen. i asked the secretary whether he was wearing to add that to our own foreign reserves. he gave a long answer that resulted in no. he did say it was a move that he supported. it also meant that bringing china into the international financial system encouraged obligations on china. that was something the administration would hold china to, in particular with china -- currency mitigation. betty: on a final note, what did jack lew have to say about puerto rico? i know in congress they will make a decision on the debt issue. brendan: that is something that the administration has had their hands tied on for most of the changes that would have to be made would have to be made in

congress. i didn't have a chance to ask the secretary that. this is something the administration has said in the past -- they are waiting on congress to make the changes. the crucial changes that would allow for companies to restructure and puerto rico, to declare bankruptcy, utilities, for example, that will have to come from congress. betty: thank you so much. brendan greeley life for us in washington on his interview with the treasury secretary. much more ahead in the next half hour of bloomberg television. the a billion-dollar hedge fund that is returning all outsider investor money. we'll look at why. paypal ceo dan schulman will talk to us about how the company is looking for new ways to expand to give access to the financial system. those stories and more are coming up on bloomberg television. ♪

betty: good morning and welcome back to bloomberg markets. it is time for the blue -- bloomberg business flash. the biggest business stories in the news right now. 73 more companies joining the climate change fight. among them, amazon and dupont. promising to bible energy while cutting emissions and water use. 154 companies have signed the pledge. petroleum will have to pay almost $160 million for its role in the 2010 gulf of mexico oil spell. they were a part owner of the well that blew up, killing 11 people. the u.s. government asked that they be fined more than $1 billion. despite the first internet buying, the average amount americans spent online actually dropped during black friday weekend. they placed smaller orders when shopping with them.

america's online spending yesterday set a record approaching $3 billion. you can always get more business news at bloomberg.com. i want to head back to the market desk with julie hyman and a check of the company movers. maybe it is hard to buy a whole kitchen appliance on your mobile phone still. tricky tois a little do that. looking at the machinery makers this morning, a downgrade from bank of america for a couple of them, driving down the stocks sharply. by 5.9%, maker is down and underperformer. going to $90. you can see it is trading at 94.5. the analysts there, the truck market in the u.s. is weakening even faster than expected. he says in 2016, there will be a set -- 17% decline in the north american class a production, a type of heavy truck that they make. in addition to that, there is,

perhaps, a currency risk as well as the bank of america currency strategist david wu says it should decline as much as 10% against the dollar. that would be bearish for emerging markets and commodities and companies like comments that depend on that. joy global being downgraded to underperforming versus neutral as well. the price target there is $10, global coal in the industrial metal outlook is as bleak as ever. bad news for joy global. i wanted to show you a couple charts on the bloomberg terminal. one of them shows valuations of u.s. construction stocks, construction machinery stocks. they traded nine times -- enterprise value to -- that was at least in november. what you're looking at here is the construction and machinery stocks as a whole, the white line, caterpillar alone is the orange one. up here, the s&p 500. you see the discount at which the stocks are trading because of the recent underperformance. then, look at if there is any

sort of -- any sort of outlook that things will improve. you can look at freight growth in the second half of 2015. you can look at bulk tanks tied to energy. these different readings that are indicators of truck demands, truck utilization as well. are these trucks being used? all of these measures are down going into the second half of the year. we are supporting this bank of america case that things are still going to be rocky for these machinery makers. some big news today in the world of hedge funds. the eight million dollars blue crest -- $8 billion blue crest capital management says he will return all outside client money and focus on managing his own private wealth. that decision comes during a tough year for hedge funds in general. stephanie ruhle joins us now. is doing this

because it has been a struggle. stephanie: it is more than just a tough your for hedge funds. think about it. there is a huge pressure in the model. investors don't want to pay that anymore. they are demanding more liquidity. they are maniacal about -- a true traitor, that is his black front -- as background, you do want to be encumbered by that. a have so much money of their own, they are simply saying i don't want to be in the situation anymore. money,n invest their whatever idea they like, they cannot execute upon. they are going to have less money under management. nobody would -- turned onto and 20. it isn't raining from the sky. there has been a shift in the industry. betty: not only to the fact that returns are not with a used to be. stephanie: returns are not with the used to be. member, the background -- we have seen mac or managers, -- macro managers. two months ago, they shut down the entire macro process -- practice.

they said they would not be in macro anymore are just yesterday, they said this is the time to have the guts -- investors don't want to see paying fees on that. we have a tight chart of what blue crest was invested in. stephanie: across the board, hedge funds have cooled performance over the last year. we are not going to see them change strategies. we are going to stay in the same strategy. they will go out and try to hire pay higherually percentage payouts. i think they currently pay 16%. they now want to top that and pay above 20%. hire the most aggressive traders out there. they are going to trade their money. these hedge funds, the

macro hedge funds have really suffered. what is interesting is how many of these hedge funds are concentrated in areas and stocks, companies that are very similar, even the same. betty: hedge fund hotel. -- stephanie: many investors followed a trend, followed a guide. you can't necessarily follow. betty: they are paying two and 24 that. year, all until this you had to do was long and strong. you simply were along the market in the last five years as you were building assets. all you have to do. in these volatile markets, you have to be a tactical fundamental investor. if you aresay significantly bigger, it is harder, especially with liquidity today as it has been. he is not winding down the fund. he is returning investor cash and changing the structure of the fund. still ahead on bloomberg

markets, unlucky times in macau, revenue and casinos is down for a row.h month and there may be a break. we will tell you what the outlook is next.

betty: welcome back to bloomberg markets. i'm betty liu. lucky may be running out in macau. casino revenue they're drop for the 18th straight month in november. their casino business has been in a rut ins last year thanks to the slowing chinese economy. their effort to crack down on corruption. joining me now is intelligence analyst brian agler. that interesting to note las vegas, who to write a huge part of the revenue from macau, part of their stocks are up today.

brian: i think these stocks are looking past the headline 32% decline number and focusing on 2016. betty: what is happening in 2016? brian: a slate of mass-market resorts beginning with the opening of wind palace in june for by the fourth quarter 2016 openings of sans parisian in the mgm property. betty: why is mass-market going to be big in 2016? market that was down 50% in the third quarter is under sustained pressure. it is the mass-market, middle-class consumer of entertainment tourism where a lot of developers are placing their bets. betty: for those of us who don't know, the chinese regulations, where they targeted at the vips? brian: the anti-extravagance crackdown, the crackdown on the banking system, all of those factors play into burning pressure on the vip part of the business. betty: that was a big part. brian: that is what was going quickly. the business was cut in half

year-over-year in the third quarter. betty: is there any sense china might pull back know that they have crackdown and flushed out some of the fraudulent money, fraudulent practices? any chance they will pull back? brian: there is no change in the table cap regime which has different how this -- these new properties open of the tabletop games here it what can these casinos due to bring in new middle-market consumers of entertainment and leisure? that is where the focus will be and that is where the opportunity is. betty: what about local players? , they just opened up, as well. brian: notwithstanding the pressure on macau, outbound tourism from china which is two thirds of the visitor base in macau is relatively strong. aside from the junket facilitated part of the is this, people coming from him and china

will drive the future of the mass-market resorts being dealt. sheldon adelson is comfortable, not nervous at all? : i am sure they wish the market were better. suree case of wynn, i'm they are happy to see a mass-market property opening up. macau is very vip focus. they are focused on the high-end business which has been under pressure. the palace property will be the first large property focusing on the mass-market. betty: the middle income user. what about back home in las vegas? how are things going for those guys? has been stable, maybe some moderate growth great numbers out yesterday from september and october. the market has been growing modestly. what we see in vegas is the middle market being relatively resilient. the macau-china inbound tourists dependent high-end customer is quite weak in las vegas, as well. las vegas is a tele two cities. betty: that has something to do

with regulation. brian: i think it is the mirror image of macau, the inbound the -- vip focus that makes occasional visits to las vegas is extracting the same pressure. betty: thank you so much. we appreciate it. brian agler, r bloomberg intelligence analysts on the casino and district. still ahead of bloomberg television, paypal dominating and television space, but what is it doing to provide access to financial services to the public? we would hear from the payout -- paypal ceo dan schulman ♪

♪ betty: live from bloomberg's world headquarters in midtown, manhattan, you are watching bloomberg television. vonnie quinn has more from the

news desk. bonnie: they have detained a man that they suspect helped to in paris.ideout the man is said to have been an intermediary, the only one facing preliminary charges in france. they did not provide details on the new arrest. the band has been extended on public presentations until the end of the climate on -- end of the private change conference. but nine have been released. in london the house of commons is expected to vote tomorrow on extending british attacks on the islamic state. david cameron called for the vote, he wants to begin bombing in syria. this is led to a split in the opposition labor party. labor leaders now oppose the

attacks. other labor party members are in favor, however. to u.s. is making it tougher enter the country, adding new screening requirements to programs that allow people from 38 countries come to the u.s. without a visa. the white house says that it is peopleent radicalized who could make their way to the u.s.. chicago is creating a task force on police accountability, reviewing their current system for accountability, oversight, and training, all coming after a was shotlege student 16 times. the 21-year-old made a threat after the release of a video showing a cut chicago police officer shooting a black teenager. that's a look at our first story news right now. these and other breaking stories 24 hours per day at the new bloomberg.com. betty: thank you so much, vonnie. back to washington we have the public and private sectors coming together to promote

specific ways to expand access to financial services to the larger american public. we heard from jack lew on that subject just a few moments ago. we are standing by with dan schulman, the ceo of paypal. brendan: i am here with dan schulman. it's a shame that you cannot see his cowboy boots, they are spectacular. the financial inclusion forum. one of the things we've seen today and yesterday are a lot of commitments from private industry to provide bank accounts and services on their own. why is it in your interest as a company to work on this, to work at this income level? mr. schulman: first of all, it was an honor to chair one of the panels at the conference today. wayncial inclusion, or the that we think about it, financial health, is such an important topic for the financial services industry to take on.

as one of the leaders in digital mobile payments, the idea of using that, the cost efficiency that it has, to be able to champion lower income and middle of thinking in ways differently about managing in moving money is a huge opportunity. reallyt for paypal, but in driving economies and economic growth. as you know, if you can do financial health, it drives the dreams and ambitions of so many people. brendan: so, it's good for economic growth, good for the united states. why is it good for paypal? mr. schulman: because we utilize software and mobile and when you can do that, there is a different cost structure that you can do, you can very profitably serve a tremendous swath of the population that is in part of the financial system today. that it isaying

expensive to be poor. the financial services industry is guilty of that as well. but that doesn't have to be that case with technology. we are a leading user of software in mobile. we can provide basic consumer in a way services that's affordable, faster, easier, more secure and less expensive, which is a huge opportunity for us. brendan: the golden example is the service in kenya run com, thely by safari cell phone provider. one of the things that helped that grow, and actual physical presence across the country. what does paypal need to do in order to actually have a physical presence in the world that is so present financially? when it started,

obviously it wasn't the banking system that they used, it was agents that they used. so people would come into the stores and refill their prepaid mobile account with money. what they found is that it's like putting money into a mobile account, like a banking account. you could go to another agency to take cash out. could be doneg inside and outside the banking system using mobile right now. we just bought zoom, a perfect example of combining the best of mobile technology for international remittances they go directly to a bank overseas so that someone sending money to a loved one could instantaneously instead of waiting three or four days, which is what it typically is with international remittance, take the money from an overseas bank account. this combination of using electronic means to move money

in physical distribution, to take out cash, can be very powerful. but oftentimes you don't even need the physical. you can go right to mobile and envision a world, maybe five or 10 years from now where you are having money on your phone and you are able to take that money out by either tapping the phone or utilizing other electronic forms. so, the world is quickly moving towards digital. we are a legal -- we are a leader in that but it still has a ways to go and until it goes fully digital you will need a way to take the money from the electronic form and sometimes transfer it into a cash form. mr. schulman: -- brendan: who do you see is your competitors? other digital transfer services or payday lenders? mr. schulman: our major competitor is cash right now, if you think about it.

85% of the worlds transactions are done in cash, which is incredibly inefficient for the most part. if we can start to attack those forms of cash, of which there is huge leakage sometimes going from a government payout to the individual recipient, sometimes that can be 10%, 20% leakage going on. it could be in certain countries. even here there is an inefficiency associated with cash. i think that the biggest competitor we have is that use of cash. for people to trust these new forms of digital payments, with a brand like paypal that really stands for security and trust in the experience we have had over the last 15 years, that's what we are trying to attack right now. brendan: the other one is just

basic savings, building up a balance in a bank account. can paypal do that? that is what development economists say is the most important part. financialan: inclusion is a buzzword for bringing people into the system. what i think is most important is financial health. it's basically teaching people how to manage and move money in they that allows them safety and security that they need in their everyday transactions. most people don't have the expenses higher than revenues, but they have typically a cash flow issue. a medical emergency, a one-time thing that happens -- you lose a job, temporarily. really what i think we need to be able to do is use data and to get people past those one-time hurdles that they have. credit, not savings?

mr. schulman: i think it's both, you can use the ability to show people and consent people to do savings. sometimes it can be a cushion against those unexpected blows. not credit always in a typical fashion. for instance, we do paypal work with capital for small get asses that could not working capital. we don't do it using fight ghost scores or traditional credit scores, we base it on our -- on the history with us. interestingly, 25% of our loans are done through the 3% of counties where 10 or more brett -- 10 or more banks have closed branches. it is a different form of lending that allows growth of the paypal percipient, growth at 20%, similar to one to 2%. ofs good for us in terms financial health and economic

growth. dan shulman, ceo of paypal, talking about moving beyond the places where the tellers don't exist anymore. betty? betty: in his cowboy boots. thank you, brendan greeley, there in washington. breaking news out on the auto industry. sales are coming out and it is a bad number for volkswagen. sales are down in the u.s., 24.7%. the first full month of sales numbers we've gotten since the diesel in missions scandal came out. honda sales for november down 5.2%, worse than the estimate and decline of 1.2%. julie hyman has a look at the reaction to share prices. julie: shares are to earning lower, not a huge drop, but you can see it's lower in the wake

of this. it's not surprising, necessarily, that you would see a big drop in the wake of the headlines. let's take a look at the honda numbers. betty was just mentioning the sales in the u.s. were down 5.2% and as you look at how the shares are doing they are actually holding up relatively well. we don't typically get as much reaction to the honda shares traded in the u.s.. -- betty: it seems like we are on pace for record numbers in november, but also we seems some big misses. thank you so much, julie hyman at the market desk. much more ahead, staying on cars, we have got some roadsigns. the ceo of the come in he behind airstream tells us how the rv became so popular and how he lands to keep that momentum going. more people going on road trips. chasing unicorns, we will dig into the latest debates around janeway, the original venture

capitalist -- so called and the tech investor, warburg pincus. ♪

betty:betty: this is "bloomberg markets." auto sales are rolling in. you just heard the bad ones from honda and volkswagen, the big decline. airstream, people are buying recreational vehicles, the company says they are selling 500 more than they did in 2009. they don't disclose revenue but their parent company sold more than $3.5 billion in recreational vehicles last year, so what is driving this room? matt miller has more with eeo of

thor industries. volkswagen, honda, we expected those numbers to be bad, but neither company makes trucks, which is what americans want, especially gigantic trucks. bill, thanks for joining us. let me ask you first of all about your outlook and how the industry just released a positive outlook, they want to sell 370,000 rvs in the full year? bill: yes, for the industry as a whole, for trevor -- travel trailers that the high goal that's continuing a trend that we have been on for six years. positivetry is looking as well, looking at our results yesterday with a record quarter to start the year. a very positive sign for us. great for investors as well. the shares are reacting positively.

what is behind the success of airstream specifically? seems like you have struck some cord in this nation's sort of yearning to go retro cruising with the airstream product. why is that? how is that? definitely airstream is retro chic. it is an iconic symbol that's made in america. so many things that people are looking for today in this economy and in this lifestyle. we see a younger demographic coming in, from 55 to about 50. we are seeing more and more people coming into the buying demographic of our airstream customers. it's not just boomers, not just some older couple. its people from all walks of life and it's become very cool. they hired another 2000 workers at ford, are you having trouble finding workers? i know it's getting more expensive to find these workers.

airstream specifically likes to bring on really sustainable jobs. how is that going? we are really an employer of choice in central ohio. we have had good luck bringing some people on for airstream. some of the other brands in northern indiana, the labor pool is tight. we were the poster child for unemployment in the recession and now with virtual zero unemployment with 100 35 factories in northern indiana, it is a challenge right now. gas prices you can't control, the broader industry is financing and is it easier for people to buyer vehicles? they are quite expensive. in the years since the recession it's become easier. prettyeasy as it was

recession. during housing it was probably too easy. people probably have to have cash down, equity and good credit. but it is very obtainable, interest rates are getting more competitive every year. as we go into this show season that starts in january, i would assume it would be quite competitive. banks, everylarge year they are opening up a little bit more, that definitely helps us. matt: we all expect a little bit of an increase, but what do you expect us far as interest rates and how do you plan for that? people have expected it to take up a bit, some were surprised that it didn't in the last session. talking to the dealers at the show, they are prepared for it and many of them who use it as a

buying or selling tool for customers have a sense of urgency as they go into the show season. things that could come. you don't know for sure, but everyone is expecting a bit of a tick upwards. they are savvy and we are prepared to take it head on. matt: thank you so much for joining us there, bob, sorry i couldn't be there at the rv show. betty: or be an rv. matt miller, thank you so much. back on the market, the average, as you saw, moved down quite a bit after the report that came out showing a contraction here in manufacturing. but we are still holding onto our gains and rebounding from the lows of the session so far. still in the green. abigail doolittle has more live from the nasdaq in midtown. abigail coleman daisy o'hara is out with an interesting call, saying it's time to buy this

year's losers who are likely to participate in a year-end rally, generally moving up between now and february. one of the highlights here at the nasdaq is whole foods markets. the stock is down 40% year to date on a string of revenue misses. the company has fought to fight declining food -- declining foot traffic and its high-end mint image. investors may be looking for that technical buzz that jc o'hara talked about today. so far analyst are on the sideline on the potential for turnaround. 90% of them have either a neutral or accelerating. thank you, abigail. coming up, a stampede of tech unicorns coming to a halt. meet with bill janeway. ♪

betty: welcome back to bloomberg television. i'm betty liu. the unicorn bubble is the first time we have seen professional a premium for basically a liquidity, right? fidelity investments marked down the value of its shares in a number of well-known startups and it now seems they are changing their tune a bit, reversing their markdowns on companies like snap chat and dropbox. joining us now to discuss all of warburg pincus senior adviser bill janeway, a longtime tech investor who also wrote a book on the academy -- on capitalism and the economy. good to have you here. the big debate, how much are these unicorns worth? what do you make of fidelity valuations? mr. janeway: fidelity is struggling with having the market on the one hand, the real market on the one hand, and

these investments in private they pay where extraordinary valuations along with other professional investors who typically cash market investors, not market. betty: this is a new thing, right? mr. janeway: bubbles will always be with us. there will always be momentum investing and herding behavior. you can identify the signature to when you are in a bubble. that is when the price goes up, demand increases instead of decreases. that's what's happened to the unicorns. the valley -- the value of these private placements has gone up to tens and billions of dollars over the last three years. isn't it through that these fidelity's over the world, not only are they marking up valuations, but are also asking for protections? mr. janeway: that's right, they are looking for downside protection through the ratchet

to produce fundamental conflict, not just with the earlier investors but with the entrepreneurs and talent. this is where -- that's one source of watching out for how the bubble deflates. sooner or later there is going to be one or two different kinds of a march towards reality. betty: is this why they have been getting marked down? mr. janeway: there is a joke now that square is the rome up -- role model for this, the ipo is the new ground round. whenarked to reality is the shares get valued in the trading market, and active trading market with liquidity. that's where you can see that with liquidity they are worth less than when they were ill

liquid. sooner or later they will have to generate positive cash flow. my mentor a long time ago used to say that corporate happiness is positive cash flow. interesting. does that mean that profits are going to matter more? exactly.ay: sooner or later, you don't know when. we know that amazon is the titanic triumph of the last great bubble. $2.2 billion in cash invested to get positive cash flow. fortunately, they got there in time. betty: thank you so much, bill janeway. coming up, scott galloway will be joining us tomorrow on exactly this topic. ♪

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is 11 a.m. in new york and midnight in hong kong. welcome to "bloomberg markets."

from bloomberg world headquarters here in new york, good morning. i am betty liu. are watching at this hour. the fed on the verge of raising interest rates and the ecb may cut at the end of this week. the all important rank of england stress tests. we tell you those results. plungedswagen sales after the in missions scandal. minutes into trading. let's go to the markets desk where julie hyman has the latest. a bit of a stumble with the reaction to the isam numbers. ism showing

contraction, unexpected contraction. if you look at the intraday chart, you can more clearly see the reaction in the wake of those numbers that came out at 10 a.m. if you look at the s&p 500, you we saw, the come down although stocks have recovered since then. this is a delayed reaction to this manufacturing numbers. it has been uneven. the biggest contraction we have seen since june of 2009. betty: right. tell us what is leading the rally though today. what is outperforming? a broad-based rally. you will see all 10 industry groups are in the green today. not a spot of red on the wheel we like to look at. health care is the best performing group, followed by tech and financials. within health care, big cap

health care getting a boost from barclays with high recommendations for j&j, it eli lilly, and merck today. they will bolster their pipelines, which would be preferable to more tax and version. -- tax in version. n. tax inversio i also wanted to point out one individual stop doing well today and that is consol energy. in see the shares rising back-to-back sessions. no news today, but we have had analysts saying that some of the year's most battered stocks tend to do a little better this time of year and outperform as people come in and buy and it could last through february. ok, thank you so much,

julie. let's check in on the first word news this morning. courtney donohoe has more from our news desk. courtney? president obama says that russia is starting to realize the price of backing syrian president the charla side is to hide. russians obama: the for severaler basel weeks, over a month. for weeks, over month. the situation has not changed significantly. courtney: the u.s. has not dropped its insistence that sad can play no role in syria for future. mr. obama says any deal to limit

greenhouse gases should be legally binding, and that could rankle some house republicans who cannot think human activity affects global warming. average temperatures in europe this year are poised to be higher than last year's record mark. left europe with enough natural gas to last the enter. investigators in indonesia blame the crash of an error asia flight on malfunction and pilate error. 320 crashed, killing everyone on board. investigators say that the pilot and copilot wrestled for control of the plane as they tried to deal with an electronic issue. there were one point 14 cases of diabetes last year, and that is tw's ago.1.7

it is unclear what is behind the decline. bloomberg first word news. you can get more at the new bloomberg.com. back to you. donohoe from the first word news desk. mario draghi is expected to take more action to stimulate europe's economy, including the possibility of pushing a key interest rate further into negative territory. a bloomberg view columnist said "if he chooses to accommodate market demand, he could aggregate a risk of future financial instability that was already highlighted in ecb's review." word folio the chief strategist for state street

financial advisors. chief portfolio strategist for state street financial advisors. i think mohamed el-erian makes a good point. what is the chance they could get this wrong? much, if they do ease too it does so the seeds for future inflation, but right now that is not the worry. the real issue is growth around the globe. betty: right, but do you worry about ecb for next year? we think the ecb will continue to ease. they have to remain accommodative. they have to get into escape velocity. they are flirting with recession. this is hardly the backdrop against which you will see inflation. betty: correct me if i am wrong

-- growth should be top of mind, but you have been upgrading your forecast for growth next year. for u.s. growth, you have it at what, 2.5%? lori: we do, we do. you have those here. lori: those are hardly high rates of growth. normal numbers would be for percent for the u.s. economy -- 4% for the u.s. economy. this is hardly breakout velocity. betty: but the right direction. what do youl recommend for investors? likely -- prices are likelysset prices are going to be affected. investors will have to be more

active with their portfolios. look at overlays. look at things like smart data where you can capture premium above and beyond market returns. betty: rely less on interest rate equities then? rate rely less on interest exposure. looking at short-term, and meaning very short-term -- just until the end of this year, it looks like investors are still piling on. let's pile on the stocks. bank of america says its highest allocation in six months, we have a chart here that shows december, which normally is one of the best markets for stock -- youreturns since 1988 would not be making a huge mistake if you stayed heavily in stocks, would you? lori: we have a fairly sizable allocation of cash right now.

levelsk that volatility will be affected as we get to the end of the year and people start to position portfolios differently. what you make of the divergence between the fed and the ecb? how will that affect 2016? been fairly well telegraphed the fed is at the place where they desperately want to raise interest rates. we think that they will move in december with a couple more moves next year. the ecb has to remain highly accommodative. the biggest issue is the dollar. and the extent of the dollar continues to strengthen vis-à-vis the euro another and what that has four u.s. corporate competitiveness and whatnot. betty: isn't that truly priced in by now? lori: one would think so.

but we do think there is still room for the dollar to rise. we would not be surprised if we saw another 5% appreciation in the dollar. the fedhere do you see ending up by the end of this year? we are anticipating they have four more moves in 2016. betty: and 25 basis moves each time? lori: yes, about a percent. betty: thank you. a program reminder we will have live coverage of the ecb news covers on thursday, following the interest rate decision. it begins at 8:30 a.m. eastern time right here on bloomberg television. do not miss that covers. much more ahead in the next half hour. in early christmas present for automakers. if you are in href for producing a truck, you would be very happy. says that divergence may

last beyond mario draghi fell term. stress test.he how the european banks do? we look at the results. there are winners and not so take winners. lots more on bloomberg television. ♪

betty: good morning and welcome back to bloomberg markets. it is time for the bloomberg's newsflash. -- bloomberg business flash. november factory conditions unexpectedly shrank at the

fastest pace since the last recession. rico has to make a choice today. pay investors more than $350 million in principal and interest, or keep the money to pay for essential services. it may be a turning point for puerto rico which is trying to restructure debt. therelders could sue if is no payment. and a nonprofit funded by coca-cola to combat obesity is expanding. this comes after revelations about coke's involvement funding the group. e-mails show that the coke suggested content for its website. you can get more business news at bloomberg.com. i want to head back to the markets desk were julie hyman has a check on the movers so far this morning, julie. julie: yeah, talking once again about sun edison and as matt

miller likes to call it suned ision -- betty: all one word. but the e one word, is capitalized. last week's management shuffle investor,rm, says one creates obvious conflicts with sun edison. terraform also raising concerns upcomingraform's acquisition. he says that it may threaten contracts the terraform has. interestingly, we are seeing terraform shares surge on this on speculation that the upper may be getting more involved. sun edison has been fluctuating

all day long between gains and losses. it is down 80-some percent for the year. big declines for sun edison. also, a deal in the mattress business. mattress firm holdings will be buying sleepy's. are the largest two specialty mattress retailers in the united states. shares have fallen about 30% year-to-date, but are bouncing back over optimism over this deal. and finally, bank of america neutral,ng shares to bleak asoutlook as ever. joy global shares down 12% on that call, betty area -- betty. julie hyman at the markets desk. volkswagen sales tumbling more

than 24 percent. other automakers did better. the at chrysler -- fiat chrysler did better. to logustry is set it's best november yet. got miller, our auto guru, beyond the surface. this is about trucks and suv's. it is, especially in the case of ford. their total volume was down 12%, but truck volume was up 30%. cars,re selling fewer which are low margin vehicles anyway, and more trucks, which are divergent -- betty: they did an incredible. matt: best november and ford at month sinceail

2005. more than 70% of all of the vehicles they sell our trucks. the same thing with gm. we looke like 80% when at chrysler. in by the way, when we say like trucks, we mean jeeps as well. betty: is that because of lower gas prices? matt: i spoke to jeff hendrix, the ford president of the americas earlier today. i asked how long can this go on. listen to what he told me. that: there is no question transaction prices have been going up with that. what is happening, consumers are vehicles.e expensive but it is a healthy industry. million the last several months. of course we expect interest

rates to begin rising, but we think it will be healthy. rates, theyst expect to start rising. he's not to worry. gas prices is the one thing they , but no oneol forecasts gas prices to get wildly high any time soon. i was just in columbus, ohio and i filled up for $1.81 a gallon. betty: well. you were visiting him? matt: i was driving my truck. fed is saying what is they raiseppen when rates, and a one basis point increase means an annual drop in car sales of 2.52%. report.saw that it was fantastic. when i was asking joe about it, he said, we expect a quarter point rise in december, like

everybody else, and then a quarter to a half next year, and he think they can deal with it. i even asked him. dealers get hit on both sides. on one side, the inventory, which they have to pay interest to kerry is more expensive. on the other side, customers find it more difficult. 0%d is now offering financing for 60 months and 1000 dollars in cash back. general motors is offering similar deals. ford and gm are offering 6%. chrysler is offering 16% -- betty: they want uim. matt: even though you are looking at peak sales. we will possibly have the best year of car sales in american history -- betty: $18 million plus? matt: possibly. all of these automakers are jostling for position. they want to grab market share now before there is any downturn

that could come in the next two or three years. betty: what about volkswagen? speciallkswagen is a case, obviously. they have shot themselves in the foot and emerge every other body parts you can imagine. but volkswagen never did well in the u.s. -- u.s. sales are down 24%, but they already outsold subaru. 23,000-pluslike cars or something. that that is the total they sold. the question is will this affect as strongly, porsche sales as strongly? these are brands that volkswagen owns. they also own bentley, lamborghini. we have not seen that so far. clearly, a lot of customers are going to think twice before buying a volkswagen after what happened. the company is working on fixing

that, but this is not their biggest problem. they could never gain a strong foothold here. betty: all right, matt miller, thank you so much. matt: they do not sell trucks, by the way. the only kind of truck they sell , but that is an suv, not a truck, which is what americans are buying. betty: something about a volkswagen truck -- matt: they do have one, but they do not sell it in the u.s., oddly enough. betty: we will discuss the european close, coming up. ♪

betty: it is that time again. we are moments away from the european close. mark barton joining us from london for the next half hour. the most important global news today, and mark, we are dancing

around these highs again. love betty, you know how i a bit of a narrative, and i was going to regale you with how the euro stoxx 600 end of the month as it started last month. i was going to tell you how half full after investors chose to ignore the official manufacturer engagement. well,services report as betty. but look, you know what, betty? it's all because of your ism manufacturing numbers. why are we reacting to this when u.s. stocks are still higher? it quite did react to a bit as well, but we are mirror images of each other here, mark. so, that narrative is intact. mark: it is true. it is true. we were trundling along, but barely changed for much of the

day. but we rose for november for the second consecutive month. that has not happened since march. factory data has accelerated. stephen morris, our u.k. banks reporter, will drill deep into the u.k. banks stress tests. -- didor banks well pass. and it is the battle of the charts. in brewing with energy after the win yesterday. bloomberg markets' european close is next. stay with us. ♪

to bloomberge back markets. i am betty liu. it is 11:30 a.m. in new york,

but it's 4:30 p.m. in london where the markets closed. let's go to mark barton in london. u.s. manufacturing data throws up concerns about the world's biggest economy. the european close starts right now. betty: so, we are going to take you from new york to london in the next half hour. mark, it looks like we are both, on both sides of the pond, trying to hold onto these gains. ism manufacturing data , betty.things off a bit it started off so well. , the china data, looking on the bright side of life.