stephanie: welcome, welcome, welcome.

you have never seen so many deutsche bank people. it is amazing. it is amazing. we are going to break down some first word news before we get into the fed. republican presidential candidates last night tried to convince voters they were keep america safe. talk of terrorism led the evening. the proposed ban on entering the u.s. would cripple policy, according to jeb bush. jeb bush: this is a tough business, and we need a leader that is tough. you are never going to be president of the united states. donald trump: i am at 42, you are at 3. you started off over here, jed. you are moving over further and further. bush a trump called total disaster and said he was trying to breathe life into a field campaign.

negotiators in congress reached agreement on defending a tax plan. making billions of dollars of tax cuts permanent. extending tax breaks for wind and solar producers. the bill today. thatd nations experts say .ran has violated sanctions the october launch is the first after iran and six world powers reached a landmark nuclear deal. you get more on these and raking stories 24 hours a day at the new bloomberg.com. markets now with ramy inocencio. ramy: happy fed day. futures are higher as we count down to the fed announcement of the rate hike. s&p futures are up about half a percent. all of this is possibly indicating investors feeling the

economy is strong enough to take on some rate pressure. this morning, one jpmorgan says it is a dovish hike since we have a strong dollar and almost no inflation. let's take a look at the implied probability of a rate hike with the wirp function. you can see futures traders are pricing in a 76% probability we will get at least a 25-basis point hike. stay with bloomberg tv for will provide the s&p and the feds target rate which is in blue. you have interest rates near zero since december 2008. since then, the s&p is risen and stocks again $60 trillion.

it was a right here if the spread actually narrows after the test starts this afternoon. as stephanie said come with an all-star panel to take on the debt. also down in the frenzy done in washington, we want to start with you down there. you can actually see what is going on. tell us what you will be looking for. >> at a good book and really scrap the statement. they're pretty sure with the move is going to be. we look at a new statement about what the new normal is. long-term for the actual rate of interest was. i went and look at the september projections they had do in prize -- revise inflation. when we look at what the markets actually think inflation will be, it is widely divergent from what the fed's own models are. the break even

rate for inflation, on the 10 year, one point 2%, this is nowhere near what the fed thinks inflation is going to be. what i will ask in the press conference, i want to understand what is wrong with their models and what they're doing to fix them. i really wonder, the fed has two responsibilities. they need to choose between those two? >> strangely, the sum and visited tom, they're usually worried or unemployment as they carefully watch inflation take up. that is not what is going on right now. employment is pretty close to what we think the natural non-acceleration inflation rate is. with having trouble with is creating inflation. they can't get to the 2% target.

>> how flat can the curve go? that can be good for banks. >> with the set looking at what is priced in. we've already priced in a very gradual case. hiks, so only two rate the bar is very low. i think we can price in mroe if the data just continues to be ok. i think we can go 30-40 flatter. stephanie: really? in 1994, none of us are paying attention, but 230 was completely flat, that was terrible. could we be facing that? >> i don't think so. i don't they be market is really going to run away this time around. fed has said they will be gradual. it will be difficult to see the

kind of move. months, the fed tightened policy by 300 basis points. talking about 75 basis points of this is much more gradual. it is intentionally more gradual until the outcome will be very different. whether it is treasury yields or the curve, equity valuations, or the effect on the economy. of the things it strikes me is that it is been a while since we have seen this. we have a whole generation of never dealt with this. i wonder what degree of uncertainty surrounds how this happens and if they can get it done. your this thing coming towards us. knowe already four, we all what is supposed to happen. if yellen doesn't do it, she --l be the least reliable mark carney is always accused of being in on reliable she will be that as well.

david: janet yellen -- >> everything he is saying is correct, it's all about pricing. i think there is a lot of people out there who just aren't used to this. there is an element of property markets. there is a lot of bond traders levinsohn this happened before. stephanie: we're already seeing this income market struggle. assuming, where is the opportunity going to be? the investment opportunity? >> the market is most concerned about liquidity right now. there are 11 trading days left in the year. we have seen those struggles in

the past weeks. stephanie: those investors are trying to get up that pain train come with a good the treasury market? >> i don't think it is clear .hat rates go up significantly it will depend a lot on risk assets. if crude move lower, you could see rates rally. up, howey does go confident are you they will make it? we at some yesterday that they could only get two thirds of that given the mechanics of how it works. >> in terms of the mechanics if of the fed raises rates they waited to 50 basis points and reverse to 25. but that the actual fed fund will be somewhere between 30 and 35 basis points. >> the new york fed's been testing the plumbing for some time. they will be ready to ramp up if need be.

they need this to work without a hitch. can they continue to raise rates between march and the election? couldn't one argue that if it is taking action during that time it be critical. >> that could increase the political pressure on the fed. and certainly want to avoid that. they want to do what is right for the economy. i think their recent survey of economists from bloomberg said they're coming in march. i think the beehive. david: i still think of a central bank looks over their shoulder and just think squirelly about that. i find it exactly as you say. wouldd find unlikely they move with the last moment. when they say it is data dependent a don't know what is coming up, they are susceptible to being interpreted as trying

to do something political. >> think of all the public is that stood up, and accuse them, think one thing he was doing it is a stephanie: very difficult role. how much activities going to slow down? trade. to actually in reality, doesn't trading basically come to a complete halt by this monday? if you need to get something done, what is your probability you can really get anything done? countless smaller than that. i'm counting christmas eve, liquidity is very difficult. you have a few days and that is why the market -- one of the reasons why they are so volatile. i would expected to continue. that means there will be opportunities. we are to make money here. regard to the race market, we like flatter curves.

i would take it back up and long duration. if we get tenure notes. i would say in the next month or so. >> yuan warren buffett agree. thank you so much for joining us. we will have full coverage starting at 1:00 p.m.. click schedule set the talk about, the force maybe with janet yellen. and they'll be very early this morning. few -- film went

to the london premiere last night in galactic fashion. given to mixtures, you need to see to know she looked incredible. the film premieres across the country tomorrow night. david westin will see if he is a darth vader cost jim. we were talking economy will he come back.

welcome back am here is the latest. pharmaceuticals has a forecast for next year. the drugmaker said it would pay down debt. there try to end questions about how it distributed product. the companies we decree mail-order pharmacy. and it's he's a doctor that patients get access to drugs.

meanwhile, honeywell estimate earnings will rise almost 10% next year. they're been cutting costs and marketing new products. sales have been helped by the theisition of an of business. she is a product of the record low. and says itestimate will increase prices to make up for slumping sales in asia and the u.s.. stephanie? stephanie: don't worry, i'm coming to help. with only a few hours remaining before the fed decision, european investors are pushing stocks higher for a second consecutive day. who likes a green market more than always enthusiastic mark barton. he joins us from london. have been looking back to the history books. when the fed last raise rates 20's --e the 29th

thousand six, guess what it rose by 1.8%. is history repeating itself? we asking ourselves it will stocks rise if the fed hikes rates later on a valuation basis. trading 20%cks is less than the s&p 500. we have been delving back in time here at bloomberg. back to 1987. guess what we discovered? federaleeks after a rate hike, european stocks tend to decline. by euro stoxx 50 has fallen 2.4 percent on average. but in the three months after, it rebounds. recouping all of those losses and then some rising by 3.2%. traders are bullish about european stocks going into tonight fed rates decision. because of the divergence between the fed and the ecb

which they say will push down on the euro. that will benefit those exports. there was more of a focus on domestically geared companies. as the economy shows signs of picking up. they you go, looking back on history, will it repeat itself? that is the big question. stephanie: doesn't it always? david: we are all about the fed here. there also some underlying numbers that have come out. we some u.k. jobs figures. what are the fundamentals of the economy apart from the fed does? >> the economy is picking up, let's of inflation data today. euro zone inflation rising last month which was above the previous estimates. come on inflation come with oil declining the fear is that the ecb won't hit the target. day-to-day guide which was just below the previous months figure.

well above the 50 line which helps exhilaration and contractor for that one positive signal is companies within the eurozone are hiring at the fastest pace in more than four years. that shows there is confidence of a to underlying economy. very quickly, i want to put this to our very own john nichols, we have some payday data out of the u.k.. down to 2%is slowing in the three months through october. that tells us, and putting it to you that the bank of england is going to have to push even further into the distance. that first rate hikes as the financial crisis. >> my guess is yes, it must be that. the way in which they are going at the moment, the way in which their thinking, any wage pressure is what they're looking at. when journalists talk about wages not going up much -- it is that they'rere

looking at those numbers. the tendency just to push it back a bit, to not push things, is worth looking at. most of the main european economists, you're the whole series of people telling people not to raise rates. there is considerable -- stephanie: larry summers has been saying that for ever. this is why he is the editor in chief because he gives us simple answers. next, a look at the top trending stories on the bloomberg terminal. ♪

now let's talk bloomberg trends, this is woman take a look at what you are reading most of the terminal today. here is a look at the top five. john, i want to know you

particularly are interested in. stephanie: here we go, we're focused on gaining, with hedge fund closing. for you, -- more i could be somewhat secure one. the one i picked was merkel allies betrayed, growing alarm about brexit. i apologize for the british parochialism bastad we're talking what economic growth, i think the from the investor's point of view look at next year, all of your big risks are political. things like a trumpet presidency, what could happen in france, there was the brexit. those to me at all the things that are sitting underneath the market at the moment. stephanie: that is exactly why more investors throughout first of those risks are not want you can prepare yourself for. it is not about doing

fundamental research. this is distal ball flavor type of stuff. >> you can see it in the numbers for some investors are holding back, prices are going up. that is all happening. many people are just sitting down waiting and watching. there are really quite frightening things going on. stephanie: or worse, they're selling into a down market because it think the market is going to go even lower. they're happy to sell at a loss today because they think it will get back into those traits even cheaper. britain, imagine scotland. if of the hour, stick with us. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. look at that shot. you're watching the sunrise in our nations capital.

no talking just yet. a beautiful morning from washington dc. quiteld new york, we have the lineup because of our special coverage is starting the fed decision post on 1:00 p.m. today we will be breaking it down. now we will talk fed, oil, and a whole lot more. just take itt's back for a minute. back from dubai, joining us come you must be exhausted. it's fine, it was exciting. it is a huge deal. stephanie: other know what did right by him specifically. when it comes to breaking down oil there is no one better. bonnie: thanks so much, congressional leaders have unveiled a spending package that would avert the government shutdown. the bill makes permanent billions of dollars of tax cuts

and lives a 40-year-old ban on oil exports. on the billto vote today. senate democrats say they want to see the final language with the meanwhile, a new study said the next president without the deal of the budget problem at the airport. according to research, the airports says nine major aviation programs are cutting costs. the next president may reduce the number of fighter planes that are built. and it japan's has ruled that a force was have the same name after marriage is not unconstitutional. they said the law breaches right under the constitution. conservatives have argued that allowing separate names would lead to the breakdown of family ties. you can get more on these and other breaking stories 24 hours a day at the new bloomberg.com. stephanie: tom, we'll get you must read just a moment. awaye six and a half hours

from the industry decision by the fed. what are you looking for? tom: i'm looking at the press conference. it will be scanned and attempted to be understood. to me, and john nichols this is so much a distinction between -- united kingdom where they never the bloomberg headline that came in from our people which sibley said carney can't raise rates because of inflation. i don't know why this is any different, frankly. >> there was a big issue, they are looking towards yellen and i think she will do something. this entire thing will be about the press conference will stop it will be about people going through those words and tried to are out how many rises they building a next year. they're looking for clues in the same way we used to look at the kremlin trying to figure with little words mean. tom, what effective and he is the fed decision having an

your business? -- it will have an impact of rates. all commodities that are mostly still price -- it will have an impact, italy and negative impact on prices. probably not dramatic. stephanie: let's stay with oil, i know your morning must-read is focusing on oil. the linkage on this historic today. he turns to iran which is always the focus. occur, there is still more supply. speaks of the commanding heights. it is a battle that will be shaped by prices, and by the geopolitical rivalries. let me talk about the price dynamic in the quantity dynamic. when we look at supply and demand everyone looks at yield and it is an barrels. a lot of it is also price dynamics.

iraqi oil the new u will do. share position is not in danger come ironically at the battle will not be east of suez, the battle will be in europe. tom: that doesn't make sense. ed: it makes a lot of sense. there were five or six refineries in europe that used to import half a million barrels a day from iran that are importing nothing at the moment. others are eager to sign upstream deals that was effective? those selling oil which is russia, and iraq, europe is the center of that battleground. david: live a story about that today. is that also an issue? strategy, a long-term

into theelf downstream. that means that no matter what the price of the love that market for stuff aim to be the second-largest exporter of petroleum products in the world next to the u.s. which is the largest above russia. very bigs that penetration into that realm. it means that oil used crude is going to become less significant as part of what their overall market share battle is. >> something oil prices aren't free fall, what the zeta that -- what do you say to that? ed: it worked in this case. i miss reading of the opec meeting where people left not in a half but because that lanes to noth and they were arguing over a number, they were arguing over who was going to be the successor to the secretary-general. it which is really miss, the was

no change at all. freefall maine up in -- may not be in freefall, but it strikes me that it is iraq, venezuela, no one has any intended to cut back on production. >> particularly, they have this sense going back to what i said earlier, you're suddenly seen that list of risks about next year. your suddenly seeing saudi arabia cropping up as him of the people are beginning to worry about. that is a new worry out there. they're looking to proclaim victory in the battle for market share. they think prices are down because of what they are doing. stephanie: don't they know the walmart model doesn't work? if prices keep going down a dozen work? in thentually does work oil market because you push at other supply they can't be produced. see you as production

turning over, they see non-opec's sliding into 2016, storage costs matter a lot to them. they feel rightly justified in what they are doing. i think that the market will end in 2016 and a significantly higher price. they are in a better position. stephanie: you do believe it into 2016 prices will be significantly higher. ed: i think this is the first time i've been on a bloomberg news cast in which i am saying something bullish about the market. we think it will be above 55. watching? are you david: when? q4 should see a drawdown inventory. lower, and that the market is really very tenuously balanced. you want to talk about percentage. there was a 1.5% difference

between supply and demand. the saudi's are producing all out. potential the structure venezuela, nigeria, and iraq. tom: that was written about yesterday. what is missing here, jeff. goldman sachs highlighted this -- need a catharsis. i haven't observed that, do i need a lower price to develop a motion that clears your world? we are very close to a cathartic moment. tom: why don't i see balance adjustment yet? it was too many christmas parties right now? expect this anomaly of consolidation to the industry by the third quarter. stephanie: management says the

smaller guys will just get choked out? medium-size will do that to the smaller ones, and the larger ones will do to the medium-sized ones. david: shale production i believe he can bring online quickly and is not that expensive. is that changing the marketplace? >> undoubtedly, the one new that it is doing that oil has elasticity to price. but theup, a goes down, adjustment is non-instantaneous. we should is in the adjustment a year ago. these companies are very resilient. people often talk about that being the mud of time to get a shale well back up. are two levels of production. we have uncompleted wells come as we model it we can see 500,000 barrels a day surging

from the initial production coming from the rush to completing those wells. on the other side, is normal drilling activities. often see a lagged because medium-sized, especially smaller cannot get real. it is like people in our homes when the market goes down. they cannot accept that the prices are down. some of the smaller companies cannot accept that prices are where they are. but you think we should see more today, but want cap until next year because they can't accept the truth? it is a lot of reluctance to what happened today. the most distressing of the companies are very well hedged. they get to be nearly nakedly exposed to the market. are you worried about whether? i can't the government of the time we had everyone this one going into winter. -- thatdup inventory eventually put even more pressure downward on prices.

before, a $20 number will be surprising. tom: when you have an espresso of your choice, what do talk about in terms of dollar dynamics? what do you talk about your ace dynamic sky? -- guy. talk about the impact of dollar denominated commodities when a movie is really short-lived unlike what happened in 2008. the dynamics of trading, the hourly and daily, -- something janet yellen will worry about. ed: not at these prices. to $35want to be readily a barrel. people thought you were an idiot. they really took some shots at you. curry, and gary shilling as well. stephanie: they go, tom keene,

we will send him back to radio. edhink your extraordinary, breaking up commodity prices. remember, this bad things but in a 2016 we will see -- $55, $60. stephanie: your deck, that is a call right there. coming up next, the final republican debate and still clashes between candidates for that did any winners emerge? they did mara merge -- emergent of the media coverage. questionsd us some about what you want to know from this guy. ♪

stephanie: vonnie: welcome back, economic growth in china is expected to slow to hear.

to 6.6% in 2016. they are moving their economy to one base more on services that infrastructure. eight of the son of consolidation, payment is agreed to by its smaller rival. the new company provides technology to help businesses process credit and debit transactions. competition is eating into the audience at espn. it is disney's biggest profit generator, is been a suffered its steepest loss in readership. sport center is down 10% this year in total viewers. that is the bloomberg business flash. stephanie: apparently those who bled them watching bloomberg tv instead. david: they are so making a fairmont the money, i would say. other las vegas, the fifth

republican presidential debate took place. john heilemann is joining us now. i once the debate, and it seemed to be everyone was trying to convince me they would make me safer. from your part of you, did anyone win on the platform? ahn: a notch or the was winner to the debate last night in the sense that we walked into this debate with a clear top-tier candidates. donald trump, ted cruz command marco rubio, who walked out of the debate with those the same three candidates in the top-tier. bush and chris christie performed pretty well, but another be fundamental dynamics were altered very much. there is no question that the contact was really different from any of the previous debates. that was to say that with five weeks to go the last time these publicans got to get a sense that we've had the horrors in paris and in san bernardino. it is really change the republican race. he saw that both in terms of

substance and tenor of the debate. trying to comfort and reassure the standards of the tough guys on stage time people we know you are fearful but we can be strong for you. stephanie: talking tough guy, showed some strength. i want to say he clashed against donald trump. the rest been a lot of criticism that is not stood up for himself. a lot of that criticism is come from wall street. if think this is tough -- donald trump: i wish you would not always -- dealing with islamic terrorism was a this is a tough business. donald trump: you are a tough guy, jeb. you will never be president by insulting your way to the top. so far, i am doing better. you're moving further and further, soon you'll be off the end. heilemann,john

talking about making people feel more secure. does that kind of ranting send that message? trump has a lot of ways of trying to project strength. him and uppity pity kind of ways that appeal to the people sitting in television studios andnd the media world certainly not people around wall street. obviously, there is a real appetite and part of the republican electorate for the kind of proposals that trump has put forward in the kind of strength that he projects. night, jeb bush last there is a talk about him a debates not taking on trump in quite as aggressive away as he did last night. i thought most people thought it was his best debate performance. partly because jeb bush was willing to get into trumps kitchen annuity did not. it may be too late for that to matter too much. hn: do you think there is some

point to which all of this playground banter, trump is very good at that, will eventually begin to play against him? if he's running to be the person knew runs the world in the end. is that going to -- stephanie: is that going to matter? john heilemann: there is obviously a. that voters when they get up to the brink of making a decision, or at the iowa caucuses going forward, people will start to settle down and say who do i really want to be behind the big desk -- and is donald trump the guy want to sit there? that could change the did amick of the race. i will just say that that kind of discussion that trump is a schoolyard bully and is a ponder and a showman, that will eventually bring them down -- people have been saying that sense he entered the race six or seven months ago. he has only gotten stronger. they could change in the future,

but there is no evidence we have seen so far that people are starting to sober up and look -- some of my jeb bush was trying to portray himself like that. stephanie: john heilemann joining us from vegas. but you take a nap or lease get out one of those beautiful gondolas. beautiful. you, you know what we will cover here all day. the fed a, we are getting that announcement six hours from now. we get a look ahead still on go. gemma am a equity group investors chairman and founder the one and only sam zell. i know you want to know this guy has on his mind. ♪

david: welcome back to "bloomberg ," we talking by

the presidential debate. give us a perspective of what the world exhibit the debate. everyone is you're looking for fed a day, but when you look back at this time they may look at the debate and said that was the last chance for people to push trump out. if you still there, still leading the polls, the rest of the world is seriously frightened by donald trump. you can see all the way across , people are afraid. stephanie: is it that people are more scared and they're looking for someone that has a voice and as strength? john: they would like that much more than they're getting from barack obama, but the natural that the voice to get from donald trump is the one that they want is a place like france, germany come all these places that of the muslim populations they find some of the things he is saying seriously frightening. that is before you get to the rest of the world, and china, which are don't think it's entirely enthusiastic about this trade policy.

david: do they take them seriously? john: that is the point. when you look back, we will all the goodbye janet yellen, but also here is trump holding on to a lead, doing something, if you're sitting in beijing in the corridors of power, you are suddenly beginning to think this a real force in american politics for stuff is not only the world's financial superpower, but also the political superpower. act of the dramatic effect on the world. stephanie: it definitely has an impact. thank you for joining us. when he returned, he is the one and only real estate king. they can energy. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. stephanie: decision day at the federal reserve. the central bank is expected to raise interest rates. we will tell you when it lifts off. what would higher rates mean for

the real estate market? he will ask the legendary investor, sam zell. and, the collapse in the energy areet may mean oil and gas fire sale prices. time for the bargain shopping. welcome to the second hour of "bloomberg ." verya little anxious and excited. i and stephanie ruhle. david: i am david weston. this is why. stephanie: because david is here. .avid: no, because sam zell we are delighted you are with us. we will start with first word. vonnie: last night republicans -- republican debate

was front and center. ted cruz called for more attacks on islamic states. >> the first persian gulf war, we've launched several hundred strikes the day and carpet bombed them. right now, there is between 15 and 30 air tax the day. we need to use overwhelming airpower, arming the kurds, fighting and killing crisis where they are. vonnie: marco rubio says the u.s. is at war with radical islamic terrorism. threatust deal with this of radical islamists, especially from isis. this is the most sophisticated terror group that is of a threatened the world. vonnie: donald trump called for shutting down the internet in parts of iraq and syria controlled by islamic states. there was something for everyone in the package of tax and spending unveiled by congress. first, it would divert a government shutdown and make

billions of dollars in tax cuts permanent. it would extend tax breaks for wind and solar producers. the house plans to vote on the bill today. and the governments of health insurance deadline is being extended. anyone needing coverage has until tomorrow at midnight to sign up. they had healthcare.gov says more time was needed because of unprecedented [indiscernible] you can get more on these and other stories at the new bloomberg.com. now it is ramey on the markets. ramey u.s. futures higher in the premarket: but they are all session highs. s&p 500 futures up, dow jones up by about .5 of 1%. as we wait for the fed announcement, we might wait for investors to take a wait and watch approach. feel the economy is ready for higher interest rates. markets have been tracking oil,

but the fed does loom larger. nymex crude is down after the games we saw monday and tuesday, down .25% of the quarter. we are under the $37 a barrel threshold. the global marker is also on the move and has crossed below the $38 there'll threshold, down about two and a quarter percent. trading at the lowest bubble in seven years. nymex crude is now trading near its smallest discount to brent crude in 11 months. this chart shows the shrinking over the past year. futures traded for just 60 cents a barrel and this comes after a u.s. congressional leaders agreed on a plan to lift the embargo on exporting oil. stephanie: thank you. we are five hours and 56 minutes away from the fed announcement.

we are expecting them to have a race hike. sam, let's talk about the hike. a get it.me even if we do, we are moving inches. given were interest rates are, even with the hike, how concerned are you about asset bubbles? sam: i think the interest rate may be going to begin the process of reducing the asset bubbles. screen this morning. futures are way up, futures are way up because interest rates are going up. of the wayindicative the market has responded. stephanie: reversely. sam: exactly. i think this interest rate hike is several months too late. i think the economy is closer to falling over than it is to going up. stephanie: hold on.

if it is six months to eight months late, what exactly does that mean? how bad is it? think there is a high probability that we are looking at a recession in the next 12 months. i think that the strong dollar is having an enormous impact on u.s. production and u.s. businesses. there are these competitively disadvantages by a strong dollar. to some extent, it is the that we are better than other places, not good, but better in other places. those places are not competing with us with the valued -- with devalued currencies that is making it difficult for the u.s. to compete internationally. david: taking in your view, when you say that there may be a recession in the next 12 months? where do you see that?

sam: world trade is slowing, currency continues to be manipulated, you are looking at the beginning of layoffs in multinational companies. we are still looking all over the world for demand. tell me where the demand is? that is ultimately what is going to rectify and move us toward going broke. it is very hard to find anyplace thane world, maybe other sub-saharan africa, where there is greater growth but note scale. when you look at those factors, where strengthee is going to come from. i think weakness is going to be pervasive. stephanie: it is hard to see those outcomes being different if janet yellen raised rates six months ago? sam: except if she raised rates six months ago, we would be

adjusting to that. i think she would then have more room if a recession is on the way. ,tephanie: help us understand since you are not in janet yellen said, if you see a recession on the horizon, what is janet yellen looking at? issue not doing a good job then -- is she not doing a good job than? sam: i do not have an opinion on how samuel and -- on how janet yellen is doing. i think the fed as a whole is very conservative and cautious. stephanie: two conservative and cautious? sam: if i think she should have raised interest rates, ird answered the question. stephanie: fair point. sam: i think the fed is very concerned and to some extent, they should be. looking at the same numbers i am, and those numbers are not robust. is improvement in employment

impressive, but the improvement in employment is at the low end of the scale. that is another factor. david: far be it from me to argue janet yellen's side, but she points to some wage increase, not huge but noticeable increase, consumer spending pretty good, so that the is shooting the lights out, at i think she is looking steady progress in the u.s. economy, put aside china and europe. sam: but the answer is you cannot put aside china, europe. china's numbers come out not to ,e as accurate as we think china could go into a recession. that is about as deflationary scenario as you could possibly come up with. one that would for sure impact growth and affect janet yellen's decision, so i don't think the fed's position is easy.

ratesk the zero interest are really negative thing, and i think that they have contributed to the fact that we have had such an anemic growth since the big recession. stephanie: let's say you are right and that we do fall into a session by the end of next year. what tools does the fed or u.s. government have to help us out of it? because that is many people's fears, no tools left. sam: the answer is they cannot come up with any answers. you cannot lower interest rates, although you are seeing negative interest rates in europe, so you may see something like that. stephanie: help us in best out of that. if that is what you believe and there are no tools left, we see you selling assets, holding onto that, are you keeping dry powder because you believe assets will get cheaper next year and you want to buy them? sam: i think there is very little about to my opinion that assets are cheaper.

with zero interest rates, the penalties for holding cash is not there is significant, so you have the kind of flexibility in the zero interest state environment they would not otherwise have if the cost of holding cash was much more primitive. stephanie: will they look cheaper if we had into a recession next year? what will you want to buy the most? is: i think the stock market above its long-term average at a time when the world greatest slowing and activity is less than 2%. i do not see anything cheap there at all. we have had a number of falling that have been obfuscated by amazon and facebook, etc. i think if you take out those stocks, the stock market is not

doing really well. david: there is one other tool, fiscal. what about the possible fiscal stimulus? big infrastructure packages and things like that? sam: i think that would be a .reat idea i think they try to do that once before. most of it was just shoveling. david: he is with us for another hour and tune in for full coverage for the feds meeting starting at 1:00. tom keene will be joined by a big lineup. when we come back, pulled quotes from the business leaders keep. about on "bloomberg ." ♪

david: welcome back.

it is time to take a look" quotes from around the world. something we like to call say what. we're back with sam zell alere joined with jason -- and we are joined by jason kelly. what you have for us? byon: i wanted to start keying off the discussion that you guys were talking about, the fed, with a twist. this comes from wells fargo investors to paul christopher talking about mexico. there are a lot of institutional investors the call looks ago proxy and that has led to mexico been looking boy. you are in mexico and you like it, right? sam: i think it is terrific and there is extra night opportunity. i think mexico is the answer to the single supply chain that used to come out of there. i think they are short-term scenario and maybe they are short-term whipping boy, but i am not a short-term investor, so

i will be there at the end. stephanie: do you share that view with donald trump? sam: i know donald trump but it does not mean i agree with him. jason: you build an airport, right? sam: no, and order process and we built it on the mexican-u.s. border chula vista. for practice funds about 10 days ago. stephanie: what happens if donald trump is the next president and builds a great the wall? sam: i think our bridge will go through the wall, but the answer is the other side of the bridge is the tijuana airport, so a big portion of the tijuana airport raffic comes from the u.s. san diego does not happen international airport, so effectively, this is going to make it difficult for u.s.

people to go park the car on the u.s. side, walk across the bridge and you end up at the counter and it gives you access to asia, all kinds of cities in mexico. we are in this kind of try out. of peopleyout period walking across so far. jason: let's talk about china, this is from hugo, an economist and talking about china -- this is not cyclical, this is prolonged deceleration to a new structural growth. get used to it. you are bullish on china, right? sam: no, i am not. jason: god, sorry. sam: every decision you make has to be individual. lead too ideas should effective individual decisions. i do not believe the numbers china produces.

i do not think china is growing as fast as it reports to be. world hase significant deflationary risk coming from a slowdown in china, which i think will impact goods all over the world. stephanie: are the other emerging nations you would not touch, brazil for example? sam: i think rizzo is suffering significantly -- i think brazil is suffering significantly. ask an investor, i'm always looking at when nobody else is willing to go. stephanie: do you want to go there? sam: we are there already. we would not have problems investing in brazil today. jason: where the other areas? sub-saharan africa? caps on: i don't think there are because it was scale or market. -- sam: i don't think there are because there is no scale or market, and although they are

growing fast, it is very middle of the class. as an investor in the emerging markets, i think the criteria you're looking for is a significant aspirational growing likee class, not -- brazil, mexico, colombia and other countries. stephanie: we have to take a break. stay with us. here is a beautiful shot of brazil. guess again? we have a better shot, sam zell kicking back in his office chicago style. back in 1984, take a look in front. originalchool bloomberg terminal. do you use the bloomberg every day? sam: yes. stephanie: there you go, that this sam zell in 1995. we are going to ask sam what he is buying. ," ands "bloomberg

that is a great shot of new york city. ♪

stephanie: welcome back. let's try to make you money. we have been tracking follow tell oil prices, including recent lows in crude, but one man's crude is another's treasure. loading up one distress energy assets and jason kelly is with us, too. do you think prices are low enough, and if you do, where specifically are you buying? sam: first of all, it is not so it is specific opportunities. obviously, prices are down, but what makes the opportunity is the distress of the situation. stephanie: like what and where? sam: we are investing in

, werado, the permian basin are responding to the difficulties that are the people are having. in the last two months, although banks have redone the reserve numbersand all of the of availability of cash and the energy place our way down, so there is a lot of pressure. currently, the energy lenders are playing pretend and extend and going, do not tell me how bad it is. the reality is that will move forward and continue to cause of people in the energy space, and that kind of a people create opportunity. david: i look at oil on the ground or oil services, pipelines, riggs? sam: i am more focused on gas than oil.

it is a little bit like real estate. we made a fortune because he bought real estate at replacement cost. we are buying gas in the ground, gas that has been drilled, we are buying wells at dramatically less than that, so it is the same kind of creating a competitive advantage by virtual entry. stephanie: clearly, you have interest in the u.s. oil. what about investments overseas? overseas in the energy space, the only thing that we ,ave done of any significance we were one of the founders of the company called kuwait energy, which was the first arab-owned independent oil company. we are drooling and producing -- we're drilling and producing in iraq, egypt, kuwait, and company is doing very well. the premise of the investment

was when the middle east oil market gets more liquid and fluid, and arab-based company will have a significant advantage, and i think that is proving to be the case. jason: is there any real estate play around oil and energy at this point? it seems like a lot of people piled into this ancillary opportunity? sam: i think you have to be careful of all of the variables. dakotaa trip in south the year and half ago and it was up for grabs. stephanie: sam, we have to take a break. you will not get to hear, but we will be back with more. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. david: welcome back. sam zell is the chairman of equity group investments and erik is joining the party.

first, we're going to first word. vonnie: united nations experts say iran violated sanctions involving ballistic missiles as they are launching an medium-range missile in october. the sanctions bar iran. the october launch was the first dr. iran and six world leaders reach the landmark nuclear deal. european union union negotiators have a great on regulations. --panies raising from thanks they are also having restrictions on the use of criminal cases. you can get these and more news -- on bloomberg's new bloomberg.com. stephanie: housing starts breaking right now -- one more time. i cannot get this up. it rose 10.5% in the month of november.

is this something you track closely, sam? yes, and we are very focused on single family. i do not think this is any big venture. i think this is a one-month look. stephanie: when you look at real estate in the united states, what is the climate and landscape look like? people are worried it is the top. sam: people have accused me of that. i am not trying to make the top now. stephanie: but you are making a statement if you are selling. sam: the answer is if you look at the world as i look at it, and do look at the pricing currently available in the commercial real estate market, it is very hard not to be a are fulfilling, in some respects, are longer-term

strategy for we are liquidating the remaining apartments we have , so that should not have been a big surprise to anybody. the difference was we did it all at once because the market could absorb it as opposed to the original plan where it would take us for years or five years to do the same amount. erik: did cap rates help to view?n your point of we look at cap rates on retail, multifamily office, hospitality, and from the bloomberg, we can see that the cap rates are the top line and the green line illustrates the spread over treasuries which is the gray line on the bottom. pretty much every single case of hospitality has been taken downward, which suggests there is not new as much value as there once was, right? sam: i do not think cap rates have moved dramatically. erik: no, no they have not, but the trend has been down.

sam: cap rates going down means values are increasing. who has been selling a lot of real estate, that is terrific. erik: that is why i say -- sam: i and not a big fan of buying at these cap rates. erik: how long before we see the cap rates at a spot where it is good to buy? ; i don't think i have ever -- ht sam: i do not buy real estate based on cap rates, so there is nothing more relevant. arecan generate values that above placement cards by the cap rates, and that is the same respect. david: how much of it is geographic? you sold the big sized building downtown in chicago. how much of it is regional? of it isink some regional, but i think the basic decision from our perspective in

the equity commonwealth situation is that equity commonwealth has remained a lot of b assets and i don't think this is an environment to own b assets so we are the quiddity accordingly. stephanie: isn't it political? are you making a statement about what it is like in chicago right now? it has gotten unsafe. sam: i don't think it has gotten unsafe. it is more or less safe than it was. stephanie: really? sam: the number of murders go back 15 years and they were much larger than they are today. stephanie: are they doing a good job there? sam: i think he has the toughest the fact that, so he gets up every morning and goes back at it since he is doing a great job. that does not mean he is not subject to everybody picking on him right and left. erik: i like talking about him, but i went to go back to

replacement cost and the point you are making about what to find? value and real estate. where is it bruce of books field told me they are buying in brazil because you are acquiring top-quality for the brazilian market office space at way below replacement cost. is that? the best value in the world right is thato not think -- the best value in the world right now? sam: i don't think i want to make a statement on that, but if you have the staying power, and bruce has the staying power, i don't know any other way to sleep at night better than buying for someone to compete with you. erik: where do you like? sam: i am not a good buyer in real estate today. stephanie: what does it say when you sell to barry? you're not in various head, but what is he thinking that you are not or vice versa? sam: he has a different kind of money. stephanie: less than you do.

i am just messing. sam: if you look at his situation, he bought his portfolio from us. the portfolio is an fabulous shape and fully rented. number three, there is a nexus to in cash flow. current interest rates allow him to borrow money at less than the cap rate he is pain, so the spread means that on his equity, you will earn 9% or 10% and he will do great. this is one of the scenarios that is a win-win on both sides. ared: let's go tech, there reports that large landlords are in discussion with airbnb to possibly rent apartments. have you looked at that and could a change your business? ; there being -- sam: airbnb has talked to every multifamily company and they have had some conversations. that the overall scale of airbnb is going to

change the multifamily business. scenarios inte certain situations or maybe a rental project is much better then and be used airbnb situation. david: could it help to soak up excess capacity? 95, in othere old words, we basically -- look at the numbers. years, rebuilt one million single-family houses a year and we are now building 500,000 a year, even with your 10.5 -- your multifamily business, is it because people cannot afford to buy homes and they have to rent? sam: it does not matter if they can or cannot afford them, if you are building half of what

you used to build and people are populating, the overall number of people is going to increase demand will increase. if you're not building houses, they filled the apartments and that is what they are doing. been apartments have great business for you. rv and mobile homes have been an incredible business. how much longer can i continue? if you look at -- how much longer can that continue? ofyou look at the returns the rv and mobile home park is this, if we bring up the check, equity lifestyle -- sam: equity lifestyle -- is the number one performing along with simon properties. it is simple. we are not building any more manufactured housing communities. it is not in my backyard. erik: fixed supply. sam: fixed supply and the demand is increasing and supply is limited. erik: so that line we were

looking at continues? know of anyt company or stocks i am involved with that has a better prospect. erik: then mobile homes and rv parks? sam: yes. class ati went into the university of michigan in economics 101 and it is supply and demand. nothing has changed. supply and demand is what it is about. stephanie: we have an instant bloomberg question. they want to know your thoughts on blackstone and the acquisition activity? what do you think? sam: i do not look at what blackstone is doing as a reacquisition as a reit acquisition activity. haven't been able to raise money and they have to put it to work. i did not say i liked it, i think john gray is a smart guy and i think that for a very, very large entity, he is doing

what he has to do which is invest the capital. guide is something we never wanted to be in a position of having so much capital that it affects our decision-making on an ongoing basis. stephanie: we have more to cover with sam. my favorite john ray facts, he has only had one job since college. he has had the same work phone number since he was 21. who is this handsome devil? fromin 1959, he graduated highland park high school. look at that yearbook shot. it is the one and only sam zell. the caption read, i am not asking you, i am telling you. clearly, he never changed. when we come back, we are talking to high yield and junk bond. ; look at the hairline. you have one property -- sam: look at the hairline. you had one opportunity to help me and you blew it.

when -- stephanie: when did you lose that hair? sam: 23. ♪

stephanie: you are watching "bloomberg ," and we are talking junk bonds. their first annual loss since 2008 and a list of companies for trouble is swelling. sam zell is still with us and erik schatzker. sam, carl icahn has said we are in the disaster situation, especially the high-yield junk market going down. other people could see this as a buying opportunity. are you? if it is going down, maybe it is a buying opportunity, but the numbers are simple. since the junk bond world was created, the average spread has been 588. in the last 24 months, it has .een 240 that means that, quote, "the risk has gone down by some huge

percentage." the succession of risk. sam: people to junk bonds that should have had 5% or 6% spreads and they bought them it to 40 and too much money and too few opportunities it leads to disaster. stephanie: are we headed to disaster in the junk bond market where and investors have piled into high heeled? -- kite yield? ield?gh ye goneenergy pricing has down, therefore, the margins have gone down. there are all kinds of junk beinggain renegotiated -- renegotiated. there is little doubt the junk bond market is going to suffer no. is it going to read the disaster described?

i don't know. i do not buy the market, i buy individual situations where the circumstances create an extraordinary opportunity. erik: do? you feel the credit cycle turning -- do you feel the credit cycle turning? sam: i think so. . think we have seen the lows i think they will raise interest rates today. i do not think it will make any difference. erik: what will make a difference? sam: i don't know. there are lots of things i can make a difference. i am very concerned about what is happening in currencies. in 1948, written words was the highlight coming together saying we cannot recover in the world without growing free-trade l.a. cannot create free trade without theing currencies, --

stable currencies, so let's make sure we have stable currencies. that worked for a long time and now we have unstable currencies. erik: what are the effects? not going back to the gold standard. sam: no, if you took all the regulations and cut them in half, that would be a big step forward. dodd-frank, i think is a job killer, and a very negative scenario for the american economy. david: in that world you look at the possible turmoil in credit -- what is it create opportunities and what do you look to buy? sam: i do not buy anything without a net. -- without an edge. stephanie: what does that mean? ; if you and i are competing for something -- sam: if you and i are competing for something, we have monetized them and that gives us an edge.

in the energy patch when everybody else is running out the door, that is an hp or if you have the guts to believe you are right, those are the edges. there are other obvious edges. david: to those seem to be distressed situations? sam: probably. in many cases, they will go bankrupt rather than take the hit. you have all kinds of issues right now. you sell midstream assets and keep expiration opportunities and keep midstream, etc., etc. the whole pipelines were supposed to be the holy grail and all of a sudden, pipelines are having an issue. i think there is a lot happening in the space. the question is, can you look at that picture and see two years down the road? i think there has been too much

pessimism about the price of energy. i think everybody talks about massive oversupply of oil. there is 93 million barrels a day demand and 95 million supply, that is 2 million barrels in the world, not very much. one bomb in the streets would change that overnight, so this is not the kind of oversupply that might be confronted in the real estate industry in the early 1990's or you could shoot the canon two office buildings and hit nobody. stephanie: you say oil and high-yield market is under pressure, but you say you do not like dodd-frank and it is a job killer. the fact that banks cannot take the positions anymore and we had dodd-frank, isn't that protecting banks from high-yield situation and hurting? environment, high yield traders would be loaded up on inventory. sam: i have never known a single

situation in my life where reduction and liquidity is supply, and dodd-frank has reduced liquidity and that is a big negative and something we have not felt with yet. true that i would say if i could give an opinion. david: last word on that subject. sam zell is staying with us and we asked him what he thinks about the presidential race on "bloomberg ." ♪

david: this is "bloomberg and we have to turn to politics after last night debate. and you are conservative you also had the on it, i think i put that in quotation marks, having donald trump asking for

money to invest, so you know him a bit. ask me for not money, but he asked me to be his partner. i do not think that was a good idea at the time. david: why? not think it was an appropriate decision and i did not think stephanie: we would do well as partners. stephanie:would he do well as president? don't know, but i would say that everybody should not underestimate donald. i think he is competent, accomplished, smart, and i think he is often in different directions, but i think he is a competent individual. i do not think he would be my choice for president. i think a lot of his views are more extreme than i could be comfortable with. stephanie: are those views handing this residency to hillary clinton? as david said, conservative in terms of fiscally, can -- and

when you hear things he says about mexico, or keeping muslims out, there are people in the middle who are landing in hillary clinton's not because republicans are saying crazy things. sam: the fact that some republicans are saying crazy things i don't think necessarily will be determining what happens next year. i think that there is a disconnect between the talking heads and what is going on out there. the american people are extraordinarily angry. the american people are extraordinarily depressed. the american people -- the last time we had anything like this, in my opinion, was 1979. stephanie: why doesn't the republican party pull it together? sam: i think the statements you are referring to and the extremes reflected are very much reflecting how frustrated the american people are. i think it would be a mistake to

assume what the iraqi people are responding to today and what they are likely to respond to -- david: we need to ask ourselves why donald trump is feeling too many americans? sam: because you are in new york city and not in des moines, older, and you are not seeing the enormous disparity that has existed between the rest of the country. you have a lot of unhappy people and i think this collection is reflecting it, and i think it is a dangerous. there is this guy who said george santana -- erik: -- stephanie: sam zell stays with us. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. little over 30 minutes from the opening bell. i am david weston. stephanie: i am an enthusiastic

stephanie ruhle, not just because erik schatzker is here, but guess who is staying for more minutes? erik: that would be sam zell. it has been fantastic our. before we get there, let's europe to speed on the news with vonnie quinn. vonnie: turkey is refusing to pay damages for shooting down the russian fighter bomber. the russian diplomat said the country should be compensated. turkey said it violated their airspace and one of the two fires was killed. executions in the u.s. this year fell to the lowest level since 1991. a nonprofit that opposes capital punishment says 28 inmates were put to death up to date and that because 98 was set back in 1999. executions are allowed in 31 states but only six conducted them this year. a milestone date for the federal reserve. they have kept interest rates at zero for seven years and not raising 49. they are widely expected to make a move today.

liveage has started, but coverage starts at 1:00 eastern, followed by decisions at 2:00 and janet yellen's conference at 2:30 eastern. you can get these stories and more at the new bloomberg.com. ramey: u.s. futures in the green. up by moreures are than 1% and the dow jones up by about .6 of 1% and the nasdaq not too far behind. all of this green you are seeing indicating investors feel the economy is strong enough to take on some rate pressure. this money, jpmorgan derivative strategists came out with a note saying, they most likely outcome is a dovish hike with a strong dollar in on most no inflation. dive into the bloomberg terminal with me and let's take a look at the implied probability of that rate hike with the wrip

function. in ae traders are pricing 76% probability that we will get at least a 25 basis point hike today. stick to bloomberg tv because you will have live coverage all day. after today, the question is whether the bull market can keep going if we do get that added great pressure. taking a look at this chart, comparing the s&p 500 and the fed funds target rate, so the s&p 500 is in the white target fed rate is in the blue. rates have been near zero since december 2008, but since then, the s&p 500 has risen 135% and stocks have gained $15 trillion in value, but that index is headed for its worst december in 13 years. we will see if this spread narrows and the test starts this afternoon. stephanie: we have news breaking. canadian pacific is to present

today and enhanced offer to norfolk southern. it looks like canadian specific has revised offer and looks like no, $25 at 32.86 -- share. this is no surprise. you sat down with hunter harrison, the ceo of canadian specific -- pacific and he said he had room to go. erik: what i saw is that there -- 32.6 to five dollars in share on the table, plus, shares for each share of norfolk southern, and then there whichs contingent value appears to be the same amount of stock, if i'm not mistaken, as was said aside in the share exchange ratio. rv, this is the extra room

they had to improve the offer and this is where the lachman will come to play because they want bill ackman to explain the value for the plus or benefit. stephanie: we say over and over that bill ackman asked as a spokesman to the companies key is involved in and here you have hunter saying, bill, present this. erik: the challenge is going to southernrth fork shareholders to see and understand how it works for them. is thaty understanding put something of a collar around the offer, so if it goes down, you get more shares. so there is some hedge. erik: that is exactly how it works. meantime, we are going to move on from cp. i have no doubt we will get back to it, but it is time for the five stories and i want to begin with this. we touched on this earlier. number one, the house is scheduled to vote today on the

spending bill that would prevent a government shutdown but also extend and enshrined benefits device makers, tax credits for research business and development and charitable giving, but the difference is they would become permanent. we spoke moments ago about the fact that you would like to get andof half of regulation that would be a boost to the economy. how do you feel about tax credits and easy tax policy as an economic instrument? sam: if i was given the choice, i would be in favor of a simple select tax. no deductions, no nothing. erik: where would you said it? sam: i do not know the answer, 12%, 15%.re from 10%, maybe two levels. erik: just individuals or the corporate side? sam: delete individuals. david: what do you think --

sam: just individuals. david: what do you think about the van of oil export? sam: we were the largest exporter and we are beginning bailey to export natural gas, i think it was a stupid political decision and it is great it is being fixed. david: wouldn't the flat tax recap a quick your business, getting rid of tax reductions or interest payments getting rid of tax reductions for mortgage interest? beauty of thehe american system is we have always been hard on how oil changes, and we have been better at adapting to change than almost any country in the world, so it would be a lot of change and require adaptation, and america is probably in a better position to do so than in the other country. stephanie: let's get to halliburton and baker hughes

delaying the closing of the proposed $26 billion merger into the end of april. they say they simply need to satisfy government concerns. halliburton says they will sell assets to avoid antitrust issues. is this a case where you are also saying the government should stay out? sam: there is a big difference between antitrust and day-to-day regulation. majorust is focused on a competitive decision that could affect the industry. pm making a career out of this one deal, and it is probably being dramatically impacted by the fact that the assets involved are becoming worth less every day. thisnk that is part of deal, too, but it is hard to negotiate with the government. i have been involved in many antitrust scenarios. sometimes the are reasonable and logical, and other times it just say, i do not get it. david: they also have to be

getting jammed up. there are so many of these proposed mergers and they only have so many people to work on them. number three, brazil. brazil will start the new year with the they bills to pay. they go almost $38 million. borrowing costs have climbed after corruption scandal that help tip the country into recession and led to the research and joblessness. you said earlier, there are real opportunities in brazil but it is a mess and hard to see when and how it will come out. sam: there is no question that brazil is a mess, but i think you cannot lose sight of the fact that this is a country with 180 million people, it is growing, self-sufficient in water, oil, food. ands an excellent mary -- extraordinary badly managed entity, but the extraordinary

part has not changed. i am an optimist and i think this whole process will be a cleansing process. erik: that may justify equity investments in a place like brazil, but is lending money to the brazilian government, on the short-term basis, destroying good money to that? sam: i am not a big lender in money. erik: i know that. sam: i don't know lending money to the american stephanie: or present government present similar risks. valeant shares are up. toy said they had adjusted lower than previously predicted and fourth quarter blow below it than expected. the 2016 is slightly over. they will host a meeting with investors later today. labors erik schatzker's

thing numbers dancing around. all you have to do cash erik schatzker is -- erik schatzker's favorite thing, numbers dancing around. sam: make it up as you go along. stephanie: do you have a view on the drug pricing scandal? you have drug companies doing more research than anyone and they are under scrutiny because of pricing. sam: i only get involved in one clinical trial myself in a particular investment we made. it was horrible experience. stephanie: why? sam: there was no certainty. wake up every morning, another three weeks, three years, you do not know what happens and how do you plan or allocate capital? i think the r&d site is an enormous challenge and if you do not pay the companies, then they're going to eliminate rmb. valeant is an example of

somebody saying, i will show you what we can do if we do not do r&d. they produce extraordinary numbers because they are not spending it on r&d. that is my perspective, short-term view. five, this is a bit of a theme. let's look at the temperature today in new york, 51 degrees and one in chicago as well, unseasonably warm. saysational association it the arctic is warming fastest and temperatures are the highest since record-keeping began in the 1900s. the finding underscores what we heard from paris, the risk of rising sea levels and the dark consequences it may have for low-lying coastal areas, including miami and boston. i would like to know, are you factor in climate change into real estate investment decisions you are making?

sam: not really. there is some of it. i am not sure -- erik: did you buy coastal property in miami beach? sam: maybe. i fall into the group on, change that says that i do not have the certainty that the amount of other people have. that does not mean i disagree, but the level of certainty of exactly what is happening has a lack of humility or an arrogance to it that scares me. anytime there is this giant consensus. as far as i'm concerned, conventional wisdom is my greatest enemy. as an awful lot of conventional wisdom. stephanie: climate change aside, i go to miami, which many people think is the epicenter of the housing crisis six years ago.

what a tremendous comeback we have seen. is it authentic or is that town been set up to fail again? terms,think in simple the recovery on miami is directly related to brazil and venezuela and argentina, etc. without that anonymous influence after the crash, miami would not have recovered as fast as it has. stephanie: now those countries are in trouble. sam: that is correct, but not necessarily the people. i do not think they will exit. i think having a place to go looks like a good idea. stephanie: what a perfect final thought. erik: those five stories that matter to the markets now. sam zell, thank you. stephanie: i love this, it is the bloomberg quote from ray charles -- i never want to be famous. i only went to the great. are you listening, kardashians?

next, we are looking at what is moving up and down as we approach the opening bell. it is fed day and we're covering it here on bloomberg. ♪

back.: welcome i am vonnie quinn. cvs is raising the low end of next year's forecast. they also boosted the quarterly dividend by 21%. shares have gone up nearly 9% in the last months. new home construction rebounded in november. they rose more than 10% to an annual rate of almost 1.2 million. work began on stand-alone houses in eight years. 7:00,ng tomorrow at khol's will be open through christmas eve.

they will hoping that shop after "the star wars" movie. we are going to be talking oil on "bloomberg ." ♪

welcome back. i am here with stephanie ruhle and david westin and jack with two point $7 billion in assets under management. welcome. we were talking about the breaking headlines, canadian pacific presenting an enhanced offer or present want to norfolk approved byay, canadian pacific's board. this is what hunter harrison was talking to meet about the other day in florida. it is substantially the same

offer as was previously on the cash, $32.86 a share in 0.541 oh canadian pacific shares or norfolk southern. the offer is what they called the contingent value. jack, you know all about this. they're putting a floor under the deal value. more stock in the k.d., another 0.541 canadian pacific shares for norfolk southern people with a maximum value. inthere is an erosion canadian pacific shares, we will make it up to up to $25 with additional stock. jack: everyone is worried about the downside and i think we will see more of this. there are interesting possibilities of putting big companies together, but where are we? are we catching falling knives or whatever? the contingent element of let me take out some of the possibility

of downside or say there is more upside. erik: the other wrinkle is bill ackman's involvement. harrison intoter the company and sits on the board. he is dissipating in a cp conference call being held right now and he says it is clear nor folks other does not want to be acquired -- clear all forks of and does not want to be acquired. he says cable leaves it will take a proxy fight to oust members of the norfolk southern thed and turn this into kind of friendly deal that is pretty much required for regulators to approve. jack: whose decision is it? the norfolk southern board representing the shareholders? you have to do what is right by the shareholders. erik: a proxy fight would give them the opportunity to decide. jack: that is where they may end up, but i think the board --

erik: we saw bill ackman do this with valeant. is it in a holy alliance when you put an activist shareholder working in conjunction with management against the third-party target? jack: i don't think so. standard and has been with us since we have had shares. you have someone who accumulates shares or sees value and gets involved. this goes back to the days in the 1800s. it has been with us forever. we have a media that makes it a little more apparent than it has been before. i think it is a good thing. i think activists force change. activists get involved, they suggest. shareholders get involved, they hope, and private equity guys can involved and fix, so you have this sort of network. stephanie: i will bring that back.

private equity guys fix, shareholders hope, and we will talk more when we come back. ♪

stephanie: you are watching "bloomberg ." inre may be a silver lining the junk bond selloff. some investors could use it as a buying opportunity, but is it a smart strategy? let's ask bob michael. jack ripken is still with us. listen, 3rd avenue, are these the first signs that the high-yield in the credit market cracking and overall asset classes down or is this a buying opportunity? energy prices take up a huge portion of the high-yield market are taking a lead. bob: it is a sign of something,

right? it is a sign that perhaps there has been an overextension of investment credit that a lot of gotstors sold liquidity and into marketing sectors and vehicles they probably should not have. ist we have actually seen the liquidity in the market got tested. the dealers took the prices down, people who were forced to sell because they had fund reduction had to liquidate cash funds at the level, but there was little follow-through. it would be great to buy at the levels that existed two days or three days ago, but you cannot find those levels because as those trace amounts of selling have dried up, prices are back up two points to four points. erik: do you think they pass the liquidity test? now.i think for the data looks pretty good. can you imagine if the fed had raised rates in september or

october? we would be hanging this whole last week and we would have said, they pulled the liquidity rug out from under the market and this is what you get. you get the tip of the iceberg, so i think they got a gift. did congress pull the liquidity rock out with dodd-frank? >> they did pull the liquidity rug with dodd-frank, but that has been with us for a long time. erik: but the markets are not tested every day. >> why does a fund with a liquidity requirement indemnifying illiquid securities -- end up buying illiquid securities? they do thisw can six years after the financial crisis? >> liquidity equals stupidity in this case. >> quantitative easing and the money being printed. you can leave your money in cash doing nothing or you can be a

seller of liquidity and at yield to your portfolio. loanl know a rolling gathers no moss. as long as there is money in the market, then it paid well. stephanie: are these hedge fund managers making poor decisions, when they should be in cash, not a liquid high distress markets, but they are not because they want to collect that 2 and 20? there are large parts of the high-yield market that are still doing pretty well. if you look at industrial corporate america or high-yield in europe, it is performing beautifully. there are parts of the market where you want to make the investment. you cannot expect to get out the door on any given day. you have to be willing to hold it through volatility. those markets can be levered up and should have been. worth hedge fund investors

responsible for the collapse in commodity prices and energy, oil, metals? seems a little too far. when somebody comes along and says you can get high return with zero interest rates. there is an element of return. david: investors should not have done it. the idea of having a daily liquidity fund in which you have that amount of illiquid securities makes no sense. >> there are some good guys out there doing the right thing in the high-yield area. they only quit securities in what i would call the non-oil commodity area. active managers. that is where you want to be. yield, when you get to this kind of yield, there is a risk relationship. that is what we saw last week, investment in areas where people should not have gone into. now we have had a bit of a bounceback, the data is coming through.

i expect with the ecb and the fed hopefully out of the way today, things will settle that down here and and money will come back in. stephanie: outflows are going to stop? >> you certainly have seen that. a bit of a concern but now you are seeing buying trying to come into the markets and you are not seeing the inventory because there was not a lot of selling, not a lot of foreselling. any fundn't focused on high risk? >> son, but the focus on distressed debt -- and: a lot of them have ccc nine rated bonds. >> it depends on how much of the portfolio. at have to look carefully what a manager is doing before

you make a decision to go into one of these funds. i think we have gone overboard in relating this liquidity problem to a credit problem. would you agree? >> i am with you on that, i don't see a credit problem. yes, leveraging corporate america has gone up a bit and you are seeing it used to buy back shares and finance takeovers, but the economy looks ok. stress ineing some the high-yield market, but we have talked about it. it is in the fringes. to go back to your original question, i think this is a buying opportunity, if you can get the ball. that is the great mystery. -- bonds. stephanie: are you ready for when google may do next year? they are saying they will be making driverless cars at the alphabet company, in 2016.

they are officially getting in the game, making driverless cars. --y separated from alphabet excuse me, out of an alphabet company. they will be making driverless cars. that is a huge statement from google. next year? >> the question is, can they sell them, and to whom, and what will regulators have to say? guess who they are looking to challenge? not just auto companies, but uber. they want to produce a fleet of driverless cars to challenge uber. the head of business development uber is on tomorrow, so it will be great to talk about. >> everyone uses google maps. the one thing you can be sure they wille cars is

know where they are going. >> let's say you go to hawaii and you say we are going to replace all of your cars with a driverless car. you have an island, you have an area where it can work. google own a piece of uber? through google ventures. onid: we had the ceo of ford and they said they wanted to move into the uber space. stephanie: when the private is larger thaner dow and dupont, a lot of people want to get into that space. we will be covering this throughout the morning, expecting more news out of google. we are six minutes into the trading day, i have to see where at about -- alphabet is trading.

we are green across the board. basically, markets are higher but we are counting down to the fed rate hike. dow jones up about .9%. nasdaq and s&p not far behind. all of this showing that economists feel ready to take on some risk after some years of near zero rate. let's take a look at all of the s&p sectors. we can see consumer discretionary right now is in pole position, up by 1%, but it has been jockeying with health care and communications. energy is the biggest laggard, 3 of 1%. markets have been tracking oil, but apparently not today as the fed looms large. nymex crude now down after the

gains we saw on monday and tuesday, by 1.7%. we are now below the $37 threshold. we were down by nearly 2% briefly. we have a whole team looking out for this for you. treasuries, equities rising, treasuries falling. 10-year,ushing of the 2.8%. the two-year is also up. this is up by .98% right now. this is the highest since may 2010. a lot of investors pushing into treasuries right now. at's go to abigail doolittle the nasdaq where she is looking at solar companies. have solars, we names on the move after congressional leaders extended a for cap credits for renewable energy companies. the budget deal appears quite

bullish for solar, according to one person. when we take a look at first solar, it has had a great year, up 47% year to date. solar city, not so much. through the close, down 25%. a stunningly high short interest of 53%. it looks like we may have a short squeeze there, and that may take solar city hire yet. erik: thank you. that was abigail doolittle. byzil was just cut to junk fitch. talking to sam zell about the challenges it faces in congressional gridlock, investigations into petrobras. fitch says the general government debt will further in 2017, that the debt to gdp ratio

2016.ng to top 70% in the big headline is that they were cut to junk by fitch and its credit rating outlook remains stable. stephanie: sam zell said that one brazil is going to is a cleanup, but this is more than a cleanup. on a corporate and government level. the amount of people, how deep this is, it will take quite some time to get through this. erik: and when doesn't get started? -- when does it get started? growthpredicts of -.3% this year, another contraction of 2.5% in 2016. >> as they are fighting inflation. >> what is the definition of cleanup, default? that is how you get rid of the debt. everything continues to function but you know longer have

something to pay. i don't think until can do that until argentina is squared away, but once it does, that is cleanup. argentine-style restructuring. >> what is more important is what is coming out of this is sovereign debt rules are changed so that you cannot have a small group holding up access to the debt markets as well. if you have that squared away on sovereign debt, then brazil can what, you're only going to get this much on the dollar. >> i thought brazil was headed for a restructuring for a while. it may happen after the olympics. they over par wrote, over invested. either there needs to be a substantial pickup in aggregate final demand, where you see commodity and energy prices rise , and they have the revenue coming in, or they will suffer

through a lot of stagflation. they have recessionary-type conditions and still have very high inflation and a currency that is bouncing all over the place. stephanie: we have to take a quick break. continuing to look at google, announcing out of alphabet, they will be manufacturing driverless cars in 2016 with the goal of producing a fleet to take on uber. not much of a stock reaction at this point. we will continue to follow this. a quick break. ♪

david: we are back on bloomberg . google plans to make it self driving cars you did a stand-alone business under

alphabet. the reporter who broke the story is john lippert. he is with us from chicago. launched aany holding company a few weeks ago, main searchd the operation is a freestanding unit within the holding company. now we are reporting that in 2016, the company will add garlic scars as a stand-alone unit. driverless cars as a stand-alone unit. that emphasizes the importance of the driverless car within the google universe. news, autounk of reporting we had done previously, we are saying today that google wants to go into the ride for hire business like uber . you will be able to summon a

self driving car, it will pick you up, and you will be on your way. have they indicated when these would be available to consumers, as opposed to prototypes? >> we all still working on that. the freestanding unit is a step in that direction. occur reporting that will next year, but we will have to see. already getting pretty aggressive. longdy one million miles to in testing these cars in places like san francisco and austin. we think that is where they are likely to build out the uber-ty pe service first. one of the important things about this, we have all been wondering and learning about self driving cars, but the question is how somebody like google intends to make money. , a ride for hire service like uber. stephanie: can they really take

on uber? they have gotten massive but they have huge role in -- regulatory issues. is right to be disrupted. the auto industry in general is right to be disrupted. that is the way google would respond to this. 32,000 traffic deaths a year in the u.s. they say that should be radically cut down. rushing nowustry is to get into this self driving space. and it is not the traditional players, but the big silicon valley giants. google, apple, tesla. this is a big ball up in the air and everyone is grabbing -- jumping to grab a piece of it. erik: based on what you know so far, does turning driverless

cars into a stand-alone unit in alphabet signal the company's ambitions in that business, or does it reflect more the commitment, financial transparency under the new ceo? >> i would say both. you can now track more clearly what is being invested in that area, and eventually profit and loss. a statement, a symbol of their ambition. this is a big deal and they intend to be a big layer, no question about that. >> i think they will be a big player, i am surprised that they did not talk about a google truck as opposed to a car. i think that is where the real opportunity is. the new ceo is one of the best things to happen to them. he is making big differences on

transparency, structure. >> and they are investing. the great criticism of these companies over the past few years, they had this enormous cash flow, and they would warehouse it in short-term buys. it is nice to see them spending and investing in research. this is what comes of it. >> this is sort of a new drug industry, in a way. john lippert, joining us from chicago. nice story. gentlemen, you are not going anywhere. got aow's guest just little more exciting, the vp of business development at uber. he will be joining us at 8:00 a.m. sam zell said the u.s. is headed toward recession. that and other highlights from today's broadcast. ♪

david: welcome back. it is time for some of today's highlights. we have had more time to organize than the d-day landing. ready for it, we know what is supposed to happen. it yellen does not do it, she will be the least reliable person alive. carney is always accused of being an unreliable boyfriend in england. if she does not do this, she would be the same. aboutket is concerned liquidity, december 16, 11 trading days left in the year, and you have to think about the bank balance sheets, certainly not what they were before. the levered community has been aghi by the post-dr trade. >> a high probability that we

are looking at a recession in the next 12 months. i think the strong dollar is having enormous impact on u.s. production and businesses. and they are being competitively disadvantaged by an extraordinarily strong dollar. stephanie: let's get final thoughts from jack rivkin and bob michael. the economy is fine, i don't see a recession in the net 12 months. it will be slow growth. i look for accidents. just a google oklahoma earthquakes and think about that facility. oklahoma is now the leading state in earthquakes. erik: you are thinking oil storage accident. >> yes. >> if yellen and the fed get it right, and amy arkin

expectations, you will see yields and credit spreads settle down. that is a pretty good tailwind into 2016. and get itl a draghi wrong, the markets will have a lot of volatility. someone of a dovish tilt. we know what ball will be doing for the next six hours. jack rivkin, bob michelle, thank you. zell says we are going down, jack says we are ok. that does it or bloomberg . tomorrow, a huge lineup. ♪

york, it is 10:00 in new 3:00 in london, and 11:00 in hong kong. welcome to bloomberg markets.

from bloomberg world headquarters in new york, good morning, i am betty liu. here is what we're watching. fishes it in day is here, only hours away from what is expected to be the federal reserve's first rate hike in 10 years. we will break down the potential implications. investors in junk bonds have been spooked it's the collapse of the fifth third fund. awakens, this time first in australia. fans down under finally get to see one of the most anticipated movies in years, so how was it, what were the reviews? we are half an hour into the trading session and it is fit day, it is finally here.