>> coming up on "bloomberg best," the stories that shaped the week in business. at long last, the fed takes interest rates off. a liftoff reverberates around the world. >> it was not too hot, not too cold, just right. >> it is a tragedy, a complete joke. >> a big week in global business with some big deals going down and some numbers going up. >> we are looking at a recession in the next 12 months. scarlet: it is all next on "bloomberg best." hello, i am scarlet fu.

welcome to bloomberg best. a weekly look at the most important business news from around the world. here's a look back at the top headlines. >> just announced, high-yield credit fund lucent is shutting down. he is going to return the $900 million they got under management. just last week we heard about the distressed fund, stone lion, we heard about 3rd avenue, the mutual fund putting the gates up. what is going on in the high-yield market? >> i will start. this is something a lot of folks have predicted for a few years now. you have more of a retail base

in high yield than you used to. flows are more volatile. and so you have some price volatility and liquidity that you did not have illiquidity that you did not have an prior cycles. the volvo role and dodd-frank have affected the high-yield. >> are we mistaken when we blame this on the vocal rule or dodd-frank? >> when you buy high, you are committed to selling low. that will play out again and again and again. i think the volga role has something to do with it. every problem is accentuated because you do not have people fitting as aggressively as you had. i do not know much about this business but i know, if you are using highly illiquid assets and redemption, it is not going to

work. it seems to me they had a pretty good run, made about 50% compounded and now they give it all back. >> earlier today, the federal open market committee decided to raise the target range for the federal funds rate by one quarter percentage point, bringing it to one quarter to one half percent. this action marks the end of an extraordinary seven-year period during which the federal funds rate was held near zero, to support the recovery of the economy from the worst financial crisis and recession since the great depression. >> i think she nailed it. it was like, it was not too hot, not too cold, right down the center. just right. it was a well scripted conference. i think she nailed every answer

very well. i think some people can interpret a little dovish. i think she was right where she should be, and what she gave the market is clarity. the opportunity they missed in september while the markets were so unsettled, because we had no clarity on their actions. in this case, they really expressed exactly what they are looking for, how they are looking for it, their forecast going forward. she is going to say, we are data-dependent on the course but she gave such great clarity that i think the marketplace can be calm and can understand, looking at numbers, how the fed will operate. >> president vladimir putin at his annual news conference. he started to talk about the downing of the russian plane by turkey. he has touched on oil and the

need to have -- >> geopolitics aside, the most important thing from the press conference is his handling of a pledge he made at last year's press conference, where he said russia's recession will last two years. that means he has one more year to pull the country out of recession. today, he said that forecast was based on higher oil prices and $50 a barrel is simply too optimistic. he also talked about monetary policy. there are plenty of people in russia saying the key rate above 10% is way too high. he said no, russia's main problem this year, unlike the rest of the world it is inflation, and it is only appropriate for rates to come down when that problem has been addressed. kind of creating a little bit of wiggle room for himself, preparing russians for the idea that because of low oil prices

this recession could extend into 2017 although he did say that the worst was behind the country and the forecast is that the economy will rise a little less than 1% next year. >> pharma's bad boy, martin, a former hedge fund manager was arrested on fraud charges. this indictment unsealed today. what did we learn about what is alleged he had done? this is not related to the price hikes. >> the great irony of the story is this has nothing to do with what he is famous for, jacking up the price of life-saving drugs under some of the companies that he runs. it is essentially a web of lies and deceit.

prosecutors are alleging on how he managed a group of hedge funds, that he was running a few years ago and basically lying to investors as straight up security fraud. lying to investors on simple things like, did they have an auditor, which of course they are required to do, how much money the hedge fund had, what the returns were. >> you have this product in the eastern district. the sec also releasing an indictment. >> often in these cases, the sec will do a parallel civil complaint. their case is interesting because as it usually happens when you have fraud charges against a public company, some of his companies are public and some are private. the ones that he has worked for and founded. you cannot be a ceo of a public company and have been convicted of securities fraud under the sec rural. that does change the dynamic and i think people are looking to see how that will shift some of

the companies he is working with. it puts their future into question. scarlet: coming up, level reaction to the fed's rate increase. ♪

♪ scarlet: welcome back to "bloomberg best." the federal reserve's decision to boost interest rates raises a host of questions. fed discussion on bloomberg television kicked off with a pointed reaction from bill gross. bill gross: janet yellen today in the press conference, to me, suggested a rather hawkish stance. she is definitely thoroughly not modern millie, or thoroughly modern janet. she reflects a fed model that

emphasizes transitory as opposed to structural factors, and continues to suggest short legs in monetary policy. i think the fed basically is living in an old age as opposed to a new age, reflective of high leverage, globalization, factors in terms of demographics that are pushing down inflation. she refuses to acknowledge it. >> i want michael mckee to jump in with his sophistication, but i have got to ask you that key question. which way will the spread differential play out? is full faith and credit going to make higher yields or do we see carnage in the high-yield market? >> i think we have reached a point of stasis in the high-yield market. for the most part it is a function of retail, and retail

confidence. certainly it has been shaken of the past few days and months as high-yield prices have gone down by 5%, 10%, 15%. that is not a confidence-inducing type of and fullest but i think at the moment with high yields where they are, 500 to 600 basis point spread over treasury, they reflect a value that can hold its own with a moment. i think treasuries are attractive but they cannot be that attractive if janet yellen continues to insist that monetary policy operates with short legs, and inflation gets back to 2%. where is she in terms of what is happening in japan? where is she in terms of commodity prices on a global basis, on the influence of monetary policy on the continent of europe? to make, she is an old-fashioned central banker and she needs to modernize her and her staff's thinking.

>> do you buy the idea of for four rate increases next year or is that wildly off the mark? >> i do not, and it is significantly dependent, in janet yellen's view, on inflation. she insists that even if oil stabilizes at the current prices, inflation will go back up and there is a certain mathematical equivalent to that. commodity prices into need to go down as reflective of deflation, a global economy that basically is not doing well. to emphasize only the u.s. economy, which is only growing at 2%, is not really reflective of reality. i think next year, it is not going to be a one and done type

of move as reflected by the press conference and her attitude and philosophy, but to the extent that we have two and weight, i think this is probably what we are going to see because she will be waiting on inflation hitting 2% for a long, long time. >> which camp are you in, coming in or going out of this event? it was about time, or no, the timing is all wrong? >> i think she is all right with the timing. the september stumble looks like it was potentially a big mistake. we are off and i think the market reaction around the world this morning tells you that the markets are delighted with the way she has handled it. i think it is a massive vote of confidence in the fed. i think the markets are voting at the prices and they are saying, she is doing ok.

>> let's just put up some of the volatility metrics we have, measuring the volatility within the bond market. stocks volatility dropping by 15%. all plummeting. the question is of course, for the bond market, the volatility in the bond market, is bill gross right? janet yellen is overly concerned about inflation. and that is just -- not the issue. >> it is about looking through the windscreen or looking in the rearview mirror. i know when you look at the inflation prints it looks like it is not an issue. we see headlines, we all know because of base fx that that headline rate will move up substantially. we know the core inflation is rising. in the u.s. it is at target. if you might want to be the opposite of bill gross, what are they doing with interest rates at just a quarter to a half a

percent? they should be moving quicker. he is on one side of the argument and there is a spectrum. you would expect that. the fed's job is to go down the middle, and it seems to me that most markets with the exception of the treasury market, she is going more at the right speed. >> we got some more clarity but as we look ahead to 2016, there is still uncertainty as to when they are going to hike again and the asian markets, and implications there. >> and the greek mythology, a tragedy is a hero who destroys himself. i think the fed is about to do that because they kept interest rates next 2047 years -- next to zero for seven years. up until today, it had never existed before, such a long period of next 20 interest rates.

-- next to zero interest rates. in fact, they never existed before. now, they increased rates a quarter of a percent exactly at the time the global economy is weakening. in 2012, 2011, they could have raised rates because the global economy was expanding. commodity prices were going up. global treasury was going up. china was booming. and now everything is going down wherever you look. exports are down. what does it tell you? demand is weak. they are increasing interest rates at precisely the wrong moment. i am against monetary policies

anyway, but if you use them, you should use them wisely. the problem with this institution, the federal reserve, is that the plan is worth it, but the wrong plan is the problem, and the fed is on the wrong plan. >> if it is not the fed, what is the game changer in your eyes? >> it is obvious, before someone said this is an extraordinary error. it is extraordinary in the sense that central bankers have manipulated its interest rates lower, and the market does not believe it entirely because if you look at the lower credit, lower credit has raised in price significantly. junk bonds and interest rates are up substantially. that, the fed cannot control. number two, the asset markets are weakening already substantially. if you look at the arts market,

the bond market, the high-yield market, the physical stock in the u.s. on friday, there were 570 new 12-month lows on the new york stock exchange and even yesterday, as the s&p rose 30 points or close to 30 points, there were four times more declining issues than rising issues in terms of new lows. and so the market, inside the market is not healthy at all. all the emerging markets are way down. the global economy, as i said, is slowing down meaningfully.

this is the time miss yellen is increasing interest rates. it is a tragedy. it is a complete joke. ♪

♪ scarlet: you are watching "bloomberg best." let's look at back at some more important business stories, starting with mixed economic growth in europe. >> earlier we had eurozone p rmb i data to 53.1. beating a forecast of 52.8. let's go to hans nichols in berlin for some analysis. what sort of reaction are we seeing to these figures? >> we are not seeing a huge

reaction in part because the figures are basically in line with expectations. we see the service number coming in at 54. it is modest, tepid, monotonous growth. a year ago it was at about 51.3. overall, we will have a sub 2% growth in germany for the year. that is the best numbers we might get in the quarter eurozone but we have disappointing numbers at a france. we are ending the year similarly to how we started it. growth but not really growth. it is so low you can barely proceed it. >> hans says, we have growth but it is not explosive. that is probably asking for too much within the eurozone.

will the stimulus measure the latest batch? >> mario draghi definitely believes they will, and a slight caution to accelerate the program in early december. i think it is fair to say yes, it will be, but it will be slow growth. people have got to come to the terms that we have been through one of the deepest recessions since the first world war. you cuold argue the most we have seen in many generations. it is going to take time to recover. scarlet: front-page news in hong kong, alibaba is buying this sunday morning post for $266 million. following in the footsteps of jeff bezos. asia company news editor peter elster joins us from tokyo. why would an e-commerce company like alibaba want to buy into old media? >> alibaba has an interesting explanation for this deal. they said they see an

opportunity to combine their digital assets and digital reach with the assets of the scmp, and they think they will be able to make something out of it. they see a good opportunity. >> it is a good opportunity, they say, but certainly there are political and financial risks. >> the deal was for $266 million. this is not a big deal financially for alibaba. they have about $15 billion in acquisition so far this year. they bought their way into online video, brick and mortar retail stores. politically it is more sensitive. scmp is the highest row file

english language newspaper in greater china so there are risks on both sides. if it is now critical of the chinese government, that could create blowback for alibaba outside of china, and conversely, if the scmp is very easy on the government, it there could be blowback for alibaba. >> you have made two offers for norfolk southern, both have been rejected. where do things stand? >> little progress has been made. i think we made some breakthrough with the shareholders and i think our polling says that they are very interested in the transaction. we would love to sit down with norfolk southern. they at this point still refuse to sit down and talk with us, but i think the next 10 days is going to bring a lot of action. >> how so? >> i think we are getting to the

end of the process, which is talking. they are going to have to talk to us or we are going to have to take another taxi. >> if they refuse to engage in the conversation that you want to have, if jim squires does not get on the phone with you, the ceo of norfolk southern, what is that other tactic? >> we have done our polling, they have done their polling. i think they are of the view that if they are waiting as out, they will wait a long time. scarlet: argentina has just today scrapped currency controls. that seems rather abrupt. talk us through what needs to happen for the next couple of months for this to be a success. >> i am an impressed and pleasantly surprised by the quality of the policy measures they have announced. there are three things they need to do, they need to devalue the

currency. the question is, do they have enough reserves to handle the bond demand that will likely occur? they seem to be showing up and have generated enough reserve at this point to help. more importantly, they need to do something with those accounts, and i am also optimistic. >> one of the first countries in the world with a new film open to the public. nothing quite brings out the fans like a star wars film. it reunites the heroes from the original trilogy for the first time in 32 years. this midnight screening, the question is, what do the fans think? >> everything i expected and much more. >> it was amazing. i could not rave about it more. i am very much looking forward to the next one. >> it was great. we waited like 30 years for

this. >> 7000 sessions of "the force >> 7000 sessions of "the force awakens" scheduled opening week in australia. when it originally opened, -- some analysts questioned there wisdom. the hype is increasingly starting to reflect. scarlet: when "bloomberg best" returns, we will look at the week's best interviews. first, some of the week's best images captured by bloomberg photographers. ♪

scarlet: welcome back. the legendary real estate mogul, a former u.s. treasury secretary and presidential candidate from the republic of china. a few of the business and political leaders who spoke with bloomberg tv this week. let's listen in on the interesting conversations. >> the world bank is one of the biggest funders and green

projects. does this change anything for you? >> absolutely. the ambition was scaled up. now we are not just shooting for two degrees celsius, we are shooting for as much as 1.5 degrees celsius. we have to get much more serious everywhere we work about finding low carbon solutions. our investments in renewable energy have to go up. we have to find new ways to make deals around hydroelectric power, so i think they will be powerful economic investment opportunities for the private sector. all over the world, you see companies moving in that direction. tom: what do you need to get to the next step? to be less optimistic, do you need crises like in beijing to

drive the conversation forward? jim: there is no question that the fact that the red alert happened right during the meeting did have an impact. the other thing was the representative of the small islands. they really lead the conversation that basically said, look, this is real today. it is not something that will happen in the future. we are facing extinction. the crisis is ongoing. that is really a big part of what pushed the discussion. >> the sustainable price of $30 just won't work. from the $30, you have to take five dollars, $15 for brazil, and you are talking about an fob price of 25 dollars from australia or $50 from brazil. there is a lot of high cost reduces in that price range. so it is not sustainable. it is fantasyland at that level. >> is that what needs to happen

to wash out some supply? the prices need to go lower? >> it is what happens in every cycle. i suspect that right now, even at $39 of ton, there are people that are suffering. >> you also said it would be a lonely place if he got near $30. it is looking crowded. sam: it is crowded. there are a lot of producers who are thinking on by their fingernails. they are burning up their shareholders and that is a decision for them, not for me. >> i do recognize the political atmosphere now as not for our

party. during the past 7.5 years, they successfully put their tech on kmt. what is the problem today in taiwan, including the end the generation's, all because of the policy. we have to check this response from the younger generation or the people. >> if they were perhaps to win and take control of parliament, what would be the economic and political impact? >> kmt should do some reform. >> if they were perhaps to win and take control of parliament, what would be the economic and political impact? >> kmt should do some reform. >> inside reform should change our policy and try to get closer to the younger generation and people. that is the change we need. >> do you agree with the

assertion that china drives the debate right now? >> i think china is an extremely important factor for commodity markets. chinese demand, growth has been a large share of growth in demand for many different commodities. china, according to one calculation, laid more cement and concrete down between 2011 and 2013 then the united states did during the 20th century. that gives a sense of the magnitude of heavy investment in china. i think those days are gone. china is working to reform its economy, working to maintain growth and they may or may not succeed, but either way, they are unlikely, it seems to me, to generate growth in global demand for iron ore or oil that they once did, and i think that has important implications for those commodity markets. stephanie: we have heard criticism from early investors

saying, i cannot get out. i do not care. i would monetize myself if it was worth $20. >> if you are an investor and you want to invest in uber and you say, i want you to take my money because i am a long-term player, and they sign it and they do not need to sell, well, -- it means as long as it takes, and facebook did not go public for nine years. stephanie: is it nine years? help us understand. emil: uber is 5.5 years old. a very young company. we have a long way to go. i think travis the other date said, it is like asking a ninth grader what they are going to wear for the prom. you have time. when we are ready to go, we will go. to go just to go is actually a negative sign. we are motivated to drive the value of this company, and we

will do it for as long as it takes. stephanie: the founder is on bloomberg radio right now and says uber's only exit strategy is an ipo. is that true? emil: for us, that is what we probably want to do. >> i 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 enormous impact on u.s. production and u.s. businesses, and they are competitively this advantage by an extraordinarily strong dollar. to some extent, it is a function of we are better than other places, not necessarily good,

but better in other places. those places are not competing with us with devalued currencies. it is making it difficult for the u.s. to compete internationally. taking -- david: taking in your view, when you say there could be a recession in the next 12 months, order the things indicating that? sam: world trade is slowing, currencies continue to be manipulated, you are looking at the beginning of layoffs in multinational companies, we are still looking all over the world for demand, and tell me where the demand is. that is ultimately what is going

to move us toward growth. it is very hard to find anyplace in the world, may be other than sub-saharan africa, where there is better growth but no scale. when you look at those factors, it is hard to see where strength is going to come from, and i think weakness is going to be pervasive. scarlet: you may not like what sam zell sees, but we will stay with his predictions. coming up, and optimistic call on the price of oil. ♪

♪ scarlet: you are watching "bloomberg best." i am scarlet fu. 2015 is drawing to a close, so it is the business forecast for next year? they took time to contemplate the future. mark: what surprising events the 2016 have in store for us? >> we are going to get the pessimist guides and tina is also with us.

great to see you. john, walk us through the pessimist guide. john: what we are getting that is that the world is becoming more predictable. the rollback of rings global politics for the last 20 years sort of unravels to a certain extent. we have seen two things growing, putin's militantism in eastern europe, and some of the rules, for example, pulled the eurozone for a long time and they are unraveling. politics is becoming more important. >> that is one of the unknowns of 2016. a big concern for a lot of the people we spoke to and cyber. cyber is an interesting one. specifically, what would happen if hackers targeted the cities. >> tina, how does the oil risk tie-in to 2016? tina: i more concerned about the

oil prices and the pressure that puts on producing countries. i think we have to keep an eye on venezuela, but the pressure on regimes and the risk of a sort of relapse is one of the things on my mind. >> we should crescendo -- are we going to crescendo in the terms of the political movement? tina: that is the question. you have rising geopolitical risks on one hand and they could converge and actually become something for policymakers to deal with in the incremental piecemeal approach we have seen. stephanie: oil prices are in freefall. do you agree with that? >> i thought that was news media hype. stephanie: i like that; news media hype works for us. >> it worked in this case

because the reading of the opec meeting, where people left, not in a huff, but because they had planes to catch and they were arguing not over a number of how much oil is put in the market, but over who would be the successor to the secretary-general, and it was really miss read. there was no change at all in the dynamics of everything. david: it may not be a freefall, but it is not just iran, but iraq, venezuela, saudi arabia. it seems like no oil-producing nation has an incentive to cut back. they are just ramping up. >> i think that is the problem. they have this political uncertainty that you are suddenly seeing the list of risks and you are beginning to seek saudi arabia cropping out and it is something people are worrying about. they be premature, but it is the

worry. >> the saudi arabians are looking to for came victory. -- to proclaim victory in their battle for market share. stephanie: don't they know the walmart model does not work? when prices keep going down, you do not make more money. >> eventually it does in the oil market because you can push out other supply that cannot be produced at today's prices. they see chinese and u.s. production turning over, they see opec sliding into 2016 -- stephanie: storage costs do not matter to them? >> it matters a lot, but i think they feel justified in what they are doing and they think the market boat and 2016 at the higher price, and they are in a better position. stephanie: you do believe at the end of 2016 that prices will be significantly higher? >> i think this is the first time that i have been on a bloomberg news cast in which i am saying something bullish about the market. we think wci will be above $55. and brent at $60. because the market will balance. david: when?

>>q4. the buildup that they were talking about, it gets lower and lower, and the market is balanced. ♪ >> the fed will raise rates. i'm in that camp. for emerging markets, the fed will remain the key thing in commodity prices rebounding. >> the yuan will depreciate and then they will spend billions of dollars trying to push it back up. >> i predict asia will grow 2.1467%. >> we are watching for it to form later in the year. >> i think social media apps will take over more of your life.

>> people on mobile devices avoid bumping into one another and objects. >> people will use smartphones more to monitor health. >> i am predicting one hedge fund manager is going to get into the food truck business because it will be so difficult to make money. >> superfood things like quinoa find a home in future exchange. >> i think 2016 will be better. >> i am glass half empty right now. >> nothing much will change. >> i think the world will be a better place. they can't get any worse, can it? >> i think we will see the unrest spreading out from the middle east and the attacks will continue and we are in for a

rough ride. >> i am optimistic and a lot depends on china.

scarlet: welcome back to "bloomberg best." as we wrap up our show, let's take a look at the charts that tell the story of the week in business. >> take a look inside the bloomberg terminal to see what is going on with the s&p 500 versus high-yield credits and oil and gas. that green line is the s&p 500 and the red line is etf, exploration and producers, and the white line is the high yield fund from barclays. it has been booby relatively in

-- it has been relatively moving in tandem, but the s&p 500 has shaken it off. is it to last and are we going to see oil and high-heeled drag -- high yield drag stocks further down? scarlet: this is the spread between the 2-year and 10-year and it has been flattening in each of the five tightening cycles, so each of the red circles represent the tightening period by the federal reserve. the fed is expected to begin another round of heightening this week. look for this curve to flatten. >> is the volatility we are seeing in credit a reason for the fed to be concerned or is this what the fed is trying to accomplish, tightening policy? >> i should point out to michael's point, we are seeing

the high yield spread in different sectors, so the spread all over, not just in energy. with the fed be worried about that? >> i think they should be. there is something of a divergence between the sector in the u.s. and the economy. the fed has to manage the economy. the level of inflation, employment, and behind that, it is not an official mandate, but they have to worry about financial markets. i think the danger for the fed going forward, is if we have excess supply and numerous sectors, you could have corporate office collapsing even when the economy looks ok, so it is tricky. they should have raised a couple of years ago. >> you pointed out that five year real rates, which are nominal rates on treasuries adjusted for inflation, hit their highest level since 2010. what is the big picture? >> i love this chart because this is really just shutting the door on the zero interest rate

era. if you look at this, you can't all the way back, but going back to 2010, it was negative, now it is positive again, about .5 of 1%, and this is sort of the rate that matters to the real economy. sort of the rate by consumers borrow at after adjusting for inflation. it is kind of back into that normal territory. you could say the normalization has been accomplished at this point. it is just a really poignant sort of example of how far the fed went. joe: i like the use of pointed -- the use of poignant. you said they were dovish going into 2016. how come? >> the average dots came a lot farther down then the median dots did. in september, they were below the mean dots, which suggests you have outliers that were projecting higher rates.

this shows that janet yellen brought some of those outliers from the outside in. you still have a lot of seven dots in the new plot that only project for rate hikes next year, so this reinforces this notion that the are going to go gradually. also, the variance fell, which means the dispersion decreased, so there really seems to be this consensus gathering around the slower pace of rate hikes, which is exactly what someone like janet yellen would want going into today. scarlet: that is all for "bloomberg best" this week. you can always get more business news from around the world that bloomberg.com. i am scarlet fu. consensus gathering around the slower pace of rate hikes, which is exactly what someone like janet yellen would want going into today. scarlet: that is all for "bloomberg best" this week. you can always get more business news from around the world that bloomberg.com. i am scarlet fu.

thank you for watching bloomberg television. ♪

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