from bloomberg world headquarters in new york, i'm betty liu. stocks are swinging to the upside. data shows the u.s. economy is chugging along, even though housing is dropping. is the santa claus at rally here to stay? bonds are poised to outperform stocks for the second year in a row. a threepeat in 2016? does carl icahn's plan to break up i -- aig the far enough? an hour to go until the market closes on this tuesday afternoon. stocks are making a pretty solid

come back. we thought we would see a meandering market. ramy: markets did shrug off activities. oil also a factor today. looking at the board, the s&p 500 up 8/10 of a percent, 9/10 of a percent. take a look at the s&p year to date. i want you to see where we started and where we are now. we are basically right where we began year to date. we are only 1% off. and you know, betty, we will have four straight years of

gains. i'm not sure if you could call that a santa claus rally. green.d be in the area youother mentioned earlier -- oil prices. commodities. -- nymex crudees is hitting a milestone. at a premium to break for the first time since january. you can see exactly -- it was at parity. brent crude was the global benchmark. reason for this is because some analysts say the possible listing of the u.s. export ban may be giving a lift also to the nymex crude while brent continues to see that continuous fall. commodities, gold

is lower despite weakness in the greenback. the dollar is down by a about a 10th of a percent there with in threehe first fall sessions after the u.s. economy grew faster than expected last order. a quick look at treasuries. treasuries falling for the first time since the fed raised interest rates in december. up two basis points up to 2.4%. betty: thank you, ramy inocencio. check first-- let's for news. mark? mark: prosecutors in nevada have charged a woman with murder, child abuse, and felony hit and run after she reportedly drove a crowd on theo las vegas strip. she is being held without bail in connection with a's crash that killed one person and

injured dozens. police say her three-year-old daughter was with her in the car, but was not hurt. the obama administration has imposed sanctions in connection with russian and ukrainian companies invading u.s. penalties. 34 people and entities were cited. americans will not be able to do business with those listed. in the u.s. assets they have are now frozen. the sanctions were established after russia's annexation of crimea last year and support for eastern ukrainian separatist spirit at least nine students have been killed and several wounded by a mortar shell that slammed into their school in northeastern syria. syrian tv says and islamic state group is responsible for the attack. the number of refugees crossing into europe this year is now over one million. the international musician for migration says the total is four times higher than last year's. seeking asylum have arrived by c.

sea. u.n. estimates the displaced population now exceeds 60 million. 2400l news powered by journalists in more than 150 bureaus around the world. i'm mark crumpton. back to you. you very much. it is that time of year that forecasters warn off what could go wrong. jim beyond go says investors will see zero returns in 2016. he offered this dismal outlook earlier today on "bloomberg ." it is the perception we will reduce stimulus even more in 2016. i don't think this trend will change. it will be even more of zero is the return for everything. will either give up on raising rates or the economy

will turn. that's probably where we will go for the next several months. betty: joining me now, chris whalen. chris -- hey, would you agree with jim here? guest: it's interesting. at the top of the hour you're talking about how the bond market outperformed stocks this year. it's interesting that the spread has really not common sense august when the chinese economy admitted it was growing slower than it was pretending -- and the yieldsu see whitening and that is a danger sign that indicates the cost of credit mediation -- yield widening and that is a danger sign that indicates the cost of it me edition -- mediation is too high. jim is a good friend, fishing buddy -- betty: but he has been constantly bearish throughout.

he has. guest: you have to admit, asset prices may continue to rise this wer in a lot of classes. have not seen a confirmation. they thought they could manipulate asset prices and .nvestors would come in betty: you say investors are facing the most uncertain period since 2008. that bad? the fed was late. they should have risen rates back when the bottom was low -- betty: they tried. the taper tantrum, right? guest: i think sometimes the fed has to ignore the stock market. they need to focus on the real

and we have all other sorts of impediments in place -- the creation of what are you seeing in 2016 question mark a correction stocks? edict: i do not pr what the stock market will do. i think there will be a revision in gdp estimates. i think the efficacy, the utility of central bank action is pretty much done. we have to move onto something else, which is debt restructuring. betty: the fed is moving on. they are raising interest rates now. yes, but we've got to get investors involved. we wrote that the italians are finally going to put in place a bad thing to take the bad assets out of their financial institutions. they can't support the economy as it is, much less growth.

we have two of knowledge the fact that by saving us from debt deflation, the fed did not do us any favors. we have to look at capacity, energy, commodities. that has increased dramatically. governments do not want to deal with it. they: that leads to question of where view go then? where are your best performing assets? what heou to hear jim, says, where you should put your money. returning as that this year is cash at 1/10 of 1%. we have data going back 80 years. for is the worst year ever an asset allocation level. there is nowhere to make money this year. betty: he's making his point, right? in europe where you have explicitly noted of rates, the answer is cash. now that the fed has moved, you will probably see the bond market rally. betty: really? guest: because people are going

to flight to quality. what are they doing? they are getting out of leveraged debt. out of high yields. you will see them try to get out of assets they picked up a year ago. reallocation of assets going on in my hope is the fed will continue to slowly raise rates to something that is normal, and then we have to get washington involved and start dealing with our own restructuring. -- betty: youthat could say that about pretty much every country in europe. guest: it's fascinating how every entity in the western world is unable to act. betty: we have been in that position for a while. guest: particularly in europe. europeans need to restructure. bege banks are not going to banks anymore. think about the mortgage market in this company. you will see all of the banks get out. the next five years -- think about that. betty: ok, is that your call --

that is your five-year call? guest: very much. you will see other changes. banks will get out of things like trading treasuries to agencies for cash. they will get out of repurchase agreements completely. what will you do if you are black stone and you need to repo your assets to increase your yields? betty: that is a pretty big -- guest: huge structural change. betty: that is a change of the entire banking industry. guest: these are the unintended consequences of all of the regulations, dodd-frank, etc. betty: all right, thanks a much. guest: happy new year. betty: much more ahead in the next 20 minutes of." -- in the next 20 minutes of "bloomberg markets." why les moonves may be getting the title.

♪

betty: welcome back to "bloomberg markets." i'm betty liu. time for the bloomberg business flash. -- is leaving pimco where he was the manager of quantitative portfolios. he will start his own portfolio firm.

after theching a week fed raised interest rates. he says his exit is unrelated to investors pulling out about half $1 trillion from the firm since 2013. of the u.s. economy expanded at a revised 2% rate in the third quarter, following a three point 9% advance in the second quarter. that number was supported by consumer spending as businesses struggled to sell to overseas customers. droppedhome sales sharply. they collapsed to a seasonally adjusted annual rate of 4.7 6 million. the weakest pace in 19 months. however sales of existing homes rise roughly 5% for the entire year. abercrombie & fitch says the head of its namesake brand that has been fired. the move eliminates a year-long

they can see -- vacancy. and that is your bloomberg business flash. much more ahead including who will succeed sumner redstone? ♪

betty: welcome back to "bloomberg markets." i'm betty liu. with the health of sumner redstone in question, there has questionsy of swirling about the giant media companies he controls. ceo lesrts that cbs moonves may take over to as

chairman. we're joined by our l.a. bloomberg news reporter chris .aul me very -- chris according to yours sources, les moonves taking over as the chairman of cbs, where does that leave others? learned,at we have where hean agreement would become the chairman of cbs. there's not a similar agreement with sleep. this creates a contentious point between the two of them after sumner passes or is unable to hold the chairman spot. ofty: do we have details what kind of agreement might be put together between shari redst one and les moonves? guest: no, we do not know the agreement.

the two sides seem to agree that it is there. can imagine there was every effort to make sure that you stick around. both he and felipe have terms in a contract that if they are not chairman when sumner is gone, they can leave and take a pretty large severance. to make sure we all understand -- essentially a deal has been struck between shari and les moonves on the cbs portion. we do not have the same deal on viacom. it is still up in the air who is going to take over. why viacom? viacom has been the weaker performer. , it waswas spun off much greater, and viacom was struggling with the loss of viewers. about whatquestions

is going forward with the relationship there. betty: what about shari? what are the relationships like there? guest: she appears to be very close to les. she is very interested in the future of media. there are indications she is not really interested in being an executive. she definitely wants to have an influence in their future. ok, chris, thank you. thank you, chris. toing on, moving back stocks, gaining for the second day. ramy inocencio is standing by with how the options market is trading. ramy: thanks so much. joining me for today's options inside, and managing director from chicago. dan, good to speak with you.

we shouldf said expect more volatility after the federal move last week. today be vexes down 8% last i checked. what do you make of that? is that short-term? guest: i think it is short-term. we will have a relief rally off the 2000 low, pushing up against resistance now in my book. it will be interesting to see if we can hold this level. marketssee some then now that the market has been able to find a home for the next couple of days and with that we are seeing volatility under pressure. vickspires on the options. options.the vix you're talking about lower highs as well as lower lows. how long do you think we will be seeing that? that is a little caveat

and that is why expect volatility to stay firm. low and this higher lower highs. we will have to see this market take-up the most recent high level toat 2090 embrace the current downtrend in the marketplace. any: ok, you are looking at energy company for your trade. what makes it attractive? what is the risk, what is the reward here? guest: basically what we have going on is we have a company that has had a lot of activity. a lot of space fundamentally in the next month, next year. we look at carl icahn. a lot of hedge funds in the space as well. also from a fundamental standpoint, this will be exporting liquefied natural gas. i'm looking at now, and

export of liquefied natural gas. the stock looks positioned well. think moving forward we will see stabilization and i think with that i expect the stock to snap back smartly. ramy: let's get to your trade. what you want to do? guest: i'm looking at march. there's a lot of options activity in march. i'm looking at the 40, 50 call spread. i think you will see push back. fundamentally, i do not think it will go much lower from a technical and a fundamental standpoint. violations look good. i like the stock bouncing back for the next quarter, pushing that 50 level and looking at this 40, 50 call spread. ramy: thanks so much. happy holidays. betty, back to you. can you become great by becoming small? we talked to analyst josh stirling who believes the

solution for aig is to sell it piece by piece. ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. to discover the best shows friends together and movies with xfinity's winter watchlist. later on, we'll conspire ♪ ♪ as we dream by the fire ♪ a beautiful sight, we're happy tonight ♪ ♪ watching in a winter watchlist land, ♪

♪ watching in a winter watchlist land! ♪ xfinity's winter watchlist. watch now with xfinity on demand- your home for the best entertainment this holiday season. betty: live from bloomberg's world headquarters here in midtown manhattan, you are watching "bloomberg markets." mark crumpton has more from our news desk. mark: 8.3 million people have signed up for obamacare, surpassing last year's total, signaling good news for hospital and health insurance companies. time last year 6.4 million people had signed up. for the families of some of the victims of the sandy brooke , severaly school

lawsuits were filed against the estate of the gunman's mother. the families of 16 people who were killed will split the funds from the estate. her son, adam, gunned down 26 graders and six adults in 2012. the man who blown the gun to the boston marathon bombers to kill a police officer has been sentenced to 17 months he has already served. he apologized, saying that his actions were "dumb." he testified during the trial of of garcon i have -- of one the bombers. he said he did not know about the plans and had no idea that the gun with the used to come in officer. global news, 24 hours per day powered by our 2400 journalists and 150 news bureaus around the world. i mark crumpton. betty: thank you, mark. the stocks trading pretty much here session highs, we are trying to accelerate going into the closing bell.

i want to get to abigail doolittle, live with us from the nasdaq. abigail: earlier stocks were theting to go higher, composite indexes back above its 200 day moving average for the full -- fourth time in two months. it may mean that even bigger swings are ahead. we are watching two of the big winners here today. one of them is whole foods, literally the top performer in the nasdaq hundred area this comes during the of very difficult 2015. more -- up more than 15%. perhaps investors think a turnaround is in play for 2016. shares are well above the consensus price target from analysts. it will be interesting to see how that tension plays out to turning to marriott -- plays

out. turning to marriott, shares are nicely higher, having their best day in nearly two months after the company said that they were resuming their stock buyback immediately. making a return to shareholders in 2015, something likely welcome by those investors with the stock down 10% year to date. betty: thank you, abigail. abigail doolittle at the nasdaq. much more ahead in the next 20 minutes. 50 can aig get rid of its designations? we will break down these questions, coming up. plus the growth in the new year from europe. from, we get a prediction hanging and walsh. coming up on "all due respect," an interview with republican presidential candidate john kasich. can the ohio and make inroads in new hampshire? a pivotal state for his campaign. ♪

betty: welcome back to "bloomberg markets." time for a look at some of the his business stories in the news right now. four is recalling more than 300,000 of its cars because the headlights might suddenly shut off. the affected models are the crown victoria and graham -- grand marquis built between 2003 and 2005. the automaker said that there were 11 crashes and one minor injury because of this problem. google, they could be the first of a self driving car on the road. the ceo will announce a partnership during the big consumer electronics show in vegas. google has had plans to get the car on the road within five years. sales trailing wall street estimates, declining revenue from brand, 1.4% to 3.4%.

earnings per share came in at $.71, moving 11% in the last 12 months. bloomberg's miss flash. aig has been under a great deal of pressure from carl icahn. just last month he said -- sent a letter to management saying that the company was too big to succeed and proposed that aig be split into three companies to accelerate cost-cutting margins. here is how peter hancock responded during the conference call. >> a separation between life and pnc. management has carefully reviewed such separation. they concluded that they did not make financial sense. of course, we will meet with him to further share our conclusions and give him the opportunity to elaborate on his views.

joining us now is josh stirling. josh has a price target of $75, outperforming aig, but in the last few weeks they put out a three part report, right? where you talk about how it is --imperative now for aig to essentially you say that they should no longer be a sissy. really big picture, whether it is carl icahn or the companies, they have to address these problems. costs are too high, they have to pay too much capital and they pay too much tax. the fed is at the root of the lot of their challenges. the regulatory environment in which aig -- of course, if you step back aig has been, after being a massive underperformer for more than a decade now, they have contracted a huge amount of regulatory burden.

leading them, of course, is the fed. betty: didn't you say that you believed compliant costs could be up to $1 billion? josh: we don't know for sure their compliance costs. this is when you triangulate around a number of different levels. thinking back to it might be up wea billion in this segment, don't know what actually drives those numbers. the important thing is that by our math, aig probably holds 20 to 30% at -- extra capital. they have hundreds if not thousands of people. a real cost burden. much more important than anything else is that while aig is trying to figure out how to run risk models to satisfy the fed, the competitors not regulated by the fed are moving ahead and focusing on customers. folks like ace.

we haven't outperforming on the stock. is run by evan greenberg. he's building the next aig. it's a fantastic empire. do you know that regulators will be knocking on their door, then? josh: if you are smart in today's world you avoid systemically inefficient derivatives. berkshire hathaway on some measures is the largest insurance company in the united states. what do you suggest exactly aig do about its immense cost structure? answer is tople sell most of the businesses. they are the strategically disadvantaged owner. most of them are fine businesses with leading market shares, good distribution and brands, but really old systems in a sprawling conglomerate and on top of that they paid too much tax at the base in the u.s. and a capital structure that is designed to satisfy the

invigorated by the fed. betty: how is your plan different from what carl icahn is describing? josh: that's a great point. mr. icon obviously brought this to ahead. betty: right. he kicked it off. maybe he might've thought about it before. betty: right. josh: we saw what he was saying about the company and we 100% agree but did not think it had gone far enough. in our view it doesn't do enough to mark the underlying value. what's valuable about aig's the businesses. if you sort of separate the companies into three separate entities you don't frankly get the opportunity to earn as much value. central to our plan is the idea that we are going to sell off their operating businesses to their competitors. people will play -- will pay a take-up premium for investors.

betty: what would be left? how much could aig get? published a column saying that aig would be worth more dead than alive. it was a bit tongue-in-cheek, but we think it's true. you wind up selling things for tens of billions of dollars, probably more than $100 billion. you have to pay a bunch of taxes and severance. if you execute this in a rational way, you would wind up selling half the company over three or four years. betty: josh, thank you for joining us on a report. josh stirling on aig. much more ahead, we are following the markets as stocks accelerate their gains, coming off from the highs. it hit just about 20 minutes ago, the major averages are having their best days since the post-fed rally.

betty: welcome back to "bloomberg markets." we are moments away from the close. stocks are rallying. they were gaining steam right until the close as we headed towards it and now we have kind of come back off again. overseas the 100 team has already rallied for two days of decline. will the bank of england have to hike sooner because of the fed? one of the many topics that we will be talking about on "what'd you miss?" we are here talking with joe weisenthal, the cohost of "what'd you miss?" in london they are on tinder to -- on tinder hooks?

joe: there was a lot of thinking that the boe would have to move before the fed. then there was talk about once the fed goes, the boe will go. now when you look at market expectations, people only see a 50% chance of one rate hike in 2016. it's definitely been pushed back a lot. no one knows when it's going to happen. basically i don't think that people think that the economy is still that strong. even betty: -- betty: even though the labor market is winning. joe: that's the surprising thing. there are some signs of wage growth, but other signs of the economy not being as good. the u.k. is much more exposed to the euro zone than we are, obviously. so yeah, it doesn't look like they will move anytime soon. protectionshe pretty all over the place in terms of when in 2016? a 50% chance by the

final meeting, that's december of next year. i think that people don't really have -- that's just how the market works out. i don't think that there is a real clear consensus of when it will go, but it is one of the big surprises. i think it was in 2014, earlier in 2014 the governor of the bank of england had given the hint that the hike might come sooner than expected. it looked like he was trying to prime the market for a hike. then of course it didn't happen and got pushed back, so that hinge wound up being completely useless. he thought it could have gone, but they are not there yet. betty: i know that next year is when the brits take to the polls, right? joe: right, at some point next year there is going to be a referendum. people in the u.k. are likely to stay, but they don't think it's a sure thing by any stretch. that adds more uncertainty. -- betty: right.

even if there was a rate hike, with that impact the economy much at all? joe: probably like here, where one rate hike in and of itself doesn't do anything. one interesting point that they bring up is that the boe stopped adding its qe program. you could make the argument that the doe hasnt way tightened earlier than the fed. weisenthalright, joe , thank you. catch "what'd you miss?" at the top of the hour. they will take you to the closing bell. some of the steam in the last 10 minutes, let's hear your predictions for 2016. president of henne and and walsh asset management, joining the team with bloomberg go this morning. kevin: we will close out with a rally, a santa claus rally. it is part of the last five

trading days in the next year. we don't think it will be as high as many are hoping for, but we do think that it will finish higher. meeting into next year it will look a lot like 2050. -- 2015. the baton will finally be passed from international markets in terms of growth potential in places like northern europe. places like japan. for the first time in the last six years we will start to see international markets outpacing domestic markets. seth: for the last five years you seen a lot of assets going into european markets for the last five years as well. i believe that the pe overall for those markets in europe is actually higher than the pe in the united states at this point. kevin: the major difference being that when you bring those

back and dollar chair -- dollar terms, looking at the footsie, the strong dollars actually hurting some of those investments. where many of the strategist like myself were looking to advocate money overseas through economic recovery, that's similar to where we were in march of 2009. >> is northern europe comparable to japan in the sense? is it equally true in japan? my sense was that i was more government intervention. they are putting their own forms of quantitative easing into place. i do harken back to march of 2009 in our country, when the federal reserve became more quantitative easing based and we were becoming lower in terms of the interest rate scale. greatly one of the most bull market runs in history. that was on "bloomberg

go" this morning. taking a look at what's happened here, just as we are getting towards the close in the last 15 minutes or so we have lost something like 50 points on the dow just like that. just kind of goes to show you how volatile these markets are and how quickly things can turn as we get towards the closing bell. rainey has more. --ramy --ram -- ramy: we are on track to lock in some games right now, but maybe not on the session highs. markets not paying attention to that 10% drop in existing u.s. home sales. energy and materials helping to lift the indexes higher. nymex crude, higher for the second day in a row. the s&p 500 is up 7/10 of 1%. the dow is up 8/10 of 1%.

as betty pointed out, the nasdaq is up by half of 1% there. take a look at the s&p year to date. first off, take a look at where we started. we are going to draw a line to where they are 1% from living into the green for the entire year. if we do, the s&p will have four straight years of games. this bloomberg terminal, is a seasonality heat map. up likehat this is lit a christmas tree. i want to show you to read blocks here. the s&p is bound for december by 2%. the last time that happened on a larger scale was back here, when it fell 6%. seven days of trading left in the year, we will be looking to see if we can actually get to the green on that. looking at oil, i want to look

at commodities right now. nymex crude hitting a milestone today, trading at a premium for the first time since january and by as much as four cents. looking right now we can see that it's coming off of that parity that we saw earlier. nymex crude is up, crude backup 21 cents.6 and some analysts are saying that the possible lifting of the u.s. export ban may have been giving a lift to -- lift to nymex crude . i also want to show you, looking over at some specific stock news, e. coli is impacting chipotle and costco. not a great thing to talk about during the holiday season when we are all looking for great meals, but chipotle is at a 17 month low after another e. coli outbreak came from the midwest. affectingere, e. coli costco, but costco has come up

because the cdc has said that the e. coli outbreak they reported is in the clear. that is how stocks and markets are wrapping up. back to you. -- betty: thank you. we are just minutes away from the close and joined now by our guru, dave wilson. tell us about the chart you are looking at today. showing you the course of the year argument. if you took the closing high versus the closing low, you are talking about a range of a little bit more than 14%. , byh sounds like a lot historical standards that sort of the narrowest ranges we have seen since world war ii. same stonewall -- sam stonewall ran all the numbers to get a sense of what happens the

following year, given this range. what he found was that years like this, the games the next year were the smallest on average and the odds of again were the lowest on average. aret's not like the markets a coiled spring, as he put it. ready to run up after a year like the one we've seen with relatively stable prices. more often than not this potential for decline. betty: did he give a reason for why that is? david: it's more looking at past performance. betty: what the data says. joe: the markets release -- david: the mark is really struggled to rise, so it stands to reason that there's something behind that. people looking into 2016 and concerned that we will reach seven years of a bull market.

it's kind of understandable that the demand for stocks might not be what it was a couple of years back. the year you would have some big swings. but not enough above the average, essentially? david: exactly. you could argue that what happened in august was magnified by the fact that if you look at the fed through august, the index is not do much of anything and in the last couple of months once we recover from the august swoon, similar story. stocks settling back into that range and that's why there has been so little volatility top to bottom on the index. did the fed rate increase or prospect of that play into any of this? what mightlays into happen next year. looking at the high or the low and you have the possibility of not much of a move in the market. and in the research they pointed out that if you look at the history of fed rate increases, not a positive sign in the sense

of volatility. but there has been much more, assuming double we got this month is the beginning of a series of great moves, you have seen more volatility. people to find that has 1% moves . like we will get 1% increases, but gradually. wherebout in the years the differential is wider? what do we read into that? when does that happen? looking back historically, it's not a perfect relationship over time. stonewall broke down the s&p 500 into like five different tiers, you might say. the most volatile with the biggest moves happened to be -- next year the ones that produced , 79% of thegains time you are talking about an average of something like 12% per year. betty: well, that's quite a

difference. thank you so much, dave. that's it for "bloomberg markets ." stocks are off the highs of the session, recurring in the next 20 minutes or so. ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. joe: we are moments away from closing bell. alex steele: and i'm alex steele. scarlet fu is off today.

♪ [clapping] rising, dataocks showing that the u.s. economy stands at a 2% growth rate driven by higher consumer spending. joe: the question is, "what'd you miss?" alix: global markets getting jumpy or with volatility jumping up in surprising ways. joe: will the bank raised rates more quickly now that the fed has hiked? we speak to mark carney about his plan for the u.k. economy. alix: more pressure on saudi arabia as oil falls further. will the gulf have to abandon it dollar peg? we begin with the overall stock market and a relative come back in the stocks. yes, we close off the highs of the session but it was pretty much a banner day. materials, consumer