good morning, i am betty liu. this is what we're watching at this hour. a time-tested strategy at doubling down on well-known companies. secret to her success, coming up. mark farber predicting the u.s. is on the verge of recession, clashing with fed chair janet yellen's view on a recovering economy. it is the return of an endangered species. the female homebuyer is getting back into the market. the about the market, we are about a half-hour into the trading session, i want to go to the market desk where we have breaking news on consumer confidence. an index reading of 96.5. analyst hasis what

far. looking at so ar this morning we got economic data on home prices. the case schiller home price index showing an increase of war than five percent of a weathered is talking about the top 20 cities or more broadly, looking nationally. you can see the three major averages are trading higher, representing a rebound from yesterday's decline. once again in the green for the full year. we have had a lot of switching back and forth on that front. as the is nearly as high nasdaq today. seeing a switch from yesterday. betty: while prices are dominating the direction of the trade. definitely, we are seeing

more of an issue with commodities following the trade. this, 2.3%looking at today. it is helping matters. myyou look at bloomberg terminal, financials doing the best, followed by commodities. yesterday, a broad-based decline, and today a broad-based advance. natural gas is once again powering higher rate it has been on a winning streak on the outlook finally, some colder weather. the local newscasters in new york are asked addicts, they are traveling of state to find the fallen.of snow that had all of this is feeding back into some of the energy stocks as well. we looked at them yesterday declining.

not seeing huge advances in a mobil.ike exxon betty: let's check in on our first word news. >> thank you. you can call it a victory lap for the prime minister of iraq. he arrived in ramadi a day after the troops liberated it from islamic state. they say there are still pockets of islamic state forces in the city. in brussels, police arrested two people described as terrorists. movement tof a prevent attacks during the new year's celebration. russia's former finance minister is in talks with vladimir putin about returning to a senior government post. would handle the

economic crisis, according to people familiar with that discussion. he has met privately with vladimir putin and other top officials, the decision is expected soon. davidh prime minister cameron is defending the way that flood prevention is paid for. he paid a visit to the town of york that was flooded over christmas. of people were evacuated. david cameron says there is enough money for flood defenses, it must just be spent wisely. and the west african nation where ebola began is now free of the disease. nearly a fourth of the 11,000 people killed by ebola lived there. break spread after starting their two years ago. back to you.

betty: thank you. much more ahead on bloomberg television. the number one stock picker in the u.s. made it to the topic betting big on the u.s. consumer. max winkler will join us with those details.

>> you are listening to the bloomberg advantage on this tuesday. i'm carol massar here with cory johnson. we welcome everybody on bloomberg tv to bloomberg radio. the day's about economic news and the market tone as we are 37 minutes into the new training session. here with us in studio is an eloise jackson -- anna louise jackson. the town was subdued yesterday erms of equity

trading. but we had a rally start. >> we did. and it has continued into this morning. equities are higher this morning. they are of almost 1% to -- up almost 1%. we are seeing strength across the board, strength in stocks and energy. >> consumer discretionary has been your outperform or this year. we have seen that throughout the year. even with all the questions about economic growth and concern still about the labor market and wage growth, consumer discretionary, people have been making choices to spend money. exactly. i would note that the performance has slowed a little bit. this was the leader of the year, and it still is, but some of the gains have drawn

back a little bit recently. but there are still struggling attracting investment. un fact of the flood the day. everything in the market reflects the change in the year. up 8.1%. o for the bigg deal hedge funds because it means they will take a 20% gain. while the game might be small is the difference between having a lot of money to distribute -- >> i am more worried about my 401(k) than the hedge fund guy getting paid. [laughter] i am more worried about my retirement. we should talk about energy. under warmer,n an but we see a volatile trade. really moved with oil

prices, which is not all that surprising. energy stocks are on track for their worst month in more than i talked toor someone today and he said and a lot of this is due to oil prices, but because it is december people are getting out of the decisions that have not worked this year. the stock market may not know that a new year is coming next week that traders definitely know it. people are getting out of positions before the year closes. >> you can see that in the specific stocks that have not worked. you can look at an index and see what has performed over the last year and what has not. what jumps out is you have just chesapeake energy, others losing more than 7% over the year. that's really limited on the upside to a handful of stocks or we have netflix, amazon,

activision blizzard, all of over up well over 90%. >> we were talking about discretionary earlier. amazon has driven a majority of those gains. on the energy side we have seen the biggest underperformers in energy. it can go both ways. have done better because of cheaper oil prices. but if you look at the big integrated oil companies, they have had a tough year. seeing that the oil prices have gone down. you have to separate throughout the market because there are differences in terms of performance. >> it will be interesting to see if this translates into more job cuts. >> another thing we're looking at his home builders today.

it did fairly well. up about 8% so far in 2015. we did get some housing data today. home values in 20 u.s. cities rising at a faster pace in the year ending in october. we are talking about the case schiller index property values. 5.5% from october of last year. >> if there is ever an imperfect imbalance -- [laughter] in new york, san francisco, you 20%, but itme up is not mere and in every other place in the country. >> what is interesting, in that every year-over-year increase, 11% gain in san francisco, 12 city saw year-over-year climbing faster rate than in september.

you are seeing gains across the board which is tougher for the first-time homebuyer. prices continue to go higher. >> yep. [laughter] >> you can tell this is the week after a holiday. offumer confidence kicked the broadcast today. consumer confidence rebounding in the month of december. americans were out there shopping. out into say, when i was the stores, they were not overly crowded. they were more crowded the saturday after christmas. it was crazy with everyone having 50% markdowns. >> i thought it was the opposite. i was out the day after christmas, but i thought it was dead. maybe different places. >> what we are seeing is financial results, interesting. closeushed related, very to christmas. a lot of online shopping righting in the days

before christmas break and then the day after christmas might have been there second-biggest sales day of the year. an enormous amount , people flush, willing to spend. >> i know on tv they are going to play more of this interview, mark farber who publishes the gloom and doom report to speak to those at bloomberg tv. he is recommending treasury use cautions against the start of a recession. that is clashing with janet yellen who says that things are improving and they can raise rates. >>+++

important because it will determine the slope of the yield curve. it will determine how much rates will go up and when it is going to happen. the data dependency is hard to see what the number will be. >> in about 15 seconds, anything we are seeing on the market side? >> one thing i noticed, strategists are much more optimistic. >> your listening to bloomberg on radio and tv -- you are listening to bloomberg on radio and tv.

and welcome back to bloomberg markets. it is time for the bloomberg business flash. the biggest is the stories in the news right now. home prices in the u.s. are up at a faster pace in the year that ended in october. according to the case schiller index, prices in big cities were of higher than in september. we will talknts

about the return of the single female homebuyer, who is fueling some of this demand. at thetone will decide end of the week if they will meet carl icahn's bid for pep boys. they are both trying to expand their presence in the auto parts sector. the biggest loser in the s&p is chesapeake energy. the natural gas company has halted payouts, and cut one out of every six employees. businessis our flash update. in a pretty dismal stock market this year it has not been good for chesapeake, but what about the others? we have the answers in a latest bloomberg view piece.

it is the head of the fidelity retail portfolio. using an old-fashioned strategy, that is a bit of a rebuke to a lot of her swashbuckling peers. take a look inside my terminal. you can see that the closest competitor are select i.t. bio techfunds and funds. she really made it by being an old-fashioned value investor, right? >> yes. old-fashioned means painstaking research. it means looking at a lot of elements like dividends, cash flow, book value, and so on. is really, if you like the legacy, of graham and dodd when they were in columbia university as professors. they were those who gave warren

buffett much of his inspiration. it is all about research, more than anything else. she is somebody who lives and breathes her company. buy her own admission she is she with the company that follows, selects, addend avoids. betty: it is interesting because value investors look at buffets, tt, but she was not in this in the beginning. >> her story begins when she graduated columbia university. she had a degree in sociology. she was in the human resources department at goldman sachs. assigned to the 401(k) plan to th for the firm. should while she was there

should became captivated by the thinking that drives the performance of the plan. she did not have a finance degree so she goes back to columbia, gets an mba, and after getting her degree she winds up at morgan stanley, and then piper jaffray, and then really in the past decade she has been a fidelity. for 13 years or more she has been following these companies. at fidelity she follows retail at apparel and footwear. she is a veteran. betty: clearly she has honed her craft and her skills. how did she come to begin betting on u.s. consumers? isn't it something like 46 of the companies in her portfolio are dependent upon the american consumer? thisat is been a big theme year. that everyooked, part of american expansion has

been american consumer rated has not been all one way, previous expansions, where the tide lifts all boats. it has been uneven to say the least. traditional brick-and-mortar retail companies have not fared as well this time around as they have in the past, in the previous recessions. consummate value she has to pick and choose, be very selective. this year, what she did, was she focused by the middle of the year on six companies in partake miller. the top of the list is netflix, which we all know winds up -- betty: the number one stock this year, i believe. >> the number one stock. and amazon. and just to focus on those two , when she looked at netflix she said this is a company that is looking at every

kind of opportunity around the world for e-commerce and seizing the day. with amazon she sees a company that perpetual disruptor. the way she looks at it is creating an endless a.l. of limitless choices for shoppers. betty: there is no real estate to worry about. >> the lookout or your window every morning, there is an amazon truck showing up somewhere with ox is. his andfeeding t studying this. that is why those two companies are among the six that she focused on. betty: did she stay away from energy? >> yes. betty: that brought down all these elementals, right? males, right? >> she wasn't buying gas stations. [laughter] different from warren buffett thawho went

techieway from these sectors. >> there are many ways to skin a cat. admission, she is looking at things very carefully over a long span of time. she is a long-term investor. that is a characteristic of fidelity anyway. you will,opposite, if of the big short. it is the opposite of so much of the data-driven investors that focus on volatility. what she is looking at issue would say her out what is -- output is trying to find long-term value. that is why she ends up where she is. betty: you know these investors and these funds so well. i'm curious what you read into fact shethat -- the

has beat out these guys who are characters in the big short, these alpha males. i think what is most compelling about all of this is that there is a harmonic convergence is what she is doing. she is investing in companies that are also investing. she is investing in value. this is all good for the american economy. in contrast to, if you look at the past decade and what we have lived through, so much disruption, so much upheaval, so much destruction, if you will. she is the opposite of that. the opposite of that. it is focusing on things that will get stronger over time. it is going to create more jobs and add more to the american economy. course, aref responding favorably. otherwise she would not be at

the top of the pile. betty: there are some economists say with theat th fed raising rates, with gas prices falling, the american consumer will continue into next year. this you for joining me morning. you can read his entire bloomberg view: on the terminal. in the next hour, it is value ways tog, three simple in this market. you can get business news 24/7 on bloomberg radio. ♪

live from bloomberg world

headquarters in midtown manhattan, you're watching bloomberg television. i am betty liu rate let's go to desk.rket that are bett -- betty liu. let's check in with julie hyman at the markets desk. 12% afterres are down they disclosed in a filing that they are the subject of an investigation by the securities exchange commission. they say it may have to do with recent unusual market activity. a are company, they do not have any product or revenue, but they are developing treatments for alzheimer's. youou look at the chart, can see the unusual activity that they might be referring to. it couple of months ago you saw a big spike in the shares going into the release of a study it did on its alzheimer's treatment. but then they had selling before the study. the study actually set of

methods and very end point, and this year's stabilized. unclear what this is about. an eye on keeping this one. this shares are up 728% for the year to date. a pretty incredible and unusual return. and now i want to turn to a company we were talking about yesterday. the shares plunged after an antiviral medicine it was developing a political trial did -- meet the primary endpoint clinical trials did not meet the primary endpoint. the shares are bouncing back from this morning. nasdaq we talk about the biotech index. we talked about this so much earlier this year when many of these companies were reuters group because of pricing practices, because of the volatility in the shares.

the nasdaq biotech index this year, for all that volatility, for entering a bear market, and 12% this about year while the s&p 500 is little changed. go figure. betty: resilience. thank you. let's continue with the bloomberg first word news. trump tries to turn enthusiasm into votes. the republican front-runner told supporters that they want to make america great, show up at the polls. he made a get out to vote. at the start and the end of his speech. beenuestion has always whether the trump supporters will turnout on election day. near and theg

president's motorcade props quick action by the secret service. when the drone operator landed it, he is approached by agents. he said he did not know about the presidential motorcade, and no charges were filed. a police officer accused of black teenager is expected to be tried today. ensued lastests month after showing him shooting the teenager 16 times in six seconds. more protests after a jury failed to indict a white police officer for shooting a black boy. there was no way for the officers to know that the gun was not real. the family says they were disappointed by the decision, but not surprised. day,l news, 24 hours a

back to you. much more ahead. why 2016 may be the year the single female returned to the homebuying market. we will explain, coming up. ♪

>> you were listening to the bloomberg advantage on bloomberg radio. onwelcome everybody bloomberg tv. we want to talk more about the holiday retail season because our next guest says it has gone from missable to mediocre. johnson is president of customer growth partners and he joins us on the phone from connecticut. i understand it is a little snow.

it was not a problem during the holiday shopping season. that was warm, which could have been problematic for some retailers made it did let people get out there. how would you sum up the holiday shopping season? >> is started slowly, picked up, dipped in early december, and ended on a high note. overall, it was not that bad. sales, we think came in particularly, with the strong sales of the last few days before christmas, and this last week and immediately after christmas, very strong results. sales of about three port 4% we , we think.about 3.4% retailers find excuses when the quarters do not work out so good. there were a lot to pick from. but they are actually thinking it is good, nonetheless? >> not good, mediocre, fair to middling at best.

better than a sharp stick in the eye. 3.4% was a touch above are our forecast. buy itk it best did not has because of the great strength of these last few days. day after6, the christmas, the lot a saturday for the first time since 2000 nine. that was a recession year, and est december 26 ever. it was actually second-biggest day of the year. it topped by friday and was second only to the last christmas -- last saturday before christmas. >> corey and i keep talking about how consumer discretionary stocks led the way this year in equity universe. up about 10% so far in 2015. consumers have been out there shopping. who among the retail community,

you have done channel checks have seeners, you what has been going on in the malls. who have been the real winners this holiday season? >> interestingly enough, there have been a few winners. this has not been a good season at all for the apparel and the department stores in particular. but a number of different sectors that did have a good season, most notably, for the first time in over a decade of this was a great year for toys. if you are chosen us, you did ok -- if you are toys "r" us, you did ok. among nontraditional plays, home depot and lowe's, the home improvement players had a very solid holiday. still on a secular rebound with the slow-growing housing recovery. they have a lot of ground to make up. actually did quite well despite the lack of sales.

>> toys is interesting to me. what was it about toys? is star wars a part of that? >> absolutely. star wars was definitely the catalyst for the growth in the merchandise. ninth,september 8 or this was the biggest licensing demand for any property in history. it is four times what frozen was a couple of years ago. over the last decade, they have gotten every electronics item known to man. >> i would say mid 40's for men. >> the second generation, exactly right a lot of the star wars toys the kids are buying, but the parents are buying them as well. originallytar wars

on a beach in delaware. it was great, no one had heard about it. yoare all reliving our uth, . to more all going traditional toys because they are attempt out on electronics. they have every electronic note --man-to-man they are dealt known to man and they are maxed out. ,hether it is the nerf guns dolls, radio controlled vehicles, there is a big return to that. legos is huge this year. inre has been a big rebound that, and that benefits toys "r" us, and the larger toy sellers. walmart, target, and amazon. really wells done

this year, up about 25% in terms of toys. a consumer electronics, according to your data, for the first time in a few years was down year-over-year. >> it is down on a dollar basis. down about 2% year-over-year. there is that there is a huge amount of price compression, particularly in large panel tvs. driver, 55 inch tvs that goes to $2400 for the four k product of a year ago is going for $1400. .hat is a big drop in addition, people that wanted iphones, iphones are a big seller for apple. but the peak of that occurred earlier in the fall.

phone sales were good but not great. then you have another big category of holiday for consumer electronics, the videogame consoles and so forth we are between product cycles on the product. there is no ps five, no xbox tw o. some salt, yes but not the big driver. they had great unit volume, but not great dollar volume. >> that has always been the trend, as the prices come down. the numbers have made up for the decline in price. >> the level of christ riceression this year -- p compression this year, is greater than in the past. the curved screen products were just coming out, and now of course it has been a full year. in terms of the

retail strategy that will be changed in 2016? >> on line is huge, but people still like shopping in the stores. those who will do best are those who optimize both online and in the store. >> thank you so much for checking in with us. talking about the retail holiday shopping season. we will be back in a moment. ♪

betty: good morning and welcome back to bloomberg markets. it is time for the bloomberg business flash. the biggest business stories in the news right now. the rich just got a little bit poorer this year. indexerg billionaires shows that the world's wealthiest 400 people got $19 billion. billion.d $19 whole foods stores must audit its pricing method of recorder under a settlement reached with new york city. the grocery chain will pay $.5 million in a fine. city inspectors tested 80 prepackaged foods and found that customers were being overcharged almost every single time. and hedge funds are betting your morning cup of coffee are going to be cheaper. prices are headed for their six .onth loss

iny have had a lot of rain the biggest exporter, which gers brands. now look at some company movers. call is one of the top performers over here in the nasdaq. we are in full rally mode. well, is participating after they signed 3g, 4g patent agreements with a chinese electronics company as well with a chinese smart car company. patentso signed a agreement with a smart phone maker. a lot of positive news for them. one that merrill lynch recently 2016.a top pick for

other stocks on the move our video games. is a sidelines stock, but they really like activision blizzard. they think that 2016 is likely to be a good one. betty: thank you. the biggest stories in tech in the past year has been the push into cloud computing. several software giants got into the game in a big way in 2015, including microsoft. toits stock price, it seems have paid off. my next guest says splinting on-call technology is only going to ramp up in 2016. he is a senior analyst covering software for bloomberg intelligence right he joins us now with the outlook for the coming year. we are looking at software here. how much is cloud computing going to accelerate next year? >> from the results we saw in

the previous quarter, it seems that the actuation is picking up, which could continue into 2016. this is for basic structure as a service. if you want to start a new application, start a new tead ofs, ins building our infrastructure, you rented for microsoft or amazon. we will see that much more than what we have seen in 2015. that has broader ramifications for the entire industry. companies that provide legacy software, the kinds of our call, , they will benefit from the cloud in their cloud segments. e core legacy business is the software they sell, and they will have more pressure on those areas. betty: the question is how quickly can then make that i just had so it offsets those legacy business decline?

> security software is another area of growth, right? >> yes. what we think will happen of the next couple of years as what we have seen in the last few years as there are certain advanced security companies that have done fairly well in terms of growth rates. the likes of ibm and cisco, which are traditional legacy software companies will try to catch up. they will have more advanced security products of their own so they can benefit from this in advanced security spending. betty: what about consolidation? , across the see broad spectrum, whether it is cloud or security, if your niche vendors or specialization, then they are most likely going to be likered by larger vendors ibm, cisco, and some of the others. betty: analytics?

>> that is the one area that can become the most promising area from an application point of view. what we are starting to see is a votto money going into machines working with artificial intelligence. the next few years, we will see applications of that in software packages that come from companies like microsoft or salesforce.com. hen the software is outdated, you would have artificial intelligence embedded in it betty:. . betty: thank you for joining us. now to another sector that is seeing a bounce, the number of single female homebuyers steadily declined over the past three years, but 2016 may be the comeback here. rising in common among the factors that is helping single women by more homes.

we have the managing director of the survey joining us now from washington. donew you have your own research on this. tell me exactly what are the combination of factors that means that more single women are coming into the housing market . >> david: they have traditionally been only second to married couples and housing -- in the housing market. we knew that they could come back along with first-time home byers if the market improved. right now they are at elevated levels. traditionally we have seen that investors, vacation home buyers, first-time buyers, and single females have out at the same price point. betty: what is the price point, and where are they buying? >> on a national level, they are

typically buying about $169,000 homes. is on a nationwide scale. they are buying a single-family home, but many of our single females out there are buying town houses and condos. they are a median age when they purchase a home of 50. they are looking for a comfortable pace that -- place need a lott does not of upkeep. betty: so we are not talking millennials. we're talking older women. about millennials? >> millennials are purchasing at asimilar price point, and similar type of home. they are rolling competition in the market right now. but right now those investors and vacation buyers that can come in with cash will be them out. betty: are using adjustment from -- are you seeing

adjustment from the homebuilders to more of the starter home? >> i think that there is a lot of pressure for homebuilders to start building condos in that price range, and also in that type of square footage as well for all of these buyers. the story we hear over and over again is that the baby boomers are going to get into this market and compete for these they start to as downsize. that is something i am not entirely sure about. i think they may want to have their holidays at home with their family. that is something that has been talked about as well. betty: what size are we talking about? about 1500 square feet to 1600 square feet. thea single female buyer, typical square foot is 1600 square feet. betty: thank you for joining us.

very interesting. much more ahead in the next hour of bloomberg television. we sit down with legendary investor jack bogle of vanguard. we talk about value versus index. ♪

betty: welcome to bloomberg markets. ♪ ♪

from bloomberg world headquarters in new york, i'm betty liu and this is what we're watching. he is called the father of index investing after year when indexes were much flat. let's see what jack bogle has to say for next year. not soap just metals, it's been a tough year and how will these commodities do next year? was the taking oframadi a turning point in the war? ♪ we are about 90 minutes into the trading session. let's go to julie hyman. this rebound we are seeing in the market? julie: it is larger than the decline we saw yesterday. it's a significant bounce back today in the major averages. all of them are approaching 1%.

it's up the broad-based rally. usually, when you look at the ordership in a rally declines, it stays steady but there has been some bouncing around today. the top spots in right now in terms of percentage gains but it is tied with information technology. you see all green on the screen as the industry groups are up. energy is now up the least, it's given up the strength from earlier today. i mentioned technology and the big cap tech stocks are individually contributing the most. amazon is extending its already fairly spectacular gains for the year to date. apple is rebounding after what has been underperformance recently an alphabet, known as google, is up 1.5%. they are holding their own. betty: retail is getting a boost? julie: it's the more traditional

retail pit we heard craig johnson talking about this being a fairly strong holiday season. it was not necessarily strong judging by the past numbers for brick-and-mortar retailers. are buying the more traditional retailers many of whom have been beat up for the year to date. it's a bit of a rotation. consumer discretionary is still the best performing group for date energy is the worst performing group year today which is not surprising. consumer discretionary is up 10% this year. on an dig into that, individual basis, netflix and amazon have the two top spots. cablevision is near the top spot as well. it's sort of a mixture of types

of consumer discretionary. starbucks is on the list as well as nike. thank you so much. let's check in on the first word news. we go to northwestern pakistan, a suicide bombing outside a government office building has killed at least two people. more than 40 others were wounded and people have been lined up outside the building to get cards.ational identity a group linked to the taliban says it is responsible. the prime minister of iraq is celebrating a victory over the islamic state. after ited to ramadi was liberated. military officials say there are still pockets of islamic state forces in the city. the militants captured ramadi last may. police and brussels have arrested what's described as to possible terrorist planning an attack in brussels on new year's

eve. islamic state propaganda and training gear. the first of 17 detainees are said to be released from guantanamo bay next week. they will be transferred next week to other countries as part of the obama administration's plan to reduce the number of prisoners held at guantanamo. says prisoners cannot be transferred unless officials believe they will not return to terrorism. the texas teenager in the so-called affluenza drunk driving cases been arrested in mexico with his mother. ethan couches been missing for weeks and was on probation for drunk thriving and killing four people. lawyers argued that he was coddled into irresponsibility and now he could end up in prison. local news 24 hours per day all around the world. betty: thank you. don't missust ahead,

an interview with legendary index investor jack bogle of vanguard in what he calls his three simple ways. returnsct you can now get your business news 24/seven on bloomberg radio and stations in new york, boston, and washington. ♪

caro youl are listening to the bloomberg advantage. : we want to talk about visual technology because it plays a big role in some of today's biggest companies. our next guest knows them awful lot about that. he is the managing director at ldb capital and joins us on the phone along with our bloomberg contributor.

backgroundabout your and what has come across you as you play them as venture capital world. >> i'm happy to be here, thank you for the invitation. . i invest in visual technologies my kids started at 13 years old and i have been a photo editor and photo buyer and build for visual technology businesses. thing abouting visual technology which is anything that interacts in and around images and video is that i believe it's revolutionizing business and humanity. for example, autonomous driving cars would not be able to drive autonomously unless they were leveraging visual laser technology or visual imaging capture to propel the cars. another couple of examples -- computer vision

and artificial intelligence is starting to be able to analyze instead of radiologists looking at two scans of whether we have cancer, they can look at millions of scans within seconds to hopefully track cancer before it becomes a problem so we can treat it. those are a couple of examples in the world of visual technology. [no audio] i have been on our for 18 years. i had some successes and failures in one of the biggest challenges which is also exciting is you are putting 200% into one company. 24/7.

over the years, i have done that and many people have said it would be great if that could help them build their companies. what's exciting on the small style isund kind of that i am able to help a dozen ceo entrepreneurs steer their companies. when they need help, i act as a consultant because of my experience. they can call me 24/7 to work through different challenges they are dealing with. that excites me. it enables many people to reach their goals rather than just myself. you have identified a fairly limited universe of companies to invest in. how do you find these companies and what ideas are good and bad? >> just to clarify come i look at it as a horizontal across many different sectors.

others are augmented reality or virtual reality or gesture recognition or visual search and business automation. the most important thing for my expertise as an entrepreneur, the most of the thing in any company is the team and the kind of dna of an entrepreneur of never giving up in the passion. the next piece is critical which is the domain expertise. there is one company that we invested in called clarify out of new york. nyu built algorithms to automatically keyword images and video. that came out of new york university and it was clear that he has not only had the dna of a modern are but the domain expertise. people are willing to circle around him. 99 9% of the company's i look at, ipass. it's finding the diamond in the rough which is a challenge but

also extremely exciting. when i find it. you talked about how visual technologies are creating great potential, where does it hold the most potential? is it rapidly changing the way we do everything? >> i think it is the latter. it affects how we do everything. how about satellite imaging? more and more, satellites are being premier and the satellites are now able to start tracking how an economy is doing by the export and import of cars. they can count how many cars are moving and how quickly out of a port. ,r tracking agricultural trends the health of corn crops. historically, it would take 6-9 months to get manual data for the market to know about or coffee or other agricultural

crops. satellites are now starting to track that hourly. we need more satellites in the sky and that is happening. at that level, if you enable every financial analysis or day trader to have the data of satellites tracking economies, what about the growth of construction in shanghai? the ability to track different things with visual technology will revolutionize all of our daily activities, not just a selfie or watching a video or the movies you talked about. the satellite imagery is important to financial investors to see real-time economic news. as you stated, we need more satellites. there is a word i've never heard of called yogibytes.

there forrastructure financial investors to go through this much data to look at real-time port shipments? >> that's a great question. thene aspect, infrastructure is not there fully yet and that's an investment opportunity. what is unique is not that you need the storage. every day trader will not parse the data. leveraging computer visuals in humansial intelligence, look at a couple of hundred images and a computer leveraging computer vision with cloud computing and some artificial intelligence can sift through billions of images in a second. the computers are going to hopefully, it's a matter of when, not if, will deliver this kind of eyes into the data which is more than just an image.

every image has its own data so the trend is what the computer vision and artificial intelligence algorithm is unique. we will continue our conversation on radio. we will toss it back to our folks in television. the s&p 500 is up about 18 points. you are listening to bloomberg on radio and tv, stick around. ♪

betty: good morning and welcome back to bloomberg markets. it's time for the bloomberg flash. home prices in the u.s. rose at a faster pace in the year than and it in october the prices in 20 big cities were up 5.5% which is higher than september. higher demand and limited supply have helped prop up housing prices. confidence rebounded

this month. the index rose in december 2 96.5 which was well above the median forecast. jobs market and cheaper gas has boosted household finances. that put americans in the mood to shop during the holiday season. the rich got a little less rich this year according to the billionaires index. thewealthiest 400 people in world saw other net worth decline by $19 billion. that is about the amount lost by one individual, carlos slim, once the world's richest person. he has fallen to number five on the list. his company lost 25% of its market value this year. that is your bloomberg business flash update. let's go to julie hyman where she is checking on some movers and currencies. julie: as we get to the end of the year, we have talked about what will happen next year. let's look at currencies. is the function and this

looks at the models being put in place but also being put in place by the options market. we are looking at the fourth quarter of 2016 for the euro versus the dollar. the euro right now is 109. it looks like if you look at currency forecasters, that is the green bar. forecastst cluster of so very little change over the next 12 months. this curve is the options probability which pushes it out , maybe aittle further probability we could see a higher euro. nonetheless, around 1.10. things are where trading currently, let's look at the currency board. the euro is a little bit lower and that's the trend we have seen over the longer-term. the british pound is taking a hit.

we are seeing the dollar slightly higher versus the japanese yen. forward,we have looked here is the year to date, the euro is down nearly 10%. we have seen this underperformance. we have seen the outlook for the rates int -- to raise the united states even though did not happen to the end of the year. we saw that trade happening throughout the year. looking at the british pound, it is down for the year by about 5%. one that we don't look at as often is the ruvell. this is the dollar versus the ruvell - ruble. we are seeing a record level for the dollar versus the ruble. it has been a commodity currency.

betty: thank you. janet yellinmonth, issued a big vote of confidence in the u.s. economy following the historic rate hike. the publisher of the gloom and doom report sees all of this very differently. treasuriesars, u.s. are quite attractive because of my outlook for a weakening believe we are already entering a recession in the united states. betty: he also predict that stocks will fall next year. our next guest says keep your money in stocks. when it comes to investing, keep it simple. joining us now from pennsylvania is jack bogle, the founder of the vanguard group which manages more than $3 billion in global assets. it's always great to have you on

our program. before we tackle index investing and predicting returns, marc faber is not the only one calling for a recession. sam zell said the same thing. what do you make of that? >> well, they may be right, of course. nobody knows the future. i am guessing the economy will slow down a little bit. it has been doing reasonably well but i don't see large changes in the growth of our gross to mustek product. we will probably run at about 3% next year. i don't think a recession is very likely. investors have to understand that anything can happen in the economy and anything can happen in the market in the course of a year so it's better to bet on the long-term. betty: i know you are all about the long term. at where treasuries are trading now and you look at the returns you have gotten,

even if you were an index investor this year, he would have only gotten a 2% return. that seems to signal that something is wrong here. o, i don't think so, we're at a time on the general level of interest rates of nominal interest rates is very low. the general level of real interest rates after inflation adjustment is not that much below historical norms. investing,king about you are clearly a long-term index investor. reportently wrote in a that three factors that help you predict returns, starting yields, earnings growth, and speculative returns. to this formula and why is that a good predictor? >> you want to look at the source of the returns on stocks. calledrce of it

investment return which is today's dividend yield and add to that future earnings growth, whatever that may be for the next 10 years. this is not a short-term thing. 2% anddividend yield is possible earnings growth five or 6% in the next 10 years, we could have a return of 67%. then we have speculative return. investors can change their ideas about the valuations of stock. now, stocks are selling 22 times earnings. if there was a drop to 17 or 18 times earnings come you take that 7% return down to maybe 4% or less. know what will happen there. there is a tendency for all of these things to revert to the mean. p/e's are above average, they will revert to the average after

a certain time. modest returns in the next 10 years could be coming up. betty: what is the case for index investing? you would have gotten a measly return this year. >> in a way, you are right. the index is around 2% adjusting for dividends but the average equity fund, the actively managed equity funds, is down about 5%. that's a 7% gap in favor of the index fund. i don't to know what people want more than that. small-cap and mid-cap stocks have not performed as well as large-cap stocks. that's why the index is weighted heavily toward large-scale -- large-cap stocks. the gap was about the same as that before. that was a 14% gain for stocks in a 7% gain for the average

equity fund. with small caps and mid-cap not performing well. another similarity between the two years is the international stocks of done badly off of the 5% this year and 5% last year. the index is the best alternative. no unlike to brag about relative performance. of investing is that the investor earns his or her share of whatever returns the markets are kind enough to deliver. warm enough to take away from it. betty: i want to stay with you but stay with us for a moment because we will be back. ♪

betty: welcome back. let's get more with jack bogle who is founder of the vanguard group. you and i have talked about this before.

i know you are not crazy about the rise of etf's but we have seen the trading and the volume of them increase even into this year. etf'sou come around to being a form of index investing? best we can tell, most of the trading is done by institutions trading back and forth in a standard and poor that trade is around $30 billion per day. it is a manipulative trading vehicle, sometimes hedging and sometimes used for speculation. it is an institution. you get to the individual share of the market, by my calculation, about 40%, probably 10% of that 40% is a relatively long-term mutual funin