♪ from bloomberg world headquarters in new york, good afternoon. are we headed for gloomy economic times next year? why the author of the gloom, from, and doom report says the u.s. is at the start of a recession and stocks will tumble. it's no secret the future of advertising lies in digital. digital voice to overtake television, that amounts to almost $70 billion. which companies stand to benefit the most? will we see more consolidation in the new year? we will look at which companies may be doing the buying or may be sold. let's go over to the markets desk and julie hyman. we see things recovering a little bit. are seeing a

broad-based advance in today's session and all the major averages are trading higher. discretionary stocks led the games today and some of the energy stocks up and coming back as well. are seeing consol energy and chesapeake energy and transocean which fell yesterday coming back in today's energy -- in today's trading. these are some of the worst performers this year. iran a ranked returns number so chesapeake energy is the worst-performing stock this year, falling 79%. sometimes you see this rotation and to some of the worst performers at years end. happens as weat get into it to 16th in scarlet: what about oil itself? so much of the rally has been driven by the direction of oil. julie: oil is up today so that

helps explain what's going on in stocks. it looks like the outlook for stockpiles in the u.s. on a weekly basis is for them to have fallen for a second straight week. the government is at with numbers tomorrow but we tend to see movement in the oil ahead of that so the drawdown in inventories is perceived to draw that down and is causing a pump up and oil. the increase in oil is not coming at the same time the dollars down. the dollar is up today by 4/10 of 1%. hedge funds have in this their tour positions against the british currency. we are seeing the dollar index up 4/10 of 1%. scarlet: thank you so much. we want to check in on first word news. the u.s. says one of the terror group operatives with

close ties to the paris attacks has been killed in the iraqi city of mosul where he was of the groups external operations. a u.s. army spokesman says the militant was among 10 islamic state leaders to die in the past month. . in brussels, police arrested two people described as suspected terrorists seizing military training gear and islamic state propaganda that was privy effort to prevent terror attacks and belgium during new year's celebrations. the chicago police officer accused of killing a black teenager has pleaded not guilty. he was arraigned on charges of murder and misconduct. protests broke out after the release a video showing the police officer shooting the teenager 16 times. there is movement out of guantanamo bay present, the first of 17 detainees will be transferred to other countries next week. as part of the plan to reduce the number of prisoners held at the controversial dissension center.

. 90 detailed he's will still be left at guantanamo. another day of frustration for air passengers with winter weather causing delays and cancellations in chicago and new york city. a tracking services carriers have scrubbed more than 1000 u.s. flights today. was hit hardirport with 228 cancellations. global news 24 hours per day. scarlet: thank you. we've got much more coming up on bloomberg markets. in the next 20 minutes, is the u.s. already in recession? janet yellin raised interest rates but there is a debate about whether she do the right thing. marc faber says yes p.r.. find out why he thinks global stocks could have a rough 2016. speaking of equities, jack bogle sees the economy slowing a bit but sees modest returns over the next decade. we will hear his comments coming up.

the drug's war is on in india and find out what companies lashing the price of a drug that fights hepatitis c. ♪

scarlet: welcome back to bloomberg markets. appeared with us yesterday and we asked him where he thought u.s. interest rates are headed. the u.s. willnk continue to increase interest rates. weakness inen the the global economy, and the

deceleration of growth in the u.s., i would imagine that by next year, the fed will cut rates once again and launchqe4. i don't think rates will go up a lot and i would like to mention that basically, u.s. treasuries in 2015 did not form particularly well but they did because the money bond market, the government bond market, was relatively steady. you had a total return that was actually satisfactory particularly if you measure it in euro terms. let's look ahead to what investors should look for in 2016. where should investors place their money? day just read the other

that there was not one strategy negative about the stock market next year. i think the u.s. stock market will go down in 2016. treasuriesyear u.s. are quite attractive because of my outlook for weakening economy and i believe we already entering a recession in the united states. emerging markets, as you know, have underperformed grossly since 2011. i think it may still be slightly premature to make a major commitment into emerging markets. but they are moving into a buying range. in thereal estate countryside and trickle, spain, italy and indochina.

is essentially a vietnam, cambodia and, myanmar, thailand and i think the vietnamese stock market is very as the economy continues to perform exceedingly well. >> you called out the persistent barron's. o stock markets usually go up every year and occasionally of stocks go down, isn't general optimism the right way to think about things? >> i think the right way to think about any investment is to think realistically. equities are, u.s. expensive. is high and the market this year has not harmed well in the typical stock. it has been driven by a few

shares. things like facebook and netflix and amazon and google were particularly strong but the medium stocks did not perform well. scarlet: that was mark faber. he was skype being in from thailand. joe weisenthal joins us what he had to say about his outlook for 2015. note surprise he is pessimistic. as long as i have been aware of mark faber, he has warned of calamity and the fed losing control of everything. i loved his call where he said you should buy rural real estate in spain and italy and juggle and parts of asia. in 2009 during the said to the crisis, he

buy land where the bombs will not fall. scarlet: i would love to see how much can food he has stocked up. >> we should do that, we should see what his compound looks like hi=. scarlet: he has been bearish on equities which is no secret. seasonablyt a chart and you look at the s&p over last few years. the blue line is the year to date in we are much flat right now to in 2014, the green line rose 11%. in 2013, the yellow line rose 30%. in 2012, the blue line had a 13% gain. when all is said and done the recent past, stocks have been doing fairly well. betterage, stocks to

than bonds. that if you ask economists and strategist what will happen next year, they rarely predict their markets and rarely predict recessions. that's because, by and large, markets go up and economies don't fall into recession. it happens but the flipside of always being negative tends not to go very well unless it's a specific thing. it's hard to make money if you are always negative. scarlet: we also looked back at some of his calls. four years ago, he called long-term u.s. bonds a suicidal investment. the 30 year treasury has returned 8.7% per year. that did not work out. >> i remember right after the crisis when the fed was doing a lot of qe and the deficit was high, everybody thought the dollar would be worth as much as

toilet paper and long-term interest rates will surge. that narrative has been thoroughly discredited. now people have flipped the other way or they said the there will not be any growth. that's what the doomsayers who hated u.s. treasuries several years ago an are now fairly bullish on them and rates will go down. scarlet: you can find this on , thisoomberg terminal shows the economic forecast for each country. forecast toyield is rise to 2.8% by the end of 2016. % in supposed to hit 2.28 2015. >> it's always said that bond strategists are pessimistic. the 16 is no

exception and people are forecasting a year with longer-term interest rates will rise. much forthank you so joining us. later on, we got a full line of guests. we will have rates and currencies and oil and we will talk about it all. scarlet: in the meantime, still i had, find out what jack bogle thinks about the u.s. economy and investment returns in the coming year. ♪

scarlet: it is time for the bloomberg business flash. job cuts are on the way a dupont. the chemical company says it will cut 1700 jobs in delaware where it is headquartered. to merge the dow chemical earlier this month and they will eventually be broken up into the quickly to businesses. consumer confidence rebounded month.

the index rose in december to 96.5 which is well above the median forecast. a strong jobs are -- jobs market and cheap gas prices have boosted household finances that but americans in the mood to shop during the holidays. home prices in the u.s. rose at a faster pace than the year that ended in october. according to the case schiller index, prices in 20 cities were up 5.5% in a slightly higher than september. higher demand and limited supply have helped prop up home prices. that is your business flash update. let's go to julie hyman where we can check in a company mover that carl icahn is moved -- is involved on the julie: carl icahn has opted's offer on pep boys. it's up 8% and kauai, raised his company the -- for the

to 1850. it's trading at 1880 and bridgestone has a competing bid of $17 so it looks like there's speculation that the bid could go higher. looking at the one-month chart of the company, as this activity has heated up, the flags qc are flagsent headlines -- the you see are different headlines. passed --n a bit he it has been a busy past 30 days s and they have had a strong performance, up 91.5%. even though it has acquisition offers, autozone has done well this year. auto parts retailers are up 20% generally. nonetheless, a strong return come outperforming the market. riley automotive has performed well this year.

boys p/e is much higher than that of competitors. pep boys andis orange in the automotive retailers and blue. you see the forward p/e based on estimated earnings at around 19. e boys, that number isp 88. whether its bridgestone or carl icahn, either one will pay a premium compared to some of these other auto parts retailers. scarlet: that is a massive disconnect. carl icahn would usually be on the other side of that. thank you so much. jack bogle, the founder of the spoke with betty

liu earlier today. his production for 2016 and his three factors for predicting returns. >> nobody knows the future. i'm guessing that the economy will slow a little bit. it has been doing reasonably well. i don't see large changes in the growth domestic and -- and the growth of gross domestic product. we will probably run about 3% next year and i don't think a recession is likely. investors have to understand that anything can happen in the economy and anything in happen in the markets in the course of the year. it's better to bet on the long-term. betty: i know you're all about the long-term. if you look at where treasuries are trading right now and you look at the returns you have gotten, even if you work and index investor this year, he would've only gotten a 2% return. that seems to signal that something is wrong here. >> no, i don't think it's a

signal, we are at a time of the general level of interest rates, nominal interest rates, is very low. the general level of real interest rates is not that much below historical norms. investing,king about you are clearly a long-term index investor. you recently wrote in a report three factors that help you pick returns. you talk about looking at starting yield, earnings growth, and speculative returns. how did you come to this formula? why is that a good predictor of returns on an asset? theou want to look at source of the returns on stocks. i call it investment returns 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.

the dividend yield is 2% and possible earnings growth possibly at five or 6% in the next 10 years. we could have a return of 67%. then we have speculative return. about this.s talked investors can change their ideas about the valuations of stock. right now, stocks are selling around 22 times earnings. 18, youwere to drop to take the 7% return down to maybe 4% or less. we don't 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 are likely to revert to the average over a period of time. modest returns in the next 10 years. scarlet: that was jack bogle talking about index investing.

there is a controversy over outrageously priced drugs in the u.s. that began to years ago when gilead listed a miracle to treat hepatitis c for $1000 per pill. the company is taking a different approach in india. tell us what's going on in india? there is a long history that goes back to a lot of other drugs. that causedhis drug a massive outrage when they said it would cost thousand dollars in the u.s. in india, that's more than many of those people make in one year. to license with some indian generic manufacturers for selling this for around $4.29 . furtherected to fall it's an interesting dynamic

where you have these huge disparities in pricing beat rich, wealthy nations in the west like the u.s. and for developing countries like india or the burden of disease is exceptionally high and there is no way they can afford these medications. -- 11 indianvy and companies are making generic versions of this. >> it's a classic example of what happens in a generic marketplace. we see this in the u.s. and we get generic drugs. you see medicines that cost thousands of dollars that really only cost is to produce. when a number of generic makers come o it becomes a commodity. it's a fascinating dynamic in the pharmaceutical industry. scarlet: the contrast is mind-boggling. give us an update on valium.

the ceo has been hospitalized. do we know anything more? where waiting to hear where he is hospitalized and what his condition he is in and the stock fell 10% yesterday in investors want to know when the type who was the architect of the strategy going to be back helping turn the company around. scarlet: when there's an update, let us know and valium to is down by 1.5%. good 2016 be the year when digital advertising spending passes additional tv spending? we will have the analysis next. ♪

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scarlet: live from bloomberg world headquarters in midtown manhattan come you are watching bloomberg television. let's start with the first word

news. we've got more now from the news desk. : first, we had to iraq and the country wants to use its latest victory in islamic state to crash the terror group. the cityptured yesterday but there are still pockets of islamic state fighters holed up in the city. is toay their next goal recapture basel, which islamic state captured in 2014. and investor favorite -- that's according to people familiar with the discussion. he has met privately with vladimir putin another top officials. a final decision could come early next year. in cleveland, protesters took to the street after a grand jury declined to indict a white shooting acer after

black boy. the district attorney said there was no way for the officer to know that gun was not real. global news 24 hours a day powered by our 2400 journalists in more than 100 the newsrooms around the world. scarlet: digital advertising is starting to grow faster than print ads and set to surpass tv ads. a senior analyst for consumer electronics at bloomberg intelligence joins us to discuss this issue further. when you look at the big players, alphabet and facebook dominate. they make up half of the pie? mostly mobile advertising. the fundamental group continues to be strong and is driven by social media and digital ads. what is driving this growth, it is mobile. for the next couple of years,

mobile will be at the center stage of this growth. scarlet: is it mobile search or mobile apps? guest: this is an important point because it is shifting toward an app advertising. three fourths of mobile spending -- will happen in app advertising. might blocker concerns accelerate the shift toward in app advertising. if you go to google.com, they are pitching apps on their main page so they can increase app usage. talk about ad blocking a little bit. it is more pronounced in germany than the united states. what can we learn about what options companies have in the u.s.? guest: you have smaller publishers who are more dependent on web browsers.

80%.than toward inee a shift app publishers. what you might see is other --lishers might have two [inaudible] facebook and google have captured so much market share, where does that leave the likes of twitter and yahoo!? at the marketlook share, half the market is owned by google and facebook. it is ongoing, but the market the 2% oryahoo! is in

3% range and is not moving as much because of concerns of user growth. those concerns might continue next year. scarlet: thank you for your perspective. we will have another look ahead to the media industry and what's ahead for 2016 at the end of the hour. still ahead, the outlook for small stocks in 2016. ♪

carol: you are listening to the bloomberg advantage. my cohost, cory johnson, is in san francisco. to talk about the economic environment and market environment. my next guest says there's a belief in a false recess to -- false recession. phone.s us on the

mark farber told bloomberg tv he recommendsthat treasuries and says the u.s. is at the start of an economic recession. what is this also recession you are talking about? kevin: i'm a big fan of the show. i have been listening since you started earlier this year and it's great to be with you. i'm a value investor so we have to have some view of the economy to make estimates about earnings and sales. monthe oil drop over a 12 time, it causes the industry to stop investing. slowdown. to a big the last time i checked, nobody wants a barrel of oil in their house. so it is an intermediate good which should be good for everything we buy.

we should see a big improvement in costs over the next 12 months , which i don't think people are really thinking about. given what is happening in oil and china and inventories getting out of line, that makes perfect sense. if you look at consumer expectations, things look pretty good. the bear case is overstated right now. cory: if we are going to see falling prices on products, you will see falling revenues and it might be nice for the consumer on the margin but not great for the companies. we are not really seeing inflation as measured by the fed. kevin: it will be good for half the companies.

it is the half that could raise prices ahead of the other folks. if you are in a situation with something unique and proprietary, you can raise prices ahead of the costs rising and that will keep you ahead of the curve. , we have been in a 10 year decline in interest rates that have helped growth stocks versus value. the future earnings at a discount helps growth companies but as we turn the corner, rates rising is good for value and companies with proprietary value that can get price ahead of their vendors. heart of the market do you like to play and invest in? small caps are down more than 4%.

what area of the market do you find the most opportunity for investors? kevin: we like small-cap because the number of analysts looking for information in that sector is lower, so we have a better chance of looking at information that is not yet filed into the stocks. we find the use of proprietary knowledge to be an advantage. hasttedly, value underperformed this year. you have rising interest rates a year where growth industries outperformed value, which is quite unusual. the history of value investing is put off in an academic study at the talk business school.

we limited to small-cap value where you can find an edge in the market. you mentioned the names but value is in the eye of the beholder. asin: we think of ourselves craftsmen. it is an art, not a science. so you have pioneers of value investing and we are practitioners trying to use the tools they created years ago. , the screensevel we use are meant to get an inbox of things to work by hand. is enterprisee value to sales or price to sales. i will put a filter on there that requires a decent balance sheet.

we are looking at things that might not be realized for a few years, so you have to have the financial strength to hold up for that long. enterprise values to sales is a good screen tool. get 20 or 30 names and go through them by hand. you are digging in and we tend to do 10 year models on every stock. but from a high level, that is a great screen. carol: how much money do you have in cash right now? asin: we view ourselves small-cap value investors. people are allocating to cash somewhere else. that haveith names great returns and we are basically stock pickers.

cory: when i was doing small-cap, i would like to do one or two on that. kevin: if you have one or two guys following a stock, -- cory: they also have 25 other names on their plate. kevin: our primary coverage is two or three at the most. we have about a quarter of our names with no coverage. it does take a while for that to percolate into the stock market. we go when knowing we are going

to have to have some patients. you anticipating better opportunities because you will see pressure on equities or no? kevin: there's a ton of opportunity because manufacturing has come under pressure, so there are a lot of great names that are cheaper than normal. tool: you are listening bloomberg and watching bloomberg. ♪

scarlet: you are watching bloomberg. i'm scarlet fu. the ceo of ups says u.s. exports did not pick up as much as he had hoped for. toshiba is seeking a of credit after the struggling company forecast record losses. 's net worth saw the biggest drop on the bloomberg billionaire index. we are breaking down how much the wealthiest lost in 2015. ceo of ups.with the speaking on bloomberg, he gave his outlook for the busy fourth and what is dragging down u.s. exports. guest: u.s. exports, with the dollar the weight is now, we did not see the number of u.s. exports we would like to have seen. toshiba is asking for a credit line to pay for reforms.

costsmpany faces mounting from an accounting scandal that led to job cuts and asset scales -- asset sales. the odds may be stacked against the british pound heading into 2016. the potential for a referendum in the eu has options traders the most bearish on the pound in six months. the currency undershot analyst forecasts by the most since 2010. and the rich got a little poorer this year. the wealthiest 400 people in the world saw their net worth decline by $19 billion, almost the amount lost by carlos slim, who was once the world's richest person. he has fallen to number five on the list. quickow for our bloomberg take where we provide context and background on issues of interest. today's topic is puerto rico's financial mismanagement.

the country has tumbled over a fiscal cliff but reasons and solutions are far from cut and dry. for a small island, puerto rico has giant debt, totally $70 billion. it companies downgraded the debt and the government turned to hedge funds to lend it money. agree puerto rico will default a year. it could happen as early as january 1, but there's a glimmer of hope. puerto rico's electric utility reached an agreement to restructure $8.2 billion of debt. puerto rico has population and economy is small compared to has states, but the island taken on more debt than any state government except california and new york. puerto rico did not do this on its own. to puertoof flocked rico creating new bonds after the island adopted the sales tax. thanks raked in hundreds of millions of dollars in fees.

banks raked in hundreds of millions of dollars. a special tax break was arranged for puerto rico ensigns since 2006, the economy has contracted every year except for one. resulted withhas the population shrinking and heading toward a 100 year low by 2050. because rico is a non-incorporated territory, it cannot declare bankruptcy. the one chance it has to sort out its problems is making its case before the supreme court -- critics say serious austerity measures must be taken. for more stories, visit bloomberg.com. let's go now to abigail doolittle who has the latest on

tesla. abigail: tesla is trading higher on positive comments from an analyst who said tesla likely delivered more than 18,300 units betweenourth quarter 17000 and 19,000 units. if the company turns cash flow could hold the key for a stock that has done very little for investors in 2015. turning to another pocket of strength, we have big internet companies trading higher -- amazon, netflix and google are top performers this year. three of these names are up more 50%, outperforming the

composite index. a record-breaking holiday season -- could be more momentum buying right into 2016. scarlet: abigail doolittle reporting live from the nasdaq. year fora tumultuous media. bringing record m&a for media. netflix and sling tv grabbed an ever growing share of users. here to talk about the media landscape is an analyst for bloomberg intelligence. what we are talking about his massive structural changes, not cyclical changes. 2015 was the defining year when we finally got to see some cracks and what was once an impenetrable tb bundle. we have been seeing and in the

have seenrket and we advertising and affiliate fees and advertising has been under attack for many quarters but affiliate fees, which is about a $55 billion industry, for the first time really came under attack. scarlet: what is the value of those retransmission fees? it is $55 billion paid out every year by the pay-tv operators to the disney's and viacom's. it's a very high revenue stream. when we saw was comments come out, it really spooked investors. all these changes sweeping across the media

landscape, we are not surprised by this advent of core cutting. for the longest time, was theree not sure, all this hype or was it for real? has was a defining era, it telegraphed it really well. disney and its peers -- the question is going into 2016, arguing to see a fast unraveling or will it the a slow bleed? we think it will be a slower bleed and slower subscriber declines, but probably at a slower pace. scarlet: do we see that in the skinny bundle? with dish andthis sling tv -- the rise of the

skinny many bundles targeting the price-sensitive customer, being able to go out and offer that product. on the flip side, we see that leads to subscriber decline. scarlet: do you think we will get to true a la carte television? guest: we all talk about alec hart television as this big unicorn but people are going to realize when they go out and buy all of these networks piecemeal, it's not going to save them money. it's more economic to stick with the bundles and they will come to realize that. the tv bundle and triple play the phone service which nobody uses it might be the most economical option. scarlet: which companies are best positioned for these structural changes?

john malone has been doing a lot of wheeling and dealing. guest: john malone has been very toceptive when it comes foreseeing the media landscape. he has been a big advocate of cable consolidation. that will make them the second-largest cable operator. , what are we going to see on the content side? we might see some big deals there. scarlet: thank you so much. , we will talk to the executive director of the new york city ballet about the nutcracker. ♪ . .

scarlet: it is 1:00 in new york, 6:00 in london, and 2:00 a.m. in hong kong. welcome to "bloomberg markets." ♪

from bloomberg world headquarters in new york, i am scarlet fu. good afternoon. here's what we are watching. u.s. stocks swinging to the u.s. feels a global rebound. the future of the housing market -- with prices rising in hot markets like denver, homebuilders are trying to cash in with communities designed for first-time homebuyers. the ceo of ups said they delivered 90% of christmas packages on time, but he sees softness in the economy. our interview is coming up. first, julie hyman has the latest from the markets desk. s&p 500 positive, but just barely. for the year, i should say. julie: up 0.75% on the year. we have lower volume, something

we have been talking about, not surprising on this holiday week, about 40% below the moving average. fairly positive for the year, but it looks like we see strength heading into the end of the year, at least for today. bouncing back from yesterday's declines, which ended up being quite small. now gaining and then some today, all three major averages up around 1%. just as we saw oil fall yesterday, oil is rising today along with stocks. risk appetite coming back a little bit today, with oil rising 2.5%. we have the government inventory data coming out tomorrow, and analysts estimate that for the second straight week we will see a drawdown in inventory, so any sign, any glimmer of lower supply in the market has tended to give a lift to oil prices. -- evenay, even the oil as oil is higher, the dollar is higher, too. you usually see an inverse correlation, but today both are

going up, the dollar versus a basket of currencies, up 0.3% and continuing the care it has been on all year -- tear it has been on all year. scarlet: are rates moving in the same direction? julie: despite mark saying it is time to buy treasuries, we are not necessarily sing that happened today. yields are moving higher as people sell treasuries. 2.28% is where we are on the 10-year note. a five-year auction is going on. i am seeing the results. we have been seeing, in addition to that, some reaction to the auction already, or anticipation of the auction in the market here. abid to cover ratio of 2.5, little lower demand. drying 1.758% in that auction. a quick check on gold as well, while we are talking about where money is flowing today. flowing mostly out of gold.

earlier we saw gains, and now gold is little changed. scarlet: julie hyman, thanks for setting that up with us -- for us. let's check in on bloomberg first word news. ramy inocencio has the headlines. ramy: the u.s. says one of the islamic state's operatives with close ties to the pairs of tax was killed in the iraqi city of -- paris attacks was killed in the iraqi city of mosul. the spokesman says the militant was among 10 islamic state leaders to die in the last month. --tish prime mr. cameron is prime minister david cameron is defending the way flood protection is paid for. he visited one of the cities flooded over christmas. he deployed the military after thousands were evacuated. he says there's enough money for flood defenses, but the key is to make sure it is spent wisely.

a drone floating near the president's motorcade responded quick -- provoked quick response by the secret service. the drone's operator landed it as he was approached by agents. the man said he did not know about the presidential motorcade. no charges were filed. former president bill clinton is hitting the campaign trail for his wife, hillary clinton. stump in new -- hampshire, about a month before the february 9th primary. global news 24 hours a day, powered by 2400 journalists in more than 150 news bureaus around the world. scarlet: thank you so much. coming up in the next 20 minutes -- are millennials the key to sustain growth in housing? how builders are helping some lockout due to high prices. and the head of the new york city ballet will tell us why consumers are spending some of

their discretionary income on the arts. while fedex. with delivery delays -- dealt with delivery delays, ups says they delivered 90% of packages on time. what did they learn from a rough christmas two years ago? those stories and much more, coming up on bluebird television. stay right here. ♪ -- bloomberg television. stay right here. ♪

carroll: you are listening to the "bloomberg advantage." carol massar in new york, and cory johnson in san francisco. we want to talk a little bit about the homebuilding community, and what they are doing to attract millennials. real estateg reporter joins us from the boston bureau. a really cool story, a bloomberg exclusive -- talk to us about what homebuilders are doing, in

terms of going after millennials? now,r quite some time builders have been moving away from, the starter homes that millennials might be able to afford, going to the more expensive homes where the profit margins are greater. some costs have been going up, too, so materials and land costs are higher, and they were going land was moree expensive, where they could actually justify those homes. manythere's only so move-up homes you can build, so some of them are starting to get back to the starter homes, and they are finding success. corey: it's really interesting. it looks like some economic forecasting. the high end of the market is where the most profits are, but you see homebuilders putting significant record sources -- significant resources towards these lower-end homes.

prashant: it started with a couple builders. look at the lgi stock. it's the best-performing stock of all homebuilders. they focus just on starter homes. in theon, a real giant ndustry, has an expresse brand they introduced, and they are looking at that in all 79 markets. carol: you talk about the d.r. homes.brand and lgi d.r. horton, this has become a big chunk of their revenues, these homes that are built targeting millennials, first-time homebuyers? 14% oft: d.r. horton, the revenue is the starter homes. corey: which is huge, when you think that there's a lower average selling price. it is a bigger part of the houses. prashant: it is 21% of sales.

pretty big. they see this as a growth area. right now, they have it in about 40-something markets, and they will expand to almost 79. so obviously they are doing very well with it, and i think other builders have been watching to see how well they did, because they were sort of one of the first out of the gate. i think this is going to encourage more builders to consider it. carol: is that what's going on? other homebuilders, pulte or others, are not moving so fast into this entry-level market. prashant: i talked about the builders that are. there's reasons why it's difficult to do it. one, in order to build a home that is less affordable -- more affordable, there's going to be

sacrifices. one of those sacrifices might be you have to move further out, away from job centers and where the action is. a lot of young people want to be close to the cities, so if you don't want to do that, you don't want to go further out, you have other choices. you can go to a place where maybe the schools are not as good, or you can shrink the size of the house. they, what they are doing, are also going after millennials, but they are going after wealthy millennials who want to be close to the city, so they are building high density condo projects in inner suburbs very close to the city. for higher prices. but they say they are doing very well. corey: may be cities that have not seen the price appreciation of miami, new york, san francisco. ulte is doing it in places like washington, d.c. i forget all the markets. corey: denver is a big one. carol: you know the housing

market really well. you cover these housing -- homebuilders. interesting to see what they have had to do to come back after the financial crisis. is this a trend based on your reporting, a trend that is here to stay, something they will continue to grow? scaling down in price, going after the first time homebuyers? prashant: actually, i think it is. if you look at it, this millennial segment is gigantic, and the job market is sort of firing up now. so a lot of these people with jobs are looking to be homeowners. you know, i think what they are finding in the existing market, especially in places like denver -- it's not the case in every city around the country, but in many cities you are seeing a lot of competition for existing homes. so that's not particularly appealing, if you find out that,

you bid on a home and 12 other people also bid on it and you lose out, or you have to go above list price. the other part of this that's sort of interesting is that on the lower end of the existing market, you end up with a lot of stuff that really isn't in great shape. the layout isn't very appealing. may be it's a fixer-upper. so if you are sort of a young person wanting to get into homeownership and you are not very handy, for example, you want that open layout that a modern home has, you want the energy efficiency which cuts down on your costs over time. if there's a new home, that might be a better feel for you, even though it might be slightly more expensive than your average existing home. cori: there's also the acknowledgment of student that, t, these student deb

epidemic levels of student debt. people who want to be homeowners, that gives them an outlet, because the student that is not going away. shant: that's where people see this going. that's where the demand will be going forward, especially if you look, there's a real housing shortage, and that housing shortage is not where the builders are focusing. they are focusing on move up and luxury, and the shortage is in starter homes. so you have a lot of demand. arol: despite corey having huge mcmansion. [laughter] prashant, you point out we are seeing the growth of the mcmansions, building homes larger, that trend is slowing down. prashant: the size of the average new home grew 17% since

2008, the low point. finally, you are seeing a plateau, maybe even shrinking slightly. it is a pivot point, you know. builders are kind of looking around the corner and saying, hey, maybe we better have something for these young buyers. carol: thanks. our real estate reporter here at bloomberg news, joining us from our boston bureau. you are listening to bloomberg. ♪

scarlet: welcome back to "bloomberg markets." i am scarlet fu. time for a look at the biggest business stories in the news right now. shares of pep boys are driving -- rising today after carl icahn raised his bid for the auto chain to more than $1 billion, escalating a bidding war with bridgestone, the japanese tire maker. bridgestone will decide by the

end of the week whether to increase its offer. job cuts are on the way at dupont. they will eliminate 1700 jobs at the delaware headquarters. earlier this month, they agreed to merge with dow chemical. the combined company will soon be broken up into three separately traded corporations. hedge funds are betting your morning cup of coffee will begin cheaper. money managers have been bearish on coffee for 18 straight weeks. a big reason, heavy rains have boosted coffee crops in brazil, the world's biggest producer and cost for lowering the starbucks and the maker of the folgers brand. let's go to the markets desk, where julie hyman has a look at individual names, starting with -- julie: apple. apple has been underperforming the market, but it is turning around at least today. the stock is up the most since 1.8%.december 4th, up

in doesn't look like there's a specific catalyst, but just recovering after recent underperformance. if you look at the month to date performance for apple, users see a sharp decline of about 8%. there is still a lot of negative analyst commentary over the month, questioning the demand for the newest generation of iphones, questioning the supply chain. "bloomberg " tomorrow morning we'll talk to a guest who covers apple about the outlook for the company, given the negative sentiment out there. it has been the worst month for apple since january of 2014. if you look at my bloomberg terminal, i have looked at the dow components with monthly performance, and apple is all the way at the bottom, followed by disney with a 6% decline despite the big "star wars" opening, with a lot of concern about espn. finally, sticking with technology, i wanted to look at qualcomm, also gaining today.

up by 3% after the company said it signed a 3g and 4g patent agreement with haier. there has been trouble qualcomm has had recently with licensing agreements in china, so this is a reassuring move. scarlet: just checking to see what else is going on with apple. there's a lot of speculation over the iphone 7. the talk right now is it will be a waterproof iphone, and that there is not going to be any kind of new jack for the headphones. it will be an all-purpose lightning connector port. julie: that would be good. are they making it bigger? the phones just keep getting bigger. scarlet: if it gets any bigger, you will definitely drop it. it doesn't matter if it is waterproof. julie: if it is waterproof, you can use it as a surfboard. scarlet: julie hyman, thank you so much. season, we holiday

know over 100,000 people typically attend the near city ballet's performance of "the nutcracker." let's go to bloomberg radio, where cory johnson and carol massar are lacing up the ballet shoes. carol: i want to welcome everyone from bloomberg tv. we were just telling our radio listeners, this is one of my favorite things to do around the holidays, to go see "the nutcracker" at the new york city ballet. kathy brown is executive director of the new york city ballet, joining me and corey. it really is one of my favorite things. i did it with my mom. i have done it with my daughter for many years. "the nutcracker," talk to us about this season and how it is going. kathy: this season is going really well. you are typical of a lot of our audiences, who come year after year. they bring their children, and

their children bring their children. a great tradition. carol: it does not change much. i go, i know what i'm going to see, and it feels like going home a little bit. kathy: it's a really wonderful production. as you know, it was created by george ballentine, and ran for runningt year in 1954, every year since then. it is the definitive, most beautiful nutcracker, and it continues as is every year. corey: so "the nutcracker" was around for a long time before he got his hands on it. what is so special about what he did with the choreography of that wonderful music and story? kathy: as you said, it was actually created in russia in the late 1800s. balanchine himself was a child in that production. when he created this piece, he brought a lot of the russian

tradition and combined it with american sensibility. it is a beautiful production, with so much magic and drama. the central piece is a beautiful tree, a christmas tree that grows from 12 feet to 40 feet right there during the production. there's about 150 different costumes. there are at least 120 dancers in the cast, including about half of them from the school of american ballet, little children who are studying ballet. and it is just a spectacularly wonderful performance. a great story, and beautiful music. carol: you and i talked about this a little bit. it is an era where so many things are competing for your time, so getting people to go to the opera, to go to the ballet, it is challenging. are you finding you have to do anything differently to attract a new audience? kathy: absolutely. we have a lot of initiatives we put in place to do just that.

it's a very challenging time, because there is so much competition for people viewing, and they consume culture in such a different way than they did in the past, with the internet and people having home entertainment very accessible to them. so there are a lot of things we have been doing to attract a larger audience, particularly a younger audience, because that's where you really want to build for the future. carol: does that include social media? kathy: absolutely. we have a very active social media presence, and we have grown that a lot over the last several years. we have a lot of different initiatives in place, such as an arts series initiative where we collaborate with young visual who do a site-specific piece in the theater. we combine that with special performances for younger people. it has been extremely successful in bringing new, particularly young people into the theater and also inviting them to come back. they are coming back in great

numbers, which is really terrific. cori: how do you make the business of "the nutcracker" work for the rest of the season? you get people who go every year, like carol. but how do you draw them into the rest of the programming? kathy: it's a very good question. the good news is that a lot of, a lot of people are buying now online, so we know a lot about them. know a way to get back in touch with them. we know they were attracted by "the nutcracker," so we can go back to them with an offer that appeals to what they like. that has really been great. using technology in that way to sort of build your network has really been terrific. carol:we have about -- we have about 20 seconds left. so custom? kathy: very much so.

we have about 100,000 people coming to see "the nutcracker" from the end of november 2 the beginning of january. we have another week left, so folks can come and see it. it wraps up on january 3rd. carol: i have a lot of favorite moments. i do love when the tree grows. kathy: it is magical. thank you so much. kathy brown, executive director of the new york city ballet, joining us on bloomberg radio and television. ♪ . .

scarlet: we have breaking news -- russia is said to be moving for bashar chance al-assad to extend elections in 2016.

this comes as the u.s. is trying to end almost five years of civil war. u.s. tostance from the russia keeping a sodden power is melting away a little bit. that telling john kerry there is no and on an assad reelection. now we want to move on to more headlines from our first word news desk. the u.s. military official in iraq says airstrikes have killed 10 islamic state leaders in the past month. army colonel says they were killed mainly by drone strikes in iraq and syria. he discussed the gains and what is ahead. >> we are striking at the head of the snake. we have not severed the head of the snake and it still has fangs. we have to be clear about that.

there is much more fighting to do. ramy: he says most of those killed appeared to be mid-level leaders. bag of formixed delivery companies this holiday season. ups wrapped up 98% of deliveries on time. the main thing is we were able to get our christmas deliveries done by december 24, which is always our measure. we had extremely close collaboration with our major retailers and other customers. they talked about their needs and their forecasts and we talked about the opportunities we had in our network and we really developed a good plan. control.s really about it'si mean by control is not nearly as important how many packages you can put in your system as it is your ability to

be able to get them delivered. we looked at the balance between the needs of our customers and maintaining the integrity of our network and we were able to work closely with our customers. showed we had an opening in our network. our customers advanced volume we would have received on monday and advanced it into the weekend. we moved our peak day from tuesday, 12/22 to the 23rd. is commitment. many of which are long-term employees and they were determined to give our customers the service they expected. did the holiday season

meet your expectation as far as volume? guest: the holiday season is meeting our expectation as we go. we still have the next week of this year and the first week of next year, so there has not then a lot of surprises that it has not been a final script written either. >> we try to get a sense of what the economy is doing more broadly based on holiday purchases and shipments. about thell us economy you have seen so far? what i can tell you is a mixed picture. e-commerce.y

mastercard release day survey increase but we did not see a lot of industrial activity. so it is a mixed view. we did not see the pickup from u.s. exports that we would like to have seen. up, where tong invest in 2016. ♪

carol: you are listening to the bloomberg advantage. we welcome everybody on bloomberg tv to our radio program. the managing principal at pain and regal. they've got about $95 million in assets under management. nice to have you back.

marc faber telling bloomberg television that he is recommending treasuries and he is concerned about a recession. cory: that would be victim part of his protection. dumaat would be the --doom part of his protection. carol: what do you see in 2016. guest: thanks for having me on the program. when one talks about the bond market, it is the tale of many worlds. the bond market demise was greatly exaggerated. it depends on the market. in terms of your other guest comments, i don't believe it

will be the highest yielding sector. i think the economy is on solid footing. growth and relatively benign inflation. i think yield will continue to be the name of the game and the yield spread lightning we have seen in the below investment grade market provides opportunities for share. i still like corporate. of the sovereign debt world make a lot of sense but it's not so much which market, it is which part of which market. high yields are certainly taking a hit. guest: i think it really is important to spend a lot of time

determining where the best place to be is. the overall high yield market is if one peels into that, it tells a different story. energy is down almost 24%. then there are sectors like banking and consumer goods up anywhere from 4%. the consumer is in good shape and it is reflected in these sectors but are most heavily dependent on the consumer. carol: in terms of the corporate bond market, we have seen companies tap the bond market, but how much of what we are going to see is going to be supply and demand dynamics?

there will continue to be a supply and demand disconnect. think there will be a significant disconnect and there will be more demand than supply. market.ports the bond one of the odd things is many of these corporations with billions of dollars on their balance sheet don't need the cash but are still raising it because they can. you look at it as an opportunity for the company and they will be able to repay it, but those are the high-yield names. the market wants to lend money, but most institutions don't need it.

answer is good old-fashioned diversification. spreads don'tld come without volatility risk. investors, the answer is good old-fashioned diversification. with some of these sectors that have widened out and weaker sectors, perhaps not as much. way -- whatof what we have tried to figure out is whether or not it is beyond energy and retail names, it's a bigger, deeper problem. guest: i don't think we are on

the precipice of seeing something on the credit crisis, but it is premature to say that it couldn't get worse before it gets better. one has to be careful about whether we are talking about the bond markets or sectors. energy, i would be hard-pressed to say it might get worse before it gets better. andknows what can happen that will be dependent on those spreads and high-yield sectors. some consumer dependent and retail oriented sectors, i think the worst is behind us. people will come back with money to spend and yields that are much more than they were just a few weeks ago. price popsg to see as we reinvest in the market. what are your expectations

in the coming year? going to benk it's an issue of which sectors. overall, the s&p will probably close somewhere between 2%. 6% totalhink 5% or is in the cards but it is also worth saying that there could be some sectors in their and perhaps banking that could do significantly better than that. carol: if you look at the bond market, what is your favorite sector? guest: i would say the financial world.

it will do well as banks continue to come under pressure as banks shore up more capital. banks are less risky than they once were yet offer generous yields. carol: nice to check in with you. everybody, you are listening to the bloomberg advantage, on bloomberg tv and bloomberg radio.

scarlet: welcome back to bloomberg markets. we want to head to julie hyman fore-check on currencies. the strong dollar is supposed to be the theme of 42015 extending into 2016. fx s m. am looking at this looks that what the options market is pricing and. you have the chart here and the green bars are the distribution of 4 -- of currency forecasters here. where the eurois currently is and this red arc is what the options market is pricing and in terms of where the euro could be. you are looking at a currency forecaster out $1.10.

probability seems to show more upside for the euro. is goingk about what on for the major currencies here. higher.ar index is the euro is falling and the pound is falling. we have had hedge funds increasing long bets on the dollar. if you look at the year to date numbers, the euro-dollar has been declining as scarlet pointed out. a decline of nearly 10%. in the u.k., let's look at the pound. we are seeing a little trepidation over the pound and it's potential vote coming later this year about inclusion or not

. you can see the pound down about 5%. i want to point out the russian ruble, which has been one of the underperformers this year. this is actually looking like a record low. the ruble has been a loser along with commodities since the russian economy is somewhat dependent on commodities. we will get to currencies and a moment. there are two more trading days left in the year and they are crucial for bowles. he is the chief marketing technician at mk partners. you say one of the questions you get most often is what would make you bullish? what would make you more bullish on equities? guest: you have a handful of stocks that are doing well --

the bank stocks and others. but the majority of stocks are not doing well. look at the stocks above their 200 day moving average. the percentage of stocks has gone from 77% down to 40%. most recent is the read. is howwhat we looked at long that has been going on below the 60% threshold. what we found is once you get to the six month mark, the only time that has happened has been in bear markets. the laggingt that stocks have seen a bear market correction and will start to carry us out of it is getting a bit long in the tooth. if it was going to happen, our

thought is it should have happened already. that it'st is probably not going to happen. you can see the number of days of the stocks trading above the 200 day moving average. why is the threshold at 50%? guest: it is somewhat arbitrary but if you look at history, that has been the dividing line. these short term pullbacks finish in the five month mark and a majority of stocks come out and start to take it between the eyes. we thought that was a good indicator of where previous bear markets were decided. there's always the talk of this elusive santa claus rally. thinit matter if volume is at the end of the year? it's: it doesn't matter --

-- this year it started last thursday and runs through the first two days of january. we are in the government now. favorable. when you do not get the rally, that is the concern. that could foretell weakness and we did not get a santa claus rally and we are seeing that a big down here but not much upside. we also saw negative santa claus rally that led to bear markets. scarlet: i want to talk about currencies. we talked about the strong dollar. you are going to have to differentiate between the dollar index. it's very skewed toward the euro and the yen. those may hold ok but i think it

will continue to hold versus global currencies. i think that does continue to make upside progress. scarlet: thank you for joining us. we have breaking news that has just crossed. doug hirsch, one of the founders of the sloan investment conferences returning money after two decades. he will be closing his hedge fund after almost 20 years. most of the capital will be returned by today. he made wagers on corporate events, this was an event driven strategy. he is returning money to his clients from his hedge fund. we told you about some breaking news -- russia moving closer to

securing a chance for bashar al-assad to extend his rule in elections in 2016. let's get some perspective from henry meyer who joins us by phone. this has to do with setting the terms of the election. tell us more. appears to have been a breakthrough around the middle of december between secretary of state john kerry and president vladimir putin and russia made it clear it would not concede on its position that president assad has a right to run for reelection. the u.s. did not publicly say it was a given system but it secured an important concession that would enable syrian refugees who have fled the fighting over the last four and a half years to take part in that vote which would ensure a

fair election would take place. the u.s. is showing some flexibility and russia is showing some flexibility on this end. connect the dots with a solid running for election in 2016 and islamic state. has been pushing several months for a broader coalition to fight islamic state . with the u.s., there's an agreement in which the russian military strikes in syria and the american-led coalition strikes to not conflict with each other. however, the goal of fighting islamic state can only be met if assad's forces are included. if there is a piece agreement and political settlement, that you actually combine a forces against islamic state. scarlet: where does europe stand in this? guest: europe is likely to stick

to the u.s. position. harder to convince will be the allies of the united states in the gulf region like saudi arabia and turkey. if washington decides to go down this route and seek this compromise, these players will probably have to fall in line. thank you very much. henry meyer running us by phone from moscow. we have much more coming up in the next hour. it's not easy being a billionaire in 2015. we have the rankings and how far some have fallen. ♪

david: it is 2:00 in new york, london, and 3:00 in hong kong. welcome to bloomberg markets.

from bloomberg world headquarters in new york, good afternoon, i'm david garrotte. he is known as the father of indexing. what advice does jack bogle have for investors in 2016? a major disconnect between cable and consumers. cable prices are going up again. 2015 was a rough year for the world's wealthiest. before richest people shed a combined $19 billion this year. a look at the bloomberg billionaires index. first, let's go to the markets desk with julie hyman. julie: rising to the highs of the session, the s&p now up 1% year to date as we see this burst of activity for the major averages, all of by more than 1%. it is a broad-based rally.