from bloomberg world headquarters in new york, good afternoon. i'm scarlet fu. the odds of a federal reserve rate increase in march are rising. the latest setback come a surprising drop in home sales last month. banksoes this mean for act we have the 2016 outlook for financial powerhouses. huge pain for one of wisdom trees top etf's. our financial firms putting too many eggs in one basket? julie hyman has been keeping track of all the moves in the markets good to the downside once again. julie: risk on yesterday, off today. down.jor averages

it will be down to the wire whether the s&p will post again or a loss for the year. gain in the but we will see that holds by the end of the week. the move, energy down nearly 1%. materials also down .4%. a broad-based selloff. not seeing steep declines, but seeing the many lot of different groups. crude a natural gas -- it not gas had been on an upswing with forecasts for colder weather. it has been giving up recent gains. crude oil prices down. it an unexpected build and inventories last week. of theseeing a number various energy stocks down from large-cap companies to the more

volatile companies like southwestern energy and chesapeake. it is affecting companies like chevron as well. even broad-based within the energy complex. scarlet: one of the heaviest weighted stocks in the s&p 500 and the dow, apple having a rough time lately, starting around 118, now below 108. julie: it has been on this downtrend in december. the worst month since january of 2014. also the first down year for apple since 2007. map forook at the heat the seasonal moves in apple. this month, the stock is down more than 9%. this looks at the five and tenure averages here. -- five-year and tenure averages here. -- 10 year fell averages here.

during the holiday season when people are giving devices for the holidays, the stock tends to fall. hyman with the latest on apple and its bummer of a december so far. we want to head to the first word news this afternoon. >> it afternoon. we had to the entertainment world. all cosby has been charged with sexually assaulting a woman at his home in pennsylvania. -- bill cosby. his first charge over his conduct with women. crumbled as the comedian has been dogged by allegations of sexual misconduct. those charges were announced earlier today. >> the charge we are proceeding on here today involves one victim. a victim that went to mr. cosby's home in early 2004. there is one charge file. aggravated in th indecent

assault. >> he previously said under oath that he had can sexual -- consensual sexual contact with the former temple university employee. for secret service agents involved in a fatal crash last night. their car was hit head-on by another car that crossed the highway centerline. the agents suffered serious but not my putting injuries. in a race to be the u.s. republican candidate for president, george pataki has dropped out. he is the republican to quit the race. -- the fifth republican to quit the race. scarlet: thank you so much. we have a lot coming up in the next half hour of bloomberg markets. the december rate increase is in the books. where do we stand for next year?

discussing when janet yellen and company will be ready to pull the trigger once again. from raising rates to regulations, what is the outlook for banks in 2016? the company's best positioned to capitalize on change. paywitzerland, julius will to settle charges that he helped americans evade taxes. ♪

scarlet: welcome back to bloomberg markets. the drug before the fed -- drumbeat for the fed's next on. increase is already march 15 is above 50% come up from just under 25%. joining us is neil -- welcome

back. if you come inside the bloomberg terminal, we just showed you the odds of a rate hike for march. oddsyou are seeing is the have gone above 50%. it has been a steady lineup since december 16. what is driving this? what showed up in the data? neil: it is not so much what showed up in the data but what has not shown up. there's nothing to suggest anything other than the labor market continues to heal. that's putting upward pressure you see and positive feedback loop into consumer prices. look at the stories we had this year, the downdraft in oil, , theciation in the dollar

pass-through into core inflation has not been particularly significant. core inflation is basically flat relative to last year despite those headwinds. remember what janet yellen told us. all oil has to do isn't stabilize for the feds inflation goals to be achieved. -- is to stabilize. reasonable baseline for next year is something between three and four rate hikes. as during the market is priced for 2.5, think we will see more hawkish fed than what is currently priced in. reasonably another healthy jobs number. would it take for the market to be convinced that we will get the 3-4 rate hikes? >> it is just inflation and stabilization. d pickup see continue pic

and core inflation. you will be in a situation early next year where the unemployment rate will be below 5% and headline inflation will be close to 2% just given what is going on with energy prices. it will be interesting to see how the fed communicates that. we will be close to their statutory goal and rates will still be near zero. typically too dovish in a tightening cycle. usually the fed if they go one, they plan to go many more times after that. scarlet: how much validity do you give to the recent housing data that has shown lackluster numbers? existing home sales were -- and i by new rules speculate dropping .9% in november as well.

-- unexpectedly dropping .9% in november as well. in theiven the inventory resale market, we should expect new home sales to pick up faster than existing home sales. existing home sales running well ahead of new home sales. distressed properties have come out of the market. expect new home sales to drive the activity. said, even as bad as the pending sales data was today, it still signals existing sales a lot better than the last report. i would expect existing home sales to bounce in the month ahead. my overarching view on home sales is that you should expect more growth in new single-family sales than existing. scarlet: what will you look to determine the sustainability of the gains once we get them?

first-time homebuyers are locked out of the market right now. without prices coming down, they cannot get in. >> interest rates are likely to rise. that will put some pressure on wages. mortgage applications are up 35%. there is demand out there. scarlet: that is a last rush before interest rates had higher. neil: it will still impact sales. that has not shown up yet in the data. even with that from applications have been rising over time anyway. is in, the housing market recovery. i don't think there is any denying that. 6%'re talking about ipod and -- 5-6% over the next couple of quarters. you talk about the likelihood of the jobless rate falling below the median estimate. does the fed then move the goal

post or say we have checked off the box front of limit? -- unemployment? >> it will be difficult for them to engineer a more accommodative response function if wages are rising. they cannot keep slashing their estimate because if wages are rising, that is a sure sign the labor market is tight. last summaryt the of economic projection, they did not use the response function. they kept their narrow estimate unchanged. ,y sense is that as wages rise core inflation will continue to firm and you will continue to see this selloff in the bond market as we price in more rate hikes next year. scarlet: what has he worried for next year? >> the things i'm focused on primarily are productivity numbers in the u.s. and labor

force growth. right now, we've seen this flattening of the yield curve. that could be a sign of potential growth is very weak, but because there is still some growth, that is not to pressure the feds inflation target -- if you do not see any pickup and potential, that could also mean the long and is appropriate where it is. 2.5%. that's what i'm looking for. you want to see more supply-side growth in the u.s. economy next year. we are keeping an eye global economic data. that would put downward pressure on the dollar. supporting the u.s. industrial sector and implying higher rates -- if the dollar be as to fall, that will rationale for them to go faster

than the markets are pricing in. scarlet: thank you for joining us today. neil dutta. finally raised interest rate. what does that mean for the big banks? is there more troubled waters ahead? we will discuss, next. ♪

scarlet: it is time for the bloomberg business/. carl icahn winning a bidding war for pep boys. counterone refused to his takeover offer up more than $1 billion. pep boys has 800 locations in more than 30 states. the tech world is fired up over virtual reality.

few people own the hardware to support oculus rift. there are only 13 million pcs around the world that have the graphics capabilities to run virtual reality. less than 1% total. millionrees to pay $348 to settle a tax fraud case in italy. that's according to a person familiar with the situation. apple has been accused of evading taxes over five years. apple has denied any wrongdoing and says it doesn't use "tax gimmicks." flashs your business updates. really hyman has a check on some company movers. -- julie hyman. julie: if not now, when? that is what oprah winfrey is asking in her new weight watchers had. watchers ad.

it is up 21% today. through the close yesterday, the stock has risen 185% since that announcement. it is extending those gains today thanks to oprah once again. we are watching solar stocks as well. a note that was positive on the group -- sun edison taking more steps to shore up its balance sheet. the company's try to reduce its debt, selling stakes in a power plant to a joint venture. it is swapping equity for $336 million worth of exchangeable notes. these moves designed to try to help that balance sheet. it is up 5%. we are watching fairchild semiconductor. the company got a bid to buy at

21 a share. now, the group that made that it is revising it. the bid came from china party g. holding -- the shares were up 3.3% today. finally, looking at gamestop. a lot of questions about the company's business model going into the end of this year. gamesls physical video and the online was have become much more popular. it is the most shorted stock in the s&p 500 as we close out the year. 46% of shares available are sold -- extraordinarily high number. scarlet: that can lead to potential big short squeeze as well. thank you so much. china coming up, the u.s. or -- china,arkets that

europe, the u.s. or emerging markets? stage.ry difficult of getting 27 nations to agree to something. i do think because of the complexity of that, they will have lower growth. it doesn't mean you won't have great investment opportunities. sometimes that depresses all the stock but the stocks are there come 60% outside of europe. do not confuse the two. policy rate was 6.5 -- it will ebb and flow along those dimensions. long-term, you have a tremendous development of a billion people coming into

society and doing the things that people have done in this country for a long time. >> anytime you have the growth that they have had, you get hiccups. a hiccup.oing through if you ask me long-term if i'm bullish on china, the answer is absolutely right. >> we are very focused on emerging markets. a very focused on asia. we are very focused on the middle east where we do a lot in eastern europe. in brazil, we have a great platform. from a few take assets per capita, 60%. the number two in switzerland. we are in excellent positions. >> the economy is fundamentally strong but the strength is regional. we have re-regionalized the country from an economic

perspective. take the bay area, for example. it is as strong here as i've seen in my 13 years. housing is booming, technology is booming, commercial is booming. go 150 miles to the east into the central valley, you would not see that same strength. stanley plusan former ceo visited bloomberg -- morgan stanley's former ceo visited "bloomberg " this morning. >> as interest rates start moving back up, the banks sitting on huge deposits will be a really vanished there. that's real advantage there. they can earn money on the spreads they have. as far as the big casino let's go for the home run, banks have really file that back. -- donald that back.

ialed that back. scarlet: huge deposits, spread business, dialing back. he is painting a picture of banks as utilities. >> the banks have been waiting for higher rates. that is basic bread-and-butter banking business. net interest revenue is still the biggest chunk of revenue. even though they have extended into capital markets and have great credit card businesses. an interest revenue is over 60% of revenue. you really need higher rates to help get a boost to that revenue. >> have they learned how to do that business better when interest rates were low? >> what banks have been doing as interest rates are low is cutting cost. one of the bigger chance we've seen as technology and banks using technology, changing the

way they distribute their products. forou look at the cost o processing a mobile deposit versus a deposit in a branch, it is a very tiny fraction. as banks see more and more revenue pressure as they try to go to cost cutting to help preserve profit come hopefully the way it works out for banks as they are positioned once you get this uplift, they should get some operating room. scarlet: what about using technology as an offensive move? >> goldman, this will be an interesting year. for itsa bank that history has focused on the institutional market. 90% institutional, 10% retail. their retail is really high net worth. made anr, they interesting hire by hiring

someone who previously worked for discovery. someone who will be pivotal in expanding the online consumer opportunity. -- who previously worked for discover. it is interesting in terms of they are talking about using the technology they have, the risk management competitive advantage. can these translate into the consumer lending business? no, will bank of america in citigroup raised their dividend? >> we are not allowed to forecast. they have the most room to raise their dividend. they are the most interesting to watch on that front. scarlet: thank you so much. we will be back. ♪

scarlet: live from bloomberg rolled headquarters in -- bloomberg world headquarters, a muggy day so far, this is bloomberg markets.

almost a decade long wait, the federal reserve finally pulled the trigger, raising interest rates the first time since 2006. which is central bank may be next? tony crescenzi gave his prediction today. >> england will probably be the next major nation to raise interest rates. the markets are priced for to raise interest rates in a year. it may be earlier than that. it has not seen much of a pickup in inflation rate. by midyear, it might pick iup enough that they might signal that interest rate hike is on the way. nothing should be expected from the major central banks. or easing if anything from the european central bank and bank of japan. -- more easing. rates will stay low the

rest of the decade. the markets are priced for a 1% hike in europe. same for japan or less -- lower, i should say. 2's or so.., mid investors should confidently by riskier assets when there is market volatility. there's always new opportunities. the recent one, the chinese currency in august, there was a bout of volatility that affected all markets. that was a time to take advantage to buy equities and by credit. if you're confident there will be continued economic expansion, by these assets confidently. >> when is the next u.s. recession? >> at least two years away. will say it'se even longer than that. he was with us for a quarterly meeting in december.

what usually happens is not less of been met torres or imbalance in the financial sector. excess of inventories. it can keep moving on smoothly. the key thing for 2016 is job growth. that is ok as long as it stays close to 100,000 per month. economyl keep the moving juli : moving. >> the bank of japan may ease more? >> not in the near term. i'm worried about down the road. lot of debt.a gd

if there's one thing that would cause you to change your outlook, divergence and interest rates, what is it? the price of oil or something else? tony: if consumer demand globally suddenly picked up commit there was a pickup in aggregate demand, that requires faster credit growth and a different set of demographics. the nations aren't aging. scarlet: that was pimco executive vice president tony -- takeki -- tony chris a look at the work function. the probability of a rate increase according to traders has increased steadily for the second half of the year, now at

68.6% for a december rate increase. separately, you have options traders showing their the most bearish because they worry that a slowdown in the u k and eu referendum may mean that the bank of england has less room to raise interest rates and my push that off a bit more. we have much more. stay with us. ♪

>> you are listening to the bloomberg advantage right here on bloomberg radio. cory johnson in san francisco. welcome everybody on bloomberg tv to bloomberg radio. it was a record-breaking year when it came to auto sales we want to talk about that without a guest. he joins us from irvine, california. jack, nice to have a here. it was pretty much a crazy year.

your research shows us it is a record year. how good was it for all the automakers? >> a very good year in terms of overall sales. it was a year ago in which the automakers had to work hard and pay a lot to get the sales they got. carol: what you mean work hard? jack: there was a lot of incentivizing going on. it was not easy to get these sales. money in terms of marketing? >> and incentives. car, here's $2000 on this here is a special financing deal, special lease offer. a massivee seen expansion of credit in the automobile space.

they are keeping an i on the fact that the duration of the average low now is stretching well beyond 60 months. people will be paying full price on these cars when they are very much older cars. it is not quite subprime n close.g but dam c >> i always ask consumers, would they be comfortable paying the monthly payments for a seven-year-old car? most of them say no. yet, they are still signing onto these contracts. >> how much of what happened in 2015 was because -- we talk about the suite of cars on the road today. people had to buy a new car. jack: there's a lot of replacement because the cars needed to be replaced. cars are lasting longer and longer. the alternative to a new car is

a late-model used car. >> are you shopping for a new car right now? jack: if you were shopping for a new car, you might also looking at a late-model used car. those vehicles very often look identical to the new car. they have the same features as the new car and yet, they are priced significantly lower. those are alternatives that consumers are increasingly taking a look at. cory: some of the anecdotal evidence i've read is that those are not the cheapest those vehicles -- they are going more towards the high-end. : when people look to do car shopping, they often look at the monthly payment only.

their budget is on a monthly basis. they figure out what they can afford per month. if it goes next are year, they don't seem to care very much. heavilyre buying equipped cars. they are not buying cheap models. they are buying pretty well-equipped -- they are not buying a model that doesn't have much equipment. navigationws or systems, things like that. carol: shares of ford are down 8.5% in 2015. general motors down 1.5%. ,ook at the whole auto sector the next down 8% in 2015.

break it down for me among the different automakers and who you think did really well in 2015. who did not. gm is in the best situation of the domestics. it solidified itself and has a fairly broad-based portfolio of vehicles. ford motor company, you can always look at it as being similar to a movie studio or something like that. three or four vehicles that carry the load. it was not done a good job in the luxury sector. that is either an opportunity or a shortfall. depending on how you look at it. jeep brand is carrying the whole company right now. you have to wonder how long the jeep brand can continue to do

that. jeep and ram truck is driving all of the profitability. cory: given these aggregate numbers are so big with the exception of volkswagen, there's always been the discussion of peak oil. are we at peak car right now? >> a really interesting question. you might be onto something. we might look back at 2015 as being the peak of the car market for some years to come. not that we are going to fall off a cliff in 2016, but some things are developing that might make it harder to achieve what has been achieved total sales wise in 2015. >> volkswagen with a lot of problems in 2015. a lot of questions about whether they would be able to hold on to consumers going forward. how did 2015 and up for the company?

jack: it could have been a lot worse for folks wagon -- volkswagen. the scandal doesn't seem to have had as big an effect as it might have in the showroom. i think volkswagen ran out of inventory. in a lot of popular segments toward the end of the year. when you lose diesel sales, you are losing something like 20% of the total volume. i think volkswagen has done reasonably well given what it has faced over the course of the last six months. : i will be hearing all .bout the new innovations

it are those things really driving consumer demand to cars? jack: it is a driver, but not something that is a must-have for people. there are other things that overshadow what's going on with the dash. >> have a great new year. joining us from irvine, california. ♪

scarlet: you are watching bloomberg. i am scarlet fu. this is your global business report. after a rocky year for glenn corp., what is the company doing to change up and strategy? once was bank cutting tax deal .ith the u.s. -- one swiss bank on prices and the u.k. rising in december by the most in eight months. -- home prices in the u.k. let's start with comments from john mack, the former ceo of morgan stanley. huge in the copper market. we are not backing out. we are aggressive as we have ever been in trading. the biggest thing that has changed is we have shut some mines in the copper area. scarlet: switzerland's

third-largest wealth manager agrees to settle claims that it helped americans evade taxes. julius baer will pay $547 million. 2015,estors look back on many would argue that the u.s. federal reserve was the biggest driver of global financial markets. jp morgan disagrees. >> all eyes are on china. china was much more the driver then the fed. it is still one third of global output. it is more than a one-to-one correlation. scarlet: a new survey indicates vladimir putin needs some help in economics. more than a quarter of economists gave the russian president an f for his management of the economy. 50% gave him a low-grade. prices in the u.k. rose in

december by the most in eight months according to nationwide building society. to average price was up 1% $292,000. prices arehome rising almost three times as quickly. this has been your global business report. for more stories, visit bloomberg.com. abigail doolittle's life from the nasdaq. abigail: here we are at the end of the trading your. the biggest story at the nasdaq is the outperformance of the composite index relative to the other major u.s. indices. up composite index was close to 8% as opposed to the dow down 15% in 2015. perhaps heading toward their market -- a bear market territory. the big internet companies,

facebook, amazon, and it looks topgoogle are all performers. alphabet up 50% this year. the real standout winner is amazon come up 120% year-to-date . this time last year, it opened the year at 313. a triple digit stock pulling a to $700.lose they are expected to have profit growth next year driven by the amazon web services. this momentum is likely to continue right into 2016. scarlet: thank you so much. ofdom tree is a provider exchanged traded funds it's all great success with its currency hedging etf. it did not last. the company's market value dropped $5 billion.

the ecb's disciplining status measures sent wisdom tree's etf's tumbling. and wisdom tree's stock as well. mike regan joins me now with details. what prompted you to look into wisdom tree's share price? mike: it has been an amazing story to watch the past fears. since the bull market began in 2009, this stock has risen 5000%. it is a company that has been around for a long time. look at the evolution of etf's, they started with commodities come s&p 500. it's one of these etf companies that took it to the next level. etf's --rency hedged when the ecb stimulus started, everyone thought this would be really bad for the currency but potentially really good for the

stock. if you look at currency hedged etf's, that protects against the currency volatility. first, it happened with an etf hedging the japanese currency. that exploded in popularity. their european etf did the same thing come exploded in popularity. these two of a few dozen etf's offering these two just dominated the company. share price to explode along with the popularity of these etf's. was $22pean etf billion. a sizable etf. the expense ratio on them is a lot higher. they charge less than 10 basis points because it is simply buying the index. an index like this, they charge 58 basis points. they are making a lot more of the assets. scarlet: it's a passive way of

investing. they just hedge out the currency. >> it is a middle ground. it is a rules-based approach. it is very passive. that is compared to an actively managed mutual fund. not anywhere near what an active one would charge. it is similar to what a corporate treasurer would do in the u.s. they purchase forwards and futures in the currency market. that basically bet on a declining euro or declining yen. it is a trend that worked like magic throughout 2014 and a lot of 2015. wisdom tree stock this year was up about 66% through its peak year-to-date. then, the euro weakening just stopped. scarlet: mario draghi did not over deliver as expected.

mike: it was starting to level out otherwise. that caused a reaction in wisdom tree stock that was even greater than the reaction of dts, which is interesting. -- of the etf's, which is interesting. earnings estimates have come down because these two etf's are not booming like they would be. the estimates as they stand today -- they might lower more if the euro continues to strengthen. the estimates were for 29%. that makes it pretty cheap on a forward earnings basis. it is the type of company that there has been a lot of talk with dodd frank big banks are getting out of riskier trading. management business is the type of thing that might be attractive to another asset manager that is having a rough year.

it is an interesting stock to keep an eye on. scarlet: could be a full-time acquisition for someone. it hedges against a weak euro and weak yen. it has been around for a wild. mike: that is interesting. they have been around for a while. i think of their offerings as a fisherman with a lot of polls in the water. couple salmonh a or trout on this one. they landed two wales with these . there's competitors that did well, too. is, it's only business is etf's. polesave all these other in the water. they just launched a long short etf. taking hedge fund approaches and

putting them in etf's. that is a lot cheaper. whatever.oints or way cheaper than a hedge fund. they have a bearish u.s. equities etf. there's plenty of other competitors to these two in the space. they have a lot of lines in the water. good stuff. thank you so much, mike regan. you can read his commentary at .adf go and on bloomberg.com pimco finishing up its first calendar year without bill gross and a fairly strong year as well. ♪ we live in a pick and choose world.

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from bloomberg rolled headquarters in new york, good afternoon, i'm scarlet two. china's yuan crackdown. twooreign banks are -- foreign banks are halted from making foreign trades. we look into the similarities between their planned. and the best retail stocks of the year, you know about amazon and reiki, but kroger? company has quietly become the largest supermarket chain in the country. first, we have some breaking news out of puerto rico. on commonwealth will default payments for two of its agency bonds due january 1. $36 million owed to its public infrastructure of authority and

$1.4 million to public finance corporation, this according to the governor. for more i'm joined by laura keller who covers distressed debt. we knew puerto rico had almost a billion dollars of obligations do on january 1. everyone was in agreement that it would default in 2016, but we didn't know the specifics. tell us the two that it will default on. >> we knew they would do this, and it will be a small amount, but it will be significant. they will not be paying part of what is called the infrastructure authority. also, they will not be paying $1.5 million of the public finance corporation. they don't have enough cash to pay it at this point. had beenthe governor mourning for allow that the territory is running low on cash. he is holding a news conference right now. speaking in spanish, otherwise we would take it.

tell us about the debt restructuring that one of the agencies in puerto rico managed to achieve just a couple days ago. they have a place where they had talked about the year-long, ongoing conversations. bond insurers did not agree to anything, but they will continue to go forward to get a finalized agreement. that would be the first of many different types of restructurings across different agencies. that would be great because it shows a pathway for having bondholders agree to different haircuts, not getting paid for a while. that is probably something that would be good to set up these other agencies. scarlet: that does not address the bigger problem. does this leave order rico in technical default? these, in addition to they will have some technical defaults as well. at least three different agencies. what they are doing to make the

general obligation payments, they are taking money from these different reserve accounts that should go to these other bond payments. they say we need the money to pay these higher priority bonds. they are not putting money into reserve accounts for those other bonds, so that results in a technical default. scarlet: it is like missing the payment on your mastercard to pay your discover card. >> you will probably see some litigation to come. some of the bond insurers are saying we do not want to see that, because we will be on the hook for making payments. scarlet: what kind of response to you expect to hear from bondholders? expected this, especially for these two debt types. of leasthe path resistance because you don't have as many hedge funds in this type of debt. you have some mutual funds that would be aggressive, but these tend to be bonds held by individuals, puerto rico

residents, so they are not as organized illegally. are ins of where they terms of debt, where it would be less cumbersome, this would be it. scarlet: talk about which hedge funds -- a lot of it is own body development bank. they really need to restructure that. they also own a lot the general obligation bonds. scarlet: thank you. i want to stay with this topic. julie hyman has been looking at the reaction in the markets. julie: i have been looking at the bond insurers to see if there is a reaction. some of them insure puerto rican debt. my terminal, i'm looking at assured guaranty. ago is the ticker. you can see the leg downward. only .75%, but nevertheless some

movement. probably has the most exposure, i believe. if you look at how it's been reacting, we are seeing a decline as well. scarlet: fantastic, thank you for the quick insight. thisll continue to monitor story has more headlines cross. ♪

scarlet: welcome back to bloomberg markets. you are looking at puerto rico's speaking rights now, talking about how the territory will default on payments due to two of its agency bonds. $36 million owed to its public infrastructure authority and $1.4 million owed to the public finance corporation.

it will make general obligation payments. roughly $329 million, but that is only because it is clawing back money from other government accounts. because of that, it will be in technical default. continue to monitor these headlines as they cross, but puerto rico had almost $1 billion due on january 1. it turns out it will default on some of that debt. in the meantime, we turn our attention to the chinese yuan. the chinese bank has suspended to banks from doing cross-border business until late march. this will limit their ability to profit from the widening gap between the currency exchange rate at home and abroad. what impact does this decision have on trading and their trading partners? joining us now is vincent cignarella. a lot of people are wondering about this move. is this controlled evaluation?

they are waiting for the next shoe to drop. >> the market is expecting a controlled devaluation from china. both onshore and offshore currencies are roughly going to be around 6.80. this is more of a shot across the about to slow things down. the people's bank of china are ok with a slow devaluation, but again, not too much too quickly. keeps the political pressure off as well, if it happens in a slow and methodical way. scarlet: how does this impact trading for position -- traders. they may have trouble if they are banned. >> you have to see where the sold toe, but if you customers going forward and you expected to close this arbitrage cap, you have open positions that you will not be able to

cover, unless you have counterparties in the market. mean forwhat does that other asian countries, other asian currencies? >> i think is a big deal for japan down the road. due in part to the appreciation of the dollar against the yen. that has now stagnated. consolidating in the 1.20 area. if china appreciates their currency, makes them more competitive against japan and other asian currencies, it puts china in a better position in the import/export trade market, which could mean issues for japan and korea. scarlet: in terms of the recent announcement by china that it is measuring the yuan against a basket of currencies, what does today decision due to that? >> what it does in the longer run, it allows the depreciation versus the dollar to be smoother

and less politically charged. -- ity can prove and show depends on which currency they isk -- that the yuan stronger than their other counterparts, then the depreciation against the dollar is because of the market. it is not something they need to worry about. scarlet: let's stick with the theme of devaluation. another country that is speculated to devalue soon is saudi arabia. the reality is pegged to the dollar. >> you are seeing it in a short data forward markets. inders are buying forward the hopes that the currency will devalue. -- coverto hedge that that position. you need to finance it. that is where pressure is building. highly unlikely that the 35-year-old peg will go. a lot of political issues along nith it and it becomes a

inflation issue as well. you would think, if it were that big an issue, they would be looking more at maybe cutting back on production and controlling the oil market, which is something they can do much easier. scarlet: they have been very firm on that stance. thank you so much for joining us , vincent cignarella. staying with the markets, post bill gross marks pimco's first --r since the departure of 2015 marks pimco's first year since the departure of bill gross. since then, they have outperformed 89% of its peers. joining me now is john gittelsohn, who covers pimco. when we say the total return fund is doing fine, by what measure, absolute, relative

terms? >> relative to the benchmark barclays aggregate and compared to other returns. and aabove the index almost 90% of its peers. scarlet: how much of this improved performance is a result of its smaller size? it only has $92 billion in assets now compared to more than $200 billion in 2013. >> that is right. it is a challenge to manage when you are losing funds. these guys have done pretty well. what happened to the high-yield funds, for example, that ran into trouble this year, they had a lot of redemptions and they were stuck with the least liquid stuff. that can be challenging because they had big positions relative to other traders out there. what was it that

allowed them to outperform some of their peers, were they very selective, did they take a more defensive posture? >> they were definitely defensive, imported -- avoided traps like emerging markets, derivatives,d some betting on corporate high-yield stuff. low risk indexes. they also bought some forward swaps on treasuries to take advantage of their view of where the yield curve was going. scarlet: what opportunities do they see in 2016? if they did so well in 2015, we want to hear their ideas for next year. six to 18the next months, the opportunities will be in the sectors that were better down this year, oil, energy, emerging markets. scarlet: bill gross is now over at janus.

can you tell me who is running the total fund? mather, markcott easel, and others. they have all been there more than 15 years. scarlet: john gittelsohn, thank you. break, a quick update on the breaking news from puerto rico. on governor still speaking how the territory will default on bond payments. ♪

scarlet: welcome back to bloomberg markets. it's time for the bloomberg business flash, look at some of the biggest stories in the news right now. contract by previously owned u.s. homes declined last month. fellndex of pending sales .9% following a resigned --

revised gain. the congress were looking for increase of .7%. internet providers making good on their advertising promises about faster download speeds, that is according to an sec says consumers are mostly streaming video and downloading at the speed they are paying for. however, there is a growing chasm between those with the fastest speeds and those enrolled areas, whose options are limited. the number of mobile phone subscribers in india has just dustysed the $1 billion one billion million mark. china is the only other country that has that any users. that is the bloomberg business flash. as we have been telling you, puerto rico will be defaulting on $37 million of bond payments due january first. you are looking at the governor of puerto rico who is holding a news conference right now explaining the decision to default on those bond payments

due friday. julie hyman has been checking some of the stocks, securities moving in response to the news, which is not widely unexpected, but it is having an impact. julie: if you are a bond insurer, you could be left holding the bag. they are the ones that have to pay out. it looks like the two insurers with the most exposure are mbia and am back. -- ambac. these are the ones that you want to watch in relation to the puerto rico situation. take a look at the broader markets as well. we have been seeing declines for the major averages in today's session. selling at the lows of the session but not huge declines. as we have been talking about all week, it is a low-volume week. we are looking at volume versus

the 20 day average for the various groups in the s&p 500. all of them are down. down 54%,taples is financials, 50% as well. these are all stocks in the s&p 500 specifically. year to date, it is going to be down to the wire whether we are positive or negative on the year. right now, hanging onto a gain of half a percent. of course, tomorrow and the day after will be pivotal. fairly safe bet that it will be little changed. finally, we have been talking about the best and worst performing groups. looking at individual stocks that have contributed to gains and losses. exxon, candor morgan, chevron, qualcomm, and walmart. they have dragged down the s&p the most. amazon, google, ge are the ones

that have lifted the most. scarlet: thank you. it calls itself the match.com for investors. an online platform that matches you with your right financial provider. carol massar has more. >> welcome to the bloomberg advantage. we want to talk about financial advisors. as scarlet mentioned, the new year may be a good time to reevaluate your financial advisor. our next guest knows a lot about that. he is the ceo of guid evince.com. remind the viewers and listeners what you guys do specifically. guidevine.com, we have been called the match.com for finding financial advisors. for consumers that are looking

for the right fit for them, we give them the tools. we want to make the search more transparent and personal for you rather than going with a brand name that you have heard of or what your brother-in-law recommends. carol: what are the metrics to do that, how do you find the right match for me in terms of a financial advisor? >> we have a matching algorithm where we learn about you and then we try to pair you with people that we think would be relevant and then we show videos of all the advisors are you get a sense of the person. thatve consumer concierges you can talk to if you are not sure what to ask. then we have a financial planning blog. we have our youtube channel so you can educate yourself. we wanted to deliver the information you need to make a choice on whether you want to meet with someone. and then give it to you when and where you want it. intimidation-free. you engage with advisers or not,

based on your comfort level. cory: how are you paid? >> it is the advisors. it is a flat fee. for the consumers, it is free. : is a rich dude more valuable to you then someone who is not so? carol: nicely put. >> it is a cisco should be and it does not matter who they are talking to. we want to make sure we are doing right by the consumers, getting the right advisor for them, rather than worrying about whether this person has a bigger portfolio than this person. carol: how do you screen your advisors? i would want to care about fees and performance. on the platform, certainly you have to meet certain size and experience minimums.

after that, we do specific regulatory and criminal diligence on you to make sure that as an advisor, you are a good apple. as we are interviewing, telling them about the platform. we want to make sure we are a right fit for their practice and their goals. at the end of the day, it's making sure we have quality advisors for our consumers. how can you tell when an advisor has gone bad or gotten lazy? >> as a consumer, a couple of things. does the advisor still provide the services that i need? started working with someone when i just wanted wealth management, trying to grow my nest egg. instead maybe i have started a business or expanded my family or of getting closer to retirement. that same advisor may not have those services or the expertise to give me the best advice i need. to thinkd thing is

about, are they communicating with you, or have they gotten lazy, you are are getting explanation for why things are happening in your court olio -- portfolio, you are starting to get nervous. i think a lot of people think about performance as the metric by which they are judging their advisor on, but it is too easy to get hung up on the wrong thing. your neighbor may talk about making 50% this year, but maybe they only got 5% of their assets with the advisor, and a shorted oil this year, so of course they did great. you don't know their situation. carol: you are working with fidelity. you seem to be doing things in a different way. how does working with a well-known, older established firm -- what do you get out of that? >> our strategic alliance is a great way for us to put our and digital marketing platform in front of all the advisors, so

that we are clear with them. helping them engage with our user base. thank you so much, nice to check back with you. .he cofounder of guidevine.com you are listening to the bloomberg advantage. carol massar with cory johnson in san francisco. ♪

torlet: welcome back bloomberg markets. we are monitoring comments from puerto rico's governor. he is still speaking right now.

puerto rico announcing it will default on $37 million in bond payments on january 1. it has almost a billion dollars of payments to make but it will make the general debt payment but will miss about $37 million in bond payments as it tries to save some cash, pulling cash from certain agencies to pay of certain debts as it gets through its financial hardship. we will continue to monitor the headlines for you. in the meantime, we want to check in with ramy inocencio at our first word news desk. my: bill cosby has been charged with sexual assault. shermer employee said that was drugged and assaulted near his home in 2004. since then, dozens of women have come forward with similar accusations. chicago police officers will be required to carry tasers when responding to calls. that is among the new department

policies that are to come as the city faces murder charges. police in new hampshire say four secret service agents were involved in a fatal crash last night. investigators say that they were hit head-on by a car that crossed the centerline. the agent suffered serious but nonlife threatening injuries. the faa is investigating why a united airlines flight seattle slid off the runway this morning. the chicago airport has been plagued with flight cancellations and delays because of severe weather. dayal news 24 hours a powered by our 2400 journalists and news bureaus around the world. let's turn our attention to the top retail stocks of 2015. consumers may still be skittish about splurging, but these companies were in a the

competition. topping the list was amazon.com wit. joining me now is kyle stock, who covers retail. if you have to come up with a common theme for these names, was it look, savviness? >> a little bit of both. operationally delivering very well right now relative to their peers, but they are all benefiting from a little bit of a trend. athleisure. scarlet: overpriced sneakers. >> china is also basketball crazy, and they figured out that market. scarlet: there was something about the supply chain in china. talk about that. >> they tightened up their vendor and distribution arrangements, manufacturing. a bit of a new market, so something of a learning curve. scarlet: let's go to o'reilly

and automotive. a diy car parts company. we know that people are splurging on cars. this one is counterintuitive because car sales have been so hot. these guys are betting on people that want to change the oil themselves, tinker around. despite car sales being so high, the average age of a car in the u.s. is at a record high, almost 12 years old. folks are keeping them on the road longer. scarlet: amazon, the everything store. they sell everything. they just don't sell experiences , and they are capitalizing on our national laziness. prime.s all about 3 million new members in the week before christmas. the interesting thing about them is their profits, they have never been big on those margins, but they are getting it from web services. warehouses, service space.

scarlet: kroger i am surprised about. they are a supermarket and they are notorious for having razor thin margins. >> that one, they are being very savvy. they bought harris teeter, some other regional brands. they are really hitting the high-low well with high-end goods and bargain stuff. scarlet: thank you for joining us, kyle stock. home depot was the other one that did well this year. much more after this. ♪

>> we wish him the best in 2016. you are listening to the bloomberg advantage in our new york studio. my cohost is cory johnson. we have been talking about some of the major themes that we have seen in 2015. you and i have been talking about whether they will continue in 2016.

if the commodity complex manages to come back, or if we see pressure on the oil sector. cory: there is a general belief that oil is so low, may the deflationary pressure it has had , because it has been trading below $40 a barrel for some time now, any move will be flat to up, and that will reduce a deflationary pressure from the collapse of oil prices, and that could give the fed more excuse to continue to raise rates. story out by the john gittelsohn today talking about pimco, their main fund, the total return fund, which for many years was run by bill gross . did not do so well for many years. of course, bill gross left the firm. fund15, the total return is outperforming 89% of its

peers in that category, returned almost 1% through december 28. a small gain, but nonetheless -- cory: 1%? the sound of one hand clapping. carol: nonetheless, they were able to do it when most of their peers had a tougher time. you mentioned energy and oil. what's interesting is the managers of the fund are looking forward to 2016 and where they see opportunities and they anticipate opportunities in energy-related investments. maybe the fortunes for the energy complex change a little bit. how much lower can we go from here? down toy, you could go zero, and no one is forecasting that. whether or not we start to see a bottom and that provides opportunities -- there are a lot of distressed assets out there. cory: as the u.s. stepped away from qe, you saw that in the

markets in the course of the last calendar year. a handful of stocks responsible for the averages being or the year, up right now .6%. the battle continues into tomorrow. breadth shows you that you had winners and certainly a lot more losers in any of the major exchanges. -- they all say it is a stock pickers market but the proof was in the numbers this year. money managers were able to steer clear of the disasters, most of the energy names, and find the companies that would outperform. even in that of performance we saw some oddities. amazon.com may be the best example. the stock was up 123%. company,ss of that

profit just a hint of a causing the stock to act wonderfully with the suggestion that there could be more to come. carol: i mentioned some of these companies that one of our columnists like to talk about. facebook, google. facebook is up 36% this year. amazon is up and hundred 23%. netflix is up 141%. google is up 33%, so we have seen some real out performers that have skewed a lot of other companies in 2015. you are listening to the bloomberg advantage. we are going to go back to our team and bloomberg tv. scarlet: thank you. we will be revisiting them later in the hour. now that the federal reserve has raised interest rates, how steep will of type b, what is the path

of projected rate increases? one person this morning talked about what he calls the boomerang. >> janet yellen will be tightening and hopefully it will not hit her in the head. i suspect the fed will use before the end of 2016. just to be clear, they will tighten a few more times. it is data dependent but they say 100 points a year. eight meetings, 25 basis points per raise. that means every other meaning gets them up to three to 25 basis points. we wille by the summer, not get there. we will have a recession before you can raise rates enough to cut them enough to fight the recession. by raising rates at all, they have increased the odds of recession. i expect they will raise in march and june. by august or september, even they will realize the economy is extremely weak. they are model driven.

if you have the wrong model, you have the wrong policy every time. [indiscernible] i know a lot of the governors and staff, smart, hard-working people, but these models are completely obsolete. if you look at actual data, it looks like gdp for the full year will be 1.95%. that is below everyone's forecast. last may, janet yellen had a speech in providence. she laid out her whole playbook. she said our forecast is 2.5% growth, 2% unemployment -- inflation. it has to be trending. inflation, 5%% unemployment, 2.3 percent growth, trending the right way, she would raise rates. that is what she thought she saw in december based on the models, but the actual data is coming in extremely weak.

i see is exports and imports. people look at the trade surplus. the scariest thing -- we have not seen this since the great depression -- when absolute level of world trade has declined. >> the same thing happening in china. normally with a strong dollar you would expect exports to decline. but the imports are also going down also. >> consumption is going down because the economy is so weak. are right.sume you how bad is that, what does the due to the markets, do they get a lot of confidence? >> they will not be able to cut rates. we are talking about september, so this is when the boomerang comes back. this is just before the elections. janet yellen is a well-known liberal economist. september, rates in -- they will not be able to cut then at the earliest.

we are done for the year. i consider forward guidance in the easing toolkit. my expectation is by september they will be done for the year. the markets may rally on that. it signals that they could be cutting back to zero. that was jim records from this morning. we will be right back with more on the bloomberg markets. ♪

scarlet: welcome back to bloomberg markets. i'm scarlet fu. it is time to look at the biggest business stories in the news right now. the u.s. apparel market may reach $293 billion before the year. new statistics show an increase of 2.5% over last year. sales of men's clothing rose faster than women's clothing and girls. twitter is getting tough on violent threats and hate speech. users media company says found guilty of sending sus messages will be suspended or banned. an account seeming to be intolerant will not be allowed. pay $348 million to settle a tax fraud case in italy. apple has been accused of evading taxes over five years by booking sales in italy through its irish subsidiary. had used taxey

giving's. julie hyman has a check on individual movers. we are looking at the solar sector. julie: sun edison is one that we have talked about today. we are reversing some of the declines that it has seen for the year, up by only 2% of taking more steps to shore up its balance sheet. among them, it is doing a pair of deals to reduce debt. in solarling its stake farms, part of that going to a joint venture that one of them has with jpmorgan. it also looks at a swap equity for $367 million worth of its changeable notes. all of that design to help its balance sheet. shares are up by 2%. it's definitely been a volatile stock this year and there is a great screen that a colleague of mine did looking at the beta of

stocks in the russell 1000. how volatile are they versus the index? sun edison is number three year to date. california resources, and oil and gas company, freeport back ran, recently 1.88 each. among 1000rds, stocks this year, sun edison is the third most volatile versus the index. that volatility comes when big declines. take a look at their performance year to date. down 74%. a lot of concerns and questions about the company's structure. it has these two separately traded units that have bought assets from it and operate them as solar farms. that has partially to do with what is going on with the stock. if you look at an index of solar compiled by bloomberg intelligence, you can see the index is down 5.4% year to date, underperformance

versus this index looks even more dramatic. there is also a solar etf. tan is the ticker for that, down 10% year to date. scarlet: and no special tax for that. self tanninga place, you have to pay the special tax. ifie: but you get incentives you are a solar company, so go figure. scarlet: we want to bring in michael block, chief strategist at rhino trading. he is here to give us his 2016 outlook. i read your reports every day and you are talking excessive -- a lot about the fang stocks. they have vastly perform the other markets. up about 48%. s&p 500 flat for the year. there is an amazing lack of breath in this market. >> you could call this momentum

but there is something bigger at play. let's look at this as value versus growth. we are in an environment where the federal reserve will raise interest rates. intuitively start outperforming. multiple expansion, better recognition of book value stories, financial start doing better, but that is not happening here. growth is continuing to win, but the winners are becoming less. with the economy slowing, gdp being where it is, manufacturing slowing, industrials, there is less organic growth out there. we looked at the solar space which were once a go-go stocks, and now they are gone. now you are asking where can i get growth quick? neu can get it from four to ni names. whatever you want to call it. it is creating a situation where money piled into the stocks. amazon has this growth in the cloud, buy iy.

netflix is monetizing on streaming buy it. there are a lot of crowded trades out there. everyone is counting on the dollar to strengthen, the boj come ecb to do some easing. everyone is looking for the next shoe to drop in china. but when you look at how the markets have performed as of late, and i know it is a holiday week, so it not a great benchmark, but if you come inside the terminal, crude oil is setting the tone for stocks. you don't need to look at the fundamentals is all you need to look at is how wti is trading. crude is largely dragging the market around, and that's been true over the last couple of years, certainly in december. we are seeing an issue where stocks got a lift, now taking a hit. there is fundamental news in oil. better news, overnight the api data.

now the cushion data is worse. iran is talking about how their supply is coming back bearish. that we areying using $30 oil for next year, bearish. finally, the saudi's, the big guys on the block in that part of the world, are saying that we are going to keep producing. not good. yet everyone is saying the fed will raise five times, four times next year. that is bunk. you had jim records on before. i am somewhere in between. don't think the fed will do much next year because inflation will not pick up. people think the core inflation can pick up without oil. i don't think that's true. the world does not work that way. scarlet: we want to mention oil prices are at their low of the day. if you come inside the terminal, oil prices are down 3.3%.

$36.61. right around the lows of the day. you today, it has been an ugly picture. stabilizing a little bit but nobody is calling a bottom. >> let me point out what the saudi's said. they are playing/and burn with burn with thed smaller u.s. producers. then keeping oil suppressed like this is really a blatant attempt to put the u.s. guys out of commission for a while. that will hurt the high-yield market even more than it already has. a lot of that has played out, there could be more it oil does not pick up. the saudi's know that, and are playing to that strength. scarlet: to what extent do you expect high-yield equities to be leading credit? so lopsided toward overleveraged energy names, maybe some telecom names. a lot of people say outside of

those troubled sectors, things are actually ok. >> you could say that, but the problem is who owns what, how much pain are the income and what are they doing about it? isess you have a fun that only doing energy high-end yield, they will have problems. they own industrials high-yield, all sorts of sectors. when they are hurt in one area, it affects the rest of the market. that is where information asymmetry is. all of this destruction in the high-yield and distressed spaces, opportunities will arise. when i talked to institutional investors, those that invest in hedge funds, the first question they ask is who is good in distressed, who should i be talking to? good opportunities. scarlet: are there good opportunities in japan? a lot of people waiting for the bank of japan to do some in. they did not add to stimulus. if you look at the economic data coming out of tokyo, it's been a week relative to expectations.

it has been a steady line of lower although it has stabilize as of late. a little bit of an uptick in december. that would suggest that the may be got to pessimistic and has corrected a little bit. >> i look at that chart and i get very uninspired. here is the problem. if that was going straight down and that white line did not take that spike up, i would say, abe and aso are being forced to take action and the boj will be doing more stimulus. the fact that we are in this goldilocks scenario means they may not do anything. the market expects them to do something. scarlet: thank you so much. ♪

anchor: it is 2:00 p.m. in new york, welcome to "bloomberg markets."

from bloomberg's world headquarters in new york city, good afternoon. i am david gura. a historic year for the fed, as the central bank raised rates in nearly a decade. what is next? policy makers may be wrong decision. an importer rico, they will millionon about 37 dollars worth of bond payments due on january 1, -- in puerto rico. and what assets can be salvaged? first, let's take a look at the markets. julie hyman has a look. julie? watching have been