save $1100 on the i8 mattress with purchase of sleepiq technology and flexfit3 adjustable base. ends monday. know better sleep with sleep number. mark: coming up on "bloomberg best," the stories that shift shaped the week. oil is plummeting and what is ahead. >> i got the bottom would be around $30. now we are around the silly season. mark: what do central bankers make of the rough start? >> the euro zone economy is picking up. have an exclusive interview with brookfield's bruce flatt. mr. flatt: this is a residential tower.

up to the 40th story today. mark: all this and more on "bloomberg best." let's begin with a day by day review of the top headlines. on monday, investor concerns spiked as oil and commodity prices plunged. betty: more than $100 billion has been wiped off of the 61-company bloomberg world oil and gas index as it hits the lowest level in more than a decade. >> are investors close to throwing in the towel? hedge funds have cut their bullish bet to the lowest since 2010. are we close to that point or

not? francisco: there are a couple of things and we have seen a couple of them. u.s. production is declining and domestic suites are becoming a tighter market. relative to international markets. that is the first step. we also need to see, frankly, some better news out of china, although a weaker yuan and a potential government fiscal package could help through that over the next month or two. i also want to see a more stable u.s. dollar -- definitely not continued rallies in the u.s. dollar. that doesn't help. we are starting to see the conditions for a bottom, but we're not there yet. remember, that we need to see strong demand, and that may not come until the summer because the winter, unfortunately, has taken a huge amount of demand out of the oil market. mark: investors are being bogged down with day to day volatility.

especially in the currency market. take us through what is happening in china. >> the current episode looks remarkably similar to what we had in september. following the initial selloff, markets stabilized. the spread corrected. and then what happened in january was another surprise. the yuan fixed much weaker, and it was a rerun of the same story. that adds to a pattern whereby the underlying trend remains on the downside, but it is the case that the officials do not want us to fuel financial instability, concerned, rather -- concerns. rather, they want to take it one step at a time. that similarity is quite concerning. betty: the dow is plunging, as we are seeing, coming off its

low of the session. it also begs the question more and more, when does this really start to get real for the economy, right? right now it is just stocks. when does it become, you know, your job? >> it is very hard to nail down, but what you can see historically, most the time you have a bear market, it predicts a recession. however, you cannot go the opposite way. >> the russell 2000 is in a bear market. the s&p is in a correction mode. is this the tip of the iceberg? ms. cohen: investors are worried, but the underlying economy outlook is good.

this is a reaction to some of the important news around the world. china and thoughts about what the federal reserve will do next. mark: the bank of england keeping rates the same. ian voting for a rate hike. he sees upside risk to domestic cost growth. as we know, the bank of england is focusing on domestic cost .rowth the bank of england's focus is on core inflation, which on it -- on an annual basis is 2.1%. >> they revised down growth, inflation.

they talk about risk being more evident, more volatile. mark: two early to say the impact on the economy. -- too early to say the impact on the economy. >> indeed. they have been bearish on china as well. they are waiting until february for the key decisions. what does it mean for inflation. i think from the minutes yesterday, they were more dovish. they do not expect a rate hike. mark: chinese stocks back in a bear market for the second time in 17 months. -- in seven months. >> my take on china is china has a serious problem, a set of challenges to convert from exports and construction stimulated by easy money to domestic consumption of goods and services to moderate the growth rate, and, actually, to move to a free flowing economy, maybe one that is going to have

a recession, like the rest of us, which they have not had for the last 20 or 30 years. yes, it is a serious problem, but is it something that is easily surmounted, or is it a disaster? people have gone from the first to the second. >> sentiment is really bad. the problem in china -- what we are learning here, is at the end, trying to artificially sustain prices is not possible. the market will always win. when you see interest rates in hong kong up as high as 60%, they are telling you the currency is in trouble and they have been slow to let it depreciate. at 60% rates, having lived through the exchange rate crisis in europe myself, this is telling you we are near the end game, but something cataclysmic is going to happen, we will have a crisis, and eventually this is

all going to come down. mark: coming up on "bloomberg best," the week in oil on every angle. we dig deep into a complex and perplexing story. that is next. ♪

mark: welcome back to "bloomberg best." i am mark barton. we discussed the volatile business of oil covering every aspect, supply and demand, the short and long-term outlook for investors, producers, and consumers. here is a sampling of what our reporters and guess had to say -- guests had to say this week. on the topic of oil. >> i keep hearing about $20 crude. why is $20 so important? vincent: the high in the 20's is where you would anticipate the cost to be.

if you look at the great work the emp's have done bringing down the cost, managing this tough environment, it seems as though the cost declines have reached that maximum threshold. it is very difficult, challenging to see how they can improve on that level in 2016 relative to 2015. >> why are people so concerned about oil prices being low -- isn't it a stimulant in some countries like india? vincent: they are helping the average consumer, but keep in mind, you have had cuts in subsidies. also keep in mind here in the u.s., for example, you have had significant job growth in the energy sector. that has reversed. high-paying job growth -- that has reversed. we now see job losses in the space. you can also see a negative

effect, not only in the energy sector, but also the derivative industries that support the energy sector. matt: i know it did not make a huge difference to you guys at $45 a battle, $40, $30. now that we are so low, it must be a boost to sales. >> at some point you do hit diminishing returns. the customer has already factored in low oil prices. the hard thing for us is if it starts to spike again. volatility is the one thing that causes customers heartburn. customers can get used to almost any ambient level of pricing, but when you have extreme volatility, that is until get -- when people start to get paralyzed and say i do not know what to do. >> this is brent, down 2.6%. we have not seen a move like

this since 2000. we're back at 2004 levels. are we capitulated on oil? >> the price of oil has nothing to do with oil. supply and demand of the market is heavily oversupplied. we have drifted off the picture the last two weeks. oil has become financial iced. d. financialize it is becoming intensively given by financial markets. it is a risk on, risk off proxy. if you look at the correlation with emerging-market assets, it has intensified. it is a proxy for risk appetite at our own risk index is in panic territory. >> this is not like the drop we saw in 2009. this is more like the exact opposite speculative move we saw as oil went parabolic of to $145 a barrel. you have momentum plays that do

not quit. we have seen the highest number of speculative shorts in this market the last three years, and the lowest number of speculative longs in the last five years can we have seen the fed raise interest rates. that makes the dollar go higher. you get more black boxes, algorithmic players. now we are in the silly season. these moves have nothing to do with fundamentals. you can make up any number on the downside. it all matters how long this speculative frenzy of selling will continue in the crude market. >> that touch below 30 -- significant, not significant -- are we testing what is happening? >> the markets love big, round numbers, and if you asked if we would see a two handle on crude, people would say don't be silly. here we are and people are panicking. how low can we go?

>> single digits at the moment. mr. kennedy: absolutely. no one is sure if it is bottoms -- where this bottoms out. >> what do all those oil producers and oil companies do when they see the return of oil prices to the 20's? how are they going to handle it? >> we are seeing what oil companies do in the situation -- cutting. bp will cut of further 4000 -- another 4000 jobs. brazil's petrobras is cutting. stephanie: what you think we will see in terms of forced m&a or bankruptcies given where oil prices are? mr. hamm: there has been a lot

of resilience. you have not seen forced m&a's, like we have in the past. stephanie: as we get to $20 oil, some smaller producers facing tons of debt -- they have no choice. mr. hamm: they do have some long-term choices. very few have that they have to -- have so much debt that they under because of $20 oil. it is going to be there. that is the way the market works. stephanie: i am the house optimist, so i do not like to talk about markets going red or taking the leg down. are you telling us that is what is in store? >> well, the color red has been there for a while and i do not think it is going out of fashion. to talk about iran, you have to ask if the market is pricing in new volume. the question is how much new volume. expectations are between 300000

and 500,000 barrels per day. we tend to think it is closer to the lower end of the range, but if it were to be at the higher end of the range, or where to come back faster and more aggressively than expected, then that certainly could be what an oversupplied market wouldn't want to see and could scare it further to the downside. >> as if it could not get any worse -- you are the biggest miner in the world with the commodities hurting you. now come also the biggest international investor in u.s. shale. having to take $5 billion in terms of a write-down. >> they bought the assets in 2011. they spent $20 billion going long. at the time, that was well received. it was against the backdrop of winning commodity prices across -- waning commodity prices across the board.

no surprise when the underlying commodity drops, you will see these write-downs, more to come across the sector. ♪

mark: you are watching "bloomberg best." i am mark barton. on the heels of a record year in 2015, the mergers and acquisitions keep on coming. a roundup includes big deals. >> making it a powerhouse. both company's shares have turned negative. for more on the deal, let me bring in drew armstrong. the second try was a charm. was it the introduction of cash? drew: it it is quite a bit of

cash. $18 a share. it comes out to around $12 billion, if i have done my math right. for, it was in all stock deal. really taking risk off the table. david: listed in the u k. most executives are in the united states. that tells us the story. drew: that has been the case for a long time -- companies overseas doing deals to lower the aggregate tax rate. it will go down 7%, and 8%. that is a huge savings. >> asia's richest man is to be the first person to control a hollywood film company. he is picking up the producer of godzilla and jurassic world.

we have more of this gigantic hollywood deal. what is this worth? >> a whopping $3.5 billion. wang saying his firm will buy the rights, and he hopes this will help china gain a stronger foothold in the global film industry. legendary entertainment produced not only "godzilla," "jurassic also "the dark knight" trilogy. and they have produced $10 billion worldwide. mark: they are looking to cut jobs worldwide. let's bring in alex webb. where are the bulk of these cuts going to take place in europe? alex: we think germany is going to be one of the biggest, certainly. they have not broken it down entirely.

they break down france and germany, where there are strong unions. 1700 and germany. 770 in france. mark: we must make it clear -- this is not to do with the sliding price of oil. alex: this is a separate issue. ge wanted the power to store turbines. it can be re-created at higher margins. it is eliminating manufacturing capacity so they can retain the lucrative service and maintenance contract element. >> the carmakers will be in the spotlight this morning when the markets reopened. renault shares dropped as much as 23%. we saw a drop of 20%, a rally a 50% on the drop. have the markets overreacted? >> that is the message the french government is trying to

tell. they own nearly 20%. what happened on the market could jeopardize the french state's plans to sell, to reduce its stake in renault. the economy and environment ministers try to reassure last night. they said the case is in no way comparable to that of volkswagen. the market overreacted. he retains trust in renualt. mark: bloomberg television presented a number of exclusive interviews this week. stephen angles spoke with the ubs chief executive, breaking news of the bank's plans to expand operations in china. stephen: ubs has completed

its global restructuring. china has gone through its own restructuring. what are your plans this year in 2016, which has started pretty volatile? >> it started how 2015 ended -- quite volatile. i think china is not the only zone. we have to expect adjustments for 2016. it is a good time to plan for the future. that is why we are starting to implement our strategic plan in the next five years. we think we will double our account, grow businesses in acreages, fixed income, asset-management, across the board. we also plan to expand our services -- the service companies that are getting outsourced. i think china is a great opportunity, like it has been for the last 20 years.

>> what more can the ecb do? can they buy corporate bonds? >> first, if we look at the eurozone economy, it is picking up. we had growth of 1.5% last year, and we expect 1.7% this year. inflation remains too low. it is true. facing the situation, we have been active and effective. active -- look at our decisions of december three last year. we decreased interest rates and more negative and expanded our asset purchase program's until s until march, 2017. we said we would reinvest the principal. we have been very active, and it is effective. michael: friday, the government reported almost 300,000 jobs were created in december.

monday, the markets tanked. does it worry you when the markets do not react too good to good news? mr. kaplan: investors are reacting to corporate profits and expectations of corporate profits and i am mindful of the fact that corporate profits in 2015 were down in the s&p. there has not been a lot said about that, but it actually declined. in the first couple of of weeks, some of the estimates last year for corporate profits in 2016 have been revised somewhat down . again, this is reflective of the rest of the world, as it is of the u.s. economy. i am not surprised the markets are going to pay attention to other things. mark: and "bloomberg best" continues with another exclusive interview. we will devote the rest of the program to erik schatzker sit down with bruce flatt.

i am mark barton. much more to come on "bloomberg best." ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business.

erik: everyone knows blackstone is the biggest manager of alternative assets. if i ask you as number two, would you know the answer? it is brookfield. the canadian firm with its headquarters in downtown manhattan. >> where we are standing today .s a big continent in the water erik: it has amassed more than $225 billion in investments in 30 countries. ceo has drawn comparisons to

warren buffett. >> investors were always trying to find those spots around the world. erik: since he became ceo, brookfield's has returned more than berkshire hathaway. he prefers to stay out of the spotlight. >> generally conservative. erik: until now. interview, we talk about real assets. >> our infrastructure business is owning the backbone of the global economy. 10 years from now, there will be amazing opportunities. the numbers are big. that money can easily be put to work. erik: and risk. >> it is not for the faint of heart. erik: coming up on "bloomberg best." welcome.

i am erik schatzker. i paid bruce flat a visit. here at his new york city headquarters. it has been a tough few months in financial markets. u.s. stocks are in a correction. oil fell below $30 for the first time since 2003. cracks are showing in the junk bond market. flat does not seem fazed. bruce: they want to own tangible assets. what investors in the stock markets get confused with is the daily movements confused them about the underlying value of what is there. as investors, from time to time, it is good to have stock market access, and from time to time, it is not. those prices vary. it often doesn't have anything to do with the underlying

fundamentals. today, you are seeing a real asset company in the stock market is not trading as well as they were. the fundamentals are very good around the world. there is a very robust amount of money. erik: does that mean public market real estate is undervalued or cheap? >> you will see more privatization around the world, pipelines, real estate businesses, as that transition changes. erik: do you feel more comfortable buying or selling? bruce: we are always doing both. the reason we are in four businesses and 30 countries is that there is always somewhere

that does not have enough money. what we do is move the money to the locations where there are opportunities available. to the point, we are always investing and selling. there are places in the world we put money in, there are places where we are selling. up until the last six months, even though we like united states and it is our largest market or investment, we will are probably a net seller of assets in the united states because they have matured and done well over the last five years. erik: you are a net buyer where? bruce: brazil, south america, india, europe, the oil and gas business, in infrastructure around commodities.

anything that is out of favor. value investors are contrarian. we are always trying to find those spots around the world. erik: you will not find many ceos they get excited about freefalling commodity prices. where others see misery, he sees opportunity. bruce: those companies need capital today. our capital is available to harvest the assets which are unproductive to their mainline business. they kept those on their balance sheets because those assets were core to them, but really unnecessary. we can take them off their balance sheets and buy them -- provide them significant amounts of capital to put back into their company. today, all of the commodity companies are looking for capital. erik: some people have tried to get into industries and

businesses around the oil and gas over the past few months and found themselves trying to catch a falling knife and it hurts. bruce: we bought the apache operations. they sold us probably nine months ago. we hedged all of the gas and oil going forward for a long period of time. we always try to -- what we are aying to do is earn conservative return over a long period of time. even though we are contrarian in nature, we try to protect the downside. our first and foremost, we think about downside protection. second, we think about how much return we get for our clients. erik: do you worry about oil prices and impact? bruce: no doubt.

around the edges are calgary and houston, leasing is not as robust as it was three years ago. commodity infrastructure businesses are not as good as they were a few years ago. but it creates opportunity. it is around the edges, it is creating a few issues, but it is modest. for us, there is more opportunity coming band the -- than the issues that it brings for us. >> how can you be so sure? >> it is called supply and demand. when the natural gas sells for less than what the replacement cost is to bring it over the gas, ultimately, people will not -- over the ground, it may take a while, but ultimately, people

will not justify the cost of capital, therefore, the price will go up because you have to spend. you cannot bring natural gas out of the ground for two dollars. erik: let me ask you about china. brookfield has had a favorable view for the past couple of years. does that still hold? bruce: we are devoting significant resources to build people and resources so we can build over the next 10 years. economy thatazing commodi will contribute to the world of business. and to everything in the world over the next 25 years. this is the perfect time for us to build our resources there. we are putting more people there and we are going to invest more. erik: i am not surprise you say brazil offers good value. things should. they have an economy in recession, a freefalling current

cy, the mother of all corruptions scandals, plus, they have drought in places like son -- san paolo. bruce: it is a bit of a mess right now, but this country will come around. we are finding opportunities you would never have had access to before. or, we are buying at fractions of replacement cost us. -- replacement costs. one thing we have found in the real asset business, buying pipelines, toll roads, or real estate, if you buy at discounts to replacement cost, you have a huge margin of safety when you are buying. we are buying with a large margin of safety when we buy in brazil.

we will come out five years from now with great opportunity. i would not suggest if you had a one-year horizon that you should go to brazil. it is not for the faint of heart. >> how much capital do you see re?selves deploying the bruce: we have to be prudent with our balance sheet money and our clients money. we will never bet the farm -- we never bet the farm on anything. you have to keep investing to get out the other side. we may put 10% of funds into brazil and that is a significant amount of money. erik: what are we talking about? bruce: many billions. erik: how do you feel about the economy here? bruce: good. it is not perfect, but pretty good. everyone is complaining, but it is pretty good. erik: you need to see the economy pickup for vacancy rates to go down, for rent to go up. bruce: housing sales went to

500,000 new homes a year. they are back to over one million. they continue to creep up. that is good. if you are in the housing business, that is not a bad. -- not so bad. business is not great, but it is pretty good. >> next, a lesson in real estate from bruce flatt. ♪

erik: welcome back to "bloomberg best." there is one industry where brookfield kn needs no introduction. real estate. this building used to be called the world financial center. there is no mistaking who owns it now. bruce flat gave me a scale model tour of the project. the biggest is manhattan west.

bruce: this is up to the 40th story today. erik: when complete, it will be almost -- square feet. bruce: not many people have that amount of money to take it private. we bought the telecom towers in france. we took it private. when we bought the company out of bankruptcy in march of 2009, we put $2.5 billion up in the worst financial crisis of the time. not many companies had $2 billion. it is an enormous competitive advantage. the competition gets less as you go up in size. erik: would you buy commercial property in manhattan or london? bruce: we are among the largest

owners of class a property in london and manhattan. we continue to buy. we have been buying buildings recently in both cities. we are developing in both cities. these are phenomenal markets. longer-term. they are among two of a very small number of places that over the longer term, you will almost never lose money in those markets. because they are great cities. as long as you have staying power, you will seldom lose money. even if your timing is not great. you may not earn a great return if you bought at the most imperfect time, but very seldom do you ever lose money.

erik: that is one reason he doubled down on brookfield place. bruce: four years ago, we had significant renovation to do. we spent almost $400 million redoing the building, retrofitting it into this new age of technology. we changed the retail to bring the retail into the area of battery park in lower manhattan. it had to be repurposed for the environment downtown after the buildings were built across the street. we had to lower it to the ground. there was no retail or people downtown before. we had to repurposed the center for those people. and for the tenants upstairs.

erik: they turned the atrium into a shopping center and lured some of the top brands. bruce: it was money well spent. what it was worth, nobody would have paid you anything for it. we probably created $1 billion by redoing it. it changed the image of every tenants, about what the employees thought about being here. time came in here. saks, relocating their headquarters. our business is about taking an asset and repurpose thing it and -- repurposeing it and creating value. that is what we do. erik: better option than selling? bruce: usually. erik: on the mezzanine, a curated food court. bruce: we had a team that found restauranteurs in the city who have other locations and we brought them here. we hand-picked them for this location.

it has been a tremendous success. erik: bruce flatt is on a collision course with some of the fiercest titans in finance. i will tell you who and why, when we return on "bloomberg best." ♪

erik: bruce flatt has been content to build his businesses with little fanfare. the company which grew out of the family's investment empire was low-key. flatt himself, a former accountant from winnipeg. he now has ambitious plans to take on some of the biggest and

best known firms in private equity. bruce: our businesses we have were spun out of our private equity business. we started by being investors in these businesses. eventually, we separated them off to the side. we built a platform and we raise funds for those sectors. our private equity business is now relatively small. we are putting a lot of effort into it. it will be as large as many of those businesses eventually. >> you want your private equity business to be mentioned in the same breath as the lack stone, , kkr, theone apollo's? bruce: if you do not mention it today, you should. erik: those firms have a reputation for being savvy and cutthroat. bruce: they are all savvy and excellent organizations. we are a little different. we are owner operators, we buy

businesses, we hold for longer periods of time. we are just a little different. we built the other four businesses big. we will build this one just as big. erik: that sounds like bruce flatt throwing down the gauntlet to me. bruce: however you want to say it. erik: what is brookfield's personality? bruce: generally low-key, conservative, worried about the downside protection. we think about risk. we are owner operators of the businesses that we run. we have a significant amount of capital invested inside our -- beside our clients and i think that changes the dialogue we have with them for the positive. erik: how are you different from the firm most people would compare you to by virtue of what

you do, blackstone? bruce: we are an investor first, asset manager second. as opposed to most other organizations that start as asset managers first and become investors. what we are is a bunch of value investors who happen to raise funds. because of our balance sheets, scale and size, and the money we have, we are still 25%, 40% of the money we have in every strategy we operate. erik: how much money do you plan to raise between now and the end of this year, now and five years from now? bruce: we have a number of funds in the market that total about $25 billion. they should we done this year. we raise successor funds.

usually they are larger. we will raise every few years, $20 billion or $30 billion of private money from institutional clients. the numbers are big. that money can be put to work. erik: size does not scare you at all? bruce: 20 years ago, we thought it did, but today, it is a competitive advantage. very few people have as much capital as us to put to work for as long as we have. that gives us a competitive advantage. we get a phone call when a sizeaction is of a certain because there are only a few people you can call.

we can only do it because we both have balance sheet money and our client's money. erik: you have more than doubled size. will you be twice as large as you are now 10 years from now? bruce: i am sure. erik: you will be approaching half $1 trillion in assets? bruce: probably. erik: that does not scare you? bruce: no. erik: isn't there a point where opportunities begin to run out? bruce: this is the infrastructure business. and the real estate business. these are the largest two businesses in the world. no one thinks of them that way. this is the backbone of the global economy. it is how you get electricity in the morning. every road you drive on. erik: water comes out of the drinking tap, the airport i fly out of. bruce: you've got it. we have all been funded by governments before.

today, governments cannot afford to have them on their balance sheets. real estate is on every corner. erik: this is going to be the golden age for real assets. bruce: interest rates are in the range of the worst person that is predicting interest rates, real assets are still an amazing place to be. erik: he is so upbeat about brookfield's prospect, i had to ask if there was anything that keeps him up at night. bruce: you cannot be an business -- in business and have a have a positive attitude towards business. the risks are big. the biggest risk is liquidity. 2008, 2009 or scary for most -- were scary for most organizations. liquidity was drying up. the good news today, despite the issues around the world, liquidity is generally freely available. erik: and will continue to be? bruce: we do not see signs of it not being available.

if you are in the high yield market, it is not good today. for good corporations, it is freely available. erik: that is all for this edition of "bloomberg best." you can get more news from around the world at bloomberg.com. i am erik schatzker. thank you for watching bloomberg television. ♪ . .

announcer: "brilliant ideas," powered by hyundai motors. narrator: the contemporary art world is vibrant and booming as never before. it is the 21st century phenomenon, a global industry in its own right. "brilliant ideas" looks at the artists at the heart of this. artists with a unique power to aspire, astonish, provoke. in this program, pioneering film artist diana thater. ♪