david: welcome to "bloomberg businessweek." carol: we are inside the magazine's headquarters right here in new york city. the year ahead 2017. david: taking a close look at the companies come economies -- >> products and innovators that will matter in 2017. david: we have a list of the 50 companies to watch in 2017. carol: we will talk about all of it. let's get started. we are here with the magazine's editor. let's start with the layout of

the magazine. you may make other publications. >> last year, we did a special design for the year ahead. we are doing it again this year. we are parodying other magazines. it's really fun. there's a lot of material in this issue. this makes it more digestible so the economics section looks like the economist, the tech section looks like wired. our art department did a really nice job of both helping the reader to get through it and also helping the reader read the text. it is all very readable. year: this is the fourth you guys have done a year ahead issue. you have an editor's note at the beginning in which you are urging caution. >> that's the message of a lot of the stories.

the economy is still in a muddle, but the people we spoke to sort of saw clear paths to growth. it was not a time to take huge risks. did,read everything we caution was the work that jumped out at me and i think will jump out at readers, too. carol: in the finance section, you talk about the doubt and uncertainty still hanging over hedge funds. they've not had a good year or two. >> the hedge fund situation remains very murky. people who are managing funds. there's too many funds at this point. they have not been performing well enough. what needs to happen is the number of hedge funds needs to be cut substantially. to make the market work for them. david: and the energy section, my favorite artwork, you look at

solar power here. the industry is facing a deadline. >> congress extended benefits for people who are installing panels. theh was not immediately outcome people were expecting. the question is how the solar industry is going to change. they need to focus instead of on installations that they were convincing people to install solar panels because the law was going to expire, now, they have to think about their own productivity. it is a complete pivot for them. ,arol: the whole introduction you guys talk to economists and ceos in terms of their expectations for growth and it's not very upbeat. >> it is not upbeat. the sense is there will be growth, but it will continue to be modest.

that is the way it was last year. people are a bit more optimistic. the growth will be tepid. david: i spoke to the editor about that piece. the world leaders, finance chiefs and bankers were gathered for the imf world bank meeting a few weeks ago. gave aef economist forecast for global growth that was fairly dire. >> sideways. not dire in the sense we are headed for a crash, but not exactly robust growth. looking for a year where we keep edging along, growing, but not at the pace we need in order to standards l living -- raise living standards. cocktail of interacting legacies, nonperforming bank loans, low investment and eroded

human capital. this is a global phenomenon. when he said that, he was referring to the rich countries. it's interesting because that is where you see kind of the most moping around. certainly there are parts of the developing world, brazil, for example, having real difficulties today. there are some countries doing nicely in the developing world. india is number one. india for a long time was such a disappointment. china took off and india did not. now, we have the reverse. india is growing faster than china. 2017 will be the third year in a row that india's growth rate surpasses china. strategistsked to

all the time and they bring up india as well. what has positioned it so well? >> they're finally shaking up this legacy of socialism in this ceiling that they need to make everything themselves. they are inviting foreign capital in. they are deregulating. these are all no-brainer things ofm the point of view developing economists, but there was such political resistance for so long. now we have the prime minister going ahead with these reforms and succeeding. this year, he managed to push taxugh a new national sales called the gst. that is a big positive just in terms of aiding interstate commerce within india. we also had the new bankruptcy laws. these are getting india out of self.lerotic old

david: india has been pretty well integrated into the global economy as a whole. >> right. nota being so big is still as exposed as singapore to global trends. just based on fixing its own problems, india can have a lot of growth, even if the rest of the world is not growing quickly. carol: turning fear of next year into a cover image. magazine package a that i thought it was great. from there, we are thinking, how do we feature all these covers? newsstand. we did some research. newsstands all kind of look the same. we hired a set designer who built this to scale.

we actually printed mockups of all the magazines ourselves. ship them to the set and then shot it. carol: i wonder if you played around with different angles and played with the model doing different things. crop forspecific everything. the actor was pretending to be asleep in one. we ended up using that for the subscriber cover. david: doing this with all the other sections within my lot of work for you guys. must have been a busy week. >> it was fun. carol: up next, the 50 companies to watch next year and the industries we will hear the most about. david: what exactly is that dreaded tech bubble and when

burst?t ♪

david: welcome back to "bloomberg businessweek." carol: this week's special issue has a list of 50 companies to watch. david: on it, you will find household names and lesser known and comers across the categories. these are the founders of people software -- sold software to on premise clients. you would buy the software from deploy the software and

run your hr systems on it. after a messy takeover with oracle, the founders left and started this company called workday. selling the similar product but on the cloud. slowly and slowly, companies moved their applications to the cloud. this became a popular product. why should it be on the list of 50 companies to watch? cloud applications is becoming a very interesting place right now. we have a lot of competition from legacy companies. and salesforce doing really adjusting work right now. -- interesting work right now. we are on the cusp of creative competition in the industry, a lot of fighting going on and consolidation. they have had very little impact because of the competition so far.

can they remain independent in 2017 or 2018? david: compare with this company does to work old or s.a.p. or salesforce. where does it operate in that ecosystem? their applications are still on premise. is the largest crm company. largest pure play hr solutions company and there are a lot of them out there. companies that specialize in certain verticals. the already being venture capital funds keep getting bigger. david: i asked about what we can expect in silicon valley next year. >> venture capitalists are raising record amounts of funds from their limited partners like university endowments, mutual

funds, overseas investors. on the other hand, startups are struggling to raise money. are seeing this rush of capital into the startups that are perceived as the most successful like uber and snapchat and everyone else is feeling just meh about the coming year. david: they are big and perceived to be safe or because these are companies that could go public anytime? >> both of those things. uber is an example. if you are looking for a pet and not feeling super good about the economy and your choice is up trying tort compete in that space or even an adjacent space where you have to compete for drivers, that choice which is high risk my reward and hoover would be perceived as a bet,r risk, lower return th

given the fact that we are not in a high-growth environment, uber looks like a safe bet. david: they are still raising money. lost -- uber lost an amazing amount of money. this is being caused by the huge amount of money flowing into silicon valley. this causest does julie: some investors to be concerned that it looks like a bubble. the economic prospects of all of them does not look totally certain. 2012, it was easier for somebody with a start up to go to an investor and ask for a

couple million dollars. what changed there? >> a few years ago, smartphone growth was off the map. if you had something that was pretty good and work on smartphones, you could ride that wave of growth to the bank. smartphone,buys a they needed to download some apps. they would download your app. now, most people have smartphones. that sort of avenue is closed. there are a few candidates for the next big thing. virtual reality, driverless cars, wearable technology -- there is no new iphone yet. david: there no underlying wave of growth. >> one of the big stars of the past boom, he invested in

andagram and tumblr square, smartphone driven companies, he said the times are not as good. a lot of the innovation is happening inside of large companies which are consolidating. market that iss not this market that is super friendly to startups. david: up next, we turn our attention to retail. carol: how to capture the spending power of millennials next year. ♪

carol: welcome back to "bloomberg businessweek." david: you can also listen to what's on the radio on sirius xm channel 119. let's get back to that list in the issue of the 50 companies to watch next year. carol: retailers face multiple challenges. we talked about walmart, jcpenney and american eagle outfitters. walmart is definitely the largest retailer. think about where you shop right now. you are doing most of your shopping online and that is where walmart is placing its bet for 2017. you saw the jet.com merge. it is an acquisition by the companies are coming together. even bigger bet

on taking the customer away from amazon. they're going after that prime customer and trying to get some of their wallet spend back to them. their online sales are only up seven present. -- 7%. online, it's about 2% of their total business. the change inhed leadership at jcpenney. --t will 2070 look like? look like?lik >> think of a department store, they sell apparel. jcpenney is now selling appliances. stores seller appliances? sears. they have an opportunity to get a new customer and increase that ticket. they are a $12 billion company

in sales. they still have $5 billion lost in sales. they've been showing signs of improvement to increase same-store sales while others have been contracting. american eagle, why is that when you are looking at? >> that is a turnaround story. you think about teen apparel, that is one of the hardest hasors -- american eagle done a phenomenal job to turn the business around. the are really focusing on product. apparel, aink about teacher is a teacher. what makes it different is the fabric -- a t-shirt is a t-shirt. what makes it different is the fabric, the fit. having stretchy jeans, having denim that fits well and has

that elasticity. they've done a great job on their product. a helpful guide to getting one presenters and millennials to spend their money. >> we cannot stop talking about millennials because there's so many of them. they relate command so much power. they are very health conscious, they make choices about eating healthier, being more active. see,hese trends we millennials out there doing things. they live in cool, athletic sneakers. is a social awareness that goes to their spending as well. they want to buy things that they can feel good about. organic products, natural products, responsible products. not to say these don't cover

other groups, but this is a big factor. when of the biggest divining characteristics is the approval -- they will not make a decision about something to buy, whether it is an item of clothing or a place to go and needed they have not checked with friends, check the reviews online and then they will make a decision. there's not a lot of individualism. david: we always talk about millennials and housing. we don't see millennials interested in buying homes. >> goldman sachs came out with a study on millennials recently. they are pointing to the huge potential that is there. they are starting to age. they are into their early 30's. that's something they are starting to think about. is someoment, it renting, some living at home, or living away in this sharing

economy egos. sharing economy ethos. xers carolyn about housing. that's care a lot about housing. momentsstraddle these in time that are kind of interesting. technology is something they are comfortable with. they are also the whole rights rats.all it's very much about who they are caring for right now. a lot of them are caring for aging parents while raising

their teens or even younger children. the choices are not so much about themselves and more about these others. when it is about a choice they are making for themselves, it's typically going into the home. they are still very individualistic. group --other >> they cross all these lines. there are likely some dual income no kids millennials. they were an offshoot of the yuppies in the 1980's. people who have more disposable income for themselves. they're spending it in ways that are not so surprising. their trips are more lavish or involved because it doesn't have

to factor in children and keeping them busy. hobbies that require gear, another big thing. they might be giving more to philanthropy than these other groups. personal grooming is very big with the dinks. then nos the dinks are dinks because even though they are older, they start having kids. the middle-aged couple that is out there skiing at that great resort in aspen or flyfishing out in wyoming somewhere. enjoying their lives. a lot of them come into by

choice and they are -- carol: the developing program that could offer visas to startup founders and their employees. ♪

much more fromp, this week's special issue, the year ahead to 2017. carol: what will matter next year, like the jobs that could see a boom thanks to brexit. david: and the products divining the future of virtual reality. on "bloomberg businessweek." we are here with the magazine editor in chief. let's start with the technology section. how some entrepreneurs are pinning hopes on a change to visa rules in the u.s. >> lots of entrepreneurs that

have done incredibly well in silicon valley are from all over the world. there are a lot of people who want to work in this country and start companies, but they can't because they have to skedaddle after their visas run out. there is a plan that would allow them more time in the u.s. to get their startups going and that will make it easier for them to find funding. that's been difficult for them. you have venture funds saying yeah, but you may not be here. carol: a special visa tailor-made for entrepreneurs. >> to let them get their companies off the ground. carol: big election-year around the globe. you talk about the upcoming elections in china. this is a big deal. >> it doesn't happen often. willuestion is whether xi

want to put another term on the back of the term he will be starting next year. it's unclear who else is going to be in favor. that is not decided until next fall at the big party congress. could there's a chance xi stay on for another term. that would be pretty radical. >> there was a sense that they needed to put limits on how long somebody served. it would be quite radical. the question would be whether he would still be controlling the military. david: we are continuing to follow what happened in brexit, the aftermath of the eu referendum in the u.k. you look at a number of other in thens happening european continent going forward. >> a super cycle of elections, germany and ae,

lot of these countries in europe, there is a very conservative hand today. the question is very anti-immigration candidates, whether they will gain in parliaments. carol: there is a worry about how these elections play out. a developed be for world that is trying to create economic growth. >> whether these parties will andpressure on the eu whether others will think, ok, we want to withdraw from the eu. it's the issue bubbling up. carol: thank you for the setup. the run up to article 50, we are waiting to see how this plays out. there's one job that will be in demand temporarily. >> a good year for consultants and law firms.

whenever there is trouble and uncertainty, they bubble up. and when a lot of dollars. a lot of companies, a lot of agencies are trying to plan for the plan. it's a little early because it has not been negotiated yet. we don't exactly know how that period after theresa may pulls the trigger will come out. it's sort of planning for the planning. you have law firms setting up specialized brexit departments, accounting firms doing the same. you may have your lawyer lined up and they may be doing research and coming up with plans, but it's a little early. it could all crater for them because once it's decided, those practices, those lawyers will have to go back to what they're doing before.

one of the few groups of people in the u.k. who may benefit economically from the 23rd brexit boat is lawyers and consultants. isotee 23 brexit lawyers and consultants. someone i spoke to compare it to reuniting the two germany's after the cold war. we are talking about that level of legal complexity. if you are in the business of helping deep pocketed professional clients sort through complicated problems, this could be an extremely lucrative time for you. even as the broader economy begins to sputter. david: what are firms looking at, what are they worried about right now? >> the big one is finance. theecret, london is one of

two or three true financial capitals of the world. it's something called the financial passport, a piece of legal jargon that refers to the ability of banks domiciled in the u.k. to do business across any eu state, and that goes away, banks will have to go through their operations in london business line by business line, deal by deal to see what can be legally conducted here and what will have to be moved elsewhere in europe. whether that is paris or amsterdam or somewhere else. that's one area where lawyers and consultants will have a huge amount of work to do. every industry is regulated by the eu. they all have to run through everything in the event of brexit to figure out how to be on the right side of whatever new rules will be. david: we don't even know when article 50 will be triggered. what are the consultants doing at this point?

as one senior consultant put it, they are planning for a for, developing scenarios various clients as two different outcomes that could occur. there is not an infinite range of outcomes. infinite new want an infinite variation, but broadly, there are several models. it's a question of which one. noise coming from theresa may has been in the direction of a so-called hard brexit. the u.k. would have no special relationship with the eu. muchuld deal with the eu as the u.s. or australia does. there's something like norway and switzerland who are quite integrated in the eu while not being members themselves.

those have quite different implications for the volume of regulatory and legal change we are talking about. david: we asked the creative director about how he put it all together. economic,ging global energy, retail -- we've heard up this section with the magazines we thought was naturally fit. global economics, we took inspiration from the economist and for retail, we took inspiration from in style magazine. there wasn't a well-known energy magazine, so we paired energy to a fitness magazine aesthetic. is the objective here to mimic it as completely as or get a sense of what the economist looks like? >> first, we tried to replicate

it as close as possible. and then we added our own brand. a little more playful and loser. .- looser we look at the magazine a couple of times to make sure everything is progressing well. there was more laughter than there usually is. david: will wall street make it through 2017 without another financial crisis. could the good times just be getting started for u.s. energy producers? ♪

carol: welcome back to "bloomberg businessweek." peter coy looks at the unhappy history of years that end in sevens. help us understand why the debate is so important in economic circles right now. the positive short-term trends would include somewhat stronger commodity prices which helps him developing economies -- helps some developing economies. and some sign of easy money in the developed markets. if you are a developing economy and suddenly, rates are going up in the rich world, they worried that money would get sucked out of their economies.

the u.s. has held back on some of the interest rate increases. the fed will probably still raise, but not as quickly. won't be a sucking sound of money coming out of the developing economies. that is a short-term relatively good, not such a crisis feel as there might have been six months ago. the medium-term is still problematic. these are things we talk about all the time like the decreased public support for free trade. developing economies really need free trade, they need to be part of the world economy, they need to have markets are there goods. eroding fiscal balances , the cost of supporting the social infrastructure and so on. debts that china

would be a great example of that. debt is something that may not cause a conflagration in the medium-term -- david: how worried are people about tdebt? >> is high on the list for an obvious reason. debt makes the economy or company or household brittle. becauseces your growth you don't have to put up all the money for your investment. in a house, classic example, you are a money, the house price goes up, you are happy because you only put down 10%. what happens when the house price goes down? it's the same thing for an economy. you still own the money even if your wherewithal is decreased and you become brittle that way. mounts, household and

corporate debt as well as corporate debt worldwide becomes more and more vulnerable. david: why the shale boom may hit hyperdrive next year >> sometime next year, we are going to basically sell more natural gas then we buy. it won't be an annual average, we won't get there until 2018, but sometime in november, we will have more natural gas to sell to the world than we buy. this is a huge shift. this is the first time the shale revolution has kicked into gear and given us enough gas to push out there into the world more than we buy. david: a big reversal from where we were a decade ago. what happened in the interim? matt: 10 years ago, the government was saying we are going to be forever short.

our importsrease ar and continually go up. billions of dollars building these really expensive import .erminals to take lng that flipped around 2008. we are not sure, we are long. we have a century of gas. the industry to seven or eight years to recalibrate around that. you have import terminals in the gulf that were never used. particular opened in 2008, immediately turned around and said let's build and export terminal. this year, we will see more come online. this is the geopolitical weapon we can use. pushing our influence into places like europe and latin america and trying to get our

trade balance a bit more in line. next, the companies that may finally figure out what virtual reality is for. david: what the editors got right last year. carol: and wrong. ♪

david: welcome back to "bloomberg businessweek." carol: let's get back to the issue's 50 companies to watch. we spoke to paul sweeney about netflix, comcast and cbs. david: what is comcast looking forward to in 2017? paul: they will focus on growth areas. one will be there consumer

broadband business. it's become a basic utility for consumers as they consume more and more content over the internet. it has been a strong growth story for them. also the commercial business. they are providing high-speed internet access to enterprise businesses. it's becoming a very big profit contributor to them. a business that is growing 20% per year. a business that comcast will allocate more capital to. david: comcast has content under control. let's go to netflix. very big aspirations of growing around the world. paul: netflix just put up a strong quarter in terms of subscriber growth. that is still the primary metric for this company. that will ultimately drive revenue and drive profits that will fund their ever-increasing programming budget.

right now, they spend $7 million year in programming. year inllion a programming. they have a very big programming ambitions. that requires a lot of capital. they continue to need to grow. inid: cbs has been involved this big drama surrounding the redstone family. paul: cbs has done very well. the ceo has been a constant programmer. had the topork has ratings of any of the broadcast networks. showtime has shown consistent growth. the stock is performing very well. cbs ine another life for the context of viacom? controlling shareholders

have pressed for a merger of the two companies. what will the role for les moonves be? les will be the ceo and it will be his task to revive the fortunes of the cable network and the paramount studio of viacom. david: a look at the different variations of virtual reality hitting the market. josh: 2016 was supposed to be the year of vr. released aus high-end virtual reality headset, as did htc. those things need powerful computers, they are the deluxe experience. google gained a lot of steam as well for releasing a cardboard thing you put a phone and. it's a cardboard holder for a phone that fits on your face.

that gives a very basic virtual reality experience. there is stuff in between. oculus worked with samsung to make a plastic headset that you also put a phone and but has a bit more of the bells and whistles. oculus rift and htc are at the high end. >> is a very expensive devices. you have to spend $1000 for a pc to run with them. the google thing is essentially free. the same something is in between. google released a competitor to gear vr called the daydream view. you can use your phone with it.

that gives you something in between. not quite oculus rift, but good enough at this point. it's clear what you are paying for when you get the high-end experience like especially the vibe. it tracks you around the room. struggle --f a there's two cameras you have to set up that track your movement. you have to plug this into a computer and you have a cord hanging off of your head plugged into this computer. each year, bloomberg businessweek offered its predictions for the year ahead. it gets some things right and something's wrong. >> this is the third year in a row we've done this what we got

right, what we got wrong. some are qualitative, some are quantitative. some are writer insights, some come from analysts we talk to. it's like a reverse back-check. -- fact check. we find anything that is a prediction and some of them leap right out -- the death of scalia. others, you have to check. did this come true? david: talk about the means by which you did it this year. the whole issue this week nodding to other magazines here. using the matrix that is a weekly facet of new york magazine's. weird.ike to be a little this is a nod to the approval matrix. there is another awareness level on top of that. also a nod to the movie "the

matrix." whaoan see that in our category. prediction, this was about the counterintuitive likelihood that of the nine supreme court justices, if there was one who who boththe swing vote sides would have the most recent in this extremely potentially impactful case about wasatory union fees, scalia the one who could make it go one way or another. talked to various experts, when into what scalia had written in why he would not

necessarily take the same position. instead, he died. still wrestling with what will become of the court in washington. >> that particular case deadlocked 4-4, as did others. it's an issue that has deadlocked the court. people are trying to get back there. carol: "bloomberg businessweek" is on newsstands now. david: and online. i love that matrix. fun to go back and look at the predictions. how about you? it's divided how into five sections and how they did a nod to other publications. to divide the magazine and cover different areas. really well done.

more bloomberg television starts now. ♪

ix: big bang's headline a big week for corporate beatsgs, but do their leads to a turnaround in the sector? from saudi bonds to russian oil to italian banks. to the latest data from china. we will move fro through all the news. the bond issuance is very much like an ipo. with plus, a conversation