,> it's 8:00 a.m. in hong kong making it midnight in london. i'm rishaad salamat. prime minister shinzo abe. unemployment rate unexpectedly rose for the first time in three months in november, now at 3.1%. cpi inflation dropping by more than anticipated, by six/10 of 1%. the bank of japan says japan will take a big step towards overcoming deflation in the year ahead. let's have a look at the trading day as we get going. this is the situation at the moment for the nikkei 225, off by 1/4 of 1%.

a little flatness for the kospi. a mixed start to the trading day. most markets are shocked because of the christmas day and boxing becausedays -- are shut of the christmas day and boxing day holidays. the chinese economy shows no signs of faltering after three months of 6.7% growth. private service companies reported their momentum was the best since august, 2014. bloomberg intelligence says the expansion picked up to about 7% last month. toshiba may take a loss on its business in the u.s., but there are conflicting estimates of how much. this coming after the acquisition of a power services business by westinghouse last year. there is a dispute over the unit's values. the nikkei puts the expected loss at around $850 million. nha expects that to be $4.2 million.

sony music has apologized to britney spears after its twitter account was hacked and falsely reported the popstar's death. it comes to have years after a major cyber attack rippled the company's film division. sony says the issue has been fixed. was north korean attackers -- hackers angry over a set rogan -- seth rogen film. -- government funds should be a last resort. the ecb says that monte dei as $9.2ay need as much billion based on a recent stress test. they will be discussing the intent -- the european central bank's assessment. global news 24 hours a day, powered by 2600 journalists and

analysts in more than 120 countries. a day when we are seeing very few markets open because of the holiday. the ones that are open, pretty mixed. you are watching bloomberg. ♪ david: coming up on "bloomberg best," the stories that shaped the year in business in the americas. >> if i do not get donald trump with change, i'm going to get hillary clinton. >> he has not been able to control himself when he is this close to the presidency. he is not going to change. david: a presidential race like none in history puts a business leader in the white house. >> it is going to be a very business friendly administration. . >> it's a sea change. david: the markets wait for the fed to move, and not always patiently. janet: get off of this fixation of lower interest rates providing economic growth. david: plenty of action in m&a

and plenty of reaction to the biggest deals. >> this checks all the boxes. >> oracle is making a desperation move to boost their cloud revenue. david: where did money move this year, and why? we revisit reflections from investment insiders. >> etf's are sharpening volatility. >> i think what we see is a play -- flight to quality. >> we are in a low return world. those are the three most important words to remember. >> i am not predicting calamity but my portfolio -- i am sitting on a lot of cash. david: join us for a look back at 2016 straight ahead on "bloomberg best." ♪ david: hello, i am david westin. welcome to a special edition of "bloomberg best." on this program, we will review the most important business

news, analysis, and interviews for the united states and the americas in 2016. without a doubt one of the most globally significant events was the u.s. presidential election. this kicks off our year in review. >> let's turn to the race for the white house and the results of super tuesday. on the democratic side, hillary clinton jumped out to a big lead in the delegate count after winning seven states compared to four states for bernie sanders. on the republican side, donald trump taking seven states as well, and taking a lead over his closest opponent, ted cruz. the question is, how do the strategies change now? we are headed into a winner take all zone. >> the strategies change radically and this is why. we expected donald trump to do well and he did, and marco rubio had a difficult night. the establishment eyeing him are now left with his option of, do we start to think about getting behind donald trump or do we have sitting lawmakers and governors saying, this is not what the republican party represents?

mark: how beneficial is it that hillary clinton can probably now sit back and start to plan ahead to november, is that to her advantage? >> it is beneficial in that she can try out a lot more strategies. she has a bit more breathing room. mark: trump won in mississippi and michigan. does this stress the ability of him to win across very different areas, across distinctly different demographics? >> he has won in all areas of the u.s. that is the thing about donald trump, he has built this broad coalition of support. >> let's turn back to donald trump and the surprise by ted cruz to drop out. what are your key takeaways from last night? >> there is only one key take away, it is obviously clear. even before cruz decided to drop out, trump was on a glide path. >> how does donald trump go

about healing these rifts in the republican party among the donors and the elite? >> with great difficulty. i think the people around him recognize that there is a lot of mending to do. david: you have been pretty outspoken about donald trump. don't we need to know what he is going to change to? has he told us what he is going to take us to? >> i understand the question, and i too also have some doubts, but i know that if i do not get donald trump with change, i'm going to get hillary clinton. she has already told you, i want to shut down all coal mines and get off fossil fuels. it is the most stupid statement on energy i have ever heard. david: hillary clinton declared herself the victor, becoming the first woman to run for the presidential race for a major party.

>> historic night for hillary clinton and for the u.s. she has won a majority of the states and population and she is now the candidate that the democratic party is going to have to rally around. on the donald trump side, we saw a different donald trump last night. we saw donald trump on teleprompter, scripted donald trump, a man on the leash and making perhaps an olive branch to the republican establishment in a campaign cycle that we look to be a vicious cycle. with deeply personal attacks. >> do you think donald trump is good for the republican party? >> obviously, i wish he would speak less about things like judges in indiana. i wish we would not lay out these things, but anyone could beat hillary clinton. mr. trump: i humbly and gratefully accept your nomination for the presidency of the united states. >> what should he do about quantitative easing?

what should he do about the tax code, the federal debt? these are the issues you identified. >> you need to ask him specifically about what he needs to do is shatter the old system. you cannot effect a bureaucracy unless you crack it because the bureaucracy will tell you that you need them and you will move slowly. ms. clinton: when there are no ceilings, the sky is the limit. >> i think the democratic party in 2016 has done a very good job of trying to get to the actual concerns of broad-based american people. mr. trump: upon taking office i will issue a temporary moratorium on new agency regulations. >> on top of halting new regulations, trump would lower the top individual tax rate to 33%, cut corporate taxes from 35% to 15%. david: are we going to get numbers that say, this is how much this will cost and this is

how we will pay for it? >> i am skeptical about how accurate that scoring can be because you do not know how dynamic the economy can be. i think we are way underestimating america because we have been so many years in slow growth. if you speed up the growth, you will get more business investment, tax revenues. it will make it easier to do the spending reforms. ms. clinton: starting on day one, we will work with both parties to pass the biggest investment in new good paying jobs since world war ii. >> hillary clinton's is one of a more robust governments that can get its hands dirty in the economy. is there a redistributional aspect to her proposal? yes, tax the rich more and provide more benefits to the middle and lower class but what she is also doing is investing in america and that is a pro growth agenda. jonathan: the first of three presidential debates, donald trump was not shy to touch on

yellen's fed. mr. trump: the fed is doing political by keeping these interest rates at this level. >> what he's saying about the fed is the fed by design was a nontransparent entity and was designed to be that way. the real issue to me is not as a great person like janet yellen, political. she is doing the best job she can. the process is not opaque or transparent and that makes it difficult to understand. emily: how do you think trump versus clinton would impact the growth in general? >> where it impacts us. when you have a president -- let's say trump wins -- and you do not know what he will say next, that is the ultimate uncertainty. he has not been able to control himself this close to the presidency, he is not going to change. david: some of the last polls show hillary clinton maintaining a moderate lead over donald trump. >> the dow gaining 350 points, u.s. stocks overall gaining 2%

with every major interest -- industry group and the s&p 500 up. this is the best one-day performance since march 1. >> financial markets are making it clear -- they do not want to see a president trump. >> donald trump has won the state of pennsylvania. extending his electoral vote. bloomberg news saying donald trump is poised to become the next president of the united states. >> we are actually looking at a possibility tonight that is even more extraordinary, he wins pennsylvania but he might also win wisconsin and michigan. the redness of this map is overwhelming. >> trump stuns the world. wisconsin has been called for donald trump, taking him north of the 270 that is required by the electoral college, that effectively leaves him as the only candidate standing. david: we will return to the trump transition later in the program, and look back at an important battle between government and business in 2016,

apple's dispute with the fbi over data privacy. up next, the federal reserve was under a microscope. it was often hard to tell the hawks from the doves. >> there is hawks and doves and perhaps a few chickens. david: this is bloomberg. ♪ david: welcome back to

"bloomberg best" and our 2016 americas year in review. i am david westin. call it the great rate debate. throughout the year, economists and investors argued whether the u.s. economy was strong enough to justify a rate hike, and the fomc became increasingly divided on the issue. let's look back at a fascinating 12 months of u.s. monetary policy.

>> the rate remains unchanged. the fed would like you to know that they are watching things, they see what you see, and everyone can take a deep breath and stop freaking out. here is the key language, we are closely monitoring global economic conditions and assessing for the balance of risks. tom: take us inside the debate at the fed of the how, how do you determine through 2016 the when of those rate increases? >> it is not, we are going to do it four times. we do not have to make that -- do that to make that decision. we say the results will depend on the development of the economy and it will be data dependent. >> no interest rate change, but clearly that is what is most important, but equally important is the dot plot.

the fed scales back its plan for rate hikes throughout the year and policymakers expect to raise the fed funds target by one half of 1%. i don't need to tell you that is a big change from where we were in december. >> it is a more dovish fed. it seems to me that stan fischer has been overruled to some extent by chair yellen in terms of the forward policy. >> all of your extraordinary policy, much of which is still in place, still contributing to growth, are they still effective? >> i think we are providing a very accommodative policy with our zero interest rate. i think you want to be edging closer and closer to something of a more normal setting so you do not get stuck in this zero rate environment the way japan did. >> the federal open market committee drafted a statement with a somewhat hawkish tone. that is a surprise.

gone is the reference to risks posed by global, economic and financial developments, which the fed used to not make a -- to explain its decision not to change policy in march. >> did you learn anything about what the fed is going to do? >> much ado about nothing. they did downgrade the global condition, and they did mention -- did not mention june. that has given heart to the long bond in the u.s. by two or three -- three or four basis points, but we will learn more over the next month or two as long as global and equity markets are stabilized. >> what does john williams have to see in june to say, i am on board for the rate hike? >> i think we need to see a continuation of that progress we have been seeing over the past year. seeing underlying measures of inflation continue to move generally up towards 2%, and

continued job gains. continued signs of the economy as it builds momentum. >> no change in interest rates. no change in interest rates. the fed, in a unanimous decision, is holding at a quarter percentage point. what is more important of course is the outlook for rate increases, the dots. there, another shift by the fed to lower for longer. i repeat, lower for longer. scarlet: is this an admission that this business cycle we are in is different than what we have seen in the past and interest rates will not return to what we think of as normal? >> that is absolutely the case, and this is an enormous acknowledgment by the fed. in 2012 when they started the dots, the longer run. was at 4.25 and now it is at three. this is what we call the new neutral. scarlet: we are minutes away from the fomc's july decision. the federal reserve is expected

to leave interest rates unchanged. let's go to michael mckee. michael: no change in policy or rates, a few changes in the economic assessment. no mention of economic activity overseas or the dollar, and no timeframe for future action. if you are feeling hawkish, there is this inserted into the second paragraph, a statement noting that near-term risks to the economic outlook have diminished. tom: it is a pretty good america and yet she is central banker to this troubled world. what would be your counsel to her for september and in the next year? >> i would say get off of this fixation of lower interest rates providing a push for economic growth. >> wall street, janet yellen has a message for you. she does not put a timetable on it, but says the economic data have improved and "the case for an increase in the federal funds rate has strengthened in recent months."

>> when i look at where we are with the job market and when i look at inflation and our forecast for that, i think it is time to move. >> i do not think the committee is risking a lot by being cautious and gradual. i do not think we are behind the curve in terms of inflation or risking a big financial instability event. erik: no change in interest rates, but a strong suggestion there will be a quarter-point hike before the end of the year. you can see it in the dots, 14 of 17 fed officials expect a benchmark rate of 50 points for the first time since december of 2014. we are talking about almost two years. three policymakers dissented from the majority. michael: you take right now almost a pledge from janet yellen they will raise rates if nothing untoward happens?

>> i do not think anything is a pledge from janet yellen anymore. it is all confusing. there is hawks and there is doves and perhaps a few chickens. >> it seems like the more the central banks cut their rate low, the more there is a bond rally. is this sustainable in the long term? >> no. >> people with capital are enjoying this environment and people who are saving every day to help them build a nest egg for retirement, or a nest egg to build enough to buy a house, or a nest egg for their children's future, they are being harmed. we are seeing a real division. >> if the outlook does not change, will you argue for a rate hike in november? >> if the data comes in as consistent with what we have been seeing, yes, i think it

will remain a compelling case. >> you would vote for a rate hike? >> i would see. again, the case would be compelling enough. >> it is the least surprising at least interesting fed decision. no change in rates and no explicit signal that any rate increase is imminent. there were two dissents. >> what is the big take away? for you from today? >> they did not want to make any waves six days before an election and they did not. michael: did the election come up in the discussions at all? >> we work very hard to remove political considerations from our decision-making. the one context where i think it is appropriate to consider political considerations as if -- is if they affect underlying economic conditions. michael: no surprise, the target range moves up a quarter of a percentage point to a range between 50 and 75 basis points, that decision unanimous. the real news is the movement in the dot plot. the appropriate projected policy

path next year is 1.4%, which would mean three rate hikes in 2017, not two. tom: do you buy into three rate increases? >> i would doubt the ability of a central bank, and the global central bank, the fed to raise interest rates three times a year. >> i think the fed took a small step beyond being just data dependent. she walked back this notion of high pressure, this is a fed that could be tighter than we saw otherwise and that is what moved the market. not so much the statement, but the press conference. david: straight ahead on "bloomberg best," one of the year's most significant showdowns, apple versus the united states government. in the dispute over privacy, did anybody win? >> i'm not sure this really works in anyone's favor. david: this is bloomberg. ♪

david: uber is taking a big step forward in self driving cars. starting later this month they will allow riders from pittsburgh to hail self driving vehicles from their smartphones. >> uber has embarked on this crazy research that they thought would take decades, and it is -- they are trying to launch it now and it is very exciting and leaps them ahead of google and tesla, even though google is seen as the leader in terms of technology. david: you are watching the "bloomberg best 2016: america's year in review." i am david westin. apple remains the world's most profitable technology company, but for a few weeks in 2016 it was also the most controversial after it refused to comply with a court order to help the government gain access to data from an iphone linked to a terrorist attack.

emily: apple and the fbi have been testifying on capitol hill. >> we see it in isil's efforts to reach into this country and using mobile applications that are end to end encrypted, task people to kill innocent people in the united states. that is a huge feature of our national security work and an impediment to our counterterrorism work. >> the inability of law enforcement to access devices or -- where a judge has determined there is evidence that may relate to a crime, is having a big impact on our ability to do our job, to protect our constituents, and i think is having an overall negative impact on public safety. emily: tim cook says there is no middle ground that does not put everybody at risk. it is not just about one phone, it is about every phone and the future. how do you respond? >> in the present, we have seen how we do in fact balance

privacy and security everyday. until recently, apple was able to comply with our requests, and they have some of the strongest security out there. we have not seen that parade of horrible conclusions in those cases either. >> there has to be some discussion about how to solve this problem if there is, but you cannot conscript a private company such as apple to do something that changes products. we have civil rights that prevent that sort of thing. david: the u.s. said it may not need apple's help in unlocking the iphone used by a terrorist in the san bernardino attack. a judge has postponed a court hearing at the 11th hour before the oral arguments. the government said, we do not need you after all. if that is true, does that substantially undermine apple's position that these phones are not as protected as we thought? >> i think apple can and has done things in places like china that we might not want to talk

about publicly. >> the department of justice withdrawing legal action against apple after they bypassed the lock on the iphone without apple's help. >> as of right now, it looks like the fbi is dropping its request to have apple write additional codes to circumvent security features. >> folks on the apple side will present this as a win but it is not a win to find out it is so insecure that people are lining up to say, i could provide you with access. i am not sure this works in anyone's favor. that puts off the legal day of reckoning and demonstrates iphones are not particularly secure. david: still ahead, how some of the world's most respected investors coped with market volatility. >> we have amped up our caution. david: a roundup of the biggest mergers, from deals that seemed to take forever to those that took the market by surprise. >> this is truly out from the

left field. david: this is bloomberg. ♪

david: it is 8:30 here in hong kong, 9:30 in japan. this is the latest first word new zealand. in japan, toshiba, tumbling, turning in the lowest in nearly a month. 11% fold on loss in its u.s. nuke business. there are conflicting estimates of just how much. $750 kkei news says about million. another estimates $4.3 built. japan shows sign of weakness. the unemployment rate rose for first time in flee month in november. it is standing now to 3.1%

compared to estimates of 3%. dropping by 0.6%. the bank of japan said it would take a big step toward overcoming deflation in the year ahead. vietnam stocks higher, trading up 15.9 times earnings. that is compared to the southeast asia index, which is at 14.7%. economists predict vietnam will be among the world's fastest growing economies on the back of a boom in manufacturing. we are looking at the nikkei and the kospi head negligence opposite directions. the nikkei recovering from the early drop, pretty much flat there at 19,392. he kospi up .2%.

news power forward by over $,500 analysts in over 120 countries. we are going to leave you withs of the imperial palace in tokyo. markets at the moment are pretty much flat. >> is it time for yahoo and others to face the music? star board value once again urging the company to make changes, specifically in its leadership. >> the entire board comes up for re-election this summer. this is the first shot on its way towards a proxy fight. >> new leadership is a approximate dwri for selling the core assets. >> overall on the board, management and the board are very aligned. >> if you sell the core business, would you view that as a failure? would you view that as a personal failure? >> i would say that what is good for yahoo and good for me and vice versa. >> look, at&t and verizon are both at the point where there is only so much they can do, at

least u.s.-wise from an m&a standpoint. he can't find another wios network or another cable copy. regulators won't allow them to. content like yahoo is appealing. >> verizon is buying yahoo's operating business for $4. billion. this was the merger we knew was going to happen for like seven months. identify the assets that verizon has that can make a job of yahoo that others could not. >> yahoo gives us a scale that takes us out of the millions and into the billions. combining the two is the right start for us. >> you said you plan to stay. what role do you envision for yourself? >> immediately i have two priorities. one is seeing this transaction through to close, but also watching over the value of our asian assets and the equity stakes we have there. moving forward, we will ltimately figure it out.

david: welcome back to the "bloomberg best: americas 2016" year in review. i am david westin. 2015 was a record year for mergers and acquisitions. all though m&a activity slowed in the first quarter, the pace picked up. here is a look back at some of the biggest and most interesting deals. >> there are some big health and pharma deals that came out. and the lab toward agreed to y st. judy medical for $25 million. centrics. em >> january and february, the deals that happened were ones worked on last year. then it got slow. today is obviously a pretty busy day and health care is leading the way. that is not a surprise with the obama care and the push for

consultation, you are going to see more companies, whether pharma, device or others. >> comcast plans to buy dreamworks animation. it is a $3.8 billion price tag, about a 50% premium. >> this is a huge multiple for this company. one thing that makes it appealing to comcast is the theme park. >> kung fu panda and shrek are now going to be at universal stayed osi. >> and they also make how to train your dragon. there is a clear tie-in between kids movies and theme parks, which is why this was appealing to comcast. > they are proposing a deal. hey want to buy monsanto for cash. it would be the biggest take

over. if monsanto rejects your offer, do you have the capacity to increase your offer? >> we are totally increased about the attractiveness of our office. >> monsanto said it is open, not hey said it does provide reassurance to some of the regulatory risks related to the ago decision. >> do we intimate there that that they would sell if a price. >> i have rarely seen such a friendly rejection from the target company. >> the big deal, microsoft $26.2 linkedin valued at billion. >> one would have thought they were going off a sales force arcs work day, a traditional software company. but this 1 truly out from the left field. i wouldn't have expected that.

>> the key here is sbe desperation. what will that process, like and how do you make sure this doesn't turn out like nokia or skype? >> when i think about acquisitions, emily, i think about is this something that is going to be expandsing our market opportunity? is this riding the technology waves of the future, and is this at the core of microsoft? is this something we can differentiate. this checks all boxes. oracle announced they would buy net tweet for $9.3 billion. deal. t surprising >> they wanted to move into the close. netsuite is a truly cloud business. it was almost a side project for larry nelson and run by nelson. it will be curious to see if there were other bidders for this. this is a healthy premium. >> oracle is making a

desperation move to boost their cloud revenue. >> wal-mart has agreed to buy jet.com for $3 billion in cash, giving the world's largest retailers a stronger online presence. >> this is a desperate move by wal-mart. a year and a half ago, their amazon. double of that has flipped. >> they are saying the number acquire has to hit to monsanto is $135 a share. they are talking about a break up fee and a price. >> a step closer. how much closer? >> i believe right now bare has offered $1.5 billion in a termination fee. they are going to won more at monsanto. >> bare has increased its bid for monsanto a second time.

that will be 127.50 a share. it appears to want even more. it is around a five dollar pick up from the original bid. >> from the original. >> the share price has dropped, and so it is more contractive. what is to stop monsanto from saying we accept? >> i think monsanto have been clear from early on in this one that they are not really going to negotiate anything less than a number starting with a three. they won 130 minimum just for get to the table and get a proper deal done. >> bare has clinched a day -- dayier has taken over monsanto. the largest foreign take over by a german company. >> do you two feel confident to do whatever is needed to get this deal threw? >> in a way we are blessed because this combination is one that is highly complementary, and has for the size of this

transaction a very low overlap. >> now the big deal. at&t has agreed to buy timewarner for $85.4 billion. >> this feels like a bet the ranch strategy. at&t is betting on con than tent. they are going for something that is very aggressive. but this is a game-changing transaction. >> yes. >> g.e. agreeing to combine its oil and gas business with baker hughes in a $32 billion deal. >> g.e. takes over 2/3 of the now company, baker-hughes gets one third, and at&t gets the chairmanship. it should be noted that baker-hughes shareholders get a whopping cash pay-out, $7.5 billion. at the moment it looks like the shareholders are much happier than the g.e. shareholders. >> what is going on? i would think an election would make people slow down, be a little concerned, a little

worried, about you it doesn't seem that has had any impact at all? >> i think the election would have mattered if equity prices had been more volatile. one of the things about last quarter is incredibly stable equity price very large companies. a lot of these big deals involved some equity. but the fundamental factors, they are very strong. low growth, which is bad for moat things but good for m&a because that is how you get growth. and very accommodating capital markets. david: coming up on "bloomberg best: americas 2016" year in review, on the whole, 2016 was not the best of times for hedge funds. it is all a matter of perspective. >> is there too much money chasing a thin set of opportunities? >> $3 trillion isn't what it was 10 years ago or 20 years ago. david: this is bloomberg.

david: you're watching "bloomberg best: americas 2016" year in review. i am david westin. time now to revisit some of 2016's most compelling conversations with investors, financial leaders and economists. market volatility was a theme throughout the year, especially in january as a global sell-off raised fears of a recession. it was a topic of much discussion at the world economic forum. >> once again we are in the midst of a sell-off. it kind of feels a little bit like 2009, but i hope not. >> it reflects a tug of war between countries that are growing plus the downgraft and the expectation that china won't grow as fast. it is being played out in the markets. >> you make it sound sensible. >> it is always sensible. but at the end of the day, companies like i have to keep

driving. the consumers of america will continue to spend. the economy is as strong as it was a few weeks ago. the question now is how it plays out. >> i would say that we are in an environment in which it is ery important to have -- to be well diversified. maybe gold in your portfolio. try to achieve balance in various ways. that is a whole subject about how to do it. and also i think that gold at 5% your portfolio, 5 to 10% of your portfolio under the circumstances would be a prude thing to do. prudence is the important thing to do. the reason i am referring to that is we have a situation where debt is money. we have a fiat monetary system, so we are having problems as the central banks operate. think of it as another form of cash. when cash has zero% interest rates or less, think of it as one of those possibilities.

how do you create diversification? >> first quarter for hedge fund business has really been a very unfavorable period in large part because when you hedge equity positions, for example, and markets turn and they go up, sometimes everything goes up, and you are short, and it goes up. then what compounded that were too few really interesting opportunities that many people were in. so when they tried to cover their positions, stocks went up 100%, 200%, 300% just for technical reasons. but stepping back from it, the rates have returned in the hedge fund business and the fee structure has discouraged some investors. so it is highly probable that the asset class will shrink a bit.

we will find out. >> the hedge fund industry has grown to a gigantic industry. more than $3 trillion in the industry. it has gone from a modest size 10 or 15 years as to a gigantic industry. people are investing because they want higher rates of return with lower interest rates, low returns on bank deposits. some of these hedge funds have had problems. typically the macrofunds have had problems. but i do think people will realize that you have smart people, highly motivated, investing their own money. >> is $3 trillion too much money? >> it is not just in the united states. and $3 trillion isn't what it was 10 years ago or 20 years ago. it seems like a lot, but not as much under management.

>> the market then no longer can look to banks to make markets. so you actually have to have a match after buyer and a seller. what institutions do is they have turned to t.t.s. it is an easy way to at data or take risk off. paradoxally -- the high market is $1.4 trillion. if you want to look at the size of the .'s, they are 3% market. we don't have any objective evidence of how much trading activity they provide in the market, but say it is 10%, what we are hearing. and e.t.f. flows on a daily basis do move the market one direction or another. you have the advent of institutional investors trying

to deal with market volatility, using e.t.f.'s, and they are sharpening market volatility to an extent. that is detail. but what it translates to is you need more and more portfolio managers -- more and more portfolio managers have to set their course and state on their course. >> what is happening in the bond market versus what is happening in the domestic u.s. economy. >> what you say is is certainly right. i think what we see is a flight to quality. after the brexit shock, people are going for sovereign debt of the strongest countries. the feeling of risk aversion is very, very high, and they say take me to the safest asset, and those happen to have the sovereign debt of japan, germany and the united states. and what is interesting is the u.k. yield is going down. the pound dropped 10%.

you didn't do well in u.k. bonds if you were a non-sterling investor. but the demand for high quality liquidity has been the story over the last two or three years. >> it is very challenging today. we are in a low return world. those are the three most important words to remember. how do you go about doing your business in a low return world? well, you can settle for a low return with characteristic safety, or you can pursue a high return. how do you get a high return in a low return world? the answer is you have to take significance risk. >> are you comfortable taking that risk? >> well, i am a professional. don't try this at home. i have been doing this for 38 years. we know how to do it. and what we have done in last five years, we have operated under a mantra. move forward but with caution. when i say with caution for oak tree, that means more caution

than usual. so we have amped up our caution, amped up our selectivity and skepticism. all the things that were in short supply we have increased. >> i think that the negative stop saving, ly not e you are not only rewarded for saving, but penalized for saving. i tone think that is good -- don't think that is good. i also think that it has caused a huge bubble in the bond market because people have nowhere else to put their money unless this he buy a beautiful piece of art like our ceiling, some pictures or something of that nature. >> where would you put your money now? we will get to the hedge funds later, but if negative rates have distorted the markets, if central banks have zported the

markets, how would you be exposed today into the end of the year? >> well, i think the only game in town are equities, and we have to play in that theater. >> you are cautious, almost as cautious as you have been at any point in your career. >> yes. >> why? >> utep not uber bearish, so i am not predicting calamity. but i am sitting on a lot of cash right now, almost 65% cash. there are a few reasons for it. number one, just going about my day-to-day business of trying to find good stocks to buy and a handful of shorts. i am finding very few longs and a lot of shorts. that tells me something. from the top down i see all the major indexes at or near all-time highs. yet a very uncertain world with a wide range of outcomes. i predict not calamity, but i

am certain there will be more volatility out in the world. as a stock picker, i welcome that. that is how i make money.

>> a big win in court today. the country can now tap the sborblee credit markets for the first time since 2001, and pay back gets hold off out creditors from its default. >> lifting the injunction allows them to issue enough debt to pay off the vast majority of the noisiest judgments against them. they can tap the marks and pay off the guys with the sharpest teeth and start re-integrating with the national capital markets. >> today could be the last day in office for president rousseff. they are holding a vote.

>> brazil is up 30% this year. that is the best return anywhere in the world. investors are betting that we have had five months of uncertainty, five months of not knowing where brazil is going. let's get this behind us, move on and take it from there. the vice president is now acting president. he is inheriting the worst economy brazil has seen in decades. david: welcome back to the "bloomberg best: americas 2016" , year in review. donald trump's presidential election was largely unexpected, and the transition has been under close scrutiny as they look forward to the new administration. >> it is going to be a very business friendly administration. i don't want to say it is going to be a christmas tree, but businesses are going to be down there getting kinds of regulatory relief they want. in the short run all of this is

good for business. longer run, $5.billion of tax cuts is probably not good for business. >> you are just like everybody else in industry and for that matter all of finance, trying to figure out what a trump presidency means to your business. >> it is a change, a republican house and a president who wants to do things like infrastructure spending. we are dabbling of moving to a faster growing economy. it is the pace we question. >> the president's cabinet is coming together. what does the appointment tell us about the treasury? >> one thing, that goldman really has a lock on the treasury. he is a loyalist and will be somebody who is following lead from the white house, maybe not bringing so much policy of his own but following trump. >> president-elect donald trump is close to naming his secretary of state, and the front runner comes from the

world of big oil. yesterday mr. trump tweeted whether i chose him or not for state, rex tillerson is a rled bo-class player and deal maker. stay tuned. > rex tillerson, the foundations shake and quick with the nomination. >> he is an incredibly impressive guy, but when we saw michael jordan go from basketball to baseball, you can be great in one area and not necessarily great in a relied area. we will have to see. >> trump's cabinet is starting to look more like a board room than a cabinet. have you seen anything like this, with injection of senior business leadership in washington and what will it lead to? >> these are obviously very successful business people. being successful in business doesn't mean you are will be successful in government. >> texas governor rick per dwri will be nominated at energy second.

>> bill oil is dominating this cabinet. whether it is a deliberate strategy or just coincidence is anybody's guess, but it is pretty amazing how many people from the energy sector are going to run this government. >> i think if you are going to be president, you should have the best people sitting around the table. it is a mistake for american public to constantly be told if you work for a company or a bank or this, that it makes you bad. you want the best team. a lot of these people are very qualified people who are patriots who are ifing to help their country. these are people with deep knowledge that hopefully will do a great job. david: that wraps up this special edition of "bloomberg best: americas 2016," year in review. you can find more stories, reviews and analysis from 2016 at bloomberg.com. along with all the latest business news 24 hours a day. thank you for watching. . i am david westin and this is

bloomberg.

>> it is 9:00 a.m. in hong kong and midday in sydney. toshepa having a tough time in it. it is opened in tokyo and trading at the lowest levels we have seen in a month. why? it cease a loss at its american nuclear business. that follows the ok situation of a power business by westinghouse last year. there are conflicting estimates of how much, one says $850 million, and others say $4.3 billion. more challenges for the prime minister of japan.