the hearing for betsy devos who is president-elect trump's choice for the education department will be next week. in the hearing for andrew -- to be labor secretary is postponed and may not happen until february. mexico's newly installed foreign relations secretary says the isn't only willing to negotiate changes to the north american free trade agreement, but it wants negotiations to begin his quick as possible. they say there is "enormous uncertainty." trump says he will tax companies that move jobs to mexico and has nafta.o renegotiate in italy, police have arrested two suspects are trying to hack the personal email accounts of leading public figures. the targets include the former premier and mario draghi. the duo tried for years, sometimes successfully, to hack into 18,000 accounts.

president obama makes his farewell's beach tonight but he won't be speaking from the white house. hispresident will deliver address from his adopted hometown of chicago. here on bloomberg tv. coverage begins at 9 p.m. eastern. global news 24 hours a day powered by more than 2600 and analyst in more than 120 countries. this is bloomberg. ♪ julie: live from bloomberg world headquarters, i'm julie hyman. scarlet: i'm scarlet fu. it is wavering to some extent. we see bankshares resuming a rally. scarlet: question is, would you miss?

president-elect on trump's nominee jeff sessions -- we will get a live report from capitol hill. goldman sachs is betting on people seem skeptical of automated training but it's time to attract funds after upgrading technology. plus, the biotech bounce. after severing its first year, the sector is whirring back in 2017 and biogen is on mungo -- is among the leaders. scarlet: us to go look at where the indexes stand. we all just ticked into the positive. >> you are right. as you mentioned, it is now ever so slightly higher. but for the dow and the s&p 500, these two's are largely unchanged. beingnow higher after

slightly lower. it is the nasdaq that is the star. another record close. the fourth record close in a row. the longest since 1999. piece of it is the nasdaq biotech index. it is up about .8% right now. .p six days releasee company did sales data. there is a high shortage of the stock. some of it could be a short squeeze, investors thinking the drug might not have done as well as it did in the short time it was on the market. is tradingillumina higher after the ceo was that the health care conference yesterday and said they would be releasing a superfast dna sequencer. in might be helping bio pharma.

acquiring an area pharmaceuticals. many of the oncology biotech companies -- one question could be whether or not m&a could help biotech from out of a big bear market. #btv1944. look at g back in the tech bubble, we see a steep trend was broken by consolidation down. it was a relatively steep uptrend over the last few years. the question is whether or not that would break down. it would be a 70% total decline. it would be interesting to see if m&a would help i/o tech. -- biotech. datave some interesting there. we see over the last few years that when biotech was climbing high and the prices were pretty high, not a lot of m&a activity.

considere stocks could to be sales, we see a huge surge. will start toear climb higher and continue to keep the biotech market from getting worse or even reverse it. thanks so much, abigail. biotech and pharma company spent much of 2016 under pressure from week drug prices and higher r&d cost. with the trump and ministration promising lower taxes, conditions could be right for more m&a activity this year. the biogen ceo says it is not in the cards. he spoke with erik schatzker in san francisco. howtarted by asking about they will invigorate the company's pipeline. >> the core mission of our country is science -- company is science and innovation. and actually, this is why i joined the company.

i have 25 years experience in the industry. it was the first time that this country -- company that we -- [indiscernible] where the epidemiology is going. a strong pipeline, and you are aware of our candidates that good is never good enough. so the objective is to go in bolster what we have so that we .an make even better preferences to bolster what you already have as opposed to going out and getting something different? >> this is the name of the game. we are confident in the significant talent we have in-house. there is a lot outside also. and we need to be in the position to partner, attract,

acquire companies in order to complement the core. neuroscience will be the focus. this is mandating the industry to come. erik: others also want to find those partnership candidates and it is very competitive. >> the foundation of the company is solid. we will be very rigorous on how we allocate capital for the best return. we won't do that in haste. there will be no panic action.

we do that the best way. erik: is there a limit to the money you are prepared to spend? >> we look into the financials. pricing? it ist a thorny topic here in the united states. you said biogen will not rely on price increases to drive revenue. then the company goes and raises of one of its leading multiple sclerosis drugs by 8%? how do you reconcile those two things? >> it is something we have to be managing with a lot of care and even more moving forward. and how the company needs to be -- i will re-ask the question. how do you say we will not rely on price increases and then raise prices? my generation is what we should do first in order to

what we implement well. toertheless, we are able make a reasonable price. this is what we have done. whatesn't mean this is will prevail forever. we will engage moving forward on the contracting's. i'm not sure it will prevail forever. you mean by redefining the management of pharmacy managers? >> towards the aim of health care reform and the outcome. it should be something that the industry needs to look into. erik: does that level of engagement exist now? >> no. it is years away. examples from other companies and i'm not sure it has been designed.

to put together because you have different actors coming along. meantime, can you stand up to the pharmacy benefit managers? what can you do to fight back in the meantime? >> we have done very well. whatever we have done, it is the price increase. in line with a concerted effort of engagement. we are very careful on price. it is very important in your question and push back is very fair. julie: that was the ceo of biogenic at the health conference in san francisco. scarlet: china factory prices rising at the fastest rate in more than five years. we look at how this affects direct investment. from new york, this is bloomberg. ♪

julie: china's factory prices rose at the fastest pace in more than five years in december. this as a factory to the world swings to global inflation to another potential force pushing prices higher. data rippled across markets. copper prices and other effects. michael enright is managing director for the economic and strategic. the work is called developing china, the remarkable impact of foreign direct investment. michael, welcome. let's start with the ppi number.

consumer price is a little more muted in china. >> it is the first sign in a long time to rebound manufacturing. among my client base, they are seeing a bit of a rebound in domestic demand. a bit of a rebound in global demand. at least in the short run, a pretty good run for the chinese economy and the global economy. julie: we have a chart just to show that consumer prices have been stable. not going very much. the zero line is down here. much sign of been factory inflation until very recently. economiclook at the heelys in china, are you seeing strengthort gathering

in the data as well? >> we have seen over the last , pressure against the foreign companies and some of them rethinking what they are doing in china. we have seen consumer prices indicate it has really been an issue. they have added to the volatility on the manufacturing side. ppi push them to do something sooner rather than later? takingrevents them from about cutting back. we have seen slowing growth in china and also chinese companies themselves become much better

competitors. combine that with the will reported examples of them being pushed back, perhaps china is starting to think that it doesn't need the foreign cuss -- those three things together have caused them to start rethinking. it would be an indicator that it is starting to come back and in a way that it is welcome. it generates about one third of china's gdp. at least in recent years, that's been the case. is that where they want the level to be? >> it is a sign of two things. it is a sign that even though

foreign companies have been very frustrated with the limited is that the reality foreign investment has been huge. it is about 1.8 trillion u.s. dollars. foreign direct investment last year would have been about 2% of gross capital formation. effect,ake the combined the operations of the foreign investment enterprises, many of whom have been there for decades now, they are vast for domestic countries. that equal to one third of china's gdp. it doesn't take into account technology spillovers. providing axis to global capital markets before it introduced

world-class sustainability practices. the hundredsntion spinoffst thousands of . those impacts may be as important if not more important than the ones we can quantify. there has been a lot of talk in the u.s. about the relationship with china both politically and economically. what are you hearing from the chinese? people about are the incoming administration? there is caution of not to move too quickly. we have not seen what policies will come out of the u.s. under the new administration.

the president has substantial power to impose trade restrictions. no new legislation has to be passed to do that. so i think the view in china and certainly the view in hong kong, it is very straightforward. more trade is always good. china has different priorities. economic development and trade is one but geopolitical status is the ability to project itself willing to stand up to others. it is equally important if not more important. julie: what is the priority if you have the change in leadership or discussing leadership changes later this year? donald trump has doing some sabr rattling and tweeting about it. how does it look from the >> i thinkspective?

there is uncertainty because just as in the u.s., there is more uncertainty in china about exactly what policies will be followed. chinese officials are well aware that some of the advisors have been hawkish on trade. and well u.s. corporate in the past has been the major defenders of china when it comes to discussions about trade in the u.s.. given the fact that a number of them have experienced the push , they may be not so concerned or not so disappointed with the u.s. government taking china to task on trade as well as investment relationship. how much do you trust the data?

it may be distorted, but is it consistently distorted? there is a hundred tractors and if nobody needed the tractors. the data is getting better. the numbers being overstated, china did and economic census about 10 years ago and found the economy was understated. more thanably a bit they would like. our view is that the numbers are reasonable.

the more and more chinese economy is taken up by the private sector and you have as much incentive to underreport as you do to over report. julie: thank you for coming in. it's good to hear your thoughts about the chinese economy and the relationship with the u.s.. he's author of developing china. talk biotech showing you how the industry history that this new year. this is bloomberg. ♪

scarlet: one data point that came out is that small business optimism -- here you can have the white line or you can see the bump tone in small businesses. it you see the move in december was particularly note worthy,

not just the size of the move, but where it stands. it was the biggest since 1980 and the highest level since the end of 2004. you can see that correlates nicely with the small business optimism index. dow, s&p, and nasdaq make record highs. but the party had been a month since they made a record high. is it a laggard? a leader? saw small caps that tend to be more domestically oriented and that performance has sort of stabilized, if you will. them correlate more with high yield. showing signs of caution or trepidation before the administration office. it might be a leading indicator. >> another group that has been in focus, biotech.

jpmorgan health care conference has been going on and it had been a laggard postelection and was laggard last year, falling and having the worst year since the inception of the nasdaq biotech index. that is what we're looking at. we see the declining performance there but in 2017, the white line is showing a strong start to the year. biotech.und here for there are a lot of? 's about the drug pricing debate. not just drug pricing but end of pharmaceuticals down sharply on one of the painkillers. >> especially with donald trump being vigilant on drug pricing. coming up, you have the market close. setting another record high.

the dow inching down by 20 points. from new york, this is bloomberg. ♪

scarlet: we are moments away

from the closing bell. traders were charged in an fx pro. charge any market rigging case. richard usher is one of the , krish ashton formerly of barclays. we will give you more details as they emerge. you heard the closing bell, u.s. stocks in racing games that took the s&p 500 to an all-time high. the day before president-elect donald trump is scheduled to hold a news conference that could shed light on his policy preferences. julie: welcome to our viewers who are tuning in live on twitter. you can watch every day from 4:00 until 5:00 p.m. eastern. we begin with our market minute. another record high for the nasdaq. the only one to set a new high. the s&p 500 resumed its advance. the dow closing down about 32

points. we'll have a lot of economic data at the start of this week. most of it comes at the end of the week. julie: today felt more like a session that was driven by individual company news more so than any macro factors driving trade overall. scarlet: if you come inside the bloomberg here and take a look at the sector performance breakdown, we see a little bit of a switch here. earlier in the day, health care was leaving -- leading the way. julie: and chipotle, which was up today. scarlet: up .4%. are energys companies and real estate, off by 1.3%. i do want to highlight the health care sector because julie mentioned biotech having an incredible start to 2017. selector --are sector spider tracks the health care industry.

that is the cool story of the day. they can sequence a gene in an hour. the stock is up 17% on the day. zimmer and boston scientific, both medical device makers, perhaps with congress taking up the repeal of obamacare, they are also in the spotlight as well. julie: zimmer came up with some preliminary sales and that helped that stock as well. let's get to the bond market as well. we did see the selloff resuming, but not in very decided fashion. we saw yields bumping up a little bit, just a basis point across the curve. we did have a three-year option that drew the highest demand since august. have been aauctions little firmer and as we saw this movement today, a little bit of re-flattening of the yield curve to some extent.

this one looks at the 5-30 spread, that's the white line, and the 2-5 spread which is the blue line which has widened out and is coming back in just a little bit. scarlet: it's something a lot of analyst have brought up in recent days. closelyar-yen moving with the 10 year yield. for the choppy trading news -- before the news, but , wherent-elect trump everyone is looking for some clue as to what he's going to set as far as policy. a lot of questions over what brexit might look like. pound coulds the drop to as low as $1.10 if the most severe brexit option is pursued. come inside the bloomberg and you will see the british pound is the worst-performing gt and currency versus the dollar so far in this young new year, off by 1.4%. when you expand it to the

majors, the mexican peso has done worse, off by 5%. clearly the central bank intervention is not doing a lot to the peso from its record low. salesntral banks dollars is neither sustainable nor likely to work. julie: some interesting moves going on in commodities. there was all this optimism about opec nations cutting as they had planned. however, bloomberg uncovered some data on exports from iraq today that seem to indicate that perhaps iraq was not cutting production as much as it is reporting. that helped contribute to a decline in crude prices, tumbling by about 2%. copper being helped by that economic data out of china that we discussed earlier with strength expanding. gold continuing a winning streak that we been seeing in the past

several weeks, up about .25%. scarlet: let's take a deep dive into the bloomberg. you can find the charts and functions at the bottom of the screen. combinesmething that commodities. the orange line shows ppi at the fastest pace in five years. factory deflation seems to be dead. had months since we've falling factory prices. rising commodity costs are helping drive that area the white line is oil prices and the blue line's iron ore. it is up almost double, 98%. the weaker yen is helping push up the input costs, contributing to pressure on prices. exportedbout how china deflation the last couple of years. the question is whether it can export this inflation and feed the global reflation story. julie: there are inflation pressures elsewhere but it is all combining. as you look at things that are moving together, i'm looking at things that are moving apart.

dispersion is a big team since the election in the u.s. stock market. brought to usrt by dan curtis, the purple line looks at the pre-election spread between information technology, the best-performing group going into the election, and telecom, the worst-performing group. even though you have the best to worst, the spread is not that wide. about 12.5 percentage points. postelection, if you look at worst to best, you're looking at a 20 percentage point spread. so indeed, this is just a real example of the dispersion that we are seeing in the u.s. stock market, as many folks have said going into 2017, it is a stock pickers market. this is perhaps evidence that that is indeed the case. scarlet: this is a great chart, by the way. and the diversion between

stocks and bonds, one strategist saying that the version is about to end and the traditional allocation of 60% stock, 40% bonds, is going to be risky going forward. mike reagan is here. we've always considered this allocation as the standard allocation. is it time to give it up? mike: first of all, this report is a real page turner. he looks at the correlation going all the way back to the 1700s and finds that, as you might expect, stocks and treasuries are historically positively correlated, which makes sense. as treasuries go up, yields kind -- yields an interest rates come down. the interesting thing is that in the last decade, they have been negatively correlated. which doesn't make a lot of sense, because they have both performed very positively over the last 30 years.

but there have been enough areas of divergent that stocks and treasures are negatively correlated. the question is why. according to the bernstein strategy team, it's because deflation was such a concern before this year, before inflation started ticking up, that it is obviously bad for equities. prices are going down, that's knowing -- that's not going to be great for corporate profit. so any fallen treasuries and cause a pick up in bond yields have a lifting effect on the stock market because it made people think the deflation bug we are fearing is going away. now that re-inflation looks like it might normalize again and we might get a pick up to more natural rate of inflation, it's saying it could cause the stock and bond correlation to turn positive again. allocation, which had been very good for the last

few decades because it was diversification, if they are positively correlated, that's going to be tricky for pension funds and anyone else that needs that income and is relying on stable returns going forward. with bond yields starting off from such a low point and from equity nitration starting out from such a high point, he's theng it's the opposite of way this stage was set in the 1980's when the bull market and treasury started. it was natural that treasuries would rally and stocks would rally, and the reverse is true now. it's not necessarily a big bearish thing but expect low returns, maybe 5% year and stocks for the next 10 years and 2% for bonds. is this good news or bad news?

reading a lot of note saying the return of the stock tickers. but i've read these reports for years now, as i'm sure we all have. option strategist saying now is the time to buy options, call and ask, the lines are open. the stage is set, the conditions are there with respect to dispersion. with so much going on other than the focus on central banks, and not just for stock pickers. our team is been joking that the trump elections is really making macro great again. there is more potential trade rates and currencies and stocks because there is a lot more going on. there's a lot more ways to analyze and place your bets rather than just fixating on central banks. julie: it sounds like there is something in it for everyone. so counterintuitively, could we actually see, if there is a piece of bullishness in the

theming administration and economic backdrop for everyone, could you see an increase in correlations, not just between stocks and bonds, but asset classes more broadly? mike: the correlations that existed in the fed dominated regime has shifted now and everyone's trying to suss out the dollar and stocks going up. a lot of people worrying about when the dollar strength will start to fight back on corporate profit. fraser jenkins at bernstein also talking about the populism in the sense that labor will exert a stronger influence. that will cause profits as a share of gdp to put some pressure on that ray show. .hat is -- on that ratio the stage is set for active managers to really dig in and do well. will they perform and will it

stop the trend of indexing is yet to be seen. some strong to show performance to reverse that big of a trend. reagan, a senior editor and lead blogger. scarlet: coming up, we'll get you up to speed on the headlines. senator jeff sessions confirmation hearing, there he is wrapping things up right now, and the latest on the republican's efforts to repeal obama care. this is bloomberg. ♪

>> let's get to bloomberg first word news. president-elect donald trump's nominee for attorney general is strongly denying allegations of

-- his confirmation hearing today, alabama senator jeff sessions called the accusations false. >> this caricature of me in 1986 was not correct. i have become a united states attorney. a civil rights attorney, major civil rights cases in my district that integrated schools, that prosecuted the klan. >> session says he hopes this week's hearing will show that he conducted himself honorably and properly at the time. he set to testify for a second day tomorrow. robert f kennedy junior says he has accepted president-elect .rump's offer of local vaccination skeptic, can be said the president-elect is very thoughtful. >> president-elect trump has some doubts about the current

vaccine policy and he has questions about it. he has his opinions on the , but we ought to be debating the science. >> in 2014, trump tweeted that he believes there is a link between vaccines and autism, acclaimed announced as dangerous by many doctors. president obama makes his farewell speech tonight, but he won't be's begin at the white house. the president will instead deliver his address from his adopted hometown of chicago, a new can watch president obama's speech tonight here on bloomberg tv. coverage starts at 9:00 p.m. eastern. --global news, 24 hours a day, powered by more than 2600 journalists and analysts in more than 120 countries. this is bloomberg. scarlet: as we've been reporting, confirmation hearings kick off today on capitol hill, beginning with jeff sessions,

the nominee for attorney general. let's get the latest from capitol hill. kevin, a contentious hearing and it got off on a rocky start. give us your highlights. what were you most prized by at today's hearing? kevin: contentious is an understatement. several protesters interrupting senator jeff sessions hearing on capitol hill. democrats continuously brought up previous racially charged statements that sessions has ,ade his decades of experience years ago in the senate. if you are, republican you are feeling pretty good about how the day went. advocating that sessions will help restore the country to law and order and they defended him from criticism of democrats. i put the question to his spokeswoman about whether or not sessions would weigh in on the at&t-time warner deal. she told me she would further

add to the leaders of the assistant attorney general at doj regarding to the leading up to the acquisition and mergers section of doj. if you're in the business community and you are watching today's hearing, the takeaways that sessions will month is critical of this deal or of other mergers and acquisitions as president-elect trump has been. i heard from the spokeswoman that sessions did not speak time warner and at&t specifically. julie: were we able to glean what some of his priorities will be, presuming he is indeed confirmed? >> he was one of the first senators to support donald trump at a time during the presidential campaign when many folks were wondering if there was any support in congress for trump. immigration has been senator sessions' key policy issue

while he has been in the upper chamber. one of his former top staffers, stephen miller, left sessions' office to join the trump campaign and is now a senior adviser. he received many questions from both sides of the island out his immigration policy, border security, and he also talked about the muslim ban and said he would not support an entire ban against a religion, but said he would support trump in advocating for more stringent policies and more stringent vetting policies. clearly making that distinction, candidly observing him on the campaign trail as a surrogate a much more is tepid, more measured jeff sessions that we've seen in the last year and a half. julie: thank you for joining us from capitol hill. obamacare, president-elect

donald trump said republican should repeal the health care law immediately. senate republicans are trying to delay the effort until march. alex, this was sort of a foregone conclusion at one point , politically, that the aca was going to be out, and now it is really a question here. what has happened, what has changed? >> maybe some people thought it was a foregone conclusion, but i've observed that when democrats got the afford care in passed, they had 60 votes the senate and they needed every single one of them to get it through. to think that it will get repealed easier than it was passed, when republicans now only have 52 votes in the senate i think was wishful thinking. thatis happening here is republicans in the senate, people we would not call moderates, i suppose, are realizing that if they repeal

this law without any consensus policy to replace it, they risk jeopardizing insurance coverage for millions of people, including people in their states who might vote for them. donald trump has warned about a quick repeal, and not having a replacement figured out. >> he's been very inconsistent. on twitter last week, he cautioned republicans to move less the collapse of obamacare dangle around the next of democrats. today he told the new york times it should be repealed virtually the day he is in office. it is a little hard to tell where he stands on this issue, and i imagine his colleagues are also having a little trouble determining where he stands on this. julie: there is also the question of where he stands on vaccines. and that they are linked to

autism, which has been debunked. he is appointed robert s kennedy junior to this panel. with this be a new effort? >> i'm not aware of any kind of scene safetyk panel existing in the u.s. government. it's very unclear what the president-elect expects the panel to do or who he expects to sit on the panel. robert f kennedy has no credibility in the scientific community on the issue of vaccines. there is nobody credible who's going to sit on a committee on vaccine safety led by robert f kennedy. i don't expect the panel to a congress anything, but i do think there is a danger just by raising the issue that donald trump could encourage the idea that vaccines are unsafe, and that could lead to parents exempting their children from getting the shots, which they should do. children need these

vaccinations. they save millions of lines a year and they are overwhelmingly safe. they have many more public benefits than harms. julie: we will see how that plays out. tune in tonight at 9:00 p.m. eastern for complete coverage of president barack obama's farewell address. also tomorrow, president-elect donald trump will be holding a news conference at 11:00 a.m. eastern time from trump tower. a highly anticipated news conference. coming up, what can we expect from gold in early 2017? we will plot golds seasonal performance. this is bloomberg. ♪

scarlet: scarlet fu. "what'd you miss?" let's take a deep dive into the bloomberg.

-- up almostt how 5%, holding their six-week highs. i wanted to check if that's been the case every year, it turns out it has been. you can find this by typing in scag. there you go. evidence of asian buyers stepping up their fiscal goal production before the lunar new year on january 28. it will be the year of the rooster. january is gold strongest calendar month. again of 3.8% over the last 10 years. 2010 are the only three times gold has declined. prior to that, a lot of read their. it's also the case for the last five years, which you can see in better detail here. here is the gain over the last five years.

it's been consistent for the last four years of gains in january. julie: one chart caught my eye about automakers not building plants in mexico and keeping jobs here. u.s.chart looks at employees who are employed by the manufacturing industry. that is the purple line, and it keeps rising. employment in manufacturing cap rising even after the start of nafta, so presumably the mexico effect was muted there. the other two lines are imports from mexico and exports to mexico with the u.s. you saw that start to roll over when china entered the world trade organization. what this chart suggests is that thea was a bigger factor on effect on u.s. manufacturing industry dan was mexico. automation is also a significant part of it. we'll take a look at

the current bond market in european history. ♪

♪ this is bloomberg. let's get a recap of the market action. we are looking at the nasdaq ending up for a sixth straight day. no change, and the dow, meantime, inching away from that 20,000 mark. technical analysts, one said he would getink the dow to 20,000 or close above that level or get there on an intraday basis, and it is playing out this week. i will have to ask when the last time is that the s&p did not move at all. it is remarkable.

all right, we are also watching in terms of market activity, just is beginning a webcast, and the only headline thus far is a comment on oil. he says he expects oil to $85llate in the $45 to range. again, looking at that range in 2017. ndlach, a lot of people pay attention to what he says, and has been a big pond shop after he left another company several years ago, so we will bring you updates on that webcast when we get them. meantime, what'd you miss? onlinealysts used an chat room that they don't to the confidentialring

customer information. this is a story that bloomberg brought you, and david joins us from washington, who got the scoop. congratulations, david, on your reporting. so what is the update? what is the latest on this? you said,l, as bloomberg broke this three years ago, and today is the indictment of three of the key players in this alleged conspiracy. banks, sod at major roughly from 2007 until about 2013, they were using this chat room to coordinate their trading and fix prices and the trading dollars, and this comes about one year after a group of banks had to plead guilty for this conduct, so this is the first big developing in

terms of charges against individuals. julie: and do we expect there to be potentially more? david: i think that is somewhat unclear at the moment. just last week, the justice department charged a former trader at barclays with trading other currencies, and that was the first indication that they were looking at, that the government was looking at, the trading of currencies besides dollar, and ite might go beyond this "cartel" group, and whether they are looking at other traders. -ulie: thank you, it david. - thank you, david. phd candidate and a visiting scholar at the bank of england said if the latest bond market bubble burst, it would be worse than in 1994, when they suffered the biggest annual rout.

he joins us now. paul, thank you so much for joining us. obviously, we have seen the bond int that happened sort of november, october/november. what do you see about the makings of a really more severe bond rout? paul: well, julie, the last 45 years really constituted the most remarkable period, and you really have to go back to the 1950's and 1960's to find similar bond market rallies in terms of yield compression and ofterms of the sheer length the bond market rally. they declared war on inflation s, and whenl shock the nominal yield hit less than

140 basis points in july of last year, that represented the lowest nominal yield of in the world.ts you can imagine that the potential reversal of that and the historic proportions once it gets underway -- yes? here is the thing, paul. for years, market watchers have warned about the market ending its bull run. what is different this time? paul: i think we are seeing the steep pickup in trends all over the world print just today, we had china, where ppi was over 5%. china was actually exporting deflation to the world, and now and exportingup inflation. we had a very high number from germany last week, when

inflation increased between november and december, and just look at the latest u.s. jobs report, where hourly earnings are now growing by 2.9%, and when you look at the president, the 20th century -- when you ent in thee preced 20th century, this is one of the ugliest on record, and i compare the current situation to the second half of the 1960's, when bond investors were facing a combination of fiscal expansion with johnson on the back of the vietnam war. labor a very tight market. and in the end, within four years, the bond investors lost 36% in real terms in this period, and i think we are facing a similar scenario of a deep selloff that we saw in

1994, when bond markets returned to the bullish sentiment just one year later. to what extent though, paul, with rising inflation will that then provide something of a of in arowth and sort cycle to inflation itself? in other words, if you are going to start seeing a heaping up, would that not -- seeing a heate that not thed inflation down the road to some extent? gdp is still trending at reasonable levels. has the equipment risk-free rate for europe, strong pmi's holding up pretty -- which has the equivalent risk-free rate for europe. equity investors still have reason to cheer. with thembined

reflection from the jurisdictions. scarlet: paul, what can people do about this reversal? well, i think, unfortunately, we have to live with the fact that we cannot undo 12. -- q.e. that wece distortion started with after the 2000 eight financial crisis. now we have to live with the fact that really investors have been conditioned for years to misprice the real situation. like italy places and the other european peripherals. it becomes a normalization process. one way or another, it will be woobly, i think. and japan and the euro zone, i think you can contain the

fallout by withdrawing earlier isher than later from what still going on. i think the ecb, for instance, -- until the end of 2017 in light of their fastest rising german inflation since 1993. it is at a 23-year high now. also, the rules. materially should be higher than they are now. 1.3% now. i think if you start conditioning the market earlier for a return to market pricing, then at least we can contain it. scarlet: and very quickly, do you see evidence of mario draghi doing that? think this i do not constitutes -- of course, we have an electoral calendar in 2017.

this is against that backdrop. you do not really want a fallout in the bond space by withdrawing too early and then getting an increase of political risk. it is rather bad news. the decision to steepen the yield curve further might be good. we have seen the eurozone rally, for instance. but for a lot of other people, life insurance, for instance, it is rather bad yields, so in that extent -- scarlet: all right, perhaps he has more to do there. paul schmelzing. we have some more numbers crossing, and investment outlook being shared by jeff gu ndlach. this is something we have from multiple investors. will lead totrump

a breakout. he said it is a good time to buy 's, so that isf what we have gotten so far from that investor webcast. remember earlier, he said it would vary from $45 to $55 in 2017. coming up, making a major play. more on the reasons, next. this is bloomberg. ♪

♪ julie: "what'd you miss? top three ranking, on a story, joining us is a bloomberg reporter. now, as your story points out,

goldman has been in this business. what has changed? the book in 2014 with was written, goldman at stake out a position against high-speed trading. cohen, he said speed was a bad thing. and shortly after all of that died down, they hired a new guy and said, hey, we need to start investing in our stock trading able to handle clients who want to do's beat, who want to do thanks fast, and who want to do trading through computers, so you could argue, or you could ask if that was just a convenient position for them to stake out when michael was writing his book or whether they had not done the investment is easyime, and so it to say, hey, we are sort of

against the market structure as it stands now, but they certainly made the decision to reinvest. they hired this guy a couple of years ago, and now they are really going after quant. of theirt of phase 2 plan. the first one was an investment, and now it is sort of a sales plan to pitch these quant funds and what they can do. scarlet: so this is a reboot. what will they do? are these going to be obsolete? well, that is often what you think about when you move to automated trading. that is not my understanding about what this means. over the last few years, they have done quite a bit of job cutting and reshuffling of management. in this is this specifically, they have hired a couple of people in the last your or so, and they -- in the last year or

so. julie: it sounds like more of an addition of business rather than a migration of their existing trade. is that accurate? dakin: yes. julie: so they are adding. what is it about quant that makes it attractive? show, haveon this talking about -- have talked ascendant.uant was from even fundamental hedge fund traders, they are getting into pace, so it is a growing part of the market. also, these seem much stickier, because quant funds do trading every day using computers, and they do not want to have any

problems. no glitches. no algorithms going crazy. they are very reluctant to move, so if goldman can convince quant our technology, is up to see. you should move your business over here. that relationship will end up being stickier in the long run for goldman. if you can bring some of those guys over from the likes of a morgan stanley, then that means years of revenue. scarlet: so how difficult of a test is it? it is rough, for the very reason i mention. they are very reluctant to move all of their all rhythms and their trading to these new firms. as we said, goldman had not invested in this technology. it was not cutting edge, so that is why it is a sales effort. it is a profit of convincing them, hey, try us out. of yourittle bit

business. if things go well, maybe you can move more. and then with the competitors, then you move even more if this. i think they are in a good position, and it seems like they are in a good position to do so. all right, come back and give us an update. scarlet: coming up, when good quants go bad. that is in today's walk the talk. this is bloomberg. ♪

♪ big data can mean big problems, especially when it comes to discrimination in hiring. in today's walk the talk, i spoke to the author of "weapons of mass description,"a a former professor, and she says there is a dark side to algorithms that is not being discussed. i started by asking her about the impact of big data when it comes to the screening of job candidates. is the i worry about filtering systems. are they filtering out people who are perfectly well while a fight and are sort of unfairly filtering out people, and it is not necessarily true that they are. for example, if you are looking for a programmer that programs then you lookn, for keywords, like "python" and

"c," edit is not necessarily unfair, because a programmer should know to put those words on their resume. searches.just fewer it is actual algorithms that go into it, and like many algorithms that i talk about in my book, they are doomed to be fair and -- because of their nature, but there is no reason to believe that. reporter: that is because them, asad to input well. is there any reason to believe that they hurt women and minorities and others? not necessarily what the definition of success is, but as you say, the people who build these algorithms get to define success. we will get back to that, but there is something objective about that definition, right? so the personality test that i am talking about is typically given to minimum-wage worker companies, and in order to get

an interview, you actually have to pass the test. hted on thered lig test, you do not get to the interview, so it goes to what constitutes passing the test, so i spoke to a man about the test, and he asked his son, whose name what kinds of questions are on this test? and kyle said that the questions were like when he was being disorder,r bipolar and that is when his father, a lawyer, said that is not legal. with the americans disabilities act, it is illegal to force someone into a medical exam during a hiring process, including a mental health exam, said that has become a class-action lawsuit that he has filed on behalf of anyone who has ever taken this personality one, on thepecific basis that it violates the ada.

use out rhythms. pro sports teams use them. they might measure someone's vertical speed or leaping. difference with hr departments? why is it ok for sports teams to use it and not others? the reason i like the sports example is everyone sees the data pit that is what we do when we watch sports. we are watching the data in real time. looking about whether something is in error or a base hit. this is something that is done on sports radio, which i listened to way too much. it is whether or not it is working. there is feedback. it is accountable and transparent. scarlet: as a nation, the united states does not score high when it comes to a mary is. people seem to be a little bit

scared of mass and algorithms. -- scared of math and al gorithms. what it tells us and other cultures? absolutely. i do not know how skeptical people are in other places. europe areastern skeptical because they are skeptical as a people, for example, but i would not say that the fear of mathematics and not being expert enough to push back is at play here. and algorithms says your score is 15 out of 100, and therefore, you are bad at this, people believe it, because they cannot push back about something mathematical like an algorithm. the point i'm trying to make is it is just an opinion. pushinion that you can back against, especially if it affects your job or your freedom. if it gets important enough, it

is tantamount to a law, and you should know what the law is. scarlet: that was my interview with cathy o'neil, the author of destruction."th it is a good time to sell off some u.s. stock profits, jeff gundlach. coming up, what you need to know about tomorrow's trading day. this is bloomberg. ♪

♪ coming up tomorrow, president-elect donald trump will be speaking at a news conference at 11:00 a.m. he does not have those often, and then continuing hits. scarlet: and don't miss this. jeff blueeason, with -- with jetblue and others. that is it for

>> you are watching bloomberg technology viewed let's get a check of your first word news. a jury sentenced dylan ruth to roof to death.

the justice department says he is the first person to get the federal -- the death penalty for federal hate crime. jeff sessions is in the hot seat today. he says that as attorney general, he would crackdown on illegal immigration and islamic terrorism. is beingnfirmation delayed. voxhearing for betsy to will be next week. the hearing for labor secretary may not happen until february. president obama makes his farewell speech tonight but he will not be speaking at the white house. he will deliver his speech from chicago. you can watch that tonight on bloomberg tv. coverage begins at 9:00 eastern.