latest tweets. scarlet: i'm waiting for the etf's as well. there is the closing bell. it looks like we have managed to hold again.- to inoline: what a difference our makes. we are unchanged in the s&p 500, but the dow is in the grind higher. backg outperformed at the of their buyback. it was tech outperforming on the nasdaq. all of this against the headwind, that was oil, crushing. scarlet: energy stocks done by 2.4% on the day. performing -- the next lowest performing group was consumer staples. this -- itke to feels like this nervous illiquid environment.

, and notown the s&p much conviction and the smoothness in the market today. all kind of things conspiring to make people jittery before tomorrow. caroline: caution ahead of the fed. watching, mike? >> i'm looking at the russell 2000 small caps. they had a drop of 20% to the tysons august. today looks like it would bounce back with as much as 1.5%. that faded. there's more concern about small caps. people like to see the sector be strong. it's good for investor confidence a cost all asset classes. the russell 2000 keeps coming down, down 6% from its peak. we may not destabilization in

the market intel the price action and earnings estimates stabilize for small caps. take a look at the s&p 500 and what it has done in the months leading up to a fed rated hike -- hike. interestingly enough, the s&p that's fallen 10% from the last meeting. this could relieve equity markets perhaps suggesting it could hike -- what it means for the bond market, it's a little different. since the last fed meeting, we have had some portion of the yield curve inverting. i'm looking at the two tens. we are down to 70 basis points. they say the fed may lower expectations to two rate hikes rather than three. if they lowered to one from

three, that is too dovish. luke? a right now, i'm looking at credit stock disconnect. it works in the bull's favor. there has been concern about the exploding triple b and how rising rates will affect american corporate. we have a disconnect between , the costing new lows to insure against default for a basket of investment-grade companies, and that is -- companies. let's think of fundamental reasons why this trend might be enforced or expected to continue. it's in line with the desires of investors. another tidbit from bank of america's fund makers survey is at the number one suggested use by cash flow from corporate is to pay down the bow and cheat than acquisitions, returns to his shoulders -- returns to

shareholders. corporate are being told to clean up their act. shareholders might not like to hear it, but it is making the downside risk a little less scary for some of the biggest companies in america. caroline: thank you. let's stick on breaking news. micron, the chipmaker involved in accusations that china has stolen ip, has numbers out. it's a slight miss when it comes to the overall revenue. we are seeing it climbing 80% overall. -- 18% overall. sharedjusted earnings per is short. scarlet: i'm looking at fedex. , it was acond quarter beat. $4.03 on the bottom line versus the $3.94. on the revenue line, billions of

dollars higher than expected. reported cost reduction initiative including a voluntary buyout program for some of its employees. in mentioned the international network capacity has seen reductions at fedex express. lower in after hours. caroline: remember how much it has fallen in the last few months. significant down. scarlet: still with us is ron of asset management. i want to get to steve mnuchin and about his comments about market structure to blame, that i want to get your take on earnings. do earnings matter? ron: i think they absolutely matter. if you think about investors, opportunity is volatility creates opportunity. if you have a less liquid market with good fundamentals coming through, this is a great opportunity to upgrade the quality of your portfolio. i think of equity investors for the next couple years, that

should be priority number one. joe: is the time now to be a liquidity supplier? and hedge funds for various are not inclined to provide it, are you getting paid here to be a provider? ron: as long as you have a time horizon beyond a few days -- --: seal have to light righted letter on january 1. -- so you don't have to write a letter on january 1. ron: right. there are a few good opportunities out there from eight securities perspective. scarlet: one more headline on fedex. willull-year adjusted eps be lower than the average analyst estimate. a earningsok like matter, at least for fedex's share price. caroline: it's the forecast that seemed to matter. that was brought out in the previous earnings cycle, what our company saying about the future?

what is it that drives us high? , uppingstanding bullish the quality. is it the next earnings season to get people to try -- stop buying? ron: i think it's a combination of factors. six to 12 months ago, people were not optimistic about the economy. became more apparent through the years. over time, the market was underestimating the downside from trade fiction -- friction. if i look to tomorrow, one thing i would like to see is perhaps what people are calling a dovish hike. but maybe theye soften the expectations for next year. there's a part of the market talking about no hike at all. that might be too much. you want the hike as planned. it's priced into the market, but maybe a sense of, ok, we are data dependent. we should wait and see. something i have noticed in

the last few weeks is that because none of the narratives, whether it is fed or trade, you hear more people talking about white house scandals, mueller, and tweets perhaps being a market trilogy -- a market volatility. politics in general is on people's minds? ron: i think that might be part of the bigger wall of worry. discussed,ecters we what is really going to drive cash flow for companies is the economic backdrop. , in an ironic way, that the market is trying to to risk.this straight it will take a while to come through, but we should try to examine who wins and loses. there will be winners. that is where the security differentiation will come into play. it will take time to move back

to those cash flow fundamentals, strength, and violation. i think people should be looking at their portfolios and saying from the debt side, i don't want to be long-duration. i want to be short duration, high-quality. scarlet: what does that mean? ron: it might even be sovereign versus corporate. some spread and whitening -- is widening. there is probably more room over time, because underwriting is questionable. in credit, i want to move away from the riskier edge credit towards higher grade corporate sovereign. market, you had an opportunity where some of the best companies in the market see their shares sold a lot. cycle, thisat late is when you want to move into a bit of the higher quality, less levered balance sheets.

where you have sustainable competitive advantages where you can maintain it. scarlet: ron vimplecom -- temp le. that does it for the closing bell and for me. we will be looking at tilde ray -- tilray's attempt to go global. this is bloomberg. ♪

caroline: live from bloomberg's world headquarters in new york, i'm caroline hyde. we managed to cling on to gains in the u.s. stock market ahead of the fed's decision tomorrow.

the s&p 500 is less than one -- 1% higher. president trump is urging the fed to feel the markets. they join -- he joins the wall street journal and asking the fed to rate hike. trade talks on the horizon. steven mnuchin tells bloomberg exclusively that the u.s. and china are planning to hold meetings to negotiate a truce in january. romaine: countdown to the fed rate decision. probably the last big catalyst for the markets in the u.s. for 2018. for more, let's welcome our federal reserve reporter, matt boesler, from washington. since weght hikes started this path and 2015 and the market expects to get another hike tomorrow.

the you see signs that the fed will pause after this meeting? matt: that's an interesting question. what we are in interest-rate markets is that wall street is braced for much sound lower path of rate hikes -- much shallower path of rate hikes. the fed watchers forecast, they don't see the steep tempering of the rates path. economists see a few more hikes next year. they be a few less than previously predicted, but continuing the study, gradual path of increases. but thata slower pace, is something we have heard reinforced by fed officials recently. they still see this gradual path forward appropriate despite the market volatility we see. marketeaking of the volatility, the conundrums people say is facing the fed is

that the market is volatile, there has been a significant market selloff since october, but the data looks ok. you brought an interesting chart that says it might be kind of naive to dismiss the market signal as not being data. what are we looking at? matt: the amber line shows the year-over-year change in the s&p 500, which is smooth on a quarterly basis. you can see that has taken a sharp turn lower. a white line is real gdp growth. strong see there is a relationship there. when the s&p 500 goes down a lot like it has recently, that leads to slower gdp growth in the future. there is a bigger philosophical question about what is going on here. anticipateock market lower growth or does the weakness in the stock market cause the lower growth? either way, you kind of look at this relationship and say if the stock market is volatile, going down like it is now, that probably means we might he

looking at a lower pace of gdp growth going forward. if that is the case, we will have a slightly higher unemployment rate than predicted, slightly lower predicted inflation. interest-rate projections will be lower. this is how the fed looks at this. mechanically, based on what we have seen in the stock market, we should expect a tempering of the rate path going forward, but that does not indicate, necessarily, that the thinking at the fed has changed in a major way. that will be an interesting way to tease at tomorrow's press conference. caroline: talk to us about the thinking of jay powell. he's a man who knows investment well. he comes from investment. they are paying lip service to the fact that they are data dependent, but he is amanda man has to understand what the market is telling us? that what of it is

happens in the stock market can have implications for the real economy. the other thing interesting about this whole moment right now is how is jay powell going to interpret what he sees in the markets. so far the fed seems like they have been content. fed officials too. i think back to six weeks ago, the new york fed president in bali was talking about how one of the added benefits of the tightening campaign they are theg is that it would take extra froth out of financial markets. this was before stocks started taking a sharp turn lower. will jay powell look at this and say we already thought stocks were overvalued, this is not necessarily a bad thing. this is kind of what we wanted. or, will the narrative shift to, this is more indicative of a slowdown in global growth, things that are outside of our control.

if that is the case, that's what indicate -- that could indicate a change in thinking at the fed. caroline: the worst december since 1931. matt boesler, thank you. tune in to our special coverage of the fed decision tomorrow at 2 p.m. -- 2:00 p.m. new york time. president trump visited the only person not agreeing with the fed. is adruckenmiller billionaire talking about the risk and reward of the fed hiking rates. let's suppose the fed did not hike tomorrow. what is the cost? i'm not sure what the cost is, but there has to be some cost to two or threelity months down the road. not a big cost, in my opinion. let's suppose these economic

indicators, the stuff we are looking at, is right. we have big potential problems brewing, and they could be bigger than we think because there is stuff hiding out there that we don't know about in terms of mal investment. think about the cost. and sugarke tomorrow balance sheet 50 million a month when the ecb is not offsetting it, that cost to me is five to 10x. caroline: that was our exclusive interview with stan druckenmiller. tilray goes global with the help of a drug giant. what this partnership could mean for the industry in the year ahead. that is next. this is bloomberg. ♪

caroline: it's time for a look at the trending stories across the bloomberg universe. they are the only non-energy company in the bottom 518 months public -- public to use this decade. donald trump is shutting down his charity and the new york attorney general has agreed to dissolve the foundation and liquidity.'s tictoc on twitter is reporting the person who starred on the fresh prince of bel air is suing

the makers of videogame, fortnite. says epic games is profiting from his creative expression. you can follow all of these stories on the terminal. joe: the cannabis industry is getting another flashy deal. tilray is going global with the help of a division of switch drug giant -- a swish drug giant. -- swiss drug giant. for more perspective, let's welcome vivian, a senior analyst at cal and -- cowin. playersll of these getting into this field. a significant is it to see a name like this make a deal for tilray? >> we think it is incredibly

encouraging which validates the case for cannabis on a global scale. what is differentiated is that tilray is the only large, public on farmer ascused a strategic partner. canada growth partnered with constellation brands, and criminals with a tobacco maker. the we talk so much about recreational use. that's the more sensational story. what you see as the prospects for the medicinal and formal logical side of this industry? vivien: what we can already see on financials is that the medical opportunity is attractive. in terms of average revenue and the margin potential. we are starting to see early butence of that in germany, the real opportunity is beyond germany to the 35 countries outside of north america that

have either legalized medical cannabis or are on their way to doing so. caroline: how is that pace going? where do you see legalization continuing? and what about u.s. legalization in particular? vivien: from a global standpoint, it happens in bits and starts. i wouldn't have anticipated it. time to expand the market. same thing in the united states. joe: in markets where cannabis is already legal for medical purposes, do we see the traditional medical establishment, doctors, are they bringing it into their therapy yet, or is it like the doctors you see how that venice beach? you get what i'm saying. vivien: you are seeing legitimate physicians start to embrace the plan. a lot comes down to education.

if you look at what happened in the medical market in florida, there was a correlation with on boarding of patients and doctors going through the continuing education process to get certified to write the scripts. romaine: we have a big farm bill here in the u.s. focused on hemp. we have -- we know a lot of companies are moving into hemp and the byproduct, cbd. what you see the prospect, particularly for u.s. growers and companies? this has always been a canadian story so far. we are getting closer to legalization in the u.s.. does that tell a shift away from the canadian market to the u.s.? vivien: no. the u.s. cbd opportunity is one global players are focused on. comforto company that -- cover turning brands made a move into the market. kennedy growth has said they plan on entering the u.s. cbd market by 2019.

caroline: remind us where we stand in market valuations now. are these indicators? vivien: the way that we think about value methodology is to give the company's credit and stocks credit for the explosive revenue growth we expect to see. we are using revenue versions of a peg ratio. caroline: great to get your perspective. great to get your analysis. where is the one place investors want to put their money? we will tell you what a survey from the bank of america merrill lynch is saying. that's next. this is bloomberg. ♪ ♪

place, the xfinity xfi gateway. and it's strengthened by xfi pods, which plug in to extend the wifi even farther, past anything that stands in its way. ...well almost anything. leave no room behind with xfi pods. simple. easy. awesome. click or visit a retail store today. ♪ there's no place likargh!e ♪ i'm trying... ♪ yippiekiyay. ♪ mom.

♪ mark: i'm mark crumpton with bloomberg's first word news. a federal judge today agreed to postpone sentencing for michael flynn. his attorney has requested the delay to continue to cooperate with the mueller investigation. a judge told flynn "you sold your country out." the judge told flynn he was not hiding his discussed nor disdain for his crimes. pleadedeading guilty -- guilty to lying to federal investigators. the white house signaled a government shutdown may be averted by tapping additional sources of money for a border wall as republican leaders proposed transferring $1 billion to fund the president's immigration priorities. chuck schumer called mitch

mcconnell today to reject the democrats characterized as a slush fund. nancy pelosi said what is happening at the u.s.-mexico border is "shameful" and republicans should shame the s.rds of one of their icons's s. >> ronald reagan, as his last presidential speech, talks about the statue that welcomed our ancestors and what it means to other people coming in. ronald reagan said our worldnence in the springs from every new generation of immigrants coming to our country. we fail to recognize that and we fail to be preeminent in the world. ark: lawmakers are seeking way to prevent a partial shutdown that would begin after friday night.

pledged torump has shut down the government if he does not get the $5 billion he seeking that she is seeking for the border wall. the missouri spoke to reporters in geneva. >> [indiscernible] mark: he stepping down on december 31 and said he is not leaving the job out of frustration after four men years but is leaving for personal regions. he scheduled to address the un security council on thursday. the eu commission president said chinese aid is responsible for

massive increase in debt among african nations. , whosetrian chancellor country holds the rotating presidency of the european union, added there should be healthy competition between africa, chinese, and european countries. that's companies. global news, 24 hours a day on air and on tictoc on twitter, powered by more than 2700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. emerging markets, once again the top choice for investors according to a bank of america merrill lynch survey of fund managers in december. here to talk about the challenges and opportunities in a post selloff environment is robin brooks, managing director and chief economist at the institute for international finance and former economist at the imf. great to have you back on the show. since the volatility has picked up in the u.s., starting in

is nicelyber, e.m. outperforming. the ratio from em stocks to s&p's back to its highest level since august. are the fundamentals in place, in your view to this -- view, for this to be sustained? the survey you were talking about, a lot of people basically look at e.m. after the to currencies fell. our metrics are quite cheap, but people are nervous because the big picture is if you have had 10 years of superlow rates in the g3, hugh have extraordinary monetary accommodation, so you have massive capital flows to emerging markets. the number one question we get is which places are heavily positioned, and which places should be steer clear of? romaine: when we talk about clap

-- capital flows, the returns have not lived up to some expectations that strategists have put out. given the fed meeting tomorrow, the potential that the fed slows down in the u.s., and a general easing in trade relations, does that provide more of a base case for e.m., particularly em equities? robin: yeah. generally speaking, if the fed communicates a slower pace of tightening next year, while also playing uprrow and the strengths of the u.s. economy, i think that is the goldilocks scenario. the run-up up to the meeting of 2015 andinds me december when we got the first fed hike. you might remember, markets were jittery. equities were wobbly. the was something also going on in credit. what janet yellen did is talked of the economy and play down

stress and credit. the markets like to that. caroline: when you look at flows, what are we seeing in which assets the money might be going into. bondssee it go into local , local equities, are people hedging this? robin: the vast majority of the flows are into low currency debt. as you may know, the equity flows are also there. however, they tend to be smaller on balance. is much focused on that. the play, in emerging markets in part, is to pick up and interest differential. a lot of people don't hedge back the currency risk, precisely because you give up that interest-rate differential. ,oe: robin, earlier in the year during some of the most anxious spots for em, particularly argentina, you were out

ahead watching the balance of payments correct as the domestic economy got smashed, import demand went down -- or credit conditions contracted, imports went down, and that is what has to happen to bring these economies back into balance. argentina, you were out ahead watching the balance of the you still see major imbalances anywhere? or has this year been so brutal that just those fundamental conditions with the balance of payments are looking better in lots of places we look. robin: i would say two things. i can't remember a year where we start with as cleaner slate as we have this time around.

the most crowding emerging markets we have in our analysis are south africa, that is very crowded relative to the size of the economy and market. crowded, colombia's crowded. what is not crowded is brazil. is china a big source of real

money flows to emerging markets? know. i think it is secondary. caroline: it's great to get your analysis. meanwhile, shutdown showdown. the white house and congress have until friday to avoid a partial shutdown and the federal government. kevin's a really is in washington with an interview in the latest negotiations. >> we are here with senator dick durbin. you think the government is down or will president trump and leadership the able to reach a deal? >> the president announced, when he met with pelosi and schumer, he was proud to have a shutdown on his watch. that's unusual. i don't think any president has ever said that before. i think the republican leaders and members of congress around him went into a panic over the possibility. and they should. .t's not a good reflection

for the first time since the declarations in the oval office, today there is some sort of indication the white house wants to talk. kevin: it sounds like mitch mcconnell earlier today said he believes there will not be a partial government shutdown come friday, that they will be able to move some of the money to fund what president trump has called for, $5 billion to bolster security along the border. will that ease some of the urns of your -- concerns of your democratic colleagues? robin: of course. -- >> of course. president that the can knows around these federal agencies and fined $5 billion, or that he might take it out of our national effort, is something that gives us pause. if he thinks he will get that through congress, he is wrong. kevin: it sounds like we are not there yet but we are closer to two averting the partial government shutdown on friday?

>> i think so. we have made simple and straightforward offers. we have seven appropriation bills left and have agreed to let six of those bills passed the house and senate and become law. we are down to one agency. the department of homeland security. we can do a continued resolution of that or a resolution for all of the appropriation bills. kevin: switching gears now in addition to what's going on, the polarizing debate regarding a partial government shutdown, there also seems to be bipartisan mark making its way through this lame-duck session. i'm talking about criminal justice reform, something you played a key part in. >> i have been working on this for about six years. this is our chance. we have strong bipartisan support.

this is an amazing opportunity. we have to fight off really damaging amendments that will be offered by senator tomorrow. kevin: what specifically are some of those poison pills? sen. durbin: one of the things that the center cotton does -- senator cotton does is expand the number of crimes making you ineligible for any efforts to come out of prison even a day early. when he expanded to the list he wants, few criminals will have a chance in prison to show resolve, determination, and develop the skills to come out of prison so they will not commit another crime. it would really be destructive. kevin: specifically, senator, from a business standpoint -- when i talk to business folks, i hear this time and time again. there is an economic opponent to criminal justice reform. is there not? sen. durbin: very much so. it costs us an average 30, 30 $5,000 a year to incorporate -- $35,000 year to incarcerate the

least violent criminals. pivot,i hate to make a but there was a legal proceeding today in the court system with regard to general flynn. according to the report, he ,ould like to see it the laid to see if he would cooperate. do you have any comment on that? sen. durbin: i know the judge made it clear that even though the government said we don't need jail time, the judge felt else wise. general flynn reached a conclusion he would be better off working for the government persuading the judge to let him off with no jail time if he is cooperative. ,evin: in the final notes criminal justice reform is something that shows, despite the polarization in washington, there is an opportunity for republicans and democrats to work together. as well as coalition of folks you just mentioned. reporter, i can't remember

covering some of those groups working together. as you look ahead to 2019, what are the areas of legislation and policy that you foresee republicans and democrats being able to work together on? infrastructure? sen. durbin: infrastructure would lead the list, but revenue is critical. republicans have to reach the point where they believe revenue strictly dedicated to infrastructure is acceptable. secondly, prescription drugs. the trump administration reach out to me on a bill that i have on disguising -- disclosing prices. kevin: come back and talk to us about those prescription drug plans. ,he final question, nafta 2.0 do you think that's will ultimately gets ratified -- that will ultimately gets ratified? sen. durbin: we are running out

of time in this section with a new congress and democratic house. we will have new challenges and new political dynamics. senator, we appreciate you breaking down trade and -- partialth government shutdown on what appears to be a monumental issue on criminal justice reform. thank you for coming on. back to you in new york. caroline: a wide-ranging interview, thank you kevin's --lly -- kevin's a really kevin's really -- kevin surilli. head of their express unit resigned a couple of weeks ago. there was a lot of concerns this would be a read through into weakness in the business of fedex. that will not meet its growth goal for the fiscal year 2020. anotherlso seeing

company where we get an economic read. this was a memory chip maker. they fell short, but they are saying they are cutting their spending. you see applied materials, which helps make a lot of the chips and micron -- that's micron makes. those shares are down as well. from new york, this is bloomberg. ♪

caroline: spacex is set to raise $500 million in valuation. according to wall street journal, the company is raising the money from existing shareholders.

the plan to invest in new money into it satellite internet service. the trump administration is stepping up pressure on germany. bloomberg has learned the u.s. officials raised concerns about the chinese headphone -- chinese mine --s role in -- and america's higher in his are living in unexpected places. bureau,g to the census chicago and cook county are home to the fastest-growing concentrations of households making at least $200,000. we see while growth in the jacksonville area and d.c.. that is your business flash update. this caught my eye. illinois, washington, jacksonville. romaine: the chicago think is not surprise me. jacksonville surprise me.

itidn't understand why, but seems to suggest a lot of financial companies have removed some of their workers. joe: i was aware jacksonville was a thing, but i never really -- -- never really [indiscernible] . up, it's mixedg signals. president xi says china will stick to its plans. that is next on asia ahead. this is bloomberg. ♪

caroline: according to the wall street journal, the x disney ceo a coo is the top one for replacement for les moonves. we know he has lost some 120 million in terms of a paycheck.

it looks as though they are talking about who could be his replacement. let's talk about asia. president xi has strong words for a beijing crowd, signaling more tensions ahead for the china -- for china and the u.s.. no one is in position to dictate to the chinese people what should or should not be done. caroline: in the u.s., steve mnuchin is announcing the u.s. and china are set to negotiate a broader truce in meetings next month. for more, let's bring in shery ahn. let's talk about the tit-for-tat going on. president xi, know all the branch has been extended to the u.s.. shery: we saw some concessions in the week when they decided to buy u.s. soybeans and potentially coin and reducing tariffs -- corn and reducing tariffs on u.s. make cars. when it comes to the speech,

they're really not providing any concessions. tone whenat defiant it comes to sticking to their ,olicy, which is the reason why a couple of weeks ago and we talked about delaying the -- there was nothing in particular aimed at stimulus or anything like that. anything to give short-term investors comfort about a change of plans? shery: it wasn't surprising because these economic conferences every year, they are just priorities laid out. we party heard from the pboc governor talking about supporting the economy just last week. untilg really happens there's a legislative meeting in march where we get more clarity on the front. they're really not giving any more hope for investors who had been pinning their expectations on more stimulus to come from

china. romaine: the current grand plan to have is still in place? shery: it's a current grand plan to continue their advance in technology. all of their plans are laid out in previous years and sticking to that as well. when it comes to reforms, president xi jinping aching it clear there is no golden rule for opening up of china. this is what he said. he said there is no tech sports of golden rules to follow for reform and development in china. a country with over 5000 years of civilization and 1.3 billion people. to thison i'm pointing focus is that sometimes we forget the huge history china has. you can catch more on all of this analysis with shery ahn. don't miss her on "bloomberg daybreak: asia" at 6 p.m. eastern. that's all for "what'd you miss?." "bloomberg technology"

is up next in the u.s.. joe: have a great evening. this is bloomberg. ♪ is bloomberg. ♪

>> i am emily chang in san francisco. coming up in the next hour, huawei scrutiny escalates. the u.s. meet with german officials to discuss -- proposed by the german company. after a new report found russian users, thegeted naacp is calling for people to log out of the social network.