Scarlet speaking of next year, reporters considered the future of investing. The availability of stocks to choose from to go long or short. Realized whyhave should i pay for an active manager that is not beating the market . Scarlet while investors, ceos, and policymakers share their insights on the here and now. Dealing with the technology shift is much easier than a Business Model shift. Imf or believer in trade. I am a fair believer in trade. Trade is good for both parties. We are beginning to see a return to stable markets. Scarlet it is all straight ahead on bloomberg best. Scarlet hello and welcome. I am scarlet fu. This is bloomberg best, your weekly review of the most important Business News analysis and interviews from Bloomberg Television around the world. The week began with a big step for bitcoin as traders were able to buy and sell futures for the first time on sunday night. Bitcoin has landed on wall street, literally with a bang. Futures on the worlds most popular cryptocurrency surged as much as 25 during its debut session on the cboe. We are seeing pretty consistently three or four trades per minute coming in. It is actually higher than the people expected. It is being driven higher by retail investors. This is not bad for an opening date for a futures contract. Thee saw some surges in first few hours of trading. And the see bow has Circuit Breakers and the cboe has certain Circuit Breakers in place. There were two of those Circuit Breakers that were triggered. Trading was fairly orderly. Today in alabama, voters are going to the polls to elect the state senator and a special election. Republican candidate Roy Moore Campaign yesterday with steve bannon and six to overcome scandals that have dogged his campaign. Doug jones in a state that hasnt elected a democrat to the senate since 1992. Doug jones, some would argue, does have some momentum. Nbaerday campaigning with legend charles barkley. On the flipside of that, judge roy Moores Campaign going all in. Both campaigns are trying to highlight this has become less about the two candidates. And more about a cultural moment in american history. Last night, the news out of alabama really locked the political world as one of the most republican state in the nation elected its first democratic senator in 25 years. You always said, he could only afford to lose to vote. When doug jones gets to washington, President Trump can now only afford to lose one vote. That puts pressure on republicans to get tax reform done by the end of the year. Markets gearing up for that last rate hike decision of the year. The fomc expected to raise rates when it concludes its twoday meeting today. You will not be surprised the benchmark goes up. A quarter percentage point to 1. 5 . But there is a surprise in the feds growth forecast. Probably due to tax cuts. A dot plot stays about the same with a consensus of three rate moves next year and two in 2019. Changes in tax policy will likely provide some lift to Economic Activity and coming years. The magnitude in timing of the Macro Economic effects of any tax package remain uncertain. It looks suspiciously like that they just bought onto the idea that there will be fiscal stimulus, especially from the pattern of the growth revisions. A bigger kick next year, and a little bit more of a followthrough. The what is really interesting about this, even though they see. 8 more gdp, there is more of a reflation path. It is a little more resigned to this at that inflation is hard to push up in a globalized economy. One of the Central Banks news of the day comes from the boe. They want of keeping their Asset Purchase Program 435 billion pounds. They do see some modest tightening over the next few years and gradual buildup of domestic inflation pressures, but how much can they stay with the brexit question mark still over their heads . There is some hope that maybe because of the progress they made on the divorce bill the boe might be more hawkish. They did mention in the statement, but really, it was not very strong. The base case is very slow and gradual with hikes remaining in place. We dont expect the next hike until the end of 2018. So, not much to get excited you are selling. Jonathan ferro mario draghi stopping short that the European Central bank will meet its inflation goal. The ecb upgrading their growth forecast. Much withally doing the inflation forecast. Make sense of that for me. It is very interesting because the growth upgrade in the euro area was really substantial. I would expect a forecast of 2020 to be around i could see 2019 and 2020 to be a good 10 basis points higher. , so to speak for cute 2020. They did not do that. And moreover, they also attempted most of the rising Inflation Forecasts to oil and food prices, which is sort of like saying, you know, it is nothing to do with the growth of great in the eurozone, but more to transit. Transit or commodity pricing. It is very counterintuitive. Breaking this morning, a deal in the global media landscape. Disney buying most of 21st century fox for we are 52 billion. Creating not only a great company, but a great level opportunity for consumers to not only consume great concert made by both entities, but to consume it under circumstances that are innovative and compelling, and much more userfriendly. And that is what the consumer today demands. Disney, for the longest time has been such a Formidable Force , in content, arguably some of the best properties in the world. But they have publicly acknowledged over the past few years that they really did not have a good distribution strategy, but now you see them with a going in on the offensive as they acquired 39 stake in sky, getting the very Distribution Channel into europe , and start india which gives , them a platform in an emerging market where there is growth. Digital and international, that is what this deal is all about. The u. S. Federal communications commission, the sec swept aside Net Neutrality swept aside Net Neutrality rules earlier today. It blocks providers from blocking traffic. This moves the future of Net Neutrality onto a likely court challenge. How concerned are you . This is the worst thing slipping under the radar in a long time. This environment of chaos we are living in where we tend to focus on these crazy elections in alabama, is that we dont have time to focus on what really might impact our lives, and that goes away,neutrality you can see Small Companies not being able to compete or have access to the bigger pipes that guys have. The idea that we dont have unfettered, equal access to what has become the mothers milk of all innovation of all online shareholder creation, and that is data into our lives, into our homes. This could be probably one of the biggest errors in one of the slowmoving train recs train wrecks we have seen in a while. Scarlet the final sprint on capitol hill for the republican tax plan. The final bill is expected to be unveiled today with details of what made the final cut or didnt beginning to leak out. President trump is confident. Pres. Trump i have seen it. I think it is going to do very, very well. I think we are going to be in a position to pass something as early as next week, which will be monumental. Only republican members have apparently seen this. Democratic staff has been saying they have still not seen the report. Lets say republicans do get this done and they fall in line mcconnell and President Trump. Is this obamacare all over again . Are democrats going to pounce on this and this could actually help democrats . This is a bill that is coined around 30 Approval Rating among american people. You make reference to obama is Affordable Care act, that strangled the rest of the president s legislative agenda for the rest of his term. It is going to be really interesting to see how , and not just the president are going to try and , frame this bill going forward. Scarlet still ahead, as we review the week on bloomberg best, microsoft ceo discusses the challenge on changing his companys culture and shifting its focus to the cloud. Plus, conversations on oil with optimism and the outlook. And more of the weeks top headlines come including how a legal battle over memory chips have ended at long last. Final resolution seems to be a win for Western Digital. Scarlet this is bloomberg. Scarlet this is bloomberg best. I am scarlet fu. Lets continue our global tour of the weeks top business stories. With a set in spike in oil prices caused by a tiny crack in the north sea pipeline. Brent crude jumping above 65 a barrel for the First Time Since 2015 after one of the most important pipelines in the world was shut. After a crackng was discovered in a Pipeline System in the north sea. It is expected to take two weeks to repair. Why is this so important . Just put it into perspective for us. Well it transports a quarter , of the u. K. s oil and gas production. What is really important is that it provides brent crude oil. They look at several grades including brent. That means more than two thirds of the global oil is being priced from 40. Mark does that mean looking for alternatives to the north the to the north sea supply . Yes. That particular grade is being bid up. The costs have to be enormous. Do you have an estimate . Is this a force majeure insurance situation . It is a force majeure insurance situation. We dont have a feel for the actual numbers, because it depends on the alternative arrangements. Most have additional cost with them. It is impossible to put a figure on that, but it is a force majeure situation. And the u. K. Inflation , unexpectedly fell, forcing bank of England Governor Mark carney to explain why price growth is so far above its target. Pieces down to his desk and says he has to write a letter to philip hammond. What does he say . This is what is required, but the issue is this is the gorilla a brexit in the background. As a central banker, how do quantify that risk . It is difficult. I dont envy who drafts letters for mark carney at the bank of england. [laughter] aramco has agreed to buy australias westfield for 15. 7 billion amid a consolidation of mobile operators worldwide. The offer, which is from the biggest commercial landlord. That is westfield at about an 18 premium as of yesterdays closing price. Westfield is a premier brand and platforms that we believe fits seamlessly with what we have been doing at aramco, focusing on innovation and differentiation. So absolutely, this is a strategic transaction, creating the first global, premier retail landlord and the best cities in the world. Digitalba and western has confirmed the end of this lengthy legal dispute that has threatened to derail the sale of the memory chip business. That was a deal struck with the Consortium Led by bank capital. This is a light at the end of the tunnel finally. It seems to have been Western Digital playing the long game. The final resolution seems to be a win for Western Digital, and i say that because basically Western Digital gets probably what they were aiming for. That is access to future chips being made by toshiba. In Credit Suisse may soon be handing out socalled doughnuts or zero payout. What is going on . Why no bonuses . We are seeing from the European Investment bank will be especially for income traders. Expecting to see a reduction of 10 on their phones bonds. It is mainly because of trading revenues. And for currencies, we are for most oft 20 the major european banks. There are bright spots as well in europe. Ubs has said they will give natural positive bonuses this year. Rbs reported yesterday about the bonds. Has followed the fed and increased costs in open market and in lending facilities. The statement from the cboe saying it is a normal reaction to the u. S. Tightening market conditions. It is this more evident move when it comes to monetary tightening . It is a move to try to keep rates in the same ballpark. Have been on rates hold, the traditional benchmarks. Because that is evolving. Traditional benchmarks have been on hold since late 2015. Keep overall borrowing costs in line with what is happening with the rest of the world. , finally talks now moving on to trade. Where are we . Finally, we have approval to move on to27 the next stage in the talks. Enough has been achieved from the first stage to move to future trade situations. That will not happen immediately. The first thing that has to happen is the u. K. Needs to decide what they want and there needs to be a discussion around the transition phase. That leaves quite a short window to get trade conversations done in time for the u. K. Parliament to work with them. We have not heard from a number of leaders in this afternoons session in russells, talking about the difficulties we will face going up to phase two. Angela merkel talking about a stage two. Over the months ahead, we will hear perhaps some other divisions that exist between the e. U. 27 and what they want from the brexit talks. We could see fallout there. Scarlet welcome back to bloomberg best. I am scarlet fu. This week in new york, megan murphy sat down for a special debrief interview with the microsoft ceo. He has been at the company for a quarter century and reflected on the challenge of changing the culture when he became chief executive officer. To me, i felt we needed a new metaphor for how to talk about this culture. You know, obviously with a tremendous success we had, i would say we perhaps were more than know it tells, and we that is where i got inspiration from the work on mindset. I read that book more in the context of my childrens education. I realized the concept of confronting their own fixed mindset is not just did for boys and girls in school, it is good for ceos and companies. We have adopted this growth mindset that at least we want to have inside of the company to talk about culture. Megan you are also very candid in talking about changing be fixed mindset about some of the parts in the business where you felt it had fallen behind. Quite a lot about is the cloud. Tell less how fundamental that process has been about pushing the Company Forward as the clock continues to expand and becomes so much a part of our everyday lives. Dealing with Technology Shifts is must is much easier than dealing with Business Model shifts. The challenge we were confronted with is we had a very good, large successful business with high margins during data center software, except that the world was changing. In fact, the market itself was going to be a much bigger market, but it was probably going to come at the different margin profile. In other words, the Business Model was going to be fairly disruptive. So we needed to confront that. We had completely framed what success looks like or progress looks like using a particular definition of what the category is, the margin profile is. It is up to the incumbent to be able to reframe, and that is what happened to us in the cloud. Quite frankly, we were perhaps a little late to get to it, but we were very fast once we got to it. And that is what has driven, if you look at the last years of microsoft, are Cloud Business has been the highest Growth Business in the country in historical terms. And that is nice to see. Scarlet we got more compelling conversations coming up on bloomberg best. Mexicos new finance minister discusses nasa. Bank of England Governor Mark carney addresses climate change, and a oil prices. Plus, brookfield tells us where the company is finding value. Where contracts are long and credit is good, people are paying high prices. Scarlet this is bloomberg. Our central scenario is that continue. Ns will and, you know, its reassuring that theres a method and dialogue going on in this. Technical here is a round going on. In january, there will be going on. Und the dialogue continues. Im a Firm Believer in trade. Is good for both parties not just one who is exporting. But also vice versa. And this has been a very fruitful relationship between and the United States and canada. The ministers that of the economy will continue to will nd im sure he continue to lead these these tions well, and will arrive at a reasonable result and good result for all three of the countries and for north america. That was joe say Antonio Gonzalez anaya speaking with nafta he on going negotiations. From the americas lets head now to europe. And policy ders makers in paris this week on the paris anniversary of the climate accord. Mark carnie spoke exclusively on bloomberg surveillance. What are the economic incentives of enterprise to actually get the job done . Actual innocecentive to do good . Say two classes of innocent eufrbs. Policies a series of that have been put in place in some countries its a carbon tax. Its me countries regulation. Others its a combination f changed the ch opportunitieds for companies and the risks they have to manage. Incentivesond set of are around how does a company manage risk . Does it manage opportunity for creating long term value . Think the thing thats interesting today is that climate is coming into the main stream in those conversations. Couple of you a facts as of today. Ten ave eight of the largest Asset Managers in the world signed up to support these recommendations. Have 20 of the globally systemic banks. Insurers and many of the major pension funds. 50 otal, more than 50trillion of assets that are looking for this type disclosure. We saw overnight just one mobils with exxon enhancement. Looking al campaign is for this information including two major share holder proxy Share Holding services which are for 90 of that market. Theyre looking for this information. To they have the frame work get it. It tells the providers of thinking about risk, whos looking at opportunity and whos managing it well. Meanwhile this week the executive al energy forum. Global Industry Leaders and experts discuss the outlook for oil. Om mackenzie landed exclusive interviews on that very topic. So lets get you started with opec secretarygeneral. Agreement recent will succeed in balancing the market. For all intents and purposes, beginning to see a return market in the fullness of time. Forthing that i have eluded several years. Due likely to the concerted of the countries in the declaration of cooperation. Extended, two weeks 2018 tended for all of bringing together again for the irst time in history 30 roducing countries to the efforts that we first took in december of last year. Given the progress that youre seeing, are the kuwaitis is a think suggest there possibility that in june of 2018 that the agreement on production come to an end . Or at least the discussions could start at around that point . I think this has been iscussed at Great Lengths in vienna on november 30 by opec as opec nonopec and decision to extend 2018. R the whole of at the moment were in the process of putting the building if you like, for a more of this frame work declaration of corporations refinancing of the oil markets. So that relationship between example, russia, for could be extended, that working relationship, beyond this deal, agreement . We had already agreed the 10th of december of 2016 when we declaration ofhe cooperation, that we wanted to first s platform that brought together 24 Oil Producing countries, to help the market return to stability. To be developed into a permanent producers. Or that would ensure us to sustainable stability. Therefore, the supply one part of the declaration of cooperation. He Building Block that we are putting together now would further entrench and Development Partnership with the nonprofit beyond the refinancing of the market. Basically, you have an pec nonopec agreement thats been reinforced for all of 2018. At the same time, were see a strong global economy. Thats translated to higher oil had expected. Thats whats really putting the floor on the price of oil. Obviously a disruption, i find it effective. Geo political me pressure. What does that mean to your outlook for prices then for 2018 . A i i think we see things in high 50s, high 60s range to be outlook reasonable right now. And i think there is more uncertainty. Mark hangs over venezuela as production is going in shamblesonomy is and somehow Holding Together just the general in charge of the oil industry. So people think about the middle east, but youve got to think ab venezuela. As far as opec, they agree to cuts into 2018. Are they succeeding in rebalancing the market . Yeah, i think so. The goal was to rebalance the market. Taken longer to rebalance because the inventories are so high. Nventories are what theyre looking at as the number one indicator. I think what happened is, coming of opec and nonopec which was ten teufrb at the eginning i think is now historic accord between those at parties and particularly the heart of it is the relationship between saudi rabia and russia and their determination to make this larger agreement work. The kuwaitis have said recently the deal could be revisited in june and the cuts could end before 2018. Is that likely . Theres been a lot of discussion about an exit strategy, when it happens. Think theyre trying to say, well wait and see the market. I think some of the parties want carry it out to the end of 2018. Lets not have a lot of up and down. We dont want this thing to get out of control. To increase to volume. It was a reasonable outcome from their point of view to say, okay, this is an agreement, but obviously six months things can change. Months. View it in six but not with that same degree of that often would have been there. What they didnt want was to in march getting whats going to happen with the agreement . Be the h happens to month that the russians will have their next President Shall election. Is not uncertainty, ut the russians also want stability here. Dhabi to d now to abu investment g conference. Eric began by asking what other plans are on the horizon. We know youve been very contrarian about brazil and the early signs are that that was a smart bet. Is there anywhere else in the world that you can be contrarian right now, where valuations here they are and with the process of Rising Interest Rates . Eight years into a cycle, it and tougher. But we always find pockets of do. Ngs to you wouldnt have said 18 months buying solar and wind farms in america was going to be value investment. Yet sun edison got themselves in trouble and we bought two called terra form and solar business. So these things, if youre out there, these things just come along. India offers value today just because theyre the entrepreneurs poured a lot of money and the banks are going reorganization of all the financing in the country and theres tunes there. Taken opportunities to sell real estate, american example. Te for where else do you feel awarding you to sell today as opposed to buy . Were always selling. Always buying. Economies, eveloped in fully Left Properties or or power where contracts are long, credit is good. Paying high prices for those. Thats where weve been selling those things. Weve been selling London Office buildings. Even though you think brexit out better than you think . Were buying, too. Were developing buildings, but selling very left ones at high prices. Were selling on park avenue in city. Ork were selling our plants that are long term left. Transmission lines that have 30 year contracts on them. Anything that feels like fixed to us, were selling. And anything that has perational Development Work to it, thats our business. You are watching bloomberg best. This week Bloomberg News series exploring the series of investing. What trends in Money Management shapeffect portfolios and the industry going forward. Reporters and editors shared their research and analysis throughout the week. Value investing has been a avorite strategy for investors. S of future of he investing. Gotham asset. K of has been d which around since 2015, part of the the s p500 racks index. With the remainder, what hes going out and going long some stocks he likes on a shorting l basis and some that he doesnt like as much. Netted. Positions are and yet, it is really to reduce the amount of tracking that the has with the index as weve seen, you know, a lot of asset have done very well recently. Greenblatt is, as told me, lot of investors chase returns. They get out at the wrong times will jump in after a funds already run up. Reduce dea here is to that tracking error and hopefully have people stick with him. With this seen particular fund is that last of its outperformed 95 peers. Its in the year top. John burbank Platform Capital its hedge fund after returns slumped. The news coming as the long hort strategy seems to be losing its luster. Investors are fleeing. Yellow. T the bars in those are hedge fund assets. Ack in 2000 they accounted for almost 50 of all hedge fund assets. Today less than 30 . Assets have grown. Ts the net dollar amount is probably not that much different. As a ially, the industry whole has continued to track investment funds. This ere really seeing year is a number of some of the traditional big Name Hedge Fund managers. Mentioned john burbank. We see others really struggle a variety of reasons. But the long short equity trategy is one that builds up the hedge fund industry. Our colleague wrote a story long short put the hedge in hedge funds. Things that are struggling. Hes rethinking how to manage money in this environment. Us what is changing . Theres lower volatility, lower interest rates. Youre seeing the rise of investment. Managers term equity need to do is really look out there for stocks that might be able to short, they thought were going down. With the rise in investing, lack rock and van guard, some stocks are just rising with their bench mark. It is harder to pluck them out. Number of publicly traded stocks has also fallen. Number it half the was in 1996. Even availability of stocks that to go e to choose from long or short has changed a lot. Major investment firms have been playing catch up in technology. Biggh they are also fearful tech giants will threaten their way of doing business. Will google or amazon disrupt black rock or fidelitys business . An amazon could offer mutual funds on their platforms. Offer Financial Advice or brokerage services. Could get into the business in a variety of ways. The banking t into business. Youve already started to see where ali baba started market fund. Ney its become the biggest Money Market Fund in the world. So, theres no reason that amazon could do something imilar, where clients could store their value, their cash, in a Money Market Fund. Mean, fidelity and google definitely recognize that. Fidelity is taking steps to rotect against disruption by investing more than 2. 5 billion in technology each year. And they took a stake in or hey bought emoney which is a Financial Planning company in 2015. Theyve also been doing a number experiments on amazons some of the g on software where a customer can go n and ask where they are in their Retirement Plan or whether theirould be able to meet education goal. Alexa would come back and say youre not on track to meet your goal, but here are the steps you have to take to meet that goal. In hats kind of a work progress right now because they ont have voice authentification. The technology doesnt seem to be there yet. Exodus is stment accelerating. All because of just how many cheaper it is to invest in passes . Yes, absolutely. What youre seeing is a very very big shift because investors realized why do i need to pay lots of money for an asset beating the s not market . If you look at the market this is up 19 . P thats not something a stock brocker can really achieve and if it costs a lot more money. The question is if theyre not mark, why at bench should i pay. I remember asking this question. To seeted out he started a difference between the shares example. For long time since weve seen this, isnt it . Sure. Is that hats whaping many active managers, especially Mutual Fund Companies like which is known for its thinking are they going to lower to try to burden investors. It is so much more expensive to active at a ats fidelity than it is to buy an intext fund at a place like van guard. When you look at the ultimate performance in fidelity funds, funds, many have not been doing that great. Some are doing great. Ut index funds now are pretty big of a place to be. Youre just marking the market. Say, e basically saying, im making 19 . Deal. Bad those stockbrokers could come rescue. Its possible. I think the issue here, people lulled into a sense of contentment. Index fund, its set it and forget it. Risk. S a big but fact taking is about good ideas. Ltimately, stock thinkers really have to show they have great ideas that can exceed the market. Manager told me, can you really have 50,000 great ideas a year because thats how managers are out there trying to come up with ideas for stocks. Right now im seeing volume shares that have been trading. Trading just under 18,000. On the right is the futures chart. The left is the caps trading chart. That shows you the difference as well. Weve got 30,000 functions on bloomberg. We always enjoy showing you our bloomberg n television, in the hopes that maybe theyll become your favorites. Heres another function. It takes you to our quick takes where you can get important context. Its a timely topic. Heres a quick take from this week. Loves to boast about Nuclear Weapons, also test them. Along with the missiles that may capable of e carrying Nuclear Bombs as far as north america. Increasingly frequent on china to rce reign in its neighbor. Donald trump warned that all are on the table. It will be solved. You can bet on that. The situation. In the second half of 2017, north korea test fired two ballistic ental missiles, saying all of the u. S. Was in range. Fired missiles over japan twice. N september they conducted the strongest Nuclear Weapons test to date, more than ten times the ger than the bomb country detonated almost a year earlier. He u. N. Security Council Approved tougher sanctions in august. Then trump followed up with further sanctions in september. Of words intensified, with north korea saying the u. S. Dearly and trump aying we will leash fire and fury on north korea. He has criticized china for failing to do enough. Are reluctant to risk the collapse of north koreas millionst an influx of of refugees and a well armed its border. In april, the u. S. Installed a Missile Defense system in south are not the chinese happy ab having the system surveillance capability in their back yard. Meanwhile, both south and north korea have hundreds of thousands f troops deployed on either side of border. North korea has a long history f escalating then deescalating tensions in order to broker concessions which leaves the tricky the world in a position. Most diplomatic situations call approach. Rot or stick unfortunately with north korea, neither the care rotted, in the the stick in the form of sanctions has worked. Whats left on the table is ever sanctions, military confrontation that risk enormous casualties. Neither ideal but neither is the status quo, especially dealing behavior. He has executed top advisers. Said as long as kim never ire, they would give up their Nuclear Capability offered 1 trillion or 10 trillion dollars. That was one of the many can find on ou bloomberg. Also find them at bloomberg. Com with all the latest businesses analysis 24 hours a day. Thank you for watching. This is bloomberg. Welcome to Bloomberg Business week. Were here inside the headquarters in new york. How to rebuild puerto rico . Saying orth carolina is bit coin is not a bubble. And a philanthropist helping girls feel comfortable in their skin. Thats all ahead on business week. Editor in with the chief of megan