Scarlet bloomberg reporters consider the future of investing. The availability of stocks to choose from to go long or short has changed a lot. Why do i lots of money for an active manager who is potentially not beating the market. Scarlet policymakers share their insights on the here now. Technology share is much easier than dealing with market share. We are beginning to see a return to stable markets. Scarlet it is all straight ahead on bloomberg best. Scarlet hello, and welcome. 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 from bitcoin. Bitcoin has landed on wall street, literally with a bang. Futures futures surge as much as futures surged as much as 25 during the debut session on the cboe. We are seeing pretty consistently three or four trades per minute coming in. This isnt bad for an opening day for a futures contract, especially for one with uncertainty. We saw a surge within the first few hours of trading. The siebel has certain plate the cboe has Circuit Breakers in place. There is a fiveminute pause in trading. There were two of those Circuit Breakers that were triggered. Trading was fairly orderly. Voters are going to the polls to elect a state senator in the special election. Roy moore campaigned yesterday with steve bannon and seeks to overcome scandals. Doug jones in a state that hasnt elected a democrat to the senate since 1992. Doug jones, some would argue, does have some momentum. Campaigning with nba legend charles barkley. On the flipside, roy Moores Campaign going all in. Both campaigns are trying to highlight this has become less about the two candidates. More about a cultural moment in american history. News in alabama has rocked the political world as the state elected its first democratic senator in 25 years. This is a razor thin republican majority in the senate for President Trump. He can only afford to lose two votes, when doug jones gets to washington, President Trump can now only afford to lose one vote. That puts pressure on republicans to the tax cuts done. Scarlet the market is gearing up for the last fed rate decisions of this year. The fomc expected to raise rates when it concludes its twoday meeting today. You will not be surprised the benchmark goes up. There is a surprise in the feds growth forecast. Gdp next year is seen expanding at 2. 5 up from a 2. 1 in september. 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 lift to Economic Activity in coming years. The magnitude in timing of the macroeconomic effects of any tax package remain uncertain. It looks suspiciously like they bought on to the idea there will be fiscal stimulus, especially from the pattern. A bigger year, and more of a followthrough. What is interesting about this, even though they see 8 10 percent more gdp, they have the same installation path. They are more resigned to the fact 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 kept their asset purchase program. 435 billion pounds, everyone is on board with holding rates steady. They do see some modest tightening over the next few years. They see gradual buildup, but how much can they see with the brexit question . For investors, you cant separate the boe from brexit. 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 it wasnt very strong. The base case, very slow and gradual hikes remain in place. We dont expect the next hike until the end of 2018. Not much to get excited if you are selling. Mario draghi stopping short declaring the European Central bank will meet its inflation goal. The euros economy is not Strong Enough to win off stimulus. The ecb upgrading their growth forecast. Not really doing much with the inflation forecast. Make sense of that for me. It is interesting, because the growth upgrade in the euro area was substantial. I would expect a forecast of 2020 to be i could see 2019 and 2020 to be a good 10 basis points higher. They didnt do that. They also attributed most of the rising inflation forecast to oil and food prices. Which is like saying it has nothing to do with the growth upgrade in the eurozone, but more to transit. We know most of the time it is treated like that, transit or a commodity price shop. It is very counterintuitive. Breaking this morning, a deal in the global media landscape. Disney buying most of 21st century fox. We are creating not only a great company, but a global opportunity for consumers to not only consume great content made by both entities, but to consume under circumstances that are innovative, compelling, and more userfriendly. Disney has been such a Formidable Force in content, arguably some of the best properties in the world. They have publicly acknowledged over the past few years that they really didnt have a good distribution strategy. Now you see them really going in on the offensive as they acquire 39 stake in sky, getting a 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 the deal is about. Julia the u. S. Federal Communications Commission swept aside Net Neutrality rules earlier today. Those rules barred web and providers from blocking traffic or demanding payments for faster passage bread it sends the future of Net Neutrality on to a likely court challenge. The isp is saying trust us, 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 crazy election is that we dont have time to focus in on what really might impact our lives, and that is, if Net Neutrality goes away, Small Companies not being able to compete or have access the bigger 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 phones. This could be probably one of the biggest errors and one of the slowmoving train wrecks 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. Will they find enough votes to pass . President trump is confident. I have seen it. 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, two members are telling me they have still not been able to see it. It will be filed at 5 30. Lets say republicans do get this done and they fall in line behind mcconnell and President Trump. Is this obamacare all over again . Are democrats going to pounce on this and this could actually help democrats . This bill is polling got at around 30 Approval Rating among american people. Obamacare was something that strangled the rest of the president s legislative agenda for the rest of his term. It is going to be interesting to see how republicans and not just the president are going to try and frame this bill Going Forward. Scarlet still ahead, as we review the week, the microsoft ceo discusses the challenge on changing his companys culture and shifting his focus to the cloud. Plus, conversations on oil with optimism. More of the weeks top business headlines, including how a legal battle over memory chips has ended. 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. A sudden 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 was shut. The gains coming off to operate discovered a crack in the north sea. It is expected to take two weeks to repair. Why is this so important . It transports a quarter of the uks oil and gas production. 450,000 barrels a day. What is important is it provides brent crude oil. That means more than two thirds of the global oil is being priced from 40. Does that mean looking for alternatives to the north the north sea supply . Yes. That particular grade is being bid up. It is then feeding to the futures prices. The costs have to be enormous. Do you have an estimate . Is this a force majeure insurance situation . It is. We dont have a feel for the actual numbers, because it depends on the alternative arrangements. Most have additional cost with them. It is a force majeure situation. In the u k, inflation unexpectedly accelerating to the fastest pace in more than 5. 5 years, forcing mark carney to explain why price growth is so far above its target. He sits down and gets out a pen 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 there is this a hundred bound gorilla of brexit in the background. How do you quantify that risk . It is difficult. I dont envy who drafts letters for mark carney at the bank of england. Rodin call agreed to buy australias westfield for 15. 7 billion amid a consolidation of mall operators. The offer, which is from the biggest commercial landlord. They value westfield at about 18 premium. Westfield is a premier brand and platforms that we believe fits seamlessly what we have been doing, focusing on innovation and differentiation. This transaction creates the first global premier retail in the best cities in the world. Toshiba and Western Digital have confirmed the end of a 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. It is is this the light at the end of the tunnel . It is. 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. Specifically, they get access to the factories that toshiba is planning to build Going Forward. Several executives have been suspended on allegations of Sexual Harassment. The nfl network has suspended a hall of fame running back. Heath evans and ike taylor. Espn has suspended two men from appearing on its network during the investigation. This was originally filed in october. It was one day after the Harvey Weinstein story broke. When i was speaking to the lawyers, they said there wasnt a greater understanding of Sexual Harassment. How pervasive it may be in workplaces. Yesterday, she filed an amendment naming names, naming these executives and household Football Player names. That has brought awareness. How pervasive they allege this Sexual Harassment was at the nfl. Adnoc has started trading. The Distribution Company opened up 16 , stomping it home. They debut on the abu dhabi. It is the fuel retailing business. What does it mean for the markets locally . It is difficult to overstate the importance of this event. This comes at a time when we are expecting a bunch of new state owned Energy Champions in the gulf region to come to market, not least of which is saudi aramco. It could be Something Like 2 trillion dollars, which could make in history. Adnoc managed to beat them to the punch. They sold the shares for initial 2. 5 each. That gives the company at a valuation of 8. 5 billion. This morning they got a pop, it is about a 2. 7 by poor dear. It is the First Time International investors have been able to be involved in Abu Dhabibased securities. A very big deal for the region as it attempts to open up and attract foreign capital to the market. European Bank Employees may be looking at their u. S. Counterparts in envy. Big european banks like barclays have cut bonuses. They may be handing out doughnuts, or zero payouts. Why no bonuses . It is going to be one of the worst years in terms of bonuses. Especially for the fixed income traders. They are expected to see a reduction of 10 . This is from the lack of liquidity and the slump in the trading revenues. Especially for fixed income and currencies, we are seeing a slump of almost 20 for most of the major european banks. There are bright spots in europe. Ubs has said they are going to give bonuses this year. Rbs, they have been reported to reduce their bonus for the first time in years. China has followed the feds borrowing costs. It increased rates charged. The statement saying this is a normal Market Reaction to the u. S. Tightening monetary conditions, but should we look at it as a move when it comes to deleveraging or a move when it comes to monetary tightening for the pboc . It is a move to try to keep its rates in the same ballpark, so its benchmark rates have been on hold, the traditional benchmarks. They have been on hold since late 2015, but they have got to keep their overall borrowing costs in line with what is happening in the rest of the world. Brexit talks now finally move on to trade. Where are we in the brexit timetable talks . Finally, we have approval from the e. U. 27 to move on to the future trade situation. I say that, but it is not going to happen immediately. The u. K. Has to decide what it wants. There needs to be a conversation about the Implementation Phase that may be around two years. That leaves a short window to get those trade conversations done in time for the u. K. Parliament to vote. That is going to be part of the process. We have heard from a number of leaders in this afternoons session here in brussels talking about the difficulties that we will face going into phase two. Angela merkel talking about it. The italian Prime Minister also talking about how it will be very complicated. Over the months ahead, we are going to hear some of the divisions that exist between the e. U. 27 about what they want to get from the brexit process. A lot of that will come down to their existing relationships. 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. With the tremendous success we had, we perhaps were more and we needed to say where do you reframe . I got some inspiration from carol and the work she has done. 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 good for boys and girls in school, it is good for ceos and companies. We have adopted this growth mindset as the means 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 of the business where you felt it had fallen behind. You talk about the cloud. Tell us how fundamental that process has been about pushing the Company Forward as the cloud continues to expand and becomes a part of our everyday lives. Dealing with Technology Shifts is easier than 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. The market itself was going to be a bigger market. It was probably going to come with a different margin profile. The Business Model was going to be fairly disruptive. 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. Frankly, we were perhaps late to get to it, but we were very fast once we got to it. That is what has driven, if you look at the last years, our Cloud Business has been the highest Growth Business in the company. Even on historical terms, that is nice to see. Scarlet we have more compelling conversations coming up on bloomberg best. Mexicos new finance minister discusses nasa. Mark carney addresses climate change. Daniel juergen makes the call on 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. The big issue hanging over the economy for 2018 is nafta. What is the current thinking in the government about whether donald trump is going to withdraw . Our central scenario is that negotiations will continue. Its reassuring that there is a method and dialogue going on in this regard. This week, there is a technical round going on. In january, there will be a ministerial round going on. The dialogue continues. Im a Firm Believer in trade. Trade is good for both parties. Not just the one who is exporting, also vice versa. It has been a very fruitful relationship between mexico and the United States and canada. What i hope is that the minister of the economy will continue to lead these negotiations well. And these will arrive at a reasonable result for all three of the countries and for north america. Scarlet that was mexicos new finance minister speaking with Michael Mckee about the ongoing nafta negotiations. Lets head down to europe. Business leaders and policymakers met in paris at the one planet summit on the second anniversary of the paris climate accord. Mark carney participated and spoke exclusively with tom keene on bloomberg surveillance. Tom what are the economic incentives of private enterprise, particularly a Multinational Corporation to actually get the job done . What is the actual incentive to do good . Mark i would say two classes of incentives. The first are a series of policies that have been put in place. In some countries, it is the carbon tax. In other places, it is regulation. In other places its a combination of those. Which changes the opportunities for companies and the risk they have to manage. The second set of incentives are around how does a company manage risk and how does it manage opportunity for longterm value . The thing that is interesting today is climate is coming into the mainstream in those conversations. Let me give you a couple of facts. Eight of the 10 largest Asset Managers in the world signed up to support these recommendations. You have 20 of the globally systemic banks. The world leading sovereign funds, major insurers and Pension Funds. In total, 50 trillion of asset under management and 80 trillion of Balance Sheet that are looking for this disclosure. We saw overnight with exxon mobils announcement and you are seeing it across the board. The capital chain is looking for this information, including the two major shareholder proxy Voting Services which are responsible for 90 of that market. They are looking for this information and now they have a framework to get it. It tells the providers of capital who is thinking about risk, looking at opportunity and who is managing it well. Scarlet meanwhile this week, beijing hosted the International Energy executive forum. Global Industry Leaders and experts discussed the outlook for oil. Tom mackenzie landed in exclusive interviews on that very topic. Lets get you started with the opec secretarygeneral. He says the agreement to cut balance will balance the market. Production cuts will balance the market. For all intents and purposes, we are beginning to see a return to a stable market in the fullness of time. Something that had eluded us for seven years, due largely to the concerted efforts in the countries which has just been extended for the whole of 2018. Bringing together for the first time in history countries to show solidarity to the efforts we first took in december of last year. Tom given the progress you are seeing, are the kuwaitis right to suggest there is a possibility that in june of 2018, this deal with production cuts could come to an end . Or at least the discussions could start . I think this has been discussed at great length in vienna on november 30. Hence, the decision to extend the supply adjustments for the whole of 2018. At the moment, we are in the process of putting the Building Blocks for a more permanent framework of this declaration of cooperation beyond the rebalancing of the oil markets. Tom that relationship between opec and russia, for example, could be extended beyond this agreement . We had already agreed as far back as december of 2016 when we were crafting the declaration that we wanted to see this platform that first brought together 24 producing countries to help the market return to stability. To be developed into a permanent platform for producers. That would ensure us to sustainability. The supply adjustments, just one tier of the declaration of cooperation. The Building Blocks we are putting together now will further entrench this partnership beyond the rebalancing of the market. Basically, you have an opec, nonopec agreement that has been reinforced for the whole of 2018. At the same time, we are continuing to see a strong Global Economy which has translated into high oil demands and that is affecting the price of oil. A disruption like a pipeline could affect it. There is geopolitical tension in the price. The fundamentals are holding the price of. Up. What does it mean for your outlook for pricing in 2018 . Dan we see things in the high 50s, high 60s range to be the most reasonable outlook right now. I think there is more uncertainty. A big question mark hangs over venezuela. Its production is going down, the economy is in shambles, yet somehow it is holding it together. Dan i think so. The goal was to rebalance the market. I think it has taken longer to rebalance because the inventories were so high. That is what they are looking at for the number one indicator. I think what has happened is the coming together of opec and nonopec which was very tentative at the beginning. I think it is a kind of historic accord between those two parties, particularly at the heart of it is a relationship between saudi arabia and russia, and their determination to make this larger agreement work. Tom the kuwaitis have said recently this deal could be revisited in june and that the cuts could end before 2018. Is that likely . Dan there has been a lot of discussion about an exit strategy. I think the message they ares trying to say is we will wait and see. I think some of the parties are saying lets carry it out until the end of 2018. Lets not have a lot of speculation of and down. Up and down. Others said we dont want this thing to get out of control. If we need to increase the volumes, there is a reasonable outcome for them to say this 2018 agreement, but obviously, six months, things could change. Not to the same degree of we we will review it in six months. Not to the same degree of speculation. What they did not want is to have everybody in march saying that was going to happen with the agreement. And march is the month they will have their next president ial election in russia. The outcome is not uncertain but i think the russians also want to see stability. Scarlet we head now to abu dhabi where Erik Schatzker caught up with bruce flatt at the bloomberg invest conference. Brookfield recently bid to acquire model owner gcb. A contrary and move given the recent trend in brickandmortar retail. Erik began by asking him what other plans are on the horizon. Erik we know you have been very contrarian about brazil. The early signs was that that was a smart bet. Is there anywhere in that world where you can be contrarian with valuations of where they are with the prospect of Rising Interest Rates . Bruce eight years into a cycle, it gets tougher and tougher but we always find pockets of things to do. You wouldnt have said 18 months ago that buying solar and wind farms in america would be a valued investment. Yet, sun edison got themselves in trouble and we bought two companies called terraform and bought a large wind solar business. If you are out there, these things, along. India offers value today just because the entrepreneurs poured a lot of money and the banks are going through reorganization of a lot of financing in the country. There are opportunities there. Erik you have taken opportunities to sell real estate, American Real estate, for example. Where else do you feel valuations are rewarding you to sell today as opposed to buy . Bruce we are always selling and we are always buying. Netnet in developed economies, in fully left properties, infrastructure or power where contracts are long and credit is good, people are paying high prices for those. Erik where . Bruce we have been selling London Office buildings. Erik even though people have been saying brexit will work out . Bruce we are developing buildings today. We are selling on park avenue in new york city. We are selling power plants that are longterm left. We are selling transmission lines that have 30 year contracts on them. Anything that feels like fixed income to us we are selling and anything that has Operational Development work to it, that is our business. Scarlet you are watching bloomberg best. Im scarlet fu. This week, Bloomberg News continued it series of the future of investing. What trends of Money Management will affect portfolios Going Forward . Reporters shared their research and analysis throughout the week. Valued investing is a favorite strategy but the eight year rally in stocks and the lagging in funds have caused money to flood to passive funds. In todays installment of the future of investment, we take a look at how the banking of hybrid investing strategy. A fund that has been around since 2015. Part of the money tracks the s p 500 index. What the remainder, what he is doing is going out and going along some stocks you like on a fundamental basis and shorting some that he does not like as much. The positions are netted. Yet, the key is to reduce the amount of tracking error that the fund has with the index. As we have seen, a lot of passive strategies have done really well recently. The problem is as greenblatt told me, a lot of investors really chase returns. They get out at the wrong times and will jump in after a fund has already run up. The idea here is to reduce the tracking error and hopefully have people stick with him. What we have seen with this particular fund is that last year, it outperformed 95 of its peers. So far this year, it is in the top. John burbanks capital will shorter its flagship after funds slumped. It seems to be losing its luster. Investors are fleeing. In yellow, Equity Hedge Fund assets. In 2000, they accounted for nearly 60 of Oil Hedge Fund assets. Today, less than 30 . The amount of assets has grown so the net dollar amounts are probably not that much different. The industry as a whole has continued to attract assets as Pension Funds and other investors had turned to the strategy. What we are really seeing this year is the number of the traditional big Name Hedge Fund managers. You mentioned john burbank. We have seen others really struggle for a variety of reasons. The long and short equity strategy is one that builds up the Hedge Fund Interest rate. Our colleague wrote a story today that essentially says long short put the hedge in hedge funds. That is one of the strategies that is really struggling. Burbank saying he is rethinking how to manage money in this environment. What exactly is changing . One of the things that are changing is there is lower volatility, lower interest rates. You are seeing the rise of asset passive investment. What longterm Equity Managers used to look at what they could short is going down. With the rise of passive investment, black rock and vanguard, some stocks are rising with their benchmarks. Its harder to pluck them out. Actually, the number of publicly traded stocks has also fallen. It is half of the number it was in 1996. Just the availability of stocks they have to choose from to go long or short has changed a lot. Emily major investment firms have slowly been playing catchup, incorporating new technology. They are also fearful big tech giants will threaten their way of doing business. How might google or amazon disrupt black rock or fidelitys business . Selina a google or amazon could offer Financial Advice or brokerage services. They could get into the business in a variety of ways. They could also get into the banking business. You have already started to see this happen a little bit where alibaba in 2013 started offering a Money Market Fund. It has become the biggest Money Market Fund in the world. So, there is no reason that amazon could do something similar where clients could store their value, their cash in a Money Market Fund. Fidelity and google definitely recognize that. Fidelity is taking steps to protect against disruption by investing more than 2. 5 billion in technology each year. And they took a stake, or bought emoney, which is a Financial Planning company in 2015. They have also been doing a number of experiments on amazons alexa. Working on some of the software where a customer can go in and ask where they are in their Retirement Plan or whether they would be able to meet their education goals. Alexa would come back and say you are not on track but here are the steps you have to take to actually meet that goal. That is kind of a work in progress right now because they dont have voice authentication. Fidelity labs is working on that, but the technology is not seem to be there yet. The investor exodus to index investing is accelerating. As soon as 2019, lowcost passive funds may be managing more assets than their counterparts, according to calculations. Is this all because of how much cheaper it is to invest in passive and etf . Absolutely. You are seeing a very big shift. Investors realized why do i need to pay lots of money for an asset manager that is actually not beating the market . Looking at the markets this year, s p is up 19 . That is not something that can be really achieved, especially if it costs a lot more money. If you are not beating that benchmark, why should i pay . I remember asking this question to bill ackman. He pointed out he started something completely different with the actively traded shares in london for example. Other managers as well. Its a long time since we have seen two and 20. I think what is happening is many active managers, especially at a Mutual Fund Company like fidelity, are going to lower their expenses to try to really bring investors. But it is so much more expensive to actually a buy a fund that is active out of fidelity than it is to buy an index fund. When you look at the ultimate performance, a fidelity fund, many of them have not been doing that great. Some are doing great. Index funds now are pretty big of a place to be because you are just marking the market and you are basically saying i am making 19 , not a bad deal. We continue to see a market rally but what happens when you see a downturn because though those stock pickers could come to the rescue. It is possible. I think the issue is that people have been lulled into the sense of security in the markets. Im making a lot of money, i am not doing a lot of work. If i have an index fund, set it and forget it. That is a big risk. Stockpicking is really about good ideas. Ultimately, stock pickers will have to show they have great ideas that can exceed the markets. As one money manager told me, can you really have 50,000 great ideas a year . Thats how many managers are other trying to come up with ideas for stocks. Im looking at vccy on the bloomberg, a great place to find everything that is going on. Im seeing volume of about 3000 shares that have been trading, trading just under 18,000. Bitcoin on the right is the futures chart. On the left is the cash trading chart. That shows you the difference. Scarlet we have 30,000 functions on the bloomberg and we always enjoy showing you our favorites on Bloomberg Television in the hopes that maybe they will become your favorites. Heres another function you might find useful. It takes you to our quick takes where you can find important content and fast insight into topics. Heres a quick take from this week. North Korean Leader kim jongun loves the post about boast about nuclear weapons. He also likes to test them, along with missiles that may or may not be capable of taking Nuclear Bombs to north america. Those tests affect the International Community and keeps pressure on china, north koreas closest ally. President donald trump has warned all options are on the table. President trump it will be solved. Here is the situation in the second half of 2017, north korea testfired two intercontinental ballistic missiles, saying all the u. S. Is now in range. They fired missiles over japan twice. In september, the north conducted its strongest test to date. More than 10 times stronger than the bomb the country detonated almost a year earlier. The Un Security Council approved tougher sanctions in august. Trump followed up with further sanctions in september. The war of words in testified. North korea saying the u. S. Will pay dearly for the measures, while trump as agreed to work with beijing to find diplomatic solutions, he has repeatedly criticized china for failing to do enough. But the chinese are reluctant to push so hard to risk the collapse of north koreas government and the influx of millions of refugees. In the event of south korea absorbing its neighbor, a well armed u. S. Ally on its border. In april, a Missile Defense system was installed in south korea. The chinese are not happy about that. Both south and north korea have hundreds of thousands of troops deployed on either side of the border. North korea has a long history of escalating and the escalating tensions in order to broker economic concessions which leaves the u. S. And the world and in a tricky position. Most diplomatic situations call for a character or stick approach. Unfortunately with north korea, neither the carrot in the form of aide or the stick in form of sanctions has worked. Awaiting the downfall of the kim dynasty or military confrontation. None are ideal but neither is the status quo especially given kims erratic behavior. He has executed top advisers. Including his own uncle. He went so far as to say as long as a senior director said as long as kim is in power, the country would never give up its Nuclear Power even if it was offered 1 trillion. Scarlet that was just one of the many quick takes you can find on the bloomberg. You can also find it at bloomberg. Com as well as the latest Business News and analysis 24 hours a day. That will be all for bloomberg best this week. Thank you for watching. Im scarlet fu. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Carol welcome to bloomberg businessweek. Im carol massar. Julia im julia chatterly. Carol in this weeks issue how , to rebuild puerto rico. An 11yearold philanthropist helping girls feel comparable in their skin. Julia all that ahead on business week. Carol we are here with megan murphy and i want to start off this week with a story in politics