Lets get to our market reporters. What are we watching . The index watching cryptocurrencies including bitcoin and either. If we look at a chart of the global strength indicator, we can see it flashed a buy signal with the index getting it percent since tuesday. That is good news for crypto fans who have seen crypto come under pressure in the last few months. Your look at bitcoins performance, we can see it rose 277 through june, lost half of we valley since then, but have some analysts coming out and saying 2020 be better for crypto prices. Say bitcoin could rise as much as 10,000 in 2020. That would be quite the rise for bitcoin appeared on the rise this year, the s p 500 up really 29 . Santana clearly visiting stocks this year with the s p 500 climbing that wallow worry. The official santa claus rally pens on january 3. Lets look at a chart that may give some clues. Lets take a look at a threemonth chart of the s p 500 and the dollar. A risk on period with dollar yen and the s p 500 climbing. This is not the right chart. That suggests the yen may start to rally. Consolidatestart to down to its uptrend, and that may suggest we could see the s p 500 give up some of its recent gains, so the official santa claus rally may not come. Sector looking and one that may not need santa claus, already has had an incredible rally. The tech sector may be flat on todays trade but has gained 47 year to date. That puts it on pace for its best year since 2009. It really has been quite the rally, r and away the best performing sector in the s p 500. It is just a few names that we have to thank for a large part of the gains we have seen in the broader index. Microsoft, alphabet, and thebook have contributed most to the s p 500 on a point spaces this year, combining for 164 points. That means just these four stocks have contributed to 20 of the s p 500s gain. Joe thank you to the markets team. As we head into the markets in seniors bring Portfolio Manager katerina simonetti. Thank you for joining us. Inobviously, not much happeninn today, but this is an incredibly fast today, but ts an incredibly fast market lately. Even on these small days, they add up when you strengthen together. Is this sustainable, can we see further gains along the likes of we have seen in 2019 in 2020 for domestic equities . Katerina we should watch every day every single piece of data. With you, what a difference a year makes. When we think about where we were a year ago, a much better place to be. When we look at the data, alltime low unemployment. We look at Consumer Sentiment that has been so strong. We are optimistic going into 2020, especially on the tail end of the phase one deal. We have yet to see the terms, but what we gather from it looks quite good. Im out here in san francisco, and all they can talk about is the massive tech outperformance relative to the s p 500. Take a look at the chart im showing in the bloomberg, massive outperformance. Does the tech sector feel overvalued to you . Katerina the tech sector is certainly exciting, we love owning, following those stocks. It brings tremendous emotional value to investors, but we cannot discount the fact that we are going into an Election Year and we have to face potential tougher regulatory environments. We have to watch more cautiously. Also,ays tell investors if they realize gains, which they have at the end of the year, to take some risk off the table. It is certainly an exciting sector. Scarlet it has caught the attention of investors the last two weeks as well. Also, if they realizewe have seen vol, but one thing our Bloomberg Team was telling us about earlier was that there is exposure in an index which measures active managers exposure to stocks. Active managers are fully invested, which is a big increase from a week ago, when it was around 80. What does that tell you about for a pullback in the start of 2020 one a lot of new money comes in to go to work . Katerina it is a big increase. We are making a call to overweight equities as well. We have to watch fourthquarter earnings. That is where we will come to the realization for a whether te valuations we are seeing right now are justified or not. We are optimistic, we think we will see positive earnings, but this is the data to watch. One of the things that characterize 2019 was the on and off again trade headlines. Edge,ept investors on under safe haven assets. This is part of your calculus for next year . How are you talking to clients about how they should follow the ups and downs of the elections . First, the trade war, we are optimistic after phase one. It came in better than we expected. There were aspects in and that we did not think would be included. But phase two is something to watch. We tell investors not to get overly excited. Coupled with the election, the regulatory environment, some of the things that we might be facing which would increase the volatility in the market, we tell investors to stay true with the asset allocation. But at the same time, stay strategic. Now would be the time, based on the phase one deal, to maybe increase exposure to equities, highquality dividend paying stocks. Take some gains, watch some of the sectors like potentials and health care that may be subject to additional scrutiny in the next year. That is where the election certainly comes into play. Taylor are you avoiding those two sectors you mentioned, given it is an Election Year . What has history told you about what sectors outperform and underperform in those Election Years . Katerina we are not avoiding them, we are looking for an opportunity. We tell investors they may come with additional risk exposure. There is an exposure overexposure to a certain sector, we would scale it back. We see Great Potential in financials, but we would caution investors another might be additional volatility. Certainly not a sector to avoid. Scarlet this is a question i was asking early on. When you look at treasuries and equities, typically they have an inverse relationship to one another. That has not necessarily been the case this year. Is that a problem, and which is leading which . Treasuries leading equities or equities weeding treasuries . Katerina treasuries historically have been a fantastic hedge to look at where equities are heading. In the short timeframe, this inverted relationship we are accustomed to may not happen, but in the longer time, it is very much in place. Joe i dont know what the ,atest number is on the 10year but how significantly should investors be exposed to bonds . Katerina they play such an Important Role in risk allocation. We tell investors not to get divested on bonds, be mindful of the income that they need. Income gives them persistent cash flow, a nice, diversified portfolio, fixed income should be in place. It shouldnt be just treasuries or municipal or corporate bonds. It should be a wellcrafted portfolio of all the above, strategic portfolio, especially in this market. Taylor i love your notes on limiting portfolio risk. Looking at risk parity strategies for example. What are you doing to limit risk in the portfolio . We are adding highquality dividend paying stocks, insuring cash flow, analyzing the rest exposure of fixed income portfolios, making highyield exposure is not as significant as this runup as we saw at the end of the year, and continue to rebalance. Scarlet limiting some of the highyield exposure but remain overweight on equities, particularly em. Thank you so much. Oil and Gas Companies account for less and less of total u. S. Equity issuance. What does that mean for the ethnic Energy Sector heading into 2020, especially with oil at the 60 range . This is bloomberg. Mark im Mark Crumpton with bloomberg first word news. Vase fors a beautiful christmas rather than a missile launch. We will find out, but the surprise, we will deal with it very successfully. See what happens. Everybody has surprises for me. I handle them as i come along. Just the president finished thinking Service Members from each branch of the military via satellite when he was asked about north korea. Thousands of people descended on the town of bethlehem today for the annual Christmas Eve parade. The main square was full of balloons, santa hats, and dancing families. Shook hands with and waved to locals and Foreign Tourists watching and taking photographs from the ground. Christmas eve journey is being tracked around the world by astronauts orbiting in the International Space station. The crew is teaming up with norad to follow santa and his reindeer as he speeds around the globe. Seasons greetings. Andrew morgan reporting to you from the International Space station with an update on santas location. This just in, we have obtained visual confirmation that santa is currently traveling south over india. According to the satellite infrared sensors, it appears santa is bearing toward sri lanka right now. Here are more the International Space station, we are 250 miles above the earth, orbiting around the earth at roughly 13 miles perhour 13,000 miles hour. I will be using the norad Santa Tracker all day long along with other astronauts on board to find out when we will cross santas flightpath again. You can track santa, too, at noradsanta. Org. Happy holidays, everyone. Mark we couldnt resist. Who dialed a child misprinted phone number in a Department Store ad thinking she was calling santa started the tradition of tracking him around the world. Global news 24 hours a day, onair, and on quicktake by bloomberg, powered by more than 2700 journalists and analysts in over 120 countries. Im Mark Crumpton. This is bloomberg. Investors appeared to be losing their appetite for shale. U. S. Oil and Gas Producers have raised the least funds from share sales this year in a decade, and the trend is expected to continue in 2020 with oil prices hovering below what investors need to boost their confidence in the second or. For more, lets bring in critic of the. These countries are not selling as much equity to investors. Is it as simple as oil prices, people cannot get excited about the spread . Kriti sounds about right. Excusee looking for any to bring these companies backup, regain the confidence. The oil price is a big part of that conversation. Are youwhat price hearing that oil need to get to in order to do some more share sales . Kriti the range i have heard is 65 to 75. E are getting kind of close going into 2020, that will be the key level to watch, see if we get up to that 65 level, if it is enough to bring investors back. Oil prices have been remarkably resilient in this tight range. What does a lack of Capital Access to markets mean for these companies being able to keep their production consistent . Kriti how long can they stay alive. Saudi aramco will be the flip argument, where the answer is they can wait it out. Wait for the margin to profits to go up and not facing bankruptcy. The companies in the local shale market are not so lucky. Going into 2020, that will be a major concern. Cycles. Has upanddown the creation of the u. S. Shale industry has been a part of this megacycle. Do people perceive the pain we are seeing right now to be a smaller cycle or truly one of the final innings not that shale is going away, but the final innings of what has been and it short and very rise of american domestic production. Kriti i wish i could say that we are near an answer to that question. The last 10 years especially, production has hit a record, and that is why we see oil prices be in such a range this year with a trade tensions. Also with simple supply and demand, access to supply really putting a cap on just how much prices can rally. It doesnt look like we are slowing down anytime soon. Scarlet we are talking about funding for these oil companies. How is management dealing with this situation where they dont have access to Capital Markets . Kriti they are kind of in a pickle, and that is why the story is so interesting. The best way to compare is to look at the last commodity crisis we had. 2015, massive drops to about 30 a barrel. , the rescue, then liferaft out of the situation, was to issue more shares. Now they cannot really rely on that anymore because they have already lost that Investor Confidence in the past year and a half. Also still reeling from some of that debt the accumulated in 2015, 2016. They cannot really turn to that anymore. That. talk more about when does debt issuance begin to step in here, or are there too many liabilities coming due . Kriti the refinancing is what we expect from the debt market. Go, thes new issues feedback that investors have given me on this story is trying to keep spending in check for these companies. These Balance Sheets are already under a lot of pressure right now. 2020, what is interesting, we will see a wall of maturing debt. , those become liabilities and could drive stocks lower. Once again, these stocks are in a pickle going into the new year. Scarlet Energy Stocks will indeed to be value. Thank you so much. Right story. Coming kicking back and having a good time. This is bloomberg. Coming up, there is an etf to help you get into the holiday spirit. We are talking about o the holiday spirit. We are talking about scarlet it is the time of year to celebrate, and of course there is an etf or that. The leisure and entertainment ticker trax leisure and entertainment stocks. It is time to close out the year in style with some fun in diversion and wining and dining. Tracks 30 u. S. Listed Companies Involved in the leisure and entertainment companies. The consumer facing names are chosen according to specific criteria, including personal thementum, earnings momentum, quality, management action, and value. You have gaming in media companies, hotels, cruise operators, and airlines. Names such as fox, mgm resorts, and hilton, and even manchester united. Uses a multi factor Selection Process that is equally weighted within tiers. Pej has an Expense Ratio of city three basis points. Since launching in 2005, it has returned 240 . That trails the s p 500 by 20 percentage points. Pej gets a green light in the Bloomberg Intelligence traffic light system with a morning on its alternative weighting system. Etf iq will be back at his usual time in the new year at 1 00 new york time, 6 00 in london. Taylor as a decade comes to a close, scarlet and joe can on how we consume information and how americas highly polarized politics have influenced our drinking styles. I was taking a look at the trends we have seen in the last decade, wanted to know which one im keeping for the next decade. It has to be low alcohol. With a gig economy, half of us are driving for uber. I cannot be drunk at 2 00 on a monday. I am going for low alcohol, maybe a mocktail, and that way i can keep up with you party animals. California, so you dont even need alcohol. Taylor we are so hit out here. Scarlet people dont drink in california, they just go hiking. Over, agree, alcohol is nobody wants to wake up drunk. Scarlet there are other divergence of people dabble in. Taylor it was a great story about having low alcohol. Some other trends about instagram drinking. Im with you, i think the new trend is a good old mocktail. Quick note asa well, money undercover is next. He is now doing listings of a different kind as ceo of Sneaker Exchange stockx. This is bloomberg. Happy holidays, everyone. [ dramatic music ] this holiday. Ahhhhh ahhhhh a distant friend returns. Elliott. You came back and while lots of things have changed. Wooooah woah its called the internet. Some things havent. Get ready for a reunion 3 million light years in the making. Woohoo yeah time lisa abramovitz. Welcome to money undercover. Oftake you inside the World Private debt, equity, and real estate. Lets get straight to the burning issues in private markets, regulating private equity. The sec looking to democratize private markets to open up risk and return. One of the leading voices on credit deals, bill brady breaks years stress in debt. And we take a look at how some investors are earning 6000 returns by flipping sneakers. Lets get straight into some of these burning issues. With me is allison, lisa, and jason kelly. Investors have debated about how pilingst in this years debt, given the u. S. Economy is ok. We are starting to see a negative quarter this past quarter of Earnings Growth being negative and we will see a couple more quarters of that in the early part of 2020. When earnings go down, that is going to be a key point for some of these companies that are so over levered when they have lower earnings and meanwhile have to service is heavy load of debt. You have been covering the distress we have been seeing. Talk about how much there has been so far this year. In november we saw the distress debt hit 126 million, the most since august way 16. The highest of this cycle. Historically speaking, that is really not that much in the grand scheme of things compared to the financial crisis or even the height of the oil crisis. We are cutting back up to that high but there is still a lot out there. What is interesting is 2016, you had oil price tanking, and a lot of that stress was in the oil price patch. What is interestingthis year, s did not go down that much, what went wrong, and for whom . We saw a lot of idiosyncratic, Company Specific situations. We have had oil prices stabilize in the 50 range. For many companies, particularly those that are highly leveraged, that is not enough to keep going. Seen them run into covenant issues, maturities, and creditors who are tired of giving them more time. Lisa meanwhile, some of these private Debt Companies are taking over for wall street. How are the likes of apollo and blackstone plowing into wall streets domain . Have been lending for quite a while now, but what has changed is there is a flood of cash into direct lending. Bigger pools of capital. That is really eating into the markets, syndicated markets. Into how is that eating marcus with leveraged loans . They are doing deals at 1. 6 billion. Deals i couldve gone to the syndicated loan market. Otherss, Goldman Sachs, may have a range to sell to institutional investors. How much could they end up ,aking away from Public Markets from these apostles and blackstones of the world . We are seeing an emergents of the new asset class. Highyield10 of the inn and debt market could go the next five years. That is a huge amount. That brings up questions about the risk that is embedded when you have more of this business moving to private firms that focus on private debt, which brings me to jason. Regulators are focusing on private markets, but figuring out ways to open them, not close them down or shutdown risk. How is the sec trying to democratize private risk in equity . Its a great question, and here in washington, they are looking at ways to make the pool a little bit bigger. This is the holy grail of sorts for the private capital managers. They want more people to give them money, simply. The sec widening it just a bit to say that if you have certain certifications, or if you are knowledgeable about the market by working with one of these financial firms, maybe you, too, can be an accredited investor. Lisa why does the sec want to open up the market so much . They have gotten a lot of pressure from the firms themselves, but also a sense that every day investors, a broader scope and investors are missing out on a lot of the gains and profits made in the private sector. You think about the gains that have been made on Companies Like pellets on. Once they go private, those private investors look much more profitable than maybe be the public investors. In the age of the unicorn, people want more access. Lisa more access but this is inherently risky. I dont mean in terms of the actual investments, but the maturity profile. Investments dont come to fruition for a long period of time, not that liquid, so what are the risks . The risks are big, and that is what you point out. And that is why we are here. Meant to look at investors, keep them away from things that are, as you say, a little more risky. This is an opaque market in many ways, doesnt have the transparency that a Public Market would, and people lose money. You worry about folks going into these investments not having the sophistication of maybe a professional investor would. Lisa thank you for all of our reporters. A question about the dynamism of public equity markets with more Companies Going to direct listings or not even necessarily going public at all. Tried and failed but is still chugging along, this time with some financing details. With us now is our financing reporter. This financing package in order to help its transition to more softbank control. What is the latest here . This is the first effortpacko save their investment bank. This gives the company time to get their act together. We are a few weeks removed from one of the greatest start of stories turned on its head. Aikido collapsed and softbank had to jump in with a bailout package that gives them control. This gives them more time to get back on the bus, back to stability. But it also opens up a boatload of cash. This is something, from a credit perspective, that becomes more appealing to investors. A long way to go but a good start. Isa this is Goldman Sachs it is a loan that will stay on their books, or that they are raging to syndicate out, how big is it . 1. 75 billion. Goldman would not have done that if it was not confident that they could format that two other lenders. So how do creditors suddenly become comfortable with wework . They made softbank one of the technical borrowers on this line of credit. So lenders will be taking the thebank credit risk, not wework credit risk. That is why goldman was willing to underwrite it. Wework now has a sufficient amount of capital to play with. Softbank is taking the risk on its books in a real way, raising questions about how much the vision fund is being conflated with the overall business of softbank, which is varied and financial, less speculative than its startups. There was a feature in business week talking about the culture within softbank. A sense of what that is like, how that is informing some of the decisions . First off, fabulous story. You have to read it. It is the cover story, we have fabulous reporters on it. It really paints a picture of chaos, confusion, and recklessness. Story,look at the wework a few weeks ago, adam neumann was marketing it as a grant tech play that would control the world. A few months later we are talking about a Real Estate Company hoping to sell off their real estate arbitrage and making sure there is a feasible business. Was it smart to go into all of startup investors, that you have to grow at all costs, forget about profitability . The conversation has shifted to figure and whether profitability is what they need to focus on. Lisa thank you for the time. Brady at the law firm Paul Hastings says the economy has a good challenge but there are warning signs. Leverage is high, the margin for error is low. So we have winners and losers in which deals are succeeding, and which are not. Lisa im lisa abramowicz. This is bloomberg money undercover. Of ther a look at some most notable names in private markets. We wanted to dig into the question of how to understand the rising level of debt trading. Is this a leading indicator of a stressed economy or a sign of a healthy market where investors are using discretion . I sat down with bill brady at the law firm Paul Hastings to speak about where we are in terms of the balance of deals falling apart, versus coming to market. Iul three months ago wouldve told you 50 50, but the pendulum has swung back the other way, so now it is 70 front end deals. Highly competitive. 30 restructuring. It is the first time in my 5 5eer it is typically 995 one way or the other. This is the first time in my career where we are busy on both ends. What does that tell you . From my perspective, there is still a pretty good tailwind economically, but leverage is high, the margin for error is low. We really have winners and losers in terms of which deals are succeeding, which ones are not. Belief out is a there that the pain and restructuring has been isolated to energy and retail. Is that the reality, is this just a sectorbased problem, or is this Something Else having do with structuring and the leveraging of those deals . Paul it is more complicated but it is both. I could close my eyes and pick 10 different restructurings from my desk and it is across the board. There is more concentration in troubled industries, retail is a big one. But with high leverage, if management makes a misstep, they can find themselves back at the table. Given the significance of paying dividends, etc. , do you think the next cycle will be really painful, more so than people are prepared for . Paul it depends on which people in which constituents. For some of the shareholders, it may be painful. But there is so much dry powder , there is a lot of distressed funds that have been raised. The cash has not been deployed yet. But unlike 2009, whenever the next recession comes frankly, i dont think it is comingthe cd yet. Soon. Ive been saying that for five years. Lisa congratulations, you have been right in the last five years. Paul i think it will be a soft landing. In 2009, when the banks pulled back, you didnt have billions and billions in distressed debt funds ready to come in. Soon. There was a hard landing for a lot of companies. A lot of those borrowers today will have a softer landing, but there is a price for the distressed lender to come in. They will be compensated for the risk. That compensation will come in the form of probably a higher interest rate, probably a huge equity kicker, but for the company and also ancillary to that, jobs can be saved through that softer landing. Private debtthink funds will significantly outperform private equity funds years,e next five to 10 basin when you are talking about, the dynamic of private equity being the one that feels the pain more than the lender . Of experts are a lot talking about the next recession coming, a lot of people say it is not coming. There is still time before the next recession hits. When it happens and it always does the private debt funds will be pretty wellpositioned in the market, not withstanding high leverage, because the private debt funds, many of them have the underwriting capability and the appetite where if they have to own it, they will. They are not in the business phone, they are in the business of lending. This was part of my practice as well. For unforeseen reasons, the lender has to take the keys, they have the capacity to bring in the experts, turner around the business, and three to five years later, resell it, and possibly recoup their equity and a good portion of their debt. Lisa that was my conversation with bill brady. The takeaway perhaps is the takeaway perhaps is that distress in credit has remained confined to specific companies, idiosyncratic if you will. There was a hard landing for a lot of companies. It speaks to a bigger issue of how deals are being crafted. There are good deals and bad deals, but when things go bad, recoveries will be a lot lower, which means losses may be significantly higher than theyve been in the past. Still, the economy seems to be chugging along. You may be surprised to know that the Global Resale shoe market has reached billions of dollars. We speak to anstill, the econome chugging along. Executive left wall street to cash in on this opportunity. This is bloomberg money undercover. Berg money undercover. Wall street to cash in on lisa im lisa abramowicz. This is bloomberg money undercover. Ine for a look at a person the private market is blazing a new way, in this case, a new asset class. Scott cutler is previously the head of global listings at the new york stock exchange, but now listing every different kind, becoming the ceo of a Sneaker Company called stockx. Todays consumer wants access to amazing brands but they also want to make sure that those brands are authentic. As a platform of a stock market of things, the original concept of this business, it is transformative to have a marketplace powered by sellers from around the world and giving access to authenticated items has been the differentiator, why this is one of the fastestgrowing Ecommerce Companies in the world. Lisa how do you check the authenticity, do you guarantee it . If you look at the product experience, it starts with coming to the page as a product. It is the only place you can find it. That product is transparently available to the customer at prices people can see. Once the transaction is completed in a stock market like way where you can bid on a sneaker, ask, sell a sneaker, sell items, but when the transaction is completed, the part is everyone of those items goes through an Authentication Center somewhere around the world for us. We part is everyone of those authenticate every iter its authenticity before it is sold out to the end consumer. That has created a high level of trust for great brands in a marketplacelike experience. Is there a marketplace for resale Sneaker Market . One pair sold for 350. Is that part for the course . If you look at the entire Sneaker Market worldwide, its estimated to be a 100 billion market. The resale component this year is estimated to be over 7 billion, and its been growing at roughly triple digit growth rates. That is significant relative to even the ecommerce size of the Sneaker Market alone. What we are seeing is explosive growth relative to general ecommerce rates, but we are also seeing, effectively, a different value proposition. People coming to find a new release that they cannot find from the brand, that they cannot get from the retailer, and coming to stockx because its about access, something not available anywhere else, and you are buying it as if it is in its original condition for the first time. Lisa nike recently launched a brand on the stockx exchange, indeed is has done something similar. Im wondering why they are coming to you to debut their items. Scott we did an initial Product Offering with a d does, one of our topselling brands on the platform in october. It was a revolutionary way to release products that come in this case, was never again to be created out of their maker lab. We released those to the market in a unique way and they priced above retail. We had over 10,000 people that came to bid on those items. That the, we expect platformat sell on our to work with us directly because the consumers are here. Lisa what are you seeing in terms of returns, people platfom usingk with us directly sneakers as an Investment Vehicle . I saw one story of a return of 6100 . Scott this has become an asset class of people that do collect, hold onto these items, trade these. Obviously, a sneaker trading at thousands using sneakers as an investment of originally retailed at 200. I look at my own portfolio of sneakers this year, well i performed the s p, the rest of the market, but it is also an acknowledgment that these are have persisted trading value. Have persisted trading value. There are a lot of people using the platform to fund a College Education, fund a platform to fund their business and passion. Lisa i cannot wait to ask somebody, how did you find her College Education and they say flipping sneakers. I wonder what the logic is of putting sneakers over time. My use, they tend to lose value as i use them. How do you ensure this is not a repeat of tulips . Scott this is important. We started with this concept of the stock market things, where at any given time, the price of a product that we show transparently is is will to the consumer. Varies from minute to minute. The difference on our platform, what you are buying is you are buying a product in what is called dead stop condition, as if it were originally released. It is not used, worn. Ofle releases drive a lot people to get access to the product, they actually come back and look at items that may have ton released eight weeks ago maybe 10 years ago, to maybe 10 years ago, and they are buying that product as if it were the first time. Different from other dollars we, and historic year for the nofounded unicorns. There were 21 startups founded or cofounded by a female the past 1 billion valuation mark. Hims,ncludes glossier, and others. In 2015, there only 15. That does it for us, happy holidays. You can remind watch us every tuesday at 1 00. This is bloomberg. Announcer the following is a paid advertisement for timelifes video collection. Welcome to our first show that we are doing. I am real excited. My lipstick. [laughter] good evening, sir. [laughter] millions of people are demanding my return to the screen. [laughter] what is so funny . We are. [tarzan yell] why the