The buy, sell, and swap strategy. Bloomberg looks at the future of investing. What does it mean for these passive investment giants have so much money . Its been gaining more market share in the hedge fund industry. Its harder for them to find growth. Thats all straight ahead on bloomberg best. Michael hello and welcome, i am michael mckee. This is bloomberg best. The week began with high hopes for brexit breakthrough, following reports that the u. K. And it you had made some terms on their divorce agreement. The dream was quickly dashed on monday. Mark the expected breakthrough failed to materialize. Apparently delayed over the irish border. The European Commission president john paul juncker roke the news. Mr. Juncker despite our best efforts and significant progress, we and our teams were not able to reach complete agreement today. This lunch started around 1 30 brussels time. About four hours ago. We understood that it one point, theresa may actually broke away from the lunch to call the leader of the Democratic Union arty that props up her government in london. At this point in time, it was ostly the issue of the irish border. That sort of put an end to any possible breakthrough. What happened today is an indication of the political weakness of theresa may. The u. K. Prime minister in the middle of International Negotiation having to break off to call the leader of an obscure Northern Irish party propping up her government, this is where we are. David the tax overhaul last week was all about getting a bill to the senate. This week, it is about reconciling that bill with what the house passed earlier. We are going to conference. There are more bumps along the road. The house and senate have a number of differences between their bills. The senate has an issue they recently found out is in their bill, dealing with the alternative minimum tax for corporations that would basically make moot a number of breaks they wanted to offer to tech firms for intellectual property. So they have to work that out. Everyone seems to be speaking optimistically, but they have a number of challenges they need to confront to make sure the house and senate are on board with the final package. Vonnie the late change to the bill that keeps the 20 amt could be partially responsible for the recent weakness in tech, tip makers coming off their worst week in over two years driven by reallocation potentially. Basically, it was almost classic. You are going to keep the amt and the corporate amt m it is going to hurt the tech sector. It will hurt the utilities. But of course, the consummate beneficiary are the essentials. Also, there is intense lobbying at this point to fix this. Many people think that the 20 that stayed in was basically a mistake. Francine theresa may once again facing a revolt from inside her cabinet over brexit negotiations. The uk Prime Minister is said to have been pressured by senior minister Boris Johnson and michael gove to keep aligned with the European Union after breaking away. The e. U. Has given her until the end of the week to present a proposal it finds satisfactory, in what officials described as the deadline of deadlines. We are both concerned that kind the uks Regulatory Regime to close to the e. U. , will tie the uks hands in the longterm when it comes to negotiating new free trade agreements with other countries, such as the United States. At the same time, if she does not get the dup on her side, the Northern Ireland party that is propping up her minority government, that could bring own her entire government. Pres. Trump i have determined that it is time to officially recognize jerusalem as the capital of israel. President trump in this case was facing a deadline, a congressionally mandated deadline to sign a waiver against moving the u. S. Embassy to jerusalem. It is something president s deal with every six months. Trump was clearly frustrated with facing that deadline after promising on the campaign trail to recognize jerusalem as the capital and move the embassy. He decided to take the step to basically unilaterally declare jerusalem to be the capital. He says the state department will start hiring architects and designers and people to begin planning the move. It is hard to know if this is the first step in what the administration has planned as a broader rollout of the mideast peace plan. They say that plan is not ready yet. The primary plo negotiator on the Peace Process has said this effectively renders the United States not to be a moderator in the process. We have heard from european allies as well, but this is not something they see as in the interest of peace. The federal government runs out of money tomorrow night. The threat of a Government Shutdown is looming over capitol hill. Can we expect another lastminute deal with democrats . It is not looking likely. Pres. Trump it could happen. The democrats are really looking at something that is very dangerous for our country. The joint resolution has passed. The u. S. Congress is set to pass a bill to avoid the shutdown for now, providing funding for the government just through december 22. It takes us to three days before christmas. Not much of a victory, is it . It is in the one sense that hey were able to come together and agree to get this done rather than push into the brink of friday night or through the shutdown. But it does defer a lot of big decisions, things there are some disagreements. Primarily, the caps on defensive spending and domestic programs, some legislation that would stabilize the obamacare markets which is tied into the tax vote as well, they have a lot of work to do over the next two weeks. Even then, they will be deferring it until january. They will come back and try to hash out a fiscal plan for the entire government for the rest of the year. Matt britain and the e. U. Have broken the deadlock over brexit. New this morning, the two parties have reached an agreement on three sticking points citizens rights, ireland, and the divorce settlement payments. Talks can now continue to trade. I believe we have now made the breakthrough we need. Millions of jobs depend upon the future trading relationship we will determine and i am optimistic about the discussion ahead. Now, the really hard work starts, in terms of the trade negotiations and for mrs. May at home. The union is still flexing its muscle, letting it do for now. They are saying it still needs to be ratified by the u. K. Parliament and it may be more problems to come when they really get into the details. Because we still do not know what the solution for ireland is. Whenever that is proposed, we have no idea when that might be, the dup may still cause trouble. Jonathan a stronger than forecast jobs report. The economy adding 228,000. The Unemployment RateHolding Steady at 4. 1 , on almost 17 point year low. Average Hourly Earnings came in a bit lower than forecast. This is a solid report. The top line number was spot on. Wages are little week, but 2. 5 is edging up. At least it is moving in the right direction. Jonathan you have said before that if this administration drove those payrolls gains. S it improving and the way people want it to . We do. We accept that. That is why we need tax reform. We been saying this consistently. We need tax reform. We need to allow workers in this country to keep more of what they earn. But more importantly, we need to be able to drive more wages to our hardworking citizens of this country, and we firmly believe that tax reform will drive wage growth. Michael still ahead as we review the week on bloomberg best, Bitcoin Futures start trading on sunday. The ceo sets the scene for the launch. Plus, interviews with jack bogle and ken mullis. Conversations from the ubs global media conference. Bloomberg kicks off a special series on the future of investing. Up next, more of the weeks top business stories. Short seller carson block made headlines when he revealed his latest target here in this studio. We believe this company is rotten to the core. This is bloomberg. Michael this is bloomberg best. I am michael mckee. Let us continue our global tour of the top business stories with a momentous merger that brings together a drugstore chain and a Health Insurer. David drugstore giant cvs will acquire Health Insurer aetna for 67. 5 billion. That will potentially transform the Health Care Industry in the United States. It is going to be really interesting because it condenses a huge part of the supply chain existing between, you know, patients on one end and their money on the other. What we will have here is an insurer combined with a drug benefits manager combined with a Retail Pharmacy that also runs a lot of clinics and other stores. You are really taking a lot of pieces that exist and almost essentially middlemen in the Health Care Supply chain and combining them into one big piece. It will resemble Something LikeUnited Health care than the separate pieces did. Vonnie the richmond fed naming Thomas Barkin as its new president. Jeffrey locher forced to quit. Michael he will walk in the door and become a voting member. The richmond fed rotates to the voting cycle in january, he will start on january 1. We do not really have a good feel for his Monetary Policy views. We know a lot about his background. He got a degree in economics from harvard, then went to Harvard Business school and harvard law. He has worked at mckenzie most of his career. He did some time at first boston. He was the chief Financial Officer for a while at mckenzie. He is now chief risk officer out of the atlanta office. In the past, he has donated to democrats, so perhaps you should read something into that. We do not know exactly where he will come from. The richmond fed has a tradition of being a very hawkish Federal Reserve bank, so if the board of directors was looking for someone like that we may expect that for mr. Barkin. Vonnie Robert Muellers investigation has expanded and is now reaching Deutsche Bank. Mueller issuing a subpoena to the bank weeks ago, the mandate documents of President Trump and is family. Mueller and his team are investigating the roughly 300 million owed to the bank. Why has Deutsche Bank not handed over the documents . What they have said in the ast, the democrats in congress have been pushing for them to release those documents for a while. Deutsche bank has always said we cannot. It is a confidential client relationship. We cannot just release these documents. We need a formal request from congress or, now, a subpoena. Now they have it. Someone in the bank previously told me they would release the documents, if only to get out of the headlines and get this off of their chest. It is probably something of a relief. Rio tinto has named Simon Thompson as its chairman after shareholders were said to reject an earlier candidate. Who is Simon Thompson . What is he bring . He is an experienced money executive. He has a lot of banking experience, so he has worked at Companies Including newmont, anglo american. He is 58 and a senior director at rio tinto where he is the chair of the renumeration committee. And essentially, he has an annuity ticket. Betty attempts to forge trade talks between china and canada fell apart in beijing with sticking points on both sides. Prime minister Justin Trudeau indicated that while his preference for socalled progressive tax, the two sides would only enter formal talks if they are confident a deal could be reached. Are those the real reasons why these talks are not working . I think we should clarify that exploratory talks between canada and china on a free trade deal continue to go on. There was definitely an optics problem today. It appears the canadians and chinese had their wires crossed before Prime Minister trudeaus plane ever landed in beijing. The chinese abruptly canceled a joint News Conference that had been planned for Justin Trudeau and premier li. You had them giving separate statements, not taking questions. There was a bit of space lost on oth sides. Do you have a new short position . It is in what stock . It is an osi systems, which most People Better know as the maker of rapid scan. The airport scanners and scanning equipment. Erik what is the issue with his company . This company is rotten to the core. Erik not mincing words. We actually have what we think is smoking gun proof that when this company got a key turnkey contract a few years ago in albania toward 150 million or 200 million top line, they paid a bribe or kickback of almost half of that concession. So to me, that is damning evidence. Then we also look at really the Major Contract these guys have is a turnkey contract in mexico that is up for renewal next year, possibly the early part of the year. The pricing on that appears to be egregious. We estimate that one contract in mexico is worth about 55 of the companys ebitda off for the last fiscal year. If you own the stock, you are basically owning it for the one contract in mexico that is up for renewal and should be looked t carefully. Vonnie we reached out to osi. A spokesman declined comment. David warren buffett. Every year at his annual meeting, someone stands up and says what is your Succession Plan . He says we know it, you do not, and we will come up with it when we need to. We think maybe we have some hint of who it might be. Who is it . We believe it is greg gable. Greg has been running brookshire hathaway, one of buffetts biggest businesses. Some other people that were on the list we think have sort of moved off in terms of what buffett is looking for. David more says great things about greg gable every time. What about ajit jaine . He and Charlie Munger have praised and as well as gregory gable. Buffett says he wants a successor to stay in the ceo role for at least a decade, so one of the key factors there is age. Jonathan the big deal news basically, the battle of foxs assets is heating up days after it was reported that the murdochs would defer to disney. Who is driving it on the fox side and what will happen with leadership at disney if the deal closes . I would have to believe it is rupert who is driving it on the fox side. The question is, does bob iger stay . Does james take over . We do not know. We just recently heard bob saying he is leaving in june of 2018. He has not said anything since. I would imagine that if they are going to win these assets, he may stay on for another year just to make sure the integration is ok. This is his legacy. He has to be pretty careful. He wants this to work. General electric will cut nearly one out of five positions at its power units, resulting in 12,000 job losses, or 18 of ge powers workforce lost. The unit needs to become leaner as customers turn away from fossil fuelbased energy sources. Theyre cutting losses. The job losses that were announced this morning, those were part of a plan they announced to cut 1 billion in ge power next year. They are in the process of cutting 3. 5 billion in structural costs across the company. Theres definitely a lot of action being taken. Vonnie how long will investors give flannery . I do not think anybody knows for sure. He will need to show some esults soon. Banks have emerged relatively unscathed from the final batch of post crisis capital rules with few lenders meeting to raise new funds. The committee on banking supervision broke a deadlock on curves on how banks estimate the risks of mortgages and other assets. 10 years in the making, is this t . What do we see here . What is the end product . Ok, well, yes, there is a very small chance this could go and fall apart. What could not fall apart in the world today . We are basically there. It is a deal which the europeans are not happy with. The americans are not happy with either. Maybe it is a good deal. A good compromise is one that no one likes. Michael welcome back to bloomberg best. I am michael mckee. Bitcoin topped the 15,000 mark in trading this week. The cryptocurrency will enter a new phase in its development. At 6 00 p. M. New york time, Global Markets will start trading Bitcoin Futures. That is a whole week of exclusivity before its rival cme gets in the game. Way ahead of the nasdaqs plan to offer Bitcoin Futures next year. Scarlet fu and julia chatterley spoke with chairman and ceo ed tilly about the upcoming launch. We know what it takes to bring new contract to the marketplace. It is a slow build. We start the futures here. Open interest builds over time. We have reliable settlements. We have oversight from the cftc and our own regulatory department. That builds over time. That is when i think the institutions will make more moves into bitcoin. But it is going to take some time. You started working at cboe in 1987 as a floor clerk. Youve seen it introduce lots of products over the past 30 years. Compare and contrast the size of the potential market in Bitcoin Futures with other products you have seen in the past. Theyre very small. Especially compared to the markets we have built in the past. To your point, cboe has a history of new tools to manage risk to the marketplace. Vix is the bes