130 people dead in november, 2015. Islamic state cleansers possibility for that violence. Emergency in power Security Forces to apply the highest level of protection in the runup to springs president ial and general elections. Global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. I am emma chandra. This is bloomberg. Live from bloombergs world is in new york, i am scarlet fu. Joe i am joe weisenthal. We are 30 minutes away from the close of trading. Scarlet u. S. Stocks making a comeback. The day after the fed meeting and the fed said they were raising Interest Rates. Joe the question is whatd you miss . Scarlet plus, is cash still ken harvard economist rogoff wrote a book about the sinister side of cash, and we might be seeing those effects in countries like india and venezuela. He will join us in the next hour. And 20 states to mylan and other generic drug makers of conspiring to raise drug prices. We will speak with the connecticut attorney general later this hour. Lets get started with a check and where major indexes stand as we head toward the close. Abigail doolittle is standing by. Abigail we have stocks trading higher into the close. The dow, s p 500, and mastec are all higher, but it is worth noting the three averages, and various times early today had peaked with record closes. The nasdaq had been within less than two points of an alltime intraday record high. The strength for stocks it seems investors are digesting a little bit of excited trade here indecisive as well, uncommitted after the fed. Speaking of the fed, of course, we are looking at rate hikes the first in a year about probably one of the most telegraphed rate hikes and certainly quite some time. And it shows. When we look at a threemonth chart roughly a threemonth chart of the 10year yield this is actually a quarterly chart we see yields have spiked higher by an astounding amount, 1 . For the biggest quarterly move ever. Really pretty amazing. Its suggests it suggest investors were pricing this in well ahead of the news. Some say this reflects trump growth, but it could be the idea that some investors. Trump would be ok for the thought trump would be ok for the fed to go ahead. When we go into the bloomberg, we have a great chart one of my favorite charts g btv 2256. On top, we have the blue 10 year yield. In white, the five year inflation swap. A future look at inflation. This comes from Vincent Cigna rela, a bloomberg strategist, and he says historically swaps have led. He has a great point. When we look at the orange circles, we see the 10year yield has a tendency to rise through the swap, and when they lower, the 10year yield follows. This could suggest we see a pullback in rates. It is worth noting on the bottom, that if the correlation. The markets are highly correlated, making the case stronger for the idea we could see yields drop following swaps down. If we take a look at yet another chart, this is of a bond index the Bloomberg Barclays and get index. There are treasuries in there, Investment Grade bonds also said different bonds. We see a massive uptrend out of 2000 and we chose the starting point because it was the beginning of qe and the extraordinary rate policy that help the market to some degree, but in the orange boxes we see what are called death crosses, when the 50day moving average moves below the 200day moving average. It signals volatility for the market. Not asf bearishness, and there are shows be for other markets. Some ared suggest what saying is the end of the bull market in bonds, but the last three have signals volatility before the market has moved up. It is interesting to take this into account, and of course, we will be following this into the future, scarlet and joe. Scarlet thank you so much, abigail. Withlets dig deeper ashish shah, head of fixed income. Thank you for joining us. Moment. Y, a huge i think that is fair to it. Gorize something i was thinking about over the last day last year, when the fed telegraph they were going to hike four times, this year it only hiked once, next year it sees three hikes. It seems that the market believes that more. Do you think it is more credible this time around . Ashish i think the backdrop is far better. Unemployment is a lot lower. Inflation is starting to pick up. They have done their job. They have eased into this. The u. S. Economy is robust. The thing that concern them and really derailed them last year will was what was going on in the rest of the world. Scarlet so, are we seeing the end of the threedecadelong bull market in bonds . Ashish i dont think so. When you think about demographics, when you think about the amount of debt the rest of the world has, i think there is still going to be a place for bonds out there. Into do think we are late an economic cycle, and you are starting to see growth. Im that is the weird part having trouble getting my head around people are talking about fiscal stimulus, inflation, getting exciting, but how many years has his recovery been going on . , like, seven years . How much longer can they go . I know this expansions do not die of old age, but it is not like we have not been growing. Ashish we have been hearing stories of deregulation and loosening up the economy. That will free up resources for further growth, but you have to worry if they push on the accelerator too hard late into a cycle that does not have a fantastic history. Scarlet how much inflation are people pricing in . We talked generally about how inflation will climb and we see parts of it coming up in Inflation Expectations, but nobody knows how much further past the 2 target we will get. Ashish they are pricing 2 , and for all this talk of inflation, inflation hasnt really very that tremendously over the last 10, 15 years there are a lot of good reasons for that. What you want to think about is we have a lot of unknowns. When you have unknowns, you want to reduce risk. How do you do that best in bonds you go global, you hedge the dollars out. Hedgeke sure you stay in global. It has much better upside versus capture. Downside if you are an italian investor, having a global diversified bond fund made a lot of sense. The same logic applies to u. S. Investors. Joe explained that further if you are a u. S. Investor, what are the specific opportunities abroad . Ashish you can look at economies like australia, where there has been weak growth. You can look at places like the u. K. , where there has been weak growth. Actually, what is interesting, when you had to those bonds back into u. S. Dollars, you pick up a lot of basis points of yields. That is easy money to be gotten. It is what you get when you hedge a global bond portfolio back into u. S. Dollars. You want to hedge because the dollar has been rising. A 5 increase since the election. Joe right, because if you were to go raw, long the aussie10 year ashish in a day. You want to hedge back to dollars. At the end of the day, if it is heating up over here, if we have a more active central bank there are a lot of Central Banks that want to continue to ease, that are looking to be accommodated for bonds. Why not go invest their . Scarlet you are talking about u. S. Investors looking abroad to buy bonds. Investors investors or european investors coming to the u. S. To capture some yield through treasuries . Ashish this deepening of the curve has attracted foreign investors, but it is very expensive for foreigners to come into the u. S. , and hedge those dollars back to yen. That is an opportunity if you are a u. S. Investor or you can pick up 100 basis points versus shortterm u. S. Cash. That is free money to japan is not going to default in the next three months. Why not go out and get that . You can only capture that if you are in a hedged global bond front fund. Hearing about the divergence reminds me of a cyclist in the Tour De France trying to do a breakaway, and the crowd catches up with them. Can the u. S. Really breakaway if everywhere else in the world is in easy mode, not inclined to hike, or does that snuff out the recovery because the dollar gets too strong . Ashish i do think you have to watch the dollar. Watch risk assets and you have seen a big rally in the s p without a lot of substance. That poses a risk to the global risk market, and that is one of the reasons why, friendly, u. S. Duration is starting to look attractive again. Scarlet are we going to talk about the new normal being dead completely . Ashish i think it is way early to do that. I think a lot of things are going on. We continue to talk about weakness coming out of china, you know, versus this Newfound Hope in the u. S. For change. I think you have to be balanced, and make sure you are hedging your bets. Bonds are there to be the anchor in your portfolio, and i do not think there is any reason near term to go away from that. Joe do you think people, when they are looking at this new incoming administration, have been overoptimistic about what it can deliver, and reality will set in they cannot change things that much . Ashish i know when it comes to politicians, you want to be skeptical on what actually is going to happen as opposed to what they promised. Sweeps, and to past say a lot gets promise. Some stuff gets delivered. I think some stuff with the delivered, and there will be opportunity. You want to own duration to make sure you balance out the risks in the portfolio. Joe chief Investment Officer of global credit and fixed income, thank you very much, ashish shah. Scarlet jurors in South Carolina have returned a guilty guilty verdict in the case of dylan ralph. We have dylan roof. We have more chills when did he come available. Amongoming up, mylan, others, are being sold by 20 states saying Senior Executives engaged in a scheme to fix prices for an antibiotic and oral diabetes medications. We will talk to the attorney general of connecticut next. This is bloomberg. Teva and aren being sued by teva 20 states. This comes a day after the department of justice charged two former executives of Heritage Pharmaceuticals with conspiring to fix prices. We are joined by george jepsen, connecticut attorney general, one of the state involved in the lawsuit. Mr. Attorney general, we need to get a sense of the scale how widespread is the price fixing scheme . We believe it is massive, quite widespread. It is the first legal action being taken. We expect more. Joe when you say massive and widespread, how exactly what with the mechanics of the scheme you are alleging how was it coordinated . A. G. Jepsen when we are finding, and the evidence will show, is explicit price fixing to this is not circumstantial evidence when the evidence comes out and some of it has been redacted in what we filed today because of sensitivity to justices and our own ongoing investigation. Explicit price fixing where in text messages, you knows, conversations, we have cooperating witnesses could the case is very strong. Generic drugs are in every household in america. It is a 75 billion dollar a year industry. If you can jack up the prices by 5 , 10 , youre talking millions of dollars in added cost to consumers. States through medicaid federal government through medicare this is a big deal. Scarlet and we are talking here about two drugs. Can you quantify how big the violation is in dollar terms . A. G. Jepsen we do not have that number because the investigation is ongoing. I can tell you that the investigations that are ongoing go well beyond the Six Companies that are listed in our legal action, and the number of drugs being investigated goes well beyond these two. Joe what is the origin of this investigation . What initially tipped you off to look into this . A. G. Jepsen good question. I just want to point out i am proud to say that state attorneys general Work Together on a bipartisan basis on tackling these national issues. This one had its origin backing july of 2014 when one of the assistant attorney general in my office read an article in the New York Times about generic drug prices moving up, not down, the way they should. He, interjection with his department chair, initiated guess yet conjunction with his department chair, initiated in conjunction with his department chair, initiated. You have had two parallel investigations going on. Connecticut, alone, until three months ago, in september, when investigation,r and now we have 19 others who have signed on to our legal action today. We expect more to follow. Justice, of course, unveiled criminal action against two heritage executives yesterday. Scarlet right, and we brought that up as we introduced you. In the past, sharp price increases of generic drugs tended to be blamed on shortages. Do you think there was, basically, fake shortages being talked about here that was a cover for pricefixing . I cannot say why the industry offered the excuses they offered. In this instance, the antibiotic acne drug they conspired by dividing up market share. Basically, different buyers were allocated to one of the three different companies. The type 2 diabetes generic acrosstheboard increase in price by the four conspirators. Joe you mentioned that you think the investigation is ongoing, that you expect to bring further action against more companies, more drugs. Can you provide more details on the scope of that, potentially . A. G. Jepsen i wish i could, but it changes as we pick up rocks. This has been changing for the last two and a half years. As we pick up rocks, we are finding new things. We do not know how big it is going to be, but it is going to be quite big. Scarlet you say to a net half years is that how long investigation has been going on, or how far that this action has been going on . I wonder if there is any link to the fort, the changes in Health Care Regulation in this country. A. G. Jepsen i am not aware of any evidence that would suggest that. Connecticuts investigation was initiated in july or august of 2014, and the Justice Department initiated their investigation two months later. Anecdotally, a lot of people noticed that generic drug prices, really in 2013, 2014, 2015, were going up, and going up in ways that seemed inexplicable. So, it is really examining those situations as the focus of our investigation. And as we mentioned earlier, and you did as well, the doj charged two former executives of Heritage Pharmaceuticals with conspiracy to fix prices. Were they the ringleader of this conspiracy, and if so, how do they go about gathering and consolidating the other drugmakers to follow their lead . A. G. Jepsen they with respect to the acne antibiotic, there was one generic in the field already, and they they made their presence known that they were going to enter the field in a significant way, and eventually reached an understanding that divided up different portions of the market. A Third Company entered as well on that basis. Drug,espect to the second it was a similar situation. You had existing generics and new entrants into the field, and it seemed that all four parties found it better to Work Together and raise prices across the board than to compete against one another. Scarlet ok. And you mentioned there are 19 other states in addition to connecticut suing these companies, and more states could potentially join in as well. What are they waiting for . Will be the catalyst for them to join in on this action . Cases,epsen in most states have their own internal processes for deciding whether to join a particular legal case. So, were confident that in the next few months not the next few months, the next few days and weeks we will have additional entrants into the case. Scarlet all right, connecticut attorney general george jepsen, thank you for joining us and clarify the situation for us. Bloomberg did reach out to the Companies Involved in the lawsuit. Mylan said it participates in pricefixing. Meanwhile, Teva Pharmaceuticals says it is reviewing the complete. Heritage pharmaceuticals say you are cooperating with the doj. The others involved in not respond to requests seeking comment by bloomberg. Next, another hacking scandal for yahoo is threatening its deal with verizon. What does it mean for the companys stock . This is bloomberg. Scarlet i have scarlet fu whatd you miss . . With the massive hack at yahoo , we want to look at the stock and perspective of the stock on wall street. This is the white line yahoo news share price, recovering from 26 in february, to as much as 45 in september, now trading at 38. The purple bar is the percentage recommendations among analysts that we track. It has been steadily falling in february, when the stock was at its low, to about 40 now. There is a divergence with analyst recommendations, and the yellow line, which is the price target. It has climbed to 47. It seems strange, right contradictory . One reason is there are no selfratings on yahoo . Analysts, of course, are the choice we optimistic. They do not have a sell rating on yahoo . Also, the stock has been converging with a price target. This was in august and september. Perhaps what happened was analysts continue to move up their price targets because they had already met their price target for a long time. They did not see any reason to get into this stock, given all the discussions. Joe also, you have to figure if the deal is to happen now, there would be a big pop in the stocks, but you are taking a big risk, because this is the second big hack, and we have reported verizon is looking into this. Here is what is doing better the global stock market. This is a chart of the msci world index. You can see it has really taken off. This is, sort of, all of the stocks in the world. The chart below is the relative strengths indicator, and anything above that red line is considered to be in overbought territory. We have been looking at a lot of charts since the election that have moved to extreme valuations one way or another because the moves have been so relentless. The stock moves have been steadily going up new highs every day. Yields on bond steadily going higher. So, we have a situation where we have extreme momentum indicators, but still in the reversal. Scarlet it is insisting that it was in oversold condition around the election. The timing worked out. Joe in terms of an extreme snapback. Scarlet the technicals were lining up. The market closes next. Thus check the major indexes. The dow coming off highs, but Still Closing high up 63 points. Were ready to close 63 points. W