proportions in america. janet yellen voices confidence in american economic growth. not possibly be like yesterday in the bond market -- wrong. reports, possibly with fewer adjustments than bank of america. this is bloomberg "surveillance ," live from new york. thursday, october 16. i'm tom keene. joining me, scarlet fu and adam johnson. markets on the move. top news. >> another day in the red for equities following a wild ride on wall street. european stocks extending their selloff to an eight day. the longest losing streak in 11 years. asian stocks were lower. indicates., futures stocks will open lower. futures overnight and this morning. we have taken another leg down and come up off the lows. deterioration.

yesterday, the s&p 500 has fallen 3% before paring losses into the close. the index begins trading at its lowest level since april. fed chair janet yellen has expressed confidence in the u.s. expansion. economy looks to be on track to achieve growth of around 3%. directors at american drugmaker abbvie had reversed course on the plan $53 billion takeover of shire. they say shareholders should vote against the deal because in the u.s. crackdown on tax inversion. itsie had planned to move legal residents to the u.k. after buying a reddish company, that would have lowered its tax bill. add fee says new rules undermined the reasoning for takeover. plunging after the bell, down as much as 28 percent. subscriber growth slowed because of a price hike for new customers. fromces competition

hbo. here is the ceo of netflix. closely to our members. as we add more and more original content, we are more valuable to consumers. we are seeing in adjustment period. over the long-term, consumers pay for value. it is up to us to frontload value. >> shares a cheaper value than they were from 2000 a late-2013 -- from 2008-2013. on edge about ebola. infected has been transferred to atlanta. on monday, the woman had flown on a frontier flight with an elevated temperature. the cdc said the risk to people near here was low. asked aboutuse was banning travel to and from west african nations. >> shutting down travel would

prevent the flow of personnel and equipment into the region. the only way for us to stop this outbreak and to eliminate any risk from ebola to the american public is to stop the outbreak at the source. >> flu season expected to raise the possibility of more false alarms. >> on baseball, finally. beatagain, royals ep theore orioles 2-0, swe american league championship series. next stop, their first world series in 29 years. kansas city has won all 8 playoff games. never done before. thoughts makers in las vegas in tears. buster posey drove in 3 runs, leading san francisco to a 6-4 victory. giants up 3-1, a win tonight. giants, royals -- >> i don't know.

>> it's exciting. >> i have fond memories of 1985. >> think of the payroll of the kansas city royals. >> a-rod didn't play. >> good for kc. yankees,ox, the the giants, all my teams are out. do a did a check. equities, bonds, currencies, commodities. futures -8. dow futures -150. below. yield nader, 1.99. euro-dollar weaker. 80.e oil, can't get through yield below-year

.30. litmus paper on fear within the global market. the volatility screen. scarlet held my hand when we looked at this. here's the shock. we go. here's the hail mary, janet yellen recovery. things are great. >> deteriorating again. hat prompted the huge leg down to 1.85? couldthe one hand it you say that print. the print held. i would argue that is a massive short cover. that is the fear. a newy talked about hitting coach for the boston red sox. what is important is the global link in and trying to report

what is going on rather then -- adam, would you say there is a lot of sweat right now? >> yes. everything has been working so well. it was bill gross at pimco in the editorial four months ago said the world as we know it has changed. the huge bull market in bonds has changed. >> his fund is unconstrained. >> everything is changing. the 10 yearchange, following to a new record low, 72 basis point. negative after inflation. the face of fear and europe. jon ferro covers markets in london. where is this lifeline going to come from? angela merkel or mario draghi? >> the lifeline going to come from -- is it going to come? that is a question. what can mario draghi do? he has done what he can on the right side. everyone is scrambling to stop quantitative easing. the bond market is talking.

we are finally witnessing a little bit of the virgins. the virgins in bond yields. look at -- we are finally witnessing a little bit of divergence. divergence in bond yields. look at italy. spanish yields are up 26 basis points. the divergence, trade back on. >> within your reporting, is seize-up, and he talked about commercial paper freezing up? we don't have that yet. >> no. that is why i don't think it is 2012. we were talking about banks heading for bankruptcy. that is not happening. have got to be looked at. when you talk about treasury, the treasury market is one of the most liquid markets in the

world. volatility yesterday it was remarkable, a move down 31 basis points. does not happen. >> let's start this up. this is the greek-german yield. all the angst -- >> that is the premium. >> everything gets better. thank you, mario draghi. to put in scale what jon ferro is talking about, here's the latest move up in the greece-german spread. >> back at the crazy -- given the scope of what is happening right now, greece almost seems quaint. little greece and somehow they figure it out. now it is all of europe. >> what is the latest on to exit itsn bailout. that was responsible for some of the panic we saw yesterday. >> aggressive move higher in

greek yields. we've moved higher by 300 basis points. greece wants to exit their bailout program early, against the wishes of some eurozone finance ministers. mainly for political reasons, they want to get a little bit more autonomy. the market is giving greece a warning. you want to exit the bailout program, we will push up yields on the 10 year by 95 basis points in a day. the market has a message for greece and they might have to think twice. >> jon ferro in london. >> with the european angle. i am more focused on europe than the u.s.. my assist area. and greeces bonds tanks, they recovered in time for baseball. giant volatility. ull, he purvis is a b joins us. it's fun for the media. for you, it's not fun.

how painful? >> if they sell off had been happening in 2012, we would not be thinking this was the end of the world. back then, we were looking at vix hit 48.e we've been accustomed to tidy selloffs. we've pushed into, opened up a wider range. that has to be benched against massive cross a as it volatility suppression we saw in the first half of this year. volatility suppression, youou can only hold things down for so long. that is what the fed has been trying to do. reality sets in. >> this is an inevitable and

healthy evolution of the market. >> we are going to use the bloomberg terminal. here is the dow. >> dow futures. >> adam went long, long, long. >> then i sold them. up week ago. this is the latest carnage down here. >> lower because it is dow futures. is this about mario draghi-angela merkel? >> europe has been driving the bus. what helps get the volatility started was questioned about whether the european central banks were going to be able to expand balance sheets in the way the markets and mario draghi -- purvis just quote pink? >> he did.

what was encouraging about a selloff? >> the russell 2000 led the way down. small caps. stability at key support levels. e asvix curve becams inverted as it has been since 2011. --inverting, maximum purvis is looking into the future and the estimate of the volatility. we will discuss that. -123.s -24, dow futures, >> our twitter question addresses market volatility. how are you responding to the market volatility? does it create opportunity, is it sparking fear? tell us @bsurveillance. tom, aj, and i will be right

back on bloomberg "surveillance." ♪

>> good morning. bloomberg "surveillance." futures deteriorate. staff futures -- dow futures -191. hong kong peaceful after the drama of the last 24 hours. >> a processor got -- a protester got beaten up. hong kong chief executive cy leung says his government is ready to meet with student leaders. hong kong. peace prevails now. there's hong kong.

we sawflection of what yesterday from, el-erian. formerly at pimco. he writes -- the first force he is talking about is what got my attention. -- the forest leveraging of certain investors. is that what we saw when we saw yields come down on the tent minutes. in.ichael, weigh you are short bonds, it's a

leveraged bet, bonds are rallying and you have to cover. is that what creates the spike? >> there is a lot of one-sided positioning. large trading firms are not providing the liquidity they once did. >> are we seeing the treasury trillion, not liquid enough? desks areading cutting back on the liquidity they can provide. fascinating movements within the risk markets over the last few weeks. became moret daily charts going back to 1988. i went back to 1998.

readingnot find a rsi ind lower than yesterday. is it that different from the past, probably not. this speaks to the heavy one-sided position and the liquidity issue. talk about the one-sided position. everyone was counting on rates to rise, not oil to collapse. >> and the massive dollar rally. the dollar sustained overbought territory back to 1966. the currency to markets. oil and really moving. this is the canadian dollar. canadian dollar yesterday. the hail mary on oil. look at this in the last 20 minutes. canada is getting crushed. >> your dollar buys more canadian dollars. >> it is an oil play.

help us with what the futures of all these indicators to say. you mentioned the futures of the vix. what does it show you? >> when we talk about the vix curve being inverted, meaning the spot is noticeably higher 90 33-month or for my futures contracts are, when that happens you see the vix spike. or recede quickly. in the short-term but ever the broader term there's not that much difference. window.es show a calmer >> even over the last hour, you saw the same thing. >> much more coverage on bloomberg "surveillance." dow futures -160. chief economic advisor at elian, mohamed

el-erian. 9:00. take carlet, and i will ain quick break. see you 2 minutes. ♪

>> good morning. bloomberg "surveillance." street.ive on wall joseph sullivan will join us from legg mason. some perspective on what is actually going on in the trenches of wall street. justice olson. coming up at 6:30. our morning must read. rove, republicans try to use, and the wall street journal. 19 days until mid-terms.

what a curious narrative, this race. there is no clear path to the senate. forth theack and different polls coming out. our own guys going back-and-forth on this. it has a complexity to it. i guess they have got the republicans nudging forward. that could change tomorrow. the getty vote out campaign. the democrats are like don't worry about it. enjoy the low gas prices. that might be something, they

can get people to show up. >> i get a strain of the media trying to make a big deal of that and people are like whatever. >> the midterm elections? >> yes, are we getting fired up, not sure. >> we are going to have lower gas prices. politicians always see a tie. lower gas prices will proud people to think differently on the current situation? gas prices are at five-year lows off this big move down in commodities. that is going to be helpful for consumer sentiment. discretionary retailers and such. as it relates to the election, it is a little tricky to tell. there might be a lag. >> hard to get excited about lower gas prices if your 401(k) is blowing up. >> that is for sure. the chart of futures is -- for 10 years, i have not seen that kind of fallout on a tenure chart. compared tortling the last couple months we've had over the summer. everyone is talk about

complacency. the worry was that there was too much complacency. >> our twitter question of the day. how are you responding to the market volatility? michael purvis, take a stab. how are you responding? >> i would not jump in with both feet but i would middle. >> coming up, "with all due respect," rand paul will join mark halperin and john heilemann. kelly paul says he can run, ann romney did not say that. rand paul, tonight at 5:00 p.m.. good morning, everyone. ♪

>> bloomberg "surveillance." i am tom keene. markets on the move again. i don't want to waste a lot of time as we know that you need to know where we are. 10 year yield is under 2% we are now under a many move here. futures -108. the two-year yield .7%. janet yellen monitoring that. checks through all the day

on bloomberg television, radio and print. >> our twitter question of the day is apropos. to market respond volatility? >> 26.25, which is elevated. >> what is the average, 20? >> yet 20. >> the current level is double where it was. >> who has a single best chart? a sub returning financial markets kind of day. if you wanted an early indication, our chart find you might have found in bond yields. spread or the difference and yield between 10 year corporate bonds. is the 200 day

moving average, the long-term friend line. above theago it moved trending average. it was aything else fairly sharp move. two days ago it was 30 basis points wider. we pay attention to this because the spread is a premium that investors demand to own high risk debt. when it widens -- much goes backow to the fed, effectively saying that at some point we will raise rates and all of a sudden there is no longer a place for these assets. beat toward the breakout that we saw before the financial crisis or the popping of the internet bubble. we certainly see a continuation, dow futures now negative, 97. yesterday was constrained, oil, gold and a 401(k). they were quite absent against

the current emotion of the bond market. sullivan had good preparation for herding cats. can leech is somewhat legendary. kean leach is- somewhat legendary. i think the bond value total yesterday was spectacular. i seen very few days with the enormity that we saw yesterday. the 187 closed at 214, that is a 60 basis point round trip. it showed that the markets have become dysfunctional. >> what is different to me is we are down in the low non-yield and the zero liquidity track. to constrained is damage responsible money if they have to reinvest. how do they reinvest with a 2%

10 year yield? >> that is the challenge that the markets are going through. you just spoke the consensus view that they to tighten and how quickly will they tighten. it has given way and a handful of days to the conjecture that they may not be of the tighten and that is where the 2% 10 year is coming. it is more about fear and economicnd global conditions at the moment than it is long-term investments. >> you manage money and people at an investment house, how at risk is wall street? we are significantly less at risk. your previous guest mentioned the fact that dealer inventories supporting the debt markets are thatficantly reviews to.

de-risks the exposure that wall street has in a significant way. to go back to a point that can ,ade, how do investors respond you can't respond in traditional ways. can doese things that well is managing more absolute return and go anywhere type strategy. is that unconstrained? i want a get a hockey jersey that says -- >> what unconstrained -- >> we've been doing that a long time. >> yes of course, what do -- whatained people go do unconstrained people do or where do you go when there doesn't appear to be a place to hide. it's that you don't have to chase markets in your favor because they are your benchmark.

midyear, we think there might be value. given how low yields are. considering the possibility of earning money, this is one of the ways -- >> i want to get your take on the single best chart which we showed earlier. on the yield gap, the spread corporate bonds and treasuries. what does thatignal to you? >> it indicates as you point out the stresses developing in fixed income markets. our take is the fear of fixed income markets is a fear of global economic conditions. weekendcials over the had different settings across the washington forum talking up a downcast economic year.

peopled a lot of thinking that would tighten, to change on the margin. >> as two guys in charge of finance, what do you desire from janet yellen and mario draghi? what is your to do list for ?oliticians >> i think janet yellen was helpful yesterday -- >> all say, she said confidence and it went boom. >> 3%. >> the u.s. economy in our view is fine. has anause the fed change their view in any meaningful way resembles a positive endorsement. >> you to see more from washington? the fed is doing a good job and will be lows to do anything to jeopardize the recovery. we are making progress in the u.s. and if you want to be an

vested anywhere it is the u.s. because of the recovery, but it is still a bit fragile. we seem to take two steps forward and one step back. the fed is loath to do anything that disrupts that. >> what did you do at your desk yesterday when you saw this? crossword puzzles? minecraft? >> he said he shorted -- , yield downprice up you said let's get out in cash question mark >> -- cash question mark -- cash? -19, we appreciate it, can an honor to have you with us today. joined by the former chrysler-home depot ceo. he will offer a little perspective on what he is doing.

>> markets are on the move and bloomberg "surveillance" from

our world headquarters in new york city. slightly better than 24 hours ago. an emphasis on slight. waiting, nobel laureate paul krugman on his way rose warns ofie europe's japanese characteristics. theredoesn't matter, essentially on a deflationary track already. sharply,s slowing down and it depends upon exports. just -- they don't have, the scary thing is they don't have tools. paul krugman on charlie rose, that is his wheelhouse. that is what he is asked at, talking about the zero bound. there is growth and there is

not deflation in germany but they are is slowing growth. -- there is slowing growth. that was a lowered view, they did that monday. don't krugman says they have tools but the one tool mario draghi hasn't talked about his full-blown quantitative easing. >> i don't think they have the depth of market to do it in 17 countries. the degrees of freedom are too much in europe as well. we also know the degrees of freedom in baltimore maryland -- baltimore, maryland are ugly. canceled on us but he is here, class act that he is. or all of maryland the edit states, we are not europe. krugman's fears of germany, you can't bring over here. as i mentioned earlier the

place to investors in the u.s.. we've made progress on the recovery but it is slow and uneven. you take twolier steps forward and one step back. the fed is doing a good job and will continue to be accommodated. >> can europe take us two or three steps back? obviously europe is a significant trading partner so it will have an impact if europe softens and continues to soften significantly. i think we can overcome that. the fed willaid continue to be supportive, tapering in this month, that aspect of support is gone, what do support mean in a moment when the fed is no longer buying? >> one of the things that is important, as it relates to the fed stopping the bond buying program, is that it is good for the economy to get on its own

two feet. the gradual tapering, up until last few weeks, the market had absorbed well -- >> in other words by doing nothing but getting out of the way the fed is doing something? >> can i point out the correction is -7.4%, not an official correction -- >> it is what? down 7.4% from the top, not even a correction. >> healthy perspective. >> i'm trying to be positive. >> it is good for the market to take a breather and reset. is investors seen have gotten scared quickly. >> that showed up in what paul krugman was saying, tuned into bloomberg television to catch the full interview on charlie rose tonight.

>> markets on the move, futures -150, eric david miller with a wonderful book in our next hour.

he is one of the experts on the islamic state and will do verge from market coverage to speak to dr. miller. scarlett king and adam johnson, we will die jet -- divest from futures. a second worker has become infected with ebola which bakes the question whether procedures actually work. suit, itn the yellow takes 30 minutes? >> about half an hour to get in and out, and the cdc is running this at a fema site in alabama that all of the knowledge comes from doctors without borders etu's, they have run ebola treatment units. if you look at what they have on the website, things you should at on, two gloves them doctors without borders says you can't going without a buddy, you're suiting up together and

going in together if someone panics or feels compromise you leave together. they have mirrors see can check that you are clothes correctly and if you look at the cdc guidelines they still have skin exposed. when you're suited up with doctors without borders there is not a centimeter of flesh expose. it's like a halloween costume, that is not a joke but it is intense. >> these guys are wearing the suits in intense heat. you are wearing this in alabama. >> it was 60 degrees and i felt uncomfortable. i can't imagine what it is like 95 degrees. >> my right the first person to take -- sick they believe it was taking off question mark taking off? hard enough, but doffing is even harder. handan surfaces on your

washed and you have to get into the suit and get it off without touching the dirty surfaces. for the cdc has done is a pdf's on the website, you have to learn how to do this, it is like a sport. there is a world of bringing really about the tragedy of american people reality. david evans is at the world bank and worked with dr. jim young kim, the president of the world bank. a medical career and didn't realize what it would mean for world bank as they confront front and center it will. of the trueyour one expert on it what is cap this morning? >> what we are is not only a health tragedy, which obviously with the number of cases and deaths into doing to climb, but we are seeing an economic tragedy. these are three of the most

fragile companies in the world. growtheriencing robust over the last two years, the what we are looking for already is significant growth this year. things could get very much worse in the coming year. so good at ise the application of funds, if the world bank puts in money, the imf puts in money and president obama, what is the best application of the money now? >> the number one thing the international community can do is help governments bring the epidemic under control in country. providing the medical centers, providing the staff, training local staff to both treat ill people and trace contact of those people, the number one thing to battle is not only the health side but the economic impact and to restore confidence. by what i was struck

germany pledged, part of that is 700 million euros for long-term investment in the health system. presumably when we get this under control, rich is a huge presumption, what has to be done long-term? presumption, huge what has to be done long-term? >> what we really need is a system for both care and surveillance. these countries and some of their neighbors have suffered in years past in terms of long-term investment in health care. we see that when an epidemic comes up, there aren't enough beds or systems in place to trace people, so with the next epidemic comes up we need to be ready. in order to the -- in order to do that we need certain systems in place so that rapidly governments can trace contacts of people who have come down with the epidemic so it is relatively easy to mobilize a

large number of beds when you have a surgeon cases. it is difficult for the international community to remember academics once they fade to the background. the longo invest over run or will be caught unprepared again. >> we could talk about putting money at this and putting on , did the cdc have anything to say at the nurse who called and's said i have a elevated temperature and the cdc said it is ok to fly. that hethe cdc said was said he wasn't vomiting. we are learning that the cdc is not a logistics or treatment organization. they don't how to do this, their experts in infectious disease but not experts in fixing the problem. david evans, we greatly appreciate your perspective from the world bank in washington.

we must get back to the markets across equity bonds currencies and commodities. report, i want x to show that oil finally breaks down and we are very close to the 79 angle. below $80 yetreak and the dollar is stronger -- then this show interdependencies of equities, bonds, currencies and commodities, it is not one homogenous hysteria it is new wants to. >> the nuance includes different asset classes and the interconnectedness of the global markets. >> as an executive do you convict -- predict or sense a freezing of the system #--? different, it has been there and has provided liquidity and i think quite frankly were we to begin to see

any hints of that, the fed would reemerge. of what? >> any hints of liquidity in a crisis. i did not have that in 2008, sense of what the fed might actually be willing to do. >> have a backstop, how much more downside to we have? ask there is probably more room isthe downs -- >> there probably more room on the downside. we will look to significant buying. we would define that as 90% of the index. of thatd a day or two we would have a better sense that we put the correction behind us. joe sullivan will continue with us. let me do a four x report. to 80.06, median go currencies this morning, back up

near 41. that occurred in the last 30 minutes. 30.98 gets my attention. we will discuss the markets further.

>> one hour 45 minutes from

cleveland to dallas, enough time to raise fear of ebola to epidemic proportion's. today could not possibly be like yesterday in the bond market. goldman sachs reports in this hour, possibly fewer adjustments. bloomberg "surveillance this isbloomberg "surveillance." we are live from our world headquarters. fu keene joining me, scarlet and adam johnson. >> we have to with the financial market. talksr day for equities, extending their selloff to an eight day losing streak. to.n stocks are down here in the u.s. futures indicate stocks will open lower. a live chart of futures overnight and this morning and we've taken another leg down.

yesterday they dropped as much as 3%. it gave up the gains briefly. the index begins today trading at the lowest since april. janet yellen expressing confidence. according to people familiar with her comment, yellen says the economy looks on track to achieve growth of around 3%. the directors of anthony -- ab abbviethe directors of have change their mind about shower -- shire. >> continuing on, no other story across america. the second health care worker to get ebola has been moved to a hospital in atlanta. healthan called officials monday because she had an elevated temperature and she was allowed to board a passenger plane because she was not

exhibiting symptoms. the cdc says there is little risk to those. we go to hong kong and the government is offering -- here is the chief executive. thing most constructive that he can offer its students is to sit down and listen what we can do together, within the framework decision. >> protesters have demanded free election in 2017. candidates would violate the city's basic law. we want to talk about mark andreasen says breaking up is the right thing to do. has predicted that every tech company older than 20 will split up. he says this is a good thing.

will probably benefit from breaking up and many will be forced if they don't do it voluntarily, which is why i feel so good about both of those in hp'scause actually case they are getting ahead of what would happen anyway -- anyway. breaking news, scarlett looking at as well, these are the transactions in the spirit -- this green is talk of the market. -- top of the market. it is selling it to southwestern energy. the shale in the east coast of the united states, again, you need energy to get rid of these assets. >> that has been a huge issue for chesapeake. it built its assets under the boundary -- founder of aubrey

mcclendon. he was betting alongside the firm with his own money and as a result, disaster chairs that had to affect -- >> you wonder if $3.5 billion is a moving target. $80, 20 cents on oil, that makes it more spencer. day,at is the theme of the here with futures and negative 30's to my dow futures negative 209. i will call that a low for the day. cream --to the second screen, for those of you have radio worldwide will give you a sense of data checks. crude 82.90. there is some of the market dynamics as well. kidding, the most likely

response from chief financial officers on the gift that keeps giving, her response to market turmoil and low yields, the a -- the uncertainty of low volatility, it is a gift. that is all there is to it. with a double-digit short-term paper and 7% money, they are absolute law. -- off. -- awe. let me start with you bob, how much do hate wall street when you have to get up there, get the deal done and the market is priced to perfection. >> you never hate wall street or the irs because there could be repercussions. an unbelievable. of time for large corporations, i was listening to both of you gentlemen, this is really an exciting time for corporations.

8% earnings coming out, growth, it will be challenging. are starting to see pulled back from walmart and some of the other retailers. >> what will you do? >> it will be interesting to see if the earnings. continues to be relatively strong, will they continue to either by revenue, because , it've done a fantastic job will be interesting to see if there is pull back and purchases. if they are concerned about a frothing market, with a start to record cash? >> what do you see in the smaller cap as well? as ceo's get more confident in the recovery, they want to take on other markets with

absolutely low levels and it will give them confidence to invest. ceos need to a little bit more in the recovery to begin investing. >> this volatility which i just saw does that undermine anything question mark >> i would say as ceo, i would be very cautious. i know tom you are optimistic and joe you are in the business, but as a ceo, i would step back and see what happens. >> you talked about this further downside which i tend to believe there is in the marketplace, i think you will continue to be a little conservative, and look at the bank's earnings, they will pull back a little bit but i'm not sure, there is a level of uncertainty. what is the trigger when you're in the corner office for announcing a buyback? >> is it a function of mice dock person got to cheap, what

triggers it? >> there are a lot of things, there are activists, and active investors. some of that is the pressure from outside in, on the boards, they directors and on the ceo. the big question here is not only announcing the stock back, we'll see how much they've advance. you, his or her point at when you say to grease up and buy it? >> we have been pretty consistent buyers up or down over the flash few years. >> we bought back over $1 billion of our stock over the last years. quite frankly, the opportunity grateful, wes very say we would like to access that kind of capital. university in 1971 you

get a day job at general have changedngs for corporate america, is it a plutocracy now of market turmoil gift ofce again it is a the corporations, everybody makes money. but the rest of america is saying, what is in it for us? >> i was going to ask, as an average guy, where do we put our money. if you are flush with cash it may be a time to buy if you're living off of your for a one and investments, what do you do? >> the principle is offsetting any interest rates you might get. you're predicting three and a half at the back of this year, with the average guy lets me have his money. >> depends on individual rights so there is not a single strategy. i think there are opportunities in the markets, fixed income

markets and we talked about this earlier, and you think how can there be any value at 2%, tradition a -- traditional strategies are not appropriate, that we look for more flexible strategies. golf on you like the the word "constrained." you had can leach in this chair, one of the worst best investors, don't you want him? >> that brings us to our unconstrained -- unconstrained widow problem. how are you responding to the market volatility?

>> with oil going down it may curtail because of the cost. job creators in this country's energy independence. is this an opportunity or a waste? inclined tobe more start buying in the oil markets again, obviously it is down significantly, but i think it seems relatively attractive, the opportunity for energy independence is a great thing for the country. >> should we be exporting? >> if it makes sense, sure. >> why not use it geopolitically, one a provide calming and confidence for these countries being threatened with m embargo's and curtailing energy's. embargoes and curtailing energies. >> down 24% from where we were.

the partnerships are energy-related companies and have cratered. next year, wait till next year. it's like the red sox. aaron david miller joins us to discuss which officials to be most concerned about while fighting in syria. ♪

>> bloomberg "surveillance." crude in america under $80 a barrel. , job futures down -178. david aaron miller has advised six u.s. secretaries of state and in his latest letter

on foreign policy he writes boots on the ground should be the least of our worries. he says the real problem is building a new syria. unwilling tost so take on mr. assad? >> because there is great uncertainty. you hit isis too hard and then outside, you create the potential for a vacuum and allow isis more running room. is toimary objective clearly undermine and we can isis. off-balance, get them so they spend less time in the prospect of planning another attack. if we think we will put the dumpty backhumpty

together again, we are not thinking clearly. it seems to me that is why the president, after willfully avoiding militarizing the american rule in syria has finally decided, he may not be all in but he has to be in. as a consequence, what you see is the middle ground policy. here, a great new book, and i was interested in your where you talk about crisis, character and capacity. i wonder now how you would evaluate the current administration, dealing with crisis and the ability to deal with capacity, would you comment on that? my argument is that under great presidents we do the math. lincoln 19, fdr

20th. the alignment of crisis of a profound nature and character of an extraordinary dimension and an amazing capacity aligned to make these presidents undeniably great. presidents have demonstrated greatness but not the kind of these three. the problem for the post-fdr presidencies is at the world has gotten more complicated. the presidency is more constrained and american wish lessns, we government but demand more. it is a paradox. ais administration inherited bad hand. the worst recession since the great depression. two longest wars in american history, but ultimately, maybe will beident role judged to be more consequential. the problem for obama is that he sent a reference flame of , andness in the presidency aspirational effort to be a

transformative leader, and the reality is that it is hard the state to transform american domestic policies, let alone foreign policy. so he could not help that, and he did disappoint. >> what you're saying is we are having a tough enough time building the nation at home and we did not succeed in rebuilding iraq. is nation an appropriate strategy? >> it is under certain circumstances. we occupied japan for seven years, you know how many americans were killed by the japanese during that occupation? none. not one. ,e had an extraordinary impact through the planned to create a new foundation western europe, checking soviet advances to some degree. but that was efrin circumstances, victory was total, the europeans were not

the broken, angry and dysfunctional middle east. we had a set of leaders, fdr and truman who were willful, and they did not overreach, at least in europe. times have changed and we have changed, but we have to get real here. hoping and aspiring somehow that we will have great presidents who will rescue us. book, the endhe of greatness here, you mentioned a man from williams college, dr. burns passed away six months ago in his 90's, and was very big on transformational leadership. is a dearth of that and washington, had you guys propose that we get leadership or governance back in washington? >> it starts with functional politics.

when was the last significant piece of social or economic was broad andat bipartisan support, considered authoritative and legitimate, and was received as a plus by most americans? reform, welfare reform, but in terms of transformation, we probably have to go back to lyndon johnson's civil rights. >> it was a generation ago. >> that is my point. politics,sfunctional genuine disagreements in this country, forget the social issues, over the government that is the single greatest issue that divides us. you don't want another great president because if we get when you have a nation encumbering crisis. >> will come back with aaron david miller and your is stress

-- interests in the islamic state. that discussion will continue tonight, on the clock p.m. -- 5:00 p.m.

♪ ♪ ♪ ♪

♪ >> good morning, worldwide. the dayter question of -- thank you to the many responses -- how are you responding to market volatility? we see it again today with futures -21 and dow futures are -152. the 10 year yield is two point zero percent. west texas intermediate oil and nymex crude are under $80 per barrel. $80.04.w i am sneezing. lloyd blankfein is making me sneeze. >> understood, let's get you top headlines --

the second texas health care worker infected with ebola is transferred to an atlanta hospital. the woman called health officials monday because her temperature was elevated but she was then allowed to work a frontier airlines flight. she was not exhibiting other symptoms. the cdc says there was little risk to those sitting close to her. they are trying to track down the other 142 passengers. public outrage is growing in hong kong over a video that shows police beating and kicking a protester. police are investigating an olive branch is being offered to demonstrators. the hong kong chief executive says his government is ready to meet with leaders. janet yellen expresses confidence in the u.s. expansion. she says the u.s. economy is on track with the growth of around three percent. she made her comments in a closed door meeting last week. those are the top headlines. >> we are waiting for goldman sachs earnings. scarlet fu will have that for us.

arun david miller is with us, author of "the end of greatness." what i see is the military every four days or so says something intelligent around the analysis and microanalysis of the islamic state. what does the american military know that everyone in your industry does not know? i think what they know is that this is a long movie. is thatwhat they know there is a difference between deploying special operators. we have 1800 in iraq now and i would not be surprised if that was doubled and you ended up with special forces of a limited nature in syria as well. i know they don't want redeployment of massive numbers of american ground forces. i think that is a redline that this president will not turn ink and i think they know the

basic mission is not to put the syrian or a rocky humpty dumpty back together but to do everything they can without getting sucked into another ground war in the middle east to keep isis off-balance and weak with respect to striking out at us. >> within the idea of the tradition of your diplomatic industry, is that gone? is the idea of nation solidity and negotiation over in the middle east? >> fascinating point -- whether it's over not, i don't know but you see a trend toward disintegration, decentralization , and above all bad government. you just don't see it in syria which is a failing state. iraq arguably is a failing state. lebanon, evenn, in the putative state of alice stein which looks like noah's ark, there is two of everything.

this is an year of decentralization and it will continue for years to come. we are stuck in this region and we have to be smart about what it is we do to protect their interests. >> is the media hysteria over the islamic state it replaced by a bowl of? the mediae to advise of what to focus on with the islamic state, what would it be? >> i would focus on the fact that last year, the state department terrorism report reported 17,000 891 global fatalities to terror. they were killed in terrorist attacks. 16 of those were american citizens. sensee lost 25 americans in al qaeda home inspired but not directed attacks.

mayra, that suggests that terror is x essential -- does that suggest that terror is an x essential threat? there's no question we could be attacked tomorrow but we are doing something right. feed on the ground, had out of the clouds. as far as ebola, remember the spanish flu. were killedpeople of the global population, 600,000 americans. i don't want to lose my mind either even though the math there is potentially very bad. i don't want to lose my mind here on ebola. >> thank you so much for your contribution. book is a celebration of the end of greatness by -- and why america cannot have another great president. i cannot say enough about it. are our great presidents?

>> a lot of them came out of western illinois university. >> it goes back to mckinley which was a different time. >> we would love to see leadership that has some scar tissue, someone being able to deal with crisis in a leadership and decisive way, the ability to handle a capacity of issues which we currently face today. you talked about isis and ebola and the economy. we need leadership that can fulfill a multitude of things. we like leadership and raise the dividend as we dive into goldman sachs. there are fewer headlines but the basic idea of boosting the quarterly dividend above the estimate, two cents above $.58, not bad. sachslooks like goldman third quarter earnings-per-share $4.57 when the

consensus was $3.21. the most optimistic was $3.86. it seems like a buyback would help the bottom line there. and terms of revenue, eight point $39 billion. -- $8.39 billion. hintz, can wead say that? he's a professor now. he has gone to academic heaven. he would say that they are allowed to beat or lose. it's a more volatile situation. >> and they are putting more dust aside more money for compensation. the compensation ratio was 40%. that is versus the consensus of 41%. lloyd blankfein has distanced himself from some of the other

banking announcements recently. >> is goldman sachs a bank? >> not by name. but certainly lloyd blankfein and the team have done a fine job. >> let's look at this chart. things could be worse. that is a much better charge than jpmorgan or bank of america. goldman sachs is migrating back in the vicinity of the 2008-2007 price levels. >> that's because the earnings of migrated back. it's the highest third-quarter earnings report since 2009 which i believe was a record at that time so it's big to the resurgence of wall street. from bank also heard of america and j.p. morgan and citigroup where they're fixed income trading topped estimates and that's the case for goldman sachs as well. for $1.83ere looking billion. it's lower than the same time last year which was to be expected. >> that also tells me that

goldman sachs went long on bonds. many of the banks have been short bonds. they have been buying it to the short side. book, 15170, goldman sachs closing at 177. that signals the healing. when you look at price to tangible will, it's a healing industry. >> it is and i think we need to watch this closely. i want to point out that aboutblankfein commented improving economic conditions in the u.s. he says conditions and sentiment can shift quickly so look to the strength of our transaction backlog in order to get a better sense of our strategic plans for growth. >> you talked about the mood is shifting, the market is down 141

points. >> our twitter question of the day is -- how are you responding to market volatility? is it greed, fear, opportunity? we will get insight and analysis. ♪

>> this is "bloomberg surveillance."

apple is introducing its new and improved ipad today. cory johnson got up early to get one. they have a finger sensor and a comes in gold. event like this are increasingly mocked and imitated by other parts of the technology world. events has had glorious that have been bordering on the ridiculous. of apple, not only did steve jobs set the standard for this kind of announcements but i think they have not only set the standard by the stars to be important because the rest of the industry looks for apple -- looks to apple for leadership.

the pace of innovation will be a big question. we know a lot about the product in part because apple made a screwup yesterday and included the technical specs of the devices to be announced today, at least some of them so we have a sense of what they will be. is importance of the event because the rest of the industry looks at apple to see what direction they should be going. >> consumers versus businesses-which matters more as a customer base for apple right now with the new ipad? >> i think that will be the most important thing we hear about today. the timing of this event suggests fourth-quarter consumer sales, the ipad many --mini, but there is important change in focus for the ipad recognizing the some of the big growth for this device may continue or start to be in the enterprise. the partnership with ibm is important for apple because it talks about other companies selling the ipad and writing new applications to work in the

enterprise in ways it hasn't already. >> cut to the chase -- is your iphone6+ nothing more than the new mini? it will be interesting, we will see where those blend. today we should be listening for the town to see if they are talking about enterprise and the ipad is a new cash register and the biometric sensor as a way can use the thumbprint to identify the apple payer across the counter. that could open up an expanding market. we have seen the ipad sales in each of the last quarters down particularly on the revenue front because the ipad mini is less expensive. it's a problem for apple. >> cory johnson in california, thank you. >> a quick market check --

a little bit improved. >> we are off the bottom. >> dow futures are 130 and that's good? >> there are still plenty of time. >> she's just a gloom and doom. >> bob nardelli is also cautious. we will discuss goldman sachs earnings with a big beat coming up next. ♪

" good morning, everyone, bloomberg surveillance." we will bring you smart conversation tomorrow at 7:30 a.m., the former admiral of nato is out with a new book and we're looking forward to this important conversation on the projection of united states of america abroad. look for that tomorrow. i am tom keene with scarlet fu .nd >> shares of goldman sachs are trading in the premarket may be getting dragged down with futures overall after goldman sachs reported a higher than expected profit and sales.

earnings per share is $4.57 beating the consensus. estimates ind fixed income and equity trading. insight, charles peabody joins us now by phone. we were looking through the numbers and noted that goldman sachs set aside less money to pay employees. was that a big boon for the bank or is that simply good volatility in september carrying over? >> i think you hit it on the nose. it was a combination at a revenues than expected due to trading being stronger-than-expected and the lower comp ratio. that's why they beat on the bottom line. it's a strong report. this is one of the few banks still earning above its cost to capital and that is allowed them to raise the dividend. yet when you look at how shares are trading today, down 1.3% in the premarket and it's early in the conference call has not happened. well drinks get dragged under by -- wilbanks get

dragged under by the recent volatility. >> i think so, the beat on the revenue side was in trading. that was enhanced by what we would call good volatility in the month of september. we have moved into bad volatility in october. i don't think people will extrapolate the trading results. three look at the other businesses, investment banking was down sequentially, investment and lending operation was down sequentially and their investment management operation was flat terms of revenues. the whole beach was on trading. -- the whole beat was on trading. the fed is employing macro inflateal tools to financial assets and i'll make the trading environment more difficult going forward. aboutwere talking earlier how you are looking at the bond futures gesture when the price spiked. you have concerns about potential he had -- hedge funds blowing up? >> i would not point the finger

at hedge funds but the whole shadow market banking system is where the growth and leverage has occurred in the last four or five years. everyone was structured for higher rates. when we had a five-point move in the bond yesterday morning, that smacked of a forced unwinding on somebody's part. we think somebody was getting liquidated. that's re-think the big banks are at risk is in the counterparty risk. >> i cannot convey how important that conversation was. charles peabody will join us tomorrow? that is the first real discussion i have heard on counterparties which shows the relationships and the expected-unexpecteds of banking. robert nardelli has decades of

experience of making distinctions online items in the corporate office and he is with us today. i love your idea that cyber security is maybe an expense, may an investment. what do you mean? >> clearly, sitting in the ceo chair, a lot of them see this as an expense which, according to accounting it is, but this is an investment. if you are not invested in protecting yourself, look at what happened to target with consumer confidence. this is something you desperately need to pay attention to. you got to be changing your passcodes and protect your back door and have a daily checklist on this. >> you actually know manufacturer hanover and chemical bank from another time and place. you and i vaguely remember this in our youth. are we going back to the conservative and boring old banking or is there some new new

with unexpected challenges of cyber security, law bills, regulation -- >>2/3 of which has been implemented. >> and shadow banking is computing every step of the way. >> look at the penalties at bank of america imposed on them. i think we're going to see a more conservative view in the investment and banking industry. >> that has certainly been the theme. you run a venture capital firm. are you willing to take a position in the industry? as time has articulated can i stick to what i know i what i have better control of from an investment standpoint. i don't in that particular area. tape but it'sved

still red all over. what do you do? do you call up your broker and go to cash? >> i wanted free advice this morning. where it is an average guy like me go? >> did you hear that? gong. the >> they take issue with you being an average guy. >> bob nardelli who ran home depot, average guy. >what are you doing with your money, average guy? >> we were thinking about the tenure going up to 3.5%. it was at two percent the other day. i am very concerned. >> you are all over the media. how do you battle against the media hysteria? >> 44 years of experience. >> but the kids watching don't have that.

>> i have a lot of scar tissue from the good and bad. that's the only way you make it through. >> let's go to our twitter question of the day -- >> if you look at the stock, they would have been better off listing chrysler. >> there is the headline. >> we want to get the answers people on how people are handling volatility. >> a set of lower highs? >> in other words, the opposite of buying the dip, i like that. >> let's look to europe -- that will be a long wait. >> you get enough sweat out there -- >> the european debt crisis has been with us for three or four years. the enemy of a currency is

inflation. there is no inflation in europe. we will continue to watch minor markets and give this to you without hysteria across bloomberg radio and bloomberg television and will look at equities, bonds, currencies and commodities and wraps up the listening to people who are in the game. >> one of those is the central bank. >> this guy is unique. >> michael mckee will speak with st. louis fed president james bullard at 10:00 a.m. we will get the feds take on what happened and janet yellen has confirmed that the economy will be ok, three percent growth. is not justtion right but it's not a deflation. tech - enda, , the new ipad comes out

today. apple is only down three percent , about four percent versus the high. second tech agenda item is google down 11%. google reports earnings after the close of business. >> they get lost in the shuffle because of the market volatility. >> down 11% gets your attention. >> did you make a joke about your wife's new mini? >> i thought it was a mini mini and i think it's awkward as a phone. tos a little awkward for me be carrying around. >> i think it would fit tom just right. >> i am not there right now. i am waiting and listening and reading articles. are you there? >> there have been three problems with ios 8 so i have

still not uploaded the new software. >> my phone crashed three times just today. bob nardelli, thank you. loop"is up next. ♪

>> we are from bloomberg world headquarters. i am betty liu. a packed show for you today.

as 460 fell as much points yesterday before partially recovering. treasury yields plunging below 2%. here are all of the markets with our all-star lineup. siegel, mohamed el-erian and roger altman. he will be with us at the opening bell. plus who wants to go public with all this market turmoil. we will be speaking with the lead underwriter who brought alibaba to the market. here is a look at our top story. looks like we are in for another rough ride in the market. futures indicate the stocks will be lower at the open. the index now at its lowest level since