unbelievable day. u.s. stocks erasing gains. joe: the question is, what'd you miss? another wild ride, stocks surge after friday's slaughter. they dive at the end. when will things cool down? alix: plus which countries have lost the most money. we have the charts. joe: and the china factor. is all of the panic real or imagined? alix: we begin with markets. s&p down 1%. this is the longest losing streak since 2012. the longest in three years. you're looking at five days selloff for the dow.

the worst since 2008. joe: this is remarkable. we were up in the morning by a lot. rate cutot to the before the market opened. that gave an extra jolt. we were going to be up, it should have been smooth sailing. then around midday it started curating and looking soggy. at the end of the day it fell out of bed. extraordinarily ugly. alix: there was no catalyst. oil, which i go to to see if that sold off, held up. .t closed up by $.50 it didn't roll over. energy stocks not a loser. that went to utilities of all things. joe: there is no clear reason. it is just one of those situations where people got

smoked and the soon as they saw the gains were going to hold, they don't want to have anything to do with this and got out. alix: i want to take a deep dive into the terminal. the countries with the worst outflows year to date. this is what you are looking at. this white line is money leaving out of india. the orange line is money leaving out of south korea. down 2000% since august. charge,out the the outflows are reaching levels we saw in 2004, 2011. joe: this emerging market panic, look at the currency, there is no clear way to see it then money rushing out the door. i want to look at a chart our guest pointed out, a lot of

people were talking about this today. people making bets on the future of volatility itself. , at its highest levels in history. extraordinary chaos about where the future of volatility is. we are in uncharted territory. here you go. we have never been this high going back years, just about expectations. alix: joining us now, bloomberg view columnist. what do you make of the selloff today? guest: it is disappointing. as you say, we got everything you could have wished for. most of asia other than china is stabilizing. we got china policy news. we got a good session out of europe. we had the ingredients to do

well. at noon i thought the major question we would be debating is whether 300 points was enough of a bounce. to have that decline at the end is worrisome. now that today's close has spooked you, how much further could we go? guest: the problem is there are no circuit breakers. why? the description -- disruption is coming from elsewhere. it is coming not from europe and the u.s. where you could have confidence in the ecb and fed to act a certain way. it is coming from the emerging world. the market has to regain its own footing. ist today is going to do make the crowd hesitate and bring out some more sellers.

alix: it's hard to not think about what happen in the 1990's. goldman sachs had a great chart that charted what happened in 1998 versus now with stocks. the s&p fell 14%. do we see a repeat? guest: we could. 1998 was different. the cumulation of the asian crisis into a russian default. contained,efault was then you could move forward. what i'm worried about is the economic issue. .his is harder to call i think the u.s. is fine but you just write out dramatic numbers in terms of the emerging world. they had become an important implement of growth. financial look at

disruption to the economic performance in the developing world. joe: i want to talk about this split view of what is going on. there is a possibility of a september rate hike. the fed is getting different signals. there is financial market indicators that are tightening due to the volatility in the stock selloff. ,he court u.s. economic data what they are supposed to be looking at has been trending up. what is the fact going to look at and how much weight does the financial market play? i think it is going to sideline them in september. there was a window open. you had pretty neutral international economy and the financial markets that were in relatively good shape. the window has closed because

the second of the two factors. it has turned violently against the fed. i don't think they will take the risk of hiking in this environment. if it makes a mistake it will end up making a mistake that could spill back onto the u.s. economy. when you are a policy maker you don't just ask can go right. you asked what mistake can i afford to make? they cannot afford to make the mistake of destabilizing the system. alix: it doesn't leave the fed with any arsenal to fight any emerging market weakness. in the 1990's they were able to cut rates. do you think they will have to do something? the market doesn't have the policy circuit breaker that it needs. upon theet has relied big central banks for a long time.

we have been conditioned to expect circuit breakers and we are realizing the circuit breaker out of china is not that powerful. that is a major paradigm change for the marketplace. that is making a lot of people uncomfortable. the fed and ecb have run down ammunition and ammunition doesn't deal with shocks that come from outside. ownmarket has to find its equilibrium level and that will take some time. today marks a shift back to the old school chinese policymaking where they remove the intervention from the stock market and went back to a rate. this china have the tools to stop the bleeding or is it going to be one of these things were the central bank and the government doesn't have the ability to prop up the economy? and the realrket economy. on the market, they face serious

challenges. promote ahelped massive bubble. the mentality was similar to what we did with housing. there was a time 10 years ago where we believed rising ownership levels was a good thing from society. they believed having more and more people participate in the stock market was a good thing in terms of transition to a market economy. we created a bubble in housing. they created a bubble in the stock market. they are finding it difficult to control. have amarket side they major challenge. it is not one they are going to overcome quickly. on the economic side i'm more confident. they will softly in the economy. they have many more tools than what people give them credit for. will they stabilize around 6%?

yes. the they continue with hesitant move towards a market-based economy, yes. we are to observe the financial instability. not juste get almost daily numbers, hourly numbers. that is what we are going to be assessed with. they have more tools than what people give them credit for. alix: you listed a of things that worry you. what else keeps you up at night? what is the thing no one is talking about russian mark -- about? guest: ip attention to the currency market. that is the most difficult market to control in terms of central bank policies. it is the one that started flashing red early on and not many people paid attention. the result of that is it started contaminating other markets. is thatthe market had

central bank's would be able to repress volatility and central banks had been able to repress volatility. central bank's are having difficulty because the currency markets have become unhooked. i can't a lot of attention to the currency markets every day and see whether stability is returning to that segment. until that happens, we are going to be exposed on the u.s. equity side. regardless of how much stronger fundamentals are. joe: thank you. when we come back. which celebrity ceo is urging thousands of employees to be kind to customers because of the selloff? ♪

alix: before the break we asked which ceo told employees to be nice to customers? joe: howard schultz of starbucks. thisspeaks to how much selloff has seeped into the broader public consciousness. we talked about how it was trending on twitter. i got one of those signals from a friend asking battle was going on. alix: that is contrarian. joe: that is why the market was going to rally today. and it tumbled. bob, it was a bizarre day. this is the biggest reversal since october of 2008. what do you make of it?

guest: 2000 and eight seems like a short timeframe. areink that markets grappling around to find some sense of equilibrium. the senses there is one big disequilibrium out there, the chinese currency exchange rate. we have been arguing the chinese move wasn't the beginning, the end of something. chinese currency was down for five -- 4-5%. you had the mexican peso down 25%. all these currencies have had these huge moves, and the chinese economy was trying to deal with competitive issues with a tiny move in the exchange rate. when they started to make their move a couple weeks ago they actually planned on it to go to 5%. there was such turmoil they cap it.

markets are reflecting this rattling around process because they think there is disequilibrium out there. it is the chinese economy. distant decline should not be a big deal. what you are saying is the reason why this time the chinese fluctuations are having this ripple is because the story isn't over yet. there is pressure on china to weaken. guest: there is uncertainty in the story isn't over. the chinese were going to stabilize their equity markets then they realized that doesn't serve a useful purpose. rates, cut interest since the first time since 2008. they are trying to be aggressive at stabilizing the economy.

a 3% move doesn't really do anything. i think that is where the uncertainty continues. that is not the end of the story. what is the direct correlation with china and the dow being off 200 points on a day where it was a 300 points? guest: i don't know if it was a direct correlation but it says investor have it in a position for a number of years for you by the tip -- buy the dip. the financial markets were being sustained by the fed. the fed is not likely to be .ustaining market they may do nanjing way overdue but move off their interest rate policy. , two ofstop for growth the four bricks are in recession . india's living along. china was your last bastion of

growth for the global economy and it is wobbling and clearly stumbling trying to find out what the policy prescription is. that leaves a level of uncertainty. people are not in a mood to buy the dip. themthe thing that keeps up at night is the volatility in the currency market. yesterday, some of the biggest swings in years four dollar yen or dollar what you make of these currency moves? do you agree that markets won't cool down until we see calming in currency? guest: most mosby we saw were unwinding positions. a lot of things going on have been taking off existing positions. a lot of euro shorts were still out there. anticipation of a fed rate hike. when you start closing up positions you sell what you have. dollar yen was being sold.

i come back to the currency markets. one of the biggest currency pairs in terms of local trading is dollar china. that is the one that is not being allowed to move that might have further to go. in terms of currency markets until the markets feel like dollar china is at a new level it is going to maintain uncertainty with these ancillary markets. with the level of interest rates having been compressed around the world, where is the incentive to buy emerging-market currencies? the incentive can be wiped out in a couple of days. there is no incentive to do that. a lot of this is about unwinding and risk reduction and that tends to lead to exchange rates that aren't near equilibrium. alix: does the quality and the beed in seen this unwind surprising to you?

guest: i have been doing this for 35 years. that doesn't surprise me. big move in currencies. you see this in currencies that have been fixed. the erm crisis, how far did italy move when it went 20%. these are the moves you get when you get markets that are fixed. the problem.rux of the dollar china exchange rate is nine equilibrium and nobody knows where the equilibrium might be and where they have to stop to stabilize the economy. cant stabilizes then they get the exchange rate here. if that level of uncertainty will play these currencies around the world. coming up, which countries have most exports consumed by china? we show you the chart after the break. ♪

alix: before the break we said you would show you a chart on which countries had their experts consumed by china. leading the way is australia, south korea, japan, brazil, and japan. alix: these countries are the most exposed when china stops buying. now we are going to look at charts that you brought that people may be missing. the first one, you want to say something about oil. guest: we had a nice bounce for oil but it was technically still in a steep downtrend. we went from the lower into the midpoint. we didn't show any sign of a breakout. until they get contrary evidence to the direction -- that channel

is a a well-defined channel for a wild. alix: it is pretty ugly. the chart says it all. real u.s. gdp versus manufacturing. tell us what you see there. at what is you look ironic about this, the data we have gotten or the third quarter has been pretty good on the u.s. economy. one thing i look at is an average of purchasing managers index. that had a big uptick. the chicago federal reserve puts out their national activity index. that had a big bounce in the month of july. it looked at the economy was doing well in july, third order was off to a better start than people expected. that was going to be supportive of the fed making their move in september. then financial conditions, long. , it the german ifo index

was better than people expected. alix: and germany is exposed to china. guest: what was really interesting, in germany the last couple of months there has been a lot of fretting. the expectations part of the index has been weaker. the one i like to look at is current assessment. how is the economy doing? that is a 16 month high. the german economy was doing better. a lot of it is export competitiveness. if you look at the current assessment they were very happy on how things are actually unfolding in the month of august. joe: great stuff -- alix: great stuff. we appreciate your voice on this. joe: we'll be right back. ♪

do not miss this tomorrow. durable goods are out at a: 30 a.m. -- 8:30 a.m. at 3/10ey is coming in of 1%. it is the rate for the underline factory demand in our economy. stronger dollar, following commodity prices have been a headwind for manufacturing. joe: given this divergence between the financial markets and real economies a data is coming under scrutiny. --en the model -- set all given the selloff, a lot of people are going to pay attention to the shanghai open tonight. what will the market did after the u.s. selloff and the rate pboc, the big massive crash we have had in china, everyone is going to pay attention to that. i don't know why i need to say

don't miss it. everyone will be paying attention. alix: you heard bob say it is all about the dollar and the u.s., and that has to stabilize for markets to get clarity. joe: that is all

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