alix: we are moments away from the closing bell. i'm alix steel. joe: i'm joe weisenthal. ♪ alix: unbelievable day. u.s. stocks erasing gains. after rebounds on the s&p first stretch from yesterday since 2011. joe: the question is, what'd you miss? another wild ride, stocks surge after friday's slaughter. -- monday slaughter, then all vectors. and then worse dive at the end.

, when will things cool down? we talked to the market guru. alix: plus, the global outflows. which countries have lost the most money. we have the charts. joe: and the china factor. is all of the panic real or imagined? we've got three charge that cut through the chaos. 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. this was a surprise th. joe: this was a surprise. this is remarkable. we were up in the morning by a lot. then we got to the rate cut before the market opened. that gave an extra jolt. between the fact we are already going to be up, and the pboc should have been smooth sailing, and then around midday it started deteriorating and looking soggy. it started sliding. at the end of the day it fell

out of bed. extraordinarily ugly. alix: there was no catalyst. i kept looking for oil, which i one. go to to see if that sold off, held up. it 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 yesterday, and then as soon as they saw it looked the gains were not 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. i want to chart the countries that have 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. that is net. interns of india, down by 2000%

since august. you max out the charge, the outflows are reaching levels we saw in 2004, 2011. you can see the damage being done. bees countries are hurting the most. 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. the v fix, 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. chief economic advisor at allie on. 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. joe: 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 disruption is coming from elsewhere. the volatility, the economic shock is coming not from europe and the u.s., where you could have confidence in the ecb and said to act as circuit breakers. it is coming from the emerging world. the market has to regain its own footing. what today is going to do is make the crowd hesitate and bring out some more sellers. i'm a little bit worried as to what the head with today's -- what is ahead with today's ugly close. alix: it's hard to not think about what happen in the 1990's. goldman sachs had a great chart today that charted what happened in 1998 versus now with stocks. the s&p fell 14%. in august 1998 before rallying 29% in the last or months of the year. do we see a repeat? guest: we could. 1998 was different. the cumulation of the asian crisis into a russian default.

once that default was contained, then you could move forward. what i'm worried about is the economic issue. this is harder to call. i think the u.s. is fine but you just read the dramatic numbers in terms of the emerging world. they had become an important implement of growth. we have to keep an eye from financial 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. the 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 volatility play on this decision? i think it will play a role, and 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. the second and third factor have 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 also ask, what mistake can i afford to make? they cannot afford to make the mistake of destabilizing the

global financial 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. now, what can the fed actually do? do you think they will have to do something? there isn't much they can do. that is why i said in the beginning the market doesn't , have the policy circuit breaker that it needs. this market has relied upon the 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. the market has to find its own equilibrium level and that will take some time.

joe: speaking of china and policy moves, today marks a shift back to the old school chinese policymaking where they apparently remove the intervention from the stock market and went back to a rate. does 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? guest: the market and the real economy. on the market, they face serious challenges. why? because they have helped promote a 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. on the market side they have a 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. -- soft landing the economy. they have many more tools than what people give them credit for. will they stabilize around 6%? yes. will they continue with the hesitant move towards a market-based economy, yes. we are to observe the financial instability. on that we get almost not just daily numbers, hourly numbers. that is what we are going to be obsessed with. but on the economic side, they have a lot 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?

guest: i had a attention to the currency markets. 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. the bet the market had is that central bank's would be able to repress volatility and central banks had been able to repress volatility. now, central banks are having tremendous difficulty. why? because the currency markets have become unhooked. i pay 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. and our fundamentals are a lot stronger than the rest of the world. joe: thank you. bloomberg view economist and cheap -- chief economist. alix: when we come back. which celebrity ceo is urging thousands of employees to be kind to customers because of the selloff? that answer, after the break. ♪

alix: i'm alix steel. joe: and i'm joe weisenthal. alix: before the break we asked which ceo told employees to be nice to customers? joe: howard schultz of starbucks. he said, let's be very sensitive to the pressures our customers may be feeling. this speaks to how much this selloff has seeped into the broader public consciousness. people are really paying attention. we talked about how it was trending on twitter.

i got one of those signals from a friend i haven't heard from in probably 10 years about what was going on. alix: that is contrarian. joe: you would think so. that is why the market was going to rally today. and it tumbled. alix: bob, it was a bizarre day. this is the biggest reversal since october of 2008. what do you make of it? guest: the first thing i make of it is, 2008 seems to me like a very short timeframe. but i think that the markets are grappling around to find some sense of equilibrium. i think the sense is 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 4-5%. you had the mexican peso down

25%. the euro was down 20%. brazil down 25%. all these currencies have had these huge moves, and the chinese economy was trying to deal with competitiveness issues globally 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 capped it. they have been intervening to try to stabilize it from becoming to weak. markets are reflecting this rattling around process because they think there is disequilibrium out there. it is the chinese economy. joe: a couple distant decline should not be a big deal. furthermore, historically the stock markets is not particularly correlated with other world stock markets. what you are saying is the reason why this time the chinese fluctuations are having this

ripple effect is because the story isn't over yet. there is pressure on china to weaken. guest: i think there is uncertainty. the story isn't over. there is uncertainty about where the next chapter is the chinese . the chinese were going to stabilize their equity markets then they realized that doesn't serve a useful purpose. we will cut interest rates, 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. alix: 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 buy the dip.

growth was being sustained by growth in china. the financial markets were being sustained by the fed. the fed is not likely to be sustaining market. if anything, they may be doing a little bit of nudging, the way overdue but move off their , interest rate policy. the backstop for growth, two of the four bricks are in recession. brazil is in recession and russia is in recession. india is limping along with growth. china was your last bastion of growth for the global economy and it is wobbling, and clearly stumbling around trying to find out what the policy prescription is going forward. that leaves a level of uncertainty. people are not in a mood to buy the dip. joe: you heard right before you came on, the thing that keeps him up at night is the volatility in the currency market. yesterday, some of the we have seen extraordinary moves. yesterday, some of the biggest swings in years four dollar yen or dollar euro, what you make of

these currency moves? do you agree that markets won't come down until we see calming in currency? guest: most mosby we saw were -- most of those moves 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. all of a sudden when you start closing out 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: nevertheless does the , quality and the speed in seen this unwind be surprising to you? we had the biggest intraday drop in 30 years. guest: i have been doing this for 35 years. that doesn't surprise me. big move in currencies. you see moves like this, particularly 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. that is the crux of the problem. the dollar china exchange rate is not an equilibrium, and

nobody knows where the equilibrium might be and where they have to stop to stabilize the economy. if it stabilizes then they can get the exchange rate here. but it is that level of uncertainty that these will continue to plague currencies around the world. alix: good talk. we have much more to talk about. joe: coming up, which countries have most exports consumed by china? we show you the chart after the break. ♪

alix: i'm alix steel. joe: and i'm joe weisenthal. "what'd you miss?" alix: before the break we said you would show you a chart on which countries had their experts consumed by china. joe: check out this chart. leading the way is australia, south korea, japan, brazil, and malaysia.

alix: these countries are the most exposed when china stops buying. joe: bob, 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 a while and oil this morning, but it was technically, unfortunately, still on a very steep downtrend. we went from the lower into the midpoint. we didn't show any sign of a breakout. so until they get contrary evidence to the direction -- that channel is a a well-defined channel for a wild. -- a while. alix: it is pretty ugly. the chart says it all. you are also looking at real u.s. gdp versus manufacturing. tell us what you see there. joe talked about the underlying strength of the economy. guest: when you look at what is ironic about this, the data we have gotten or the third quarter so far 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 -- quarter was off to a better start than people expected. that was going to be supportive of the fed making their move in september. and then all of a sudden financial conditions come along. joe: buster, the german ifo index, it was better than people expected. a confidence index. alix: and germany is exposed to china. guest: yes. 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 called current assessment. how is the economy doing? that is a 16 month high. coming into all this, the german economy was actually doing a little bit 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. alix: great stuff. thank you so much, bob. we appreciate your voice on this. joe: we'll be right back. ♪

alix: do not miss this tomorrow. durable goods are out at 8:30 a.m. take a look into my bloomberg terminal for what to focus on. durable goods backing out transportation. the survey is coming in at 3/10 of 1%. it is the read for the underlying factory demand in our economy. stronger dollar, following -- falling commodity prices have been a headwind for manufacturing. the question is, how that? joe: given this divergence between the financial markets and real economies a data is coming under scrutiny. given the market selloff and everything going on, i think a lot of people are going to be paying attention to the shanghai open tonight. what will the market do after the big u.s. selloff, after the rate cuts from the pboc the big , massive crash we have had in china, everyone is going to pay i don't know why i need to say

attention to that tonight. don't miss it. everyone will be paying attention. alix: you basically just heard bob say it is all about the and dollar the u.s., and that has to move forward and st

announcer: from our studios in new york city, this is "charlie rose." is not the creation. past tomorrow. ♪ ♪ we are going to rise up