>> we are moments away from the closing bell. i'm alix steel. >> i'm scarlet fu. x: u.s. stocks, closing down. the s&p adding to its august decline. european equities boosting their worst month in nine years, capping off the biggest selloff since 2008. scarlett: the question is, "what'd you miss?" alix: what a miserable month, the worst for global stocks in more than three years.

what is behind the disturbance, and have world markets become too complex to explain? scarlet: more chinese turmoil. the surprise countries you probably wouldn't have called safe harbors. alix: waiting for the fed. the hot debate over interest rates heats up after jackson hole. first, we have to begin with stocks. this was a truly unbelievable month that we saw, the worst for the dow since may 2010. the s&p and nasdaq, the worst months since 20 tell. -- since 2012. scarlet: of course, the fix, as well, how much volatility has been introduced. the biggest monthly gain in the vicks ever in the month of august. alix: crew decided to do something different and go into a bull market. take a look at the bloomberg terminal. i will tell you why. this is wti short contracts,

short heading for a decline in oil prices. see how much that has risen in the past month or two months? i'm going to show you in a second. it's going to be awesome. see the rally that we've seen? that explains why we've seen these violent, unbelievable moves in oil on one tiny highlighted -- headline. scarlet: oil posting its biggest three-day gain in 25 years. alix: bloomberg's matt miller is in the newsroom with more on today's action. and: i woke up this morning put on this green tie and green shirt. a lot of people have been complaining, but i was trying to induce the market to do well. it didn't work. a pretty bad day, and it's coming into the close. when you get numbers like this, 114 down on the down, it's not a rule, but they tend to

accelerate and get bigger and bigger. last week wasn't horrible. last week was a great week. the dow closed up 1.1%. the s&p was up 1%. it was the week before that that released on for people who were long stocks. we had the worst month, as you said, for the dow since may 2010, and for the s&p, september 2011, and for the nasdaq, may of 2012. i wrote this wrong. it should be september 2011. the worst month in five years, four years, three years. vix at the highest level we've ever seen in the month of august. these are just closing levels. recall, it shot up to a 50 handle and stayed there for a little while. it was terrifying for the

volatility. we are still not down to normal, 26, 27, 28 right now. .he historical norm is about 20 if the markets were to calm down -- they obviously haven't, and we are obviously not. we have all been talking about oil all day. what an amazing day for oil. the best three days we've seen in 25 years. oil stocks did quite well. median stocks had a horrible august. that is because disney came out with earnings. let's pull up media stocks. viacom is the worst, but 20th century fox, also down 20%. disney down 15%. disney came out and said, not as many people were subscribing to espn. viacom said the next day, also bad earnings because of cord cutters.

good stuff. thank you so much, matt. scarlet: what matt was saying about the u.s. is not limited to the u.s. if you look across the global markets, we track 86 different stock markets, and 62 of them are emerging markets. only four of them gained, russia, slovakia, bosnia posted gains. of the 24 developed nation markets we track, none of them gained. greece was the worst off. the best performer was ireland, off about 2%. alix: yikes. scarlet: i want to do a deep dive and take you inside my terminal to take a look at the carry trade and how it collapsed. the carry trade is where you borrow one currency cheaply to invest in a higher-yielding assets him or else. this is a function that tracks the return of any carry trade. the yen has been a popular carry trade for years. for august, it is all right. all this red.

yencould have shorted the and gone long on the brazilian rail. it didn't matter. you would've posted losses. saidloomberg news reporter the spot move on the underlying currencies was so big that it more than wiped out all the gain in interest-rate differential for the month. alix: that is fascinating. i want to take a deep dive to look at economic data that came out today. it wasn't that terrible. that blue line is the chicago-area pmi, which actually is still expanding currently, and that green line is the dollar index inverted. the dollar is gaining come even though it's going down. the chicago pmi is living up, even though we've seen a stronger dollar. it bodes well for inventories. imports, andheap we are getting the isn tomorrow, that could be a positive sign. scarlet: we will see how long the u.s. can stay insulated from

turmoil. alix: joining us, citigroup's chief equity strategist. thank you for joining us. it has been quite a month for stocks. what is your reaction? thinking about those t-shirts you see in london that say, keep calm and carry on. you were talking about the vix. i personally don't like the vix as a fear gauge, simply because it only gives you 30-day protection. if you are worried about something, you need to think about 60-day, 120-day. thane got a lower future you have an immediate fear. that just tells you something about what is going on in the markets. we look at the 90-day implied volatility divided by the 30-day implied volatility. it is three standard deviations away from where it has been. it has only happened 25 times before. alix: volatility could decrease

quite substantially by may 2016. tobias: investors aren't in the theory freaked out. they are freaked out at the moment, but if you are trying to get long-term protection, not one-month protection -- if there's a serious crisis, it's not going to be over in a month. this tends to be a misread. before the minus-three standard deviation event, 96% of the market is up in the last three months. is where we get some of the comfort. we track sentiment a lot of different ways, and in that sense, there's a lot of reason to be more comfortable. all of this starts with china and the fears around china with the yuan devaluation. if the china were to have this , we wouldn't be talking about copper or oil. we would be talking about electronics, cars, cosmetics, everything.

if that fell away, then you'd have a lot of discounting. you'd have margin pressure around the world, and a global profit recession would occur. scarlet: and possibly deflation, as well. when it comes to the u.s., you don't like the vix. what about credit spreads? could've, lot of would've, should've when it comes to credit spreads. how do you use them? spreads can blowout and stay blown out for a long time before it carries into equities. tobias: we spent a long time looking at credit spreads. one of the things that has been interesting to watch is the relation between the energy and non-energy. the most leveraged companies, are they able to access funds at a reasonable price, or do they have to pay excessively for those funds? what you've seen as the energy paper -- energy is 18% of the high-yield market -- that has blown out credit spreads, blown out like crazy.

they are far worse than what they were back in november, december last year. if you look at the nonenergy component, their spreads are far better than they were in november, december. some of the markets are quite discriminating in the high-yield market. i think that is why people are looking at credit spreads and misreading it. in investment grade market, credit spreads have widened 20, 25 basis points. much of that is the treasury yield coming in, not corporate financing costs going up, which is also important. if you want to find corroborating evidence, it's not that hard to find confirmation of a fear. i'm really good at manufacturing data, as well. it's a question of, what is going to be happening in the markets for economy? we are just not seeing it. look at the credit availability to small business. it is as good as it was. it's not getting screwed up because of the high-yield market. it's very unlike 2008 where we did see that broadening out of

the problems in credit. that would be the thing i would be most fearful of. alix: that was the first time i've heard the explanation of, hey, it's not all bad credit. thank you. tobias is staying. we have a lot more coming up. scarlet: coming up in a few minutes, which famous singer from 19 eighties wall street of relic is talking out about turmoil and markets? what is his surprising take on china? ♪

alix: i am alix steel. scarlet: i am scarlet fu. "what'd you miss?" it's michael milken himself. scarlet: you can see he's pictured right here with his wife and financier john paulson. note and is a cancer survivor, and he spoke to bloomberg news

outside a cancer benefit on long island. he told bloomberg, i believe strongly in opportunity. monday, he says, will be the best day chinese people have had in their life. if you have your health, you have everything. cancer survivor. that is all you need to know. alix: interesting quote. let's go to citigroup's chief equity strategist. tobias, you've brought a couple charts to us today. first, you measure the panic and euphoria of the markets. walk us through your model. tobias: there are nine factors in the model. we tested about 70 different ends, and found 20 that had decent correlation with future market activity, but we wanted to see how they interacted. saying,'t as simple as a occurred, so b will follow. basically, when the panic/euphoria model is below the panic line, and this is a statistical knack -- i'm sorry

for getting to statistical -- we moved into panic friday. alix: what does the p/e mean? alix: panic/euphoria -- tobias: panic/euphoria. what that means statistically, you are talking about a 96% probability the markets are up 12 months later when the norm is 75% on average. substantially better opportunity. on the other hand come to get into euphoria territory, you have an 80% chance of losing money. we've just entered panic. it doesn't mean markets couldn't slide next week or two. in terms of how do you think about the future, it's sending us a pretty good signal for people to buy and hold for a year. alix: what is the velocity of that kind of move when we come back from the panic level? tobias: it depends. during the crisis period, we

stayed in panic for a long time. it took a lot to rebuild confidence. factors like margin debt are in there. we even look at the premium people will pay for a put versus a call. how deep in your pocket will you dig to buy that protection? it's important. you, i'm afraid. how much are you willing to pay? what about correlation. we talk about correlation between asset classes, currencies, commodities. what about within the equity market? tobias: we look at the top 50 names by market cap the s&p 500, 48% of the value of the s&p 500. how is a major energy stock trading versus a major tech stock versus the major financial? are they trading in unison?

when they are all treating together, when that yellow line is spiking, that's actually a period where there is more indiscriminate selling. you know there is priced this location. you can take advantage as an investor to take those opportunities. low areae sitting in a of correlation, everybody feels like they are big shots. they don't need to care about macro. that is where you run into problems, where everyone is feeling overconfident. right now, we are in a position where it's positive. scarlet: speaking of correlation, i want to take you inside the bloomberg terminal. when you look at the euro and the yen, the euro has become a safe haven. it's the new yen. what you see is the dollar-yen converted. as the yen moves, you're looking at yen strength going up along with the euro. what do these kinds of crowded trades, the strengthen the euro and yen, do you prices in u.s. equities? tobias: i don't think it matters

as much. foreign buyers do come into the u.s. at times, and they will buy large-cap names they know and understand. for the most part, that is not where they want to be invested. they want to be invested in the qe areas, japan and europe. people have been speculating what the fed might do. it looks like the fed is on the side of taking away some of that accommodation. i think part of what is going on in the trades is the qe trades, but it is generally speaking. they want to buy japanese equities. the u.s. is not in their most favorite status. they like a merging markets. -- emerging markets. alix: what keeps you up at night? tobias: i think the potential for the credit stuff we were talking about before, if we were to see a broadening out of credit problems. china is for many people a black box. they don't know what is going on. i've had a lot of investors say, they don't understand what is going on in china, and neither

does anybody else. do we get these black swan events from something we don't comprehend? you worry about geopolitical issues, but those you can worry about for years and years. alix: jobs? tobias: jobs look ok. i don't care if it's the national federation of business, these are pretty good leading indicators. the job trends actually looked decent. it's one of the really positive developments in the u.s. housing is looking better. there are a number of things that look better in the u.s., including durable goods orders. the dollar has hurt us in energy areas. energy equipment orders have fallen. istain areas where the u.s. very strong, munitions, armaments, the dollar is not going to be the differential if you are going to buy this missile defense system or the other one. you are going to buy the one you think is better, or the better fighter jet, not the one that is currency-related. alix: snp, december 31? tobias: we are looking for 2200,

give or take 10%. alix: thank you so much. always a pleasure to have you on. tobias, citigroup chief equity strategist. scarlet: amid all this market turmoil, who are the big winners from china's stock market plunge? we will give you the answer after this break. ♪

alix: i am alix steel. scarlet: i am scarlet fu. "what'd you miss?" alix:alix: we asked, who were the big winners from china's market plunge -- scarlet: the answers, south korea and the philippines. the neighboring countries have become unlikely safe havens. steady leadership and long-term thinking matter. china's stock market plunge has been a huge drag on u.s.

markets, slowly at first, and then very quickly and suddenly later. is the market turmoil enough to spook our central bank out of a rate hike? fed officials met in jackson hole this weekend. they have a largely consistent message, which is, we are staying on course. let's bring in map those are. what does that mean, matt? matt: they are going to be looking at what comes out of the jobs report and what that might mean for inflation. at the same time, a lot of this market turmoil, several fed officials did speak this weekend to the idea of, that is not something they like to see when they are talking about potentially making a move, especially the first move in 10 years. especially what we are seeing in the oil markets the last few days, that's probably the same sort of idea, where that is not building a lot of confidence for them. alix: thealix: other thing that came out of jackson hole was a paper talking about effects of

the strength of the u.s. dollar on inflation and other countries. brendan greeley was out in jackson hole and sat down with an harvard professor. >> the implication of vast for other companies whose currencies are depreciating relative to the dollar is going to be far more significant. i think there is a bit of a symmetry. the impact on the u.s. itself is not big, but the impact on emerging markets would be fairly strong. alix: this was the chatter over the weekend on social media. what was the fed's response to this? matt: it's an interesting point she makes, that the u.s. inflation is relatively insulated from exchange rate movements, but there is still a big question on wall street how much the dollar appreciation we've seen has had an impact on inflation the last year? people are trying to figure out, it's more than zero.

that's not necessarily helpful for people trying to figure out exactly what the impact has been, what it might be going forward. that peepers speaks more to the fact that it's less important for the u.s. than it is for other countries. scarlet: i was talking to about this to mike mckee. it's not totally deflationary. if we are importing, deflation is not went to be as extreme. scarlet: there is a distinction to be made. stanley fischer is one of the people who made comments. a little more hawkish. why are people ascribing so much significance to his remarks that the fed won't wait for 2% inflation? matt: that is a great question. core inflation is at 1.2%. no one expected them to wait for 2% inflation. they've been saying that and speeches for a long time. i'm not sure that is necessarily new information. the argument people are making is if he wanted to, he could've uses -- used this weekend as a signal to say they are pushing

back rate hikes. people are quick to say, september is still on the table. alix: it's kind of what he didn't say. thank you so much. you will be with me also on friday. we break down the awesome jobs numbers. scarlet: we will be right back on "what'd you miss?" ♪

alix: i am alix steel. scarlet: i am scarlet fu. this.do not miss isn manufacturing is out tomorrow. take look inside my bloomberg terminal. we have had so many conflicting data points come in terms of the family and chicago. chicago and philly holding up. this is the level we have to watch for. anything above that indicates expansion. anything below that is contraction. 52.7, thend here, expectation is for us to rise slightly, 52.9. scarlet: we also have data coming out of china, pmi numbers, and there is some called around pmi as a broader for the global economy. that has been the case for china. tobias called it a "black box." linked to china, australia central bank makes an interest rate decision tomorrow. alix: the reason why i love that bank decision, 35% of australian

exports go to china. it is their single biggest export market. what happens there matters. scarlet: it is likely to leave the cash rate at 2%. will they highlight risks in china? alix: that is it for "what'd you miss?"

♪ >> from our studios in new york city, this is "charlie rose." charlie: sally mann is one of america's preeminent photographers. for three decades, she has captured images that are haunting and romantic all at once. her 1990 two series called "immediate family" made her ,amous and spanned 10 years featuring children on their home virginia farm. these photos outraged some for their composition as well as nudity. sally writes about that and her life in a new book ll