churning market days. said regulators get ready to celebrate. this is after a busy morning of economic data. ♪ olivia: good morning everybody. this is "bloomberg market day." first, a check of where u.s. stocks are trading. they are rallying on the major benchmark averages up by about 1%. clearly not enough to recover yesterday's losses. the dow was up by more than 300 points. all the major averages off by 3% right now. we want to show you what is happening in the oil market. oil is rebounding. we had positive economic data out this morning, including productivity better than forecasted. we you are seeing west texas

trading just a little bit lower, down by about 2/10 of 1%. rivera -- $45.31 per barrel. president obama is one senate vote the way from being able to declare victory on the iran deal. president 33e votes in the senate, just one shy of what is needed to sustain a veto. --omberg spoke with military with former defense secretary william cohen. >> we are not budgeting the level of spending, not only for china, but for the effective use of our military. it is down to one of the lowest levels in recent history. it is going to have a major impact on morale. if we have to ground planes because we cannot fly them, the pilots cannot be trained and

"cannot be ready." we have had some serious problems that if it inflicted already under the hammer of sequestration. state johnretary of kerry is sending a letter on the ironic court to members of congress today. outline.ll the -- it will -- he will deliver a speech in philadelphia focusing on how the u.s. and its allies are made safer. hundreds of migrants and hungry were once again blocked from seeking asylum in germany and other european union countries. it is become the latest focal point for tensions over migrants fleeing war and poverty in the middle east, asia, and africa. there is a report that says the extend preparing to sanctions over the fight in the ukraine.

it would be extended until march , 2016. two days until the august jobs report. we are starting to get some employment figures. figures say private employers added 190,000 jobs less month. the federal government says workers were much more productive in the second quarter than previously estimated. productivity rose by 3.3%. employee hours and compensation were also higher. bloomberg news has learned a pair of drugmakers has abandoned negotiations. looking to take over ariad pharmaceuticals. the deal would have valued ariad at nearly $2 billion. aaa is being sued in california

over gmo's. it's as many items on the aaa menu actually do contain gmo. 's. aaa plans to challenge the claim. lego is riding high. space tooko go to off today for the international space station. he is carrying 26 flacco -- plastic lego bricks made by the danish toymaker. legos profit also skyhigh at 30% in the first half of 2015. so much for video games. stocks are rallying, not nearly enough to make up for yesterday's 3% are to drop. all the average is now in the red for the year as we start september. vix futures continuing to search, up -- this is the

five-year vix move.my next guest says that the move in the vix suggest there is more pain and had -- i head for equity investors. he joins us now on set. michael, nobody quite sure what the causes been for the selloff in the past couple of weeks. everybody is trying to figure out the bottom. how reliable is the vix as a signal? michael: it is sometimes a good signal. i don't know if the options market or the vix market is better predicting market bottoms and tops. vix has been quite low and heading lower and the complete is the -- complacency zone back in 2013 followed by another in 2014.git year

it is not necessarily a quite -- great predictor over where the market is going. olivia: what it should indicate is that volatility -- which way it is going. michael: if you look at the further dated futures, and i want to point out that there is not as much liquidity in those as there is in the fun market, you have to look at this information in that context. what is really striking of all the things i'm looking at on my screens is at the further dated futures have been climbing higher and higher. now at three-year highs. since the huge monday of last week when you had the markets spiked. the vix spots the futures were slow to move but in the last week they were starting to climb higher and higher. at the face of it would suggest of the volatility will stick

into the fourth quarter. i am not so sure it is. when you look at other assets like the dollar and rates, it's all about the fed hiking in september, the dollar and rates are pretty much priced in. if it's a bad for equities, how does that unfold if he dollars and rates are not really responding in a big way? olivia: what i took away is that vix is pricing at a september 8 hike where the treasury in the greenback is not pricing in the september move. part of thet is nuanced story. i think to a certain degree what happened last week is the markets were saying december further passive -- past the summer. the narrative out of jackson hole was wait until september. olivia: all stanley fischer said

was inflation doesn't have to get to 2%. michael: i think the collective interpretation of all of jackson hole was firming up up the september move there. even after that, if you look at how the doctor reacted and how the two-year reacted, it reflected a bit more of that september narrative but it did not go crazy. the euro, the dollar, the treasury yields are kind of consolidating right there. the one real outlier is the vix futures. that may suggest that the further dated contract is something you want to sell if it -- if you believe the market will accommodate a september hike. olivia: could all of this be seen as quite normal? we are in this new era of low volatility because we are in

this new era of unprecedented forward guidance from the fed and out the fed is thinking about tightening at last. isn't it normal that volatility is coming back and we are maybe making too much of all of this? no one really knows why the markets explode like it did last week. if you look from a technical point of view, the s&p 500 has been around sideways for the last seven months. sometimes you just eat some volatility to cleanse things out. there was no real news leading to last week. technical there is a dimension to this that is inevitable. the sectors that got hurt the most last week where the sectors that it done the best in the first seven months of the year. olivia: momentum stocks. energy was one of the relatively better performance in the month of august which is not something you would expect given that if it is supposed to be china down turning and

commodities down turning, that should when energy. olivia: i think it is the with oil coming back a bit. michael: yes, fair enough. for the month of august, yes. oil did recover some but that was towards the very end. i think a lot of it was people ores.ng to the ripest shro olivia: i thought this was an extensive -- extension of foreign buffet on when the tides rollout. michael purvis, thank you for joining us. coming up, bedding and all this volatility. we will introduce you to a london hedge fund they gain more than 10% last month. i guess they saw the market moves coming. don't go away ♪.

♪ olivia: welcome back. i am olivia sterns. president obama has just said that he does in fact have enough u.s. senate support to uphold the iran deal. it looks like senator barbara mikulski of maryland has just said she will support the deal. the president has been trying to garner enough votes so he could overwrite a potential veto if it is vetoed. it looks like he now has the numbers. we will also hear from secretary of state john kerry who is making a speech about the deal coming up at 11:00 a.m. in philadelphia. back to the markets. stocks are rebounding after their third worst day of the year. not everyone is enjoying the party.

matt miller joins me now with a look at some of the biggest losers and winners early in today's session. matt: first off i wanted to take a look at what is going on in the general markets. we are rebounding but it was a pretty bad day yesterday. it actually was one of the worst starts to a september we've ever seen. going back to 1927, september is a bad month. pulling up my chart i was using so often yesterday to point out september typically looks like. if you want to bring up my terminal. you can see gains today. let me make this full-screen see you can see it better ever move my messages. in the last 10 years the average is been positive for tenths of a percent. over the last century it is been a loss.

we started out with a loss of 3% yesterday. up about 1% today so a loss of about 2% there. you have not seen anything that bad but over the past few years you see 2011 was a bad year. more.own even as far as analyst recommendations go, they are having a tough time of it. one of its suppliers which makes chips for go processor doesn't have a positive outlook for q3 four wearable cameras. you see a downgrade their. re. price target was lowered at piper jaffray to $54 from $72. go pro is at its have some of it, down 30% year to date. take a look at apple.

it is negative year to date as well. about 2.5% down for year to date. for the last 12 months is up 4%. apple is a little further away from making a car than we may think, more like 10 years rather than five years. it's only a 50%-60% chance it does make a car. i guess that is pretty good. olivia: looking forward to it. matt miller joining us from the newsroom. a look at some of the top stories. vladimir putin in china to celebrate 70 years since the end of world war ii. he landed in beijing this morning and while the occasion is to mark a pass to victory, the focus of the ceremony will be china's present military power. a huge parade will feature the newest weapons. most of them never shown in public. tweeting the rules for the next republican presidential debate.

able to use the participants by using only the most recent polling. that could help carly fiorina. she did not qualify last month but a sense surged in the surveys. the 17-candidate field is a problem for the network. they don't want to put 17 people on the stage. is notesident joe biden in the presidential race but he will look and sound a lot like a candidate today. he will give a speech and lead a democratic fundraiser in florida. he is mom about his plans but a draft biden super pac is in new hampshire. those are some of your top stories at this hour. china's surprise evaluation and markets gave the bulls a run for their money in august. one hedge fund is cashing in on it. london-based capital advisors gave more than 10% last month. they bet big on rising prices.

the chief investment officer joins us now from london with details on his strategy. jerry, congratulations. i can't think of anybody else up 10% for the month of august. when did you put this strategy in place and what was the thinking behind it? jerry: volatility, we say you cannot predict volatility and you can prepare. our primary focus on all her hedge funds is long volatility. we invested benefits from volatility and we tend to invest along that volatility. come we make excess returns. it ultimately benefits the people that invest with us which

the these returns whether traditional assets are not doing well. olivia: this is a multiyear strategy? it wasn't like in june you thought the chinese market is too frothy and i will buy? jerry: it's not even a smart thing to do to invest in volatility. it's just the sensible thing to do because volatility is really the markets attempt to adjust to a new reality. there will always be new realities coming to the market. it might take a few years but it always comes. olivia: what is the year-to-date performance for the funded but it 10% in august? : gary -- jerry: we are about square for the year. the main thing is we have the ability to make many multiples of our returns should the volatility continued. olivia: how do you play the

strategy? do you want to buy volatility on rates, currency, equities? what you invest in? to buy primarily options which of the financial answer is that benefit the most volatility. we look for options we think are a great bill you -- value on interest rates and equities. that's why we think pretty much any volatile situation we will be able to capture. olivia: globally or just developed markets? jerry: globally. olivia: i saw you had south korea, australia, it u.s., and europe. you're the first guest we've had its of 10% for the months of august. still ahead, companies will soon

have to report ceo pay ratios and it may not actually be the big banks that have the most answer for. ♪

♪ olivia: new rules will require companies to report pay ratios that the ceo makes compared to the average employee. the focus has been on bank ceos with multimillion dollar bonuses. it turns out more germanic inequalities may actually show up in other industries, especially those with a lot of low-wage workers. andrew mellon has written about this for bloomberg news. he joins us. who is going to have the most explain today? andrew: what we spoke to experts it was pretty -- retailers with the ones that were going to come out looking worse than anybody else. olivia: which ones?

andrew: a couple of examples we cvs.ht up were and t.j. maxx. olivia: that is surprising. when the pay ratio came out you would think costco or walmart, one of those giant retailers who have a lot of low rate workers. walmart employs one million people in the u.s. you expect that to be where the pay ratio is mark stream. andrew: this pay ratio will help the highly pay ratios to do not necessarily. the executive debate as much. olivia: one of the big criticisms of the pay ratio is it feels a little populist because what is the point of the pay ratio when the nature of the labor force is so different from industry to industry? yes, theyretailer,

will have a lot of offshore jobs in low-wage staff domestically. it will be different for amazon who just employees a lot of people domestically to make higher wage tech jobs. andrew: this is what experts tell us as well. it will be difficult to compare industry to industry. we think it could be a good gauge for investors to see how workers are paid versus ceo's. olivia: how is a calculated because companies are able to take x percentage of the workforce off the equation? andrew: there are a few ways you can get away with an alter the calculation. of all the workers you have, you pick the median worker, and the d compare that with the ceo and see what the ratio turns out to be. olivia: what will the sec do with this number? andrew: put it out to shareholders and see what happens. olivia: do we expect pressure on

board to reduce ceo compensation? is cvs'board going to tell him he's making too much. andrew: it will be interesting to see the fallout. it will be good for news media because it's an easy thing people can understand. a ceo makes x number of times that a worker makes. olivia: had it t.j. maxx get on the list? andrew: ask their board. olivia: thank you so much for joining us on the new ceo pay ratios coming out. more "bloomberg market day" coming up after the break. ♪ ♪

olivia: welcome back. i want to get straight to a check of the markets right now. u.s. equities are moving higher. the dow was up by about 120 points right now. bouncing back after yesterday's

selloff. averages were down by about 3%. the dow up 120 points. at its high it was up nearly 225 points. every sector in the s&p is in the green right now. now the top stories at this hour. at least one big-name investors as the equity markets have "reached some kind of tipping point." we spoke with mark farber. we had him on the line from thailand and we asked him where he would invest right now, whether for safety or the prospect of meaningful capital appreciation in the short-term. >> there is no safe asset anymore. the 1950's, itin was safe to put your money in the bank on deposit. the yields were low but it was safe. nowadays you do not know what will happen next in terms of purchasing power of money. it's going down.

olivia: that was mark farber. theaid it would be found in mining sector specifically, and precious metals. i went to intro but some breaking news. oil inventories are out. crude oil inventories rose by 4.6 per -- million barrels. continued supply gains in the u.s. crude story. oil bouncing between gains and losses after yesterday's steep drop. back to your headlines. netflix has its first foothold in asia. if launching in japan. they hope to disrupt the japanese tv industry the way it has in the u.s. and europe. the company is planning to produce original programming in japanese. amazon is looking for more ways to sign up more people for its nine dollars a year prime service. now offering members free

downloads of some tv shows and movies from its streaming service. the videos can only be downloaded to phones or tablets and not to desktops or laptops. 7-eleven is expanding its delivery service to three cities. customers in chicago, los angeles, and parts of new york city can order chicken wings, cold medicine, and paper towels. if you have a hankering for a slur be you also have to visit a -- slurpie you'll have to visit a physical location. it's difficult to bicycle with a sluprirpie. let's take another look at what is happening on the u.s. markets. u.s. markets are rallying. they are off session highs. the dow has fallen about 20 points in the past 20 or so minutes. financial stocks are really leading the rally here. all in all, a correction but not as much to recover as losses from yesterday.

what's happening to the price of oil this afternoon. oil inventories came out so oil falling 2.5%. a lot of selling on news that u.s. inventories are rising once again. oil had its worst drop in seven months yesterday. crude trading at $44.21. coming up, much more. wall street analyst are starting to see value in an unlikely place. energy junk bonds. lisa will explain. finding criminals might be as easy as hitting control f on your keyboard. how this simple shortcut could help investigators file on -- find lawbreakers on wall street. intel has debuted a new chip. could it be enough to rescue pc sales? u.s. second-quarter productivity rose by 3.3% today. the estimate was for a gain of 2.8%.

the figures shows productivity rose by the fastest pace since 2013. adp employment shows u.s. employers at one of the 90,000 jobs for the month of august. -- 190,000 jobs. with more on all of that and the jobs forecast for friday, with paul. i want to start with the productivity number. it does not seem like a lot of people care. why should we care? is this not the precursor we've all been waiting for? >> i would not get too bad a shape over today's numbers. they simply reflected the gdp revisions. we had a lot more growth per worker that we had originally estimated for the quarter. you highlighted, it's a very choppy data series and we had negative prints in the two

preceding quarters. if we looked at a smooth average , we see it isy still growing low 1%. problemproductivity persists in the economy despite one quarter's noisy rebound. olivia: how worried about that should we be? how big of a problem is it for the economy that productivity is not back where it was? carl: i think it's largely overblown. the fact that productivity is low means we are adding more workers for each additional unit of economic output. if we have a little bit of a slowdown, the labor market is likely to maintain momentum. that's critical given every thing happening in the economic landscape. productivity is low now because wages are low. when workers become more expensive, businesses will invest in productivity-enhancing

capital investments. this is just a natural response to economic conditions. olivia: 2:00 this afternoon, the beige book is out. carl: they have finished collecting survey responses on august 21. that is just as the market volatility picked up. what i would watch for is any clues as to negative feedback into the economy. we are not likely to see much evidence of that in today's report. the fed will be focused on this. i think they're looking beyond friday's job report and looking at upcoming indicators which could show evidence of the feedback. revisions to michigan sentiment showed some sense that households world -- were responding. we get the preliminary on september sentiment. managers areing

supposed to objectively respond underlying conditions they are observing, these purchasing managers do tend to have a little bit of a sentiment component. that downsideness in the main provided manufacturing evidence of economic blowback from recent developer. beyond the fed looking friday but looking at friday. carl: that was before everything else. olivia: is there a number that could take september off the table? 175,000.ething below olivia: does 300 print? carl: i think the market's response to friday's number is not even balance. things were great before global financial markets blew up, but what about now? it would give them more confidence that things are on a solid trajectory.

a downside print would really create concerns that we were losing momentum before these things transpired. things are probably gotten even worse. olivia: the bond king of janus investment out his in for yesterday. he said they fed move miami too little too late -- may be too little too late. carl: it's confusing to say we should of gone sooner while the economy is not strong is too late if it now to raise rates, would probably should've waited longer all the long. -- all along. yet to get a better sense of what the negative feedback is on the latest developments. i still believe domestic fundamentals are relatively decent. and the core engine of the economy is the domestic

demand,'s consumer spending, and the job creation happening in the private service sector which is insulated from international development. i think the fed will still get away with a one and done rate hike at the end of this year. olivia: chief economist for bloomberg intelligence. thank you for joining us. still ahead, energy-related bonds have plunged 20% in the past month. do you want to catch a falling knife anchor this spell trouble for the rest of the market? lisa abramowicz joins us next. ♪

♪ olivia: welcome back. time to get you caught up in a leave market action around the world. let's start in asia.

all the major averages ending in the red. it was the last trading day of the week for china's benchmark stock indexes. a major military parade on thursday. appears investors were willing to reign of the parade. ahead of a two-day public holiday to commemorate the end of world war ii. down by close to 5% before picking up. at one stage higher by almost 1%. despite a brief jump into the black have a close, the sellers did win out. extending its biggest two-month low since 2008. mainland shares are by foreign investors fell to a 17 month low. the markets will be closed for the rest of the week. olivia: now it's at a europe

where mark is standing by. mark: european stocks rising for the first day in three after china erased almost all the 4.7% intraday losses. now the chinese markets are closed for a couple of days. investors can focus on matters closer to home such as the ecb monetary policy meeting tomorrow. and that big u.s. jobs report on friday. the appetite for risk is causing investors to move out of the euro which is taken on a new mental of a safe haven currency. sterling is an interesting one. it is rising against the euro for the first day in three. it is falling against the dollar for the seventh consecutive day. the longest losing run since june. construction activity in the u.k. which rose but not as much as anticipated. facts about ecb meeting on

thursday. investors want some reinsurance from ecb president mario draghi he is willing to expand the ecb's bond purchases necessary to fight deflation. look at the german bund. little changed. up 2.8%. 8%.up to . the five-year forward inflation operate has actually fallen to 1.67%. you know more than i know because he used to live here at the ecb target for inflation is just below 2%. i, orto you mr. drag should i say mr. miller. matt: if only i were in mario's position i think i can do a lot. we had gains after europe gains. we are coming off session highs.

we are up 113. the s&p at half of 1%. seenf the changes we have in one of the reasons we are seeing the u.s. indexes come off this session high is because oil has now turned around after we got some higher crude supply numbers and we expected. take a look at crude. this is the intraday, down 2.2%. yesterday we were down 8%. we have a double date of back-to-back loss of 10% in crude. back down to $42.42 per barrel. he see a lot of oil stocks moving down as well. they are the biggest losers on the s&p. we are looking at noble, diamond offshore fars percentage losers. these are now some the biggest losers on the index. look at the vix. it continues to come back down and he came down yesterday as

well. we had the biggest drop in nearly a week as far as the vix is concerned. it looks like it is going back up. 7.0.0 as far as monthly gains are concerned. h&r block shares are a bright spot on the s&p. stockshave about 350 gaining, one of your 50 losing. it block up 6.6% as announces it will buy back shares. olivia: matt miller from the newsroom. now some of the top stories this morning. in kentucky, the county clerk who defied the supreme court over same-sex marriage goes before a federal judge tomorrow. kim davis says getting marriage licenses to gay couples violates her christian beliefs. she could be held in contempt of court. ismer newspaper executive

making a return to rupert murdoch's news corp.. he will be ceo of the u.k. division. this comes after she was cleared of all charges in a british newspaper phone hacking scandal. the kansas city royals are running away with the american league central but another opponent is lurking. chickenpox. alex rios and pitcher kevin herrera have been diagnosed with the pox. other players on the team are now contacting their parents to find out if they had chickenpox when they were kids which is when the pox typically strikes. those are your top stories at this hour. energy lost about $13 billion last month, bringing their losses for the last year to a whopping $42 billion. wall street analysts are starting to see value in the space but that could spell trouble for the rest of the market. joining me to discuss his lisa steel.icz and alix

ladies, great to have you this morning. lisa, what is going on? why junk energy buzz losing so much value? lisa: the big question is been --ed junk ons and junk energy related assets in general losing so much value in a vacuum. even with today's action, you have energy stocks way down at everything coming up. analyst argue ubs it is not. the biggest disparity returns between energy-related credit and non-energy-related credit possibly ever. that is data going back decades. will this just be the new normal as far as the relationship between energy-related assets and the rest of the credit world? or do something after give? does the rest of the market have to sell off to meet where energy is?

or does oil have to go back up? there is something unique coming in october. twice year they assess how much money they're going to give certain companies based on their reserves. that borrowing base has been cut for some companies. if it is cut again, those that have a lot of debt will have no access to capital. especially if the credit market is freezing up. they will not be a look of the equity market to issue shares. that will provide a huge cash crunch for certain companies. it's a catastrophe basically. [laughter] aklix says it is catastrophe. olivia: we will finally get the wave of bankruptcies. here is the question, let's

say you get that. we are seeing banker and seems and insolvencies. is that just an isolated clip or do other companies that are not as obviously reliant on higher commodity prices also going to get affected? the answer is according to the analyst there will likely be some of fax. investors start seeing be it default rate take up. they see actual losses start to grow. they become a little less benign about the whole asset class. while they have been discriminating so far, can they continue? the other question becomes overseeing that reflected in the stock market. it's in an -- interstate we've seen energy stocks come down so much. they say this is not a one-off quarter. this is going to last. we need to reprice energy earnings estimates and reprice for that. is that what we are seeing in the stock market as a catch up?

>> i actually have a couple of guests coming to mind saying equity investors were ignoring the signals you were talking about for months. ,f you look at credit spreads that was flashing warning signals for equity investors. those are flashing warning signals particularly in the energy sector. the rest of high-yield is not really sold off. olivia: could energy some kind of deeper significance? peace came outw today talking about how lower oil prices could potentially cause a recession. it would cause inflation and investors would initially be left -- >> if gary is right, and alix steel can -- catastrophe would also come true. >> it would be a lot of pain for a lot of companies. olivia: thank you so much. alix steel will be back at the top of the next hour. and thank you to lisa

abramowicz. still they come, three letters they could get a traitor into trouble if they are lgl. mgll street is going all o over acronyms. ♪

♪ olivia: welcome backolivia:. investigators searching e-mails for evidence of shady activity in wall street, they seldom uncover a smoking gun. they often come up with red flags, acronyms that indicate a suspicious conversation is being held off-line. later.ns let's discuss this could lead to big trouble for traders. gary's your dukes how prosecutors find and follow these leads. the investigators best friend. they think there's something

wrong going on, possible insider trading or one of these other huge violations of u.s. law that we have seen at many banks. they subpoena tens of thousands of e-mails. how do you possibly go through all this and you know where to look? they start with control f. acronyms are a great way to start because they are easy to find and they can indicate that whoever is using those acronyms, whether an e-mail or a recorded phone call or other type of when they are searching, that there is something that various going on that they do not want to discuss early fingerprints on. it's a great way for prosecutors to actually find intent which you need for criminal prosecution. olivia: the not looking for the smoking gun or evidence of wrongdoing, they're looking for the evidence that the traders are trying to take the conversation off-line? keri: exactly.

they need intent and find places talkings where they are off-line. traders lines are often recorded. it's basically a good indication for basically how this wrongdoing goes on. olivia: ldl. keri: let's discuss live. let's talk off-line. there is also phrases like call me on my cell. olivia: sounds like my teenage niece. lol. everything except olivia: you can read the full story on bloomberg.com. we will begin eu stock markets on the other side of the break. ♪ we live in a pick and choose world.

choose, choose, choose. but at bedtime? ...why settle for this? enter sleep number... right now all beds are on sale. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore. so your sleep goes from good to great to wow! only at a sleep number store. time is now for the biggest sale of the year, where all beds are on sale. save 50% on the labor day limited edition bed. know better sleep with sleep number. olivia: it is 11:00 a.m. in new york city and for clock p.m. in london. alix: welcome to "bloomberg market day." -- the volatility

index shoots upwards. there's nothing to fear when the fear index is high. olivia: coffee lovers, listen up. the cup of joe may be in jeopardy to their railing in the reigns of coffee production in africa. alix: we take a look at why the north paul is important to the north pole is important to the u.s. into the economy. ♪ good morning. i'm olivia sterns. alix: i am alix steel. we want to take a look at the markets 90 minutes into trading could the dow is up a little compared to the last few days, up by 127 points. volume is a bit light and off by 30% versus the 10 day average good this is after stocks got decimated yesterday, at one point down a0