- joe: we are away from the opening bell. matt: i am matt miller in for alix steel. ♪ joe: stocks sent equities in europe higher. matt: plus, the $72 billion debt map. enough and will there be a ripple effect? so-called liar loans. are we back? ♪ matt: let's kick it off with the markets. i have been hesitant all day to cry massive rally and put on a because we hat

obviously had the second worst week of the year last weekend we have seen an extremely volatile market. at the end of the day, it turned out to be a massive rally. joe: it was one of these days where the market rallied in a midday scare and it really kicked into high gear. matt: almost no one i have spoken to has been willing to call a bottom to say we reached a bottom and now we are going back up. even if they are bullish long-term. joe: everyone is hesitant and cautious in the near-term p want to take a deep dive into my terminal 2 look at something not so pretty. it tells you something about the world economy. the reason why it matters, it

says that backdrop for the isrging markets, it's what roiling markets everywhere in large part. that's pretty bad. >> it's only russia, to be fair. it's just indicative the kind of global turmoil that is shaking targets everywhere. matt: but europe had a pretty good gdp revision. you take a look at my chart here, i've actually put it into u.s. terms. always quoted in quarter over quarter. for us of .3% growth -- that sounds like nothing at all. but they're getting closer and closer to 2% here. year-over-year growth of 1.5%.

it looks almost as good as what we are experiencing. had 3.7%, but let's average it out. we're looking at about 2% growth here in the u.s.. joe: i want to bring in our guest from wells fargo. surge, alljor dow the indices up well over 2% coming off last week's friday decline. is this it, are we out of the woods now can you say with this rally that the volatility we've seen over the past 2.5 weeks or so is gone? >> i wouldn't be quite so hasty. i'm hopeful. we think fundamentals are still intact. there was a lot of technical damage done in late august and we have yet to really recover. matt: what do you mean by

technical damage? you mean like charts, and is this an upside down w formation? in allcannot really call clear. the fundamentalist in me says actually we're seeing some signs of the stable growth globally. we haven't really had anything change our earnings targets and forecast and the market itself got a lot cheaper over the last month. like a good opportunity to continue to put money to work. those two things are conflicting right now. i have to say my view remains relatively conscious short-term with an eye toward that longer-term. matt: i'm learning something about gina. do you believe in this technical mumbo-jumbo? this move we just had up, had ans the s&p

extraordinary drop. to what do you attribute fundamentally this volatility that we have seen? >> for the last year we've seen oil prices fall, more than 60% now. that's something that doesn't happen usually outside of a recession. at least arienced 10% correction, so we were due payment we also have some nervousness around the fed. it's not unusual for the markets to trade in a volatile and sideways pattern leading up to that first fed rate hike. usually the market falls between 8% and 10% with the first rate hike anyway. then you have the china risk and the emerging markets risk. it was not until this summer with the china meltdown, the financial market meltdown in china that we started to pay attention to the emerging market

financial crisis, because china is the second largest economy in the world. it does have some profound impacts. china was the second-biggest market until this year. now i don't even know if it ranks in the top three. so they're are really having big problems there. , theu look at the vix technician in me worries about anytime the fix has a huge spike and cannot seem to come back down. 25 centsot been above 2011. pull up a terminal a look at this. one year were above 25, we -- maybe it's easier if we put it on a five year scale.

>> i think we have to get through the fed decision before going to see volatility calm itself down. the put call ratio exploded over the last month or so and has yet to come back down to more stable levels. i think quite frankly until we get to the first fed high, until we get more days under our belt of stability over china, until we know what the longer-term outlook is for china, we start to get more economic data following through on demand accelerating, it's just going to take a while to find our bottom here. this spike lower in character 2011 thatt more like any of the other spikes lower with had so far this cycle. joe: with the asian markets and a lot of turmoil, there's been a lot of talk about the late 1990's all over again. you've done some work on that showing some parallels with 1998. >> the biggest similarities, it

was an emerging market led financial crisis. no financial crisis is the same. this will not be 1998 all over again, but it was an emerging market driven crisis. two, it followed a 30% gain in the dollar. almost the same exact numbers we had in the dollar and oil prices over the last year. that happened in 1998 as well. the characteristics of the intermarket trend looks similar to 1998. energy stocks led the decline in 1998 as well. health care consumer discretionary turned over viciously as the market corrected. so there are a lot of similarities to 1998. it is something to learn from. a chart that goes back to like the dawn of time and it shows the late 1990's. this goes back to 1972 before

any of the three of us were even born yet. you can see it looks like everest there. , the the fundamental side broad market looks a lot better than it did in 1998 four longer-term vocus investors. , as much as trends we complain about earnings, earnings are a lot stronger than they were in 1998. we had five consecutive quarters of negative year-over-year earnings growth. today we have had one and we two.it to -- we may get matt: so you would not have liked the tech sector at the end of the 1990's. i loved it, but i was just reporting on it. you have the semiconductors in services ine i.t.

purple. they look like they are negatively correlated. , whenally what you want semiconductors are leading you get a longer-term payoff for technology. what we had so far this year was pretty substantial underperformance of semis. semiconductors suddenly started to outperform the broad market. we could see a much better outlook for technology at the end of the year. so you're fairly optimistic, but what would keep you nervous? >> figure the what might keep me up at night, if were on the ,recipice of a turn in the long 30 year bull market for bonds, had we navigate that environment going forward as investors? like you said, we are not working in this business without as our bigull market

tailwind. that's going to be one of the biggest secular challenges that are generation of investors faces over the next 20 or 30 years. joe: gina, thank you for coming on. matt: when we come back, oil is not the only business being killed. another commodities prices drop i more than a third last year. it could be putting american fishermen out of work. we will tell you what it is, when we come back. ♪

matt: i'm matt miller, in for alix steel. we asked what commodity has seen its value drop by more than one third from the past year. joe: the answer is shrimp. commodity -- because

demand grew so much, production grew even more. but that is good, because shrimp is great protein and protein is in high shortages in other parts of the world. sophie people. a $72uerto rico has billion debt problem. today's the deadline for the government to come up with a plan to take back the debt. kate smith is a municipal bond reporter for bloomberg rejoins us now. why is today such a big deal? kate: apparently the government is finally going to get a copy of the five-year projections of revenue and expenditures. tomorrow it will be announced to investors in the press. delayes after a week long because of last week's tropical storms. matt: does this make the default

strategy easier to map out? clearly they don't have the ability to pay this debt. does this mean they know how big the haircut is that they need? kate: they are figuring out what their revenues and spending is going to look like. that does not include any of the $72 billion they borrowed over the past however many years. only the actual spending on the island. from there they will say this is our surplus and this is how much we can spend on our debt service moving forward. that's when they will start to save this will be saved, that won't. and the fact that they don't know that already is part of their problem. about puerto rican bonds, they have been rallying lightly? kate: this was probably the most distressed agency on the island,

and they came up with a restructuring plan that gave investors $.85 on the dollar. these were trading much lower than that. the expectations were very low. everyone was pleasantly surprised by that. they were thinking maybe things on the island were not as that. a surprise restructuring would give them so much more than they were trading. investors?any of the kate: we have a cool chart of who increased their holdings the most. one is goldman sachs. year,ast year to this they doubled their holdings in puerto rico. this is only from may. we have to wait for those investor statements to come out. matt: oppenheimer did well, franklin resources has reduced.

kate: these are the largest mutual fund holders. yields,these huge upwards of 10% or 11%, they also got alternative investors interested. there is a large hedge fund contingent investing in the islet -- in the island as well. there are other ways to get involved in the island. paulson bought a hotel earlier this year. bought a investors hotel as well. there are all sorts of different entry points. today and tomorrow people will be offloading the bonds. matt: thanks for covering diligently the puerto rican debt default. what major european market is showing a robust rebound in the housing market?

the answer when we come back. ♪

joe: "what'd you miss?" enjoying ak is surprising comeback and its policing housing -- in its beleaguered housing sector. spain's unemployment still stands at 23%, the second highest in the euro area after greece. a good place to move though, maybe. you would not have to lie about your income to get a loan over there, assuming you had income. the same toxic loans that -- they are creeping back into the market here, but how safe are those aaa rated bonds? remember., we all

you do not even have to declare income or you just made up a number, did not have to prove you had a job. it's not as bad. >> there's a twist, in part because those have essentially dodd-frank.d in the have somethingwe equivalent to liar loans, they require the lenders and banks to make sure people can afford the loans they are getting. have, you rule we need to makes sure the borrower can afford the mortgage, which is a twist on how you lend money. exemption for business purpose loans, if someone is buying a home they're not going to reside in and rent out. or you own a home and you're taking equity out to put toward your dental practice or to make different investments. all of that is exempt from the

ability to repay regulations. there are similarities to the liar loans of the past. >> they don't even ask you your income if you're getting a loan for a business purpose. there's all sorts of things they can do. but you've got to have a big down payment. interest only loans are also coming back. but with a better down payment themore documentation, mortgage market is far away from where we were. don't give us anything to prove what you make, don't put any money down, all at the same time. joe: who is the onus on to confirm one of these loans being used for the stated purpose? >> there is no case law on what

might end up going on in the courts. in the past the exemption tried to be used after the government rolled out high cost loans, they losses byorts of private litigant saying you cannot just say this is if you're not actually verifying. they say we get someone who signing a document, and many of them have it written out in their own handwriting and nine by them, it will be ok. there's always the possibility the borrower comes back and says that was not me, my broker did that on my behalf. we don't know how courts are going to treat any of this stuff at this point. in cases where you would be surprised they would want to go through these links to say i should not get foreclosed on even though i did not pay my mortgage. other signsere any

that the old behaviors of the 2004 coming back? >> private capital is taking more risk in the mortgage market. they are -- the government has been offering a pretty wide box already. private capital is looking at filling of the crannies, things statement loans where the borrower doesn't have the income hetheir w-2, but looking at has this much money coming in every month and we will accept that. it might be people with low credit scores or recent foreclosures. during the crisis, a lot of good borrowers got foreclosed on. i'll never forget a long romantic walk i had on the beach with erik schatzker in 2008 or 2009. i said sunday in five or 10

years another bank is going to package subprime loans and sell them off in pieces. is that happening again? there were subprime loans in their and there were loans to people who had gone through recent addresses or did not have any credit scores at all. we saw that with a lone star affiliate. in a world where everybody else's taking on a ton of risk in all sorts of other areas, maybe it's not the most scary thing for there to be a little risk coming back here because it's starting from such a measured place. entirely bad for people to get a mortgage a little more easily than it has been. >> we all have different profiles in who we are. there are people outside of the cookie-cutter boxes who will be served in one way.

matt: thanks for joining us. joe: and we will be right back. ♪

matt: i'm matt miller. joe: "what'd you miss?" tomorrow's apple event, i'm sure you've been waiting as desperately as i have for the news tough. i don't expect the new phone to be that much of a leap forward. joe: i'm not really that excited about it. i'm super pumped for the apple tv. something i'm more excited about,the jolt survey is janet yellen likes this report .ecause it shows indicators

it's a labor turnover survey. that is out tomorrow at 10:00. matt: the only way to get better is to challenge yourself, and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20. it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around.

emily: we have the top things you need to watch for at tomorrow's big event. emily: i'm emily chang in this is bloomberg west. theing a spotlight on excesses of the san francisco tech community. will speak to nancy pelosi about the widening income divide.