joe: i'm joe weisenthal. alix: and i'm alix steel. ♪ alix: u.s. stocks closing higher, surging toward the longest rally of the year on speculation that the fed will keep interest rates lower for longer. joe: the question is, "what'd you miss?" scarlet: we speak to a leading expert about the face-off between china and the fed. doomsayer, mark farber, the prognosticator of him why he thinks he's right this time. mess.andy emerging-market the sector is flailing, for how far will it fall before rebounding? we ask our guest. joe: welcome to "what'd you miss?" now a full hour each weekday.

welcome scarlet fu as coanchor. scarlet: thank you. marketedible day in the today. since friday week seen as 700 point rally in the dow industrials. it rounds out a global equity rally. the ice and services showed migger than expected -- the is services should bigger unexpected growth. this ahe idea being, is rally being based on fundamentals, or is this short covering and technical bounce joe: there is definitely a lot of short covering.

i spoke to one analyst and effect, you've got to love the rally after bad news. just average was and then off to the races just again. leapet: i want to take a inside my bloomberg terminal to show you the dip in this brief recovery that we've had. look -- do we have that up? we don't have it up. in any case, energy stocks have not done well throughout the last year, but in the last two days they are in recovery. joe: we talked about that ugly services -- the ugly isn services reporting this morning. if you look here, the white line andhe employee's of index

it is pretty much at its highest level since the crisis. this yellow line with in the jobs report last week. many are saying that maybe the jobs report was just noise. we had strong car sales last month, decent ddp. other indicators are saying it was not that bad. some are just saying it was a one off. than --d you want more more data points as well. a look at what i want to talk about, that is, glencore. 72% in hong surged kong today. look at that volume right over here on your screen. that is incredible volume that we saw, and the idea is that it is being traded high-volume, but thinly traded. there is not a lot of liquidity anywhere, whether in the u.s.,

london, or hong kong. that volatility is not going to go anywhere. joe: that was an amazing move, 72%. alix: it is like a penny stock. change for this a glencore, or the inevitable technical bounce. alix: if you look at volkswagen, it decimated european stocks at some point, but they do hold a lot of weight. scarlet: we will tweet all of our charts on twitter later today. alix: david booth, global head of currencies at merrill lynch and bank of america is with us. there will be some warning signs in the market. take a look at the credit spreads. they have this really blown out emerson's the fed did not hike. is this bad news actually glad -- bad news? david: i don't think so. s&s the fed -- as soon as the fed put rates on hold, it tells monetary policy

will depend on the credit market. if the credit market is not that excited about easing fed policy, i fail to see how anyone else will get to excited. -- will get too excited. joe: so we should not get too excited. is, investorst have been looking at the u.s. as the only bright spot in the global economy. the possibility that the u.s. could be succumbing to pressure is not positive. we have seen math levels at -- layoff levels at levels that we have not seen since 2011. so much is riding on the third-quarter numbers coming out. because the u.s. is not doing quite as well as we thought

otherwise. joe: another thing is market expectations for inflation continue to follow and the fed did not help them to move at all. you put weightdo on that? david: i think it is very important. i think the breakeven will be hugely important, but for breakeven, we need to cem doing better. see e.m. doing better. had a great chart in your note that show developed stocks have consistently outperformed emerging markets is 2012 and that kind of move would support a decoupling. how much faith you have a net, the decoupling, and is everyone on the other side of it?

david: i thought it was interesting when i was at a dinner and everybody went around the table and said, what is your favorite trait -- trade? it was the end. if we go into a coupling into a re-coupling world, that will affect joe: payment across the board. -- will affect payment across the board. joe: you mentioned challenger. the blue line is the three-month layoff. the orange line is initial jobless claims. that has not picked up yet, but it is that something that you would watch? david: obviously, the announced layoff is not what happened, but what is still to come. however, it now has to be the

barometer, or basically the leading indicator of job loss to come. these numbers will be very crucial. alix: i want to read you a quote from david bianco at deutsche bank about what to expect from the fed. he said, we stand a better chance of landing men on mars before a for not -- a full normalization of nominal interest rates, especially the yields. is that true? think the 10 year yield will be on hold for a while. but the thing that were shocking to me in the past couple months since china's devalue, the stock the bondllapse, but has not gone down much. if i told you that the u.s. stock market would be downs 5% and very little trading until march, you would not be trading. it is trading up 2% right now.

i personally think that what is happening is china has been telling all of the u.s. treasury and helping offset any impact of easing u.s. fed policy. --m that point of view, the china is still more important than the fed as far as the market is concerned. scarlet: we will get back to china in a second, but i want to go to a you said. youdo you ever -- how do view earnings reports coming out this week? s&p 500 just revise the forecast down and i think we are basically the most conservative forecast for equities. clearly, we are more concern than the rest of the industry about the outlook. and especially given that the market is tightening. many have engaged in engineering alter their numbers.

it is basically windowdressing. joe: all around the world, no sign is happening anywhere that inflation is happening. if you look at europe, japan, and obviously the u.s. atyou think will look back this time frame and start to tear up the textbooks and wonder what our the central bank actually has as far as stoking inflation? david: honestly, yes. all qe has done in the past five years is forced china to leverage up in a big way. now that china needs to go through the deleveraging goesss, what comes around around. china is now feeling the aftermath of five years of qe and now it will be a deflationary run. alix: lots more to come on china. up, china andg

the fed face-off. what that means for volatility and the global market next. ♪

mark: the rain keeps pounding south carolina after days of flooding and at least nine people died in two states. walking is a category one storm with winds about 80 miles per hour. bermuda,oday, a past uprooting trees and knocking out power to thousands. the u.s. coast guard says a ship that went missing in the

atlantic ocean during hurricane joaquin sank. the body of one crew member has been found. there were 33 on board, 28 of them americans. the top u.s. general in afghanistan is confirming that an american venture care. the aerial assault that destroyed a doctors without borders center in the city ofkunduz. it was the first statement of response ability for what general campbell called "a tragic event." doctors without borders says it is withdrawing from the city. about the company's 2800 jobs, workers stormed in and the wording on to managers at air france. they escaped narrowly, but their clothing was left in tatters.

the ceo says seven people were hurt, one seriously. the violence erupted after air france said it may eliminate 300 pilots, 900 flight attendants, and 1700 ground staff. those are your top headlines at this hour. back to scarlet, alex, and joe. scarlet: back with us is david woo from bank of america, merrill lynch. oflier you said the easing policy represents the single greatest risk for the financial markets for the rest of this year. does that necessarily mean china has to devalue further for monetary policy? david: for me, the most important development is that we are seeing chinese capital pouring out of china at an unprecedented rate. this is the first time we've ever seen this.

money is leaving china in search of safe haven. if the fed starts hiking rates, this will suggest that the chinese central bank will have to sell even more treasuries to maintain stability, which will only compound the effects of 25 basis point hike by the fed. i think it is very unlikely that china can ease monetary policy without the said taking it a bit more easy. the fed rate hike in september, it's hard to believe that china has something to do with it. alix: and what you made in the had all because we have of this selling, it is actually holding pretty steady. can you talk about that? this: i'm glad you bring up, because that is the key point. in the past few months, the chinese doc has gone down 40% and they have cut interest rates twice.

the funds rate is higher today than it was through months ago. -- three months ago. intervention is basically or sell and by removing liquidity from the system they are preventing interest rates from falling. the priceo say that china is paying for civility is monetaryable to ease policy very aggressively when they need to do so. that is clearly not sustainable. joe: let's talk about currency stability. we saw the volatility when china made a relatively tiny move, especially in the grand scheme of what we have seen in currencies is here. how much farther might we let the currency fall? gutd: i don't know, but my tells me could be as much as 10%. when the ecb started qe, the euro went down 30%.

letting the currency go is going to be part of the package of monetary easing. for the chinese, there's dudley moore's -- there is definitely more downside. china is not one to basically risk the fdr vote. joe: how many more aftershocks could we see for global assets? allid a 2% move because of of the fluctuations. what would a major devaluation look like? david: it would be pretty jarring to the world. you will see commodities going down further and basis points going down further. however, the fed is now hiking rates at -- against that backdrop. i don't know how long it will take to go from the first or the -- from the first to the second base.

qe first is the opening of and that has to be good for the chinese economy. after the initial selloff, people will be headed back into commodity assets and looking for bargains. alix: are they prepared for any devalue wishon -- for the devaluation in any way? david: no, the market is only pricing less than 3% depreciation. and for more -- for one month forward it's only pricing 1%. scarlet: i want to go back to what he said the imf special drawing rights. your take is that because it is so politically significant it limits china's options. david: i think it is a little bit about -- like the beijing olympics in 2008. there is a lot of national pride.

once you mount the back of a tiger, you cannot get off because otherwise you will be eaten by the tiger. if you follow this path of letting go and easy monetary policy, basically everything is done. it is counterproductive. scarlet: david, thank you very much. and we have some breaking news. dupont ceo aaron: will be retiring as chairman and ceo -- the dupont ceo aaron coleman will be retiring as chairman and ceo. this is below what anticipated -- what analysts had dated. if you look at what shares are doing after hours, they did get a pop on this announcement. 9.1%, i believe from yesterday's close. currently it is up $4.56 at $51.28. alix: my response when you read

the headline is, here we go. we will start to see earnings coming in and the forecast have come down significantly in the last four weeks. over 1% for s&p and it's not energy. it is energy and materials, but also financial are seeing a downward revision. if you like this is just the start of the next six weeks. scarlet: david was saying a lot is riding on that quarterly report. back, willwe come turkey get into short-term debt? ♪

alix: i'm alix steel.

"what'd you miss?" before the break we were talking about turkey banks in short-term debt. scar since the beginning of this year, the borrowed at 90% over 10 to one days. barely not short-term loans. joe: i love this that the central banks say they have got to have longer than short-term debt, finale are two days outside of that window. -- so now they are two days outside of that window. --x: the expected resolution evolution of a credit default cycle. i'm going to look at the factors going forward. first, you've got to have a lot of debt creation. that is one of the things that they set in the note. if you look at the last cycle, 58%, 63%.d like

guess where we are now. four years in the cycle and we've seen stocks grow by about 55%. the issuance is up about 17% in this cycle. the prerequisites for a default cycle are in place. fed is not saying, yes, we are going to have tons of default, but they are starting to build the condition. another condition is a surge in volatility. everyone knows we have seen a surge of volatility in recent weeks. it is not that every time there is a volatility surge that is necessary at the beginning of a wave of new defaults, but it is andcase that there is now in 2007 we saw a surge of volatility. 1990 nine we saw a surge of volatility. it is those kind of ink that you look to see -- those kinds of things that you look to see. there is, the one like in the

late 90's, and then the one in the late 80's. each one of those preceded a wave of default. there was a lot more that you want to look at. the cycle that you see there, we were already in the default cycle when that happened. scarlet: conditions can be dicey for a long time before anything happens. you can be over short and a long timeor before things get really off-balance. spreads, and it's not just energy names like ge or walmart, they have a spread and they -- in basis point that indicates trouble in the commodity sector. aa spreads move at high-yield. aa is the yellow line and high-yield is the orange line. in the past, aa has peaked nine to 12 month before high-yield. because we this

spend a lot of time talking about high-yield debt and junk other stuff is the that people get nervous in first. people switching out is perhaps a leading indicator. alix: the one thing they said was missing from the equation is tighter monetary policy. we are not as loose as we were, but we are certainly not tight. therefore, they are working closer consensus with banks. joe: how fiercely can the fed tighten? if all ofo wonder these other conditions are red. scarlet: and we are not even tightening. we are just talking about the possibility. --x: coming up, mark farber talking to marc faber about the --oom, boom, and do report

doom report." ♪

scarlet: i'm scarlet fu. "what'd you miss?" up forck market closed the fifth straight day, the for the s&p 500. the dow has seen a 700 point rally since the low on friday. we also have some breaking news after hours. ellenpont, alan -- coleman, the ceo is stepping down. mentionly, we should try and is also increasing its stake in the company.

perhaps they will push once again for another breakup of the chemical company. alix: i want to take a dive into my bloomberg terminal to take a look at official selling of saudi arabia and oil to the u.s. this line is how much they are selling it for to the u.s. and to much they are selling it asia. they are both declining and the reason why this is significant is saudi arabia is still saying they want market share. they are cutting their prices to venezuela, north africa, and they are really trying to compete for buyers. joe: is not over yet. alix: no, and that is why that chart is so important. joe: one of the hottest countries in europe economically has been spain, but they can out with data and it was a pretty sharp drop from last month.

55.46 -- from 59 down to 55.46. spain has been one of the standouts and that is a pretty sharp downturn. it is still an extension, but nothing to write home about. scarlet: four mighty dive, we know the fed is dated -- for my deep dive, we know the fed is data dependent. let's flip that around. orange is services and white is manufacturing. you can see how closely they have correlated since 2001. almost 80% correlation. shows theakness weakness in manufacturing is affecting the rest of the economy. services make up about 80% of the economy. above 50, services is

obviously stronger, but they are both lower. today's global stock market rally, just for today, was fueled by expectations the fed will keep rates lower for longer. expectations are that they will be below 50% until next march. mark father believes -- marc faber believes the fed should have raised interest rates ages ago. if they do raise, how do they correct course now without throwing every asset class into turmoil? marc: the problem is that they should have raised the rates, in my view, in 2011 or never lower than two such a low level. now the problem is this, that the global economy is slowing remarkably, especially

coming at the result of the slowdown in china. it strikes to other emerging economies. then we have weakness in the , whichd the japanese yen reduces global gdp in u.s. dollar terms. and that lowers demand for goods from around the world. in other words, world trade is going down and the u.s. is obviously affected. in this situation, it would be very difficult to raise interest rates at the present time. scarlet: which is where they are now. i want to read you something ben bernanke wrote in the wall street journal today. he said, if there is a problem with inflation, it is not the one expected by critics, who predicted repeatedly that it to a collapsing dollar and surging commodity prices.

i know you say both sides are right, just at different times. tot would be the trigger signify the onset of hyperinflation? first, we have to define tion correctly. it is basically the absence of money and the presence of credit. to rising wages, rising asset classes, rising home prices. in the last 20 to 30 years, we ofe because of the opening china and other emerging economies, basically a dis-inflationary consumer price not that they have toned down, but it was dis-inflationary. and we have huge asset inflation

that has created now a stock market bubble. already one in 1999, another in an art marketn bubble and a high-end bubble. joe: i feel like if we have listened to the critics, some of them have been hoarding tin cans and ammo. thatis going to happen so everything actually comes true? when is this going to happen and why? marc: i would like to say this. we have a depreciation in the purchasing power of paper money. if you look at the fed funds ine that went to almost zero

2008, we are averaging seven years of near zero interest rates. if you held your money from deposits during that time, basically you lost purchasing power, because everything is more expensive today than it was at that time. so the purchasing power of money has diminished, and it has also diminished in other countries, but even more so in other countries other than the u.s.. brings us to commodities, in particular glencore. i'm looking at it on my terminal and the implied volatility of glencore, the white line is one month, the orange light is three months, and the green line is six months. it shows that the bearishness of the stock and the volatility is expected to persist for a while. where does this show that we are in the commodity cycle.

cycle?he commodity marc: that is an interesting question, and the issue with cycles is you are never 100% sure that you are at the top of the cycle or the bottom of the cycle. my sense is that some commodities are approaching .ajor lows but could they stay low for an extended time frame? even in my global economic outlook that may be the case. scarlet: we do get an increase in prices. for those still hell-bent on expecting all of this easing monetary policy to lead to a hyperinflationary scenario, what might it look like question mark what will we see first -- what might it look like? what will we see first? marc: my guess is the signal would be investors losing -- the

signal that would make investors is if golddence falters. of the my forecast chinese economy, if it proves to it continues to improve and growth around the world is disappointing, that is when the fed is unlikely to raise rates for a long time. alix: i know you have been calling for a global market crash in 2016. can you quantify what that would ?ook like i would looking at a pretty percent drop in the s&p?

marc: the last correction was in 2011 when the s&p dropped 21%. we had the meaningful correction stocks,ne in many especially economically sensitive stocks. semi conductor stocks are down more than 20% from their recent highs. market may not crash right away, but it's possible that it will. it will enter a longer-term timeframe of unattractiveness and where prices may actually go lower, and significantly lower. likeuld have a decline , which was a slice of hope where the market cap going up, and then went down again. or it could be like 1987, where at some point we have a very

significant correction. you so much. we really appreciate it, mark father, editor of the "gloom, ."om & doom report scarlet: when we come back, we'll talk about what is starting with emerging markets, speaking to paul mcnamara. ♪

scarlet: i'm scarlet fu. "what'd you miss?" we will check in with mark crumpton. "gloom, boom & doom report" tell -- mark: california is the first drugs in ato allow

right to die legislation. legalizessay the bill suicide, but opponents reject -- but supporters reject that saying that it only applies to mentally sound terminally ill patients. a trained human element in vermont left seven people injured, one seriously. to washington, d.c. when it reportedly struck a rockslide about 20 miles southwest of mapping the air -- of montpelier. there were no indications of negligent or -- negligence or's be as factors. -- or speed as factors. people close to the vice

president leaning toward entering the race. back to you. joe: today, we saw global stock markets rally with investors, coming to the reservation that brazil will likely move full lower. palm act america's investment director at jam and joins us from london. this winningep up streak or is there more room in your view? alix: paul, can you hear us? it look at we are having some technical difficulties with being is thisidea actually a sustainable rally or will we wind up rolling over joe: we have just seen pain

nonstop. if you look at the emerging market currencies, doesn't look like there is anything close to a bottom. everyone is asking this question of when you buy e.m. and there is no answer. ultimately, china matters to brazil, but its fortunes cannot be reversed as long as china is in this slowdown. alix: and on the back of it you have all of the political turmoil with dilma rousseff really fighting for her life. i think we have paul back now. would you like to react? paul: we saw little bit of it --joe: we saw little bit of reaction with brazil. can they bounce back? paul: we definitely will see a bounce, especially for a while. as we saw in russia this year, you don't need to fix an awful lot to get a decent bounce. i think russia returned 40% on

just the currency alone in three months. when the oil price did not move they were still in ukraine. the intermediate situation has got to be fixed. we got used to the idea that countries in the west can run huge budget deficits and it does not affect interest rates. that is clearly not the case in brazil. and to establish credibility they will have to do something on the fiscal side. it seems that it counterintuitive after all that we have seen in the west in the past couple of years. scarlet: they certain have a lot prove to investors. i want to show you something here. the white line that you see very clearly is brazil. downgraded last

itth, it became clear weighted against a russian default. what specific steps do they need to take to reassure investors? paul: they are running a budget deficit of about 8% of gdp, nearly all of which is interest. the background that they just did is reduced their primary by about 8%.rget a percent. by about relatives a lot less -- a debt relative to gdp. the compatibleis with growth part that is not put it on a sharp to victory. alix: we had this morning of high emerging market debt while raising interest rates. so which is it?

paul: i think there is a lot of exaggeration about the level of foreign debt in the e.m. -- if you look back to the asia crisis of 1997, or even at the european peripheral crisis, it has generally been external borrowing. places like turkey do have a problem, but the e.m. at large does not have a foreign bet -- foreign debt burden. brazil is really exceptional in not having much credibility with domestic investors. investors don't trust it to repay debt, because as i said, most of brazil's fiscal problems is that the interest rate are too high and that is brazil -- unique to brazil. scarlet: paul will be staying with us. we will be right back. ♪

joe: i'm joe weisenthal. "what'd you miss?" .e are still with paul mcnamara he joins us on the line from london. you discussed looking at opportunities in the e.m. one opportunity you are looking at is the next in peso. why is that? paul: there are a couple of currencies that are particularly oversold. mexico is actually one of the emerging markets that benefits from a lot of the commodity prices. brazil and south africa are really going to slow -- suffer

from the slowdown in china. it's a very strong player on the u.s. auto market as well, all of which ticks along the boxes that we do not see in a lot of emerging markets, you know, benefiting from lower commodity prices and plugged into u.s. growth. rates are much higher than they are in the u.s. it looks to us something that is overdue for a bit of a bounce. joe: let's go further on the frontier. another currency that you have spotlighted is the peruvian soul . what do you make of that? takes 10% of global oil, but 40% to 50% of global production, including copper, which is essential to peru.

where finding is that most of these currencies are now becoming oversold. i am not particularly picking on the peruviansol, but the chilean peso among others, these are currencies that everybody knows about. everybody knows about metals at this point. we saw a lot of distraction the price last year before things stabilized. that we were discussing was "dead cat bounce" and i think you look at the stuff that has been hurled the furthest, that has dropped the furthest, rather than something that has been healthy for a long time, because i think we are some way away from global growth and from recovery in china. it is looking for ways the market has become distressed. asia, it is doing

better because of the aggressive global bank. what is it lowering from the crisis -- what is it learning from the crisis? paul: it shows that you do not need to wait from -- four emerging market prices to come back. emerging market prices can come back before the recession really gets going. in the asian crisis of 1997, think it was just the banking sectors. by the end of 1907, the first quarter of 1998 -- 1997 and the first quarter of 1998, it was that the government was going to use their killing balance sheets to bail them out. indonesia, it seems different. they regard growth at 6%, whereas everybody else in the world seems to think it is close to three. monetaryening of

conditions beyond rate hikes, we have seen about five basis points in the front and money market rates. think that is going to be enough to turn indonesia around. paul, thank you for your insight. palm america -- paul mcnamara. we will tell you about the trifecta of trading information for you. ♪

scarlet: yum! brands reports earnings tomorrow. >> do not miss the australian rate decision. domestic data has been actually printed good, but the pboc has been selling reserves.

deutsche bank says there is underlying risk. 3.5% of chinese reserves are in the aussie dollar. joe: that is all for "what it do miss." ♪

mark: i am mark halperin. john: i am john heilemann. with all due respect to new york city, tonight, mark and i are at the center of the universe for real. it is the early-stage special, sports fans. i am here in iowa. these are two states that make up 1.4% of the entire population of the united states but have an outsized role in determining who will be the next president. let's start with the activity where you are in the granite state. hillary clinton's theory -