[bell ringing] scarlet alix: the dollar falling to a three-week low. joe: the question is "what'd you miss?" scarlet: hello dollar stores spurs-- the low dollar along much of the market. -- earnings season jp morgan kicks it off tomorrow. alix: we take a closer look at norway's massive sovereign wealth fund. the very unusual danish mortgage market. scarlet: we began at home with the u.s. stock market. it was closed for columbus day. a low volume in stocks, down 30% from the 10 day average. how much can we read into what

happened today? joe: i think we should skip what happened on the market today. the markets went absolutely nowhere. the vix did decline a bit more. alix: i've got nothing for you. fortress is planning to close down their macro hedge fund. out, " note was sent what this shows is it is really difficult to make money now if you are a hedge fund." it is difficult to stay positive in this current environment. it's a double whammy. this is yet another casserley. -- casualty. scarlet: investors want to withdraw their money. joe: a lot of macro funds have been struggling for years. it is not a total surprise to see these headlines. alix: part of it is what we have been used to has now unwound.

that brings me to my deep dive. take a look at what has happened to the dollar. this is an index that tracks the dollar versus other currencies, like the yen or the euro. if it is negative, it means positions are long the dollar. we are currently getting less negative, moving near positive territory. that means some overall bullishness is being pared back from the dollar. it was a fascinating note out from morgan stanley, asking if we were at the -- at peak dollar. is that triggering the rotation we have seen in the market? scarlet: from id guys, i wanted --look -- for my deep dive, this index has jumped as much as 42%, but then it went negative in late august. since then i'm a it has recovered and is up about 15% --

since then, it has recovered up.is about 15% the biggest loser is brazil, down about 2/3 of its value. joe: i think that chart will surprise people. what i want to dive into speaks to your chart about the dollar. the fed cannot convince the market it is going to hike rates anytime soon. stanley fischer said december. so many people at the fed have said december. if you look at the work function, the implied probability-based on the that futures market -- the implied probability based on the fed futures market -- whatever it is, the

fed cannot convince market it's going to go this year. that may explain some of the air coming out of the dollar bullish chart. scarlet: for more, check them out on twitter. alix: we had the ceo of -- michael shaoul. great to have you here. action in't a lot of u.s. stocks, but last week was the best week of the year of the s&p -- the year for the s&p. can the rally hold? : there's not a lot of things going on -- there is an awful lot of things going on. the rest of the developed world was trying to catch up with the u.s. the real problem in the commodity sector -- i think that we -- i think we are at risk of that spilling over into a generally

-- general equity market correction. joe: is what we saw at the end of august what you were warning about or was it a preview of something to come? michael: it was in line with what was expected. we did not have a dogmatic view. we felt it would be a multiweek volatility event, bad enough to qualify as a correction. i think that's what we had. it could have gone a little bit lower. kind of happy it's 1875 level. atkind of happy it stopped that 1875 level. the credit cycle was very much driven by credit markets. that's the point we were trying to get across, the credit markets were already showing signs of stress and of dislocating. the good news is credit markets are showing some signs of repair, which is a reason to believe that this particular volatility event is over. my guess is it is one of a series we will have to suffer between now and the end of a

cycle -- end of the cycle. the first wave was in the u.s., subprime, lehman, the second was in europe, the third wave is now in emerging markets, coinciding with a collapse in commodities. should we link the three together and take of you that, --il they're unwound michael: 2008 was a crisis of financial sector credit. what we have now is, i think, over time, going to be thought of as a crisis of global corporate credit. the global corporate sector has it has over, invested in certain key industries. the equity market has had a wonderful time at the credit market's expense. whether it is aggressive buybacks or m&a activities, all coming at the expense of the credit market -- this was the first time the credit market had had enough of

being compensated at current levels. we charted what happened in the credit market. last week was a different story. you some money flow into the credit market. before that, we saw money flowing out of the credit market. so, which story is right? michael: i think you went through a period of stress. stress eme. people start to panic. bargain-hunting, new money back into the market -- that was the story of august and september. you had reached a point of high yields with additional funds on the sidelines willing to set been -- to step in. we saw the flow of data when you saw the reaction of credit markets that buying overwhelmed selling at the beginning of october.

the question is what was the fundamental reason for the dislocation in the first place. you started slow and steady deterioration of corporate earnings in general, particularly corporate earnings that benefited from free and easy access to the credit market . i don't want to overstate it. i don't think this earnings season is going to show massiveed -- show a hole. recovered, then materials followed. i would watch a sector like communications, which is looking long in the tooth. very aggressive m&a activity. a very high future bar for earnings set. ymentsying the sorts of pa being made. credit in the sector is at the verge of the level that you call it is located, but, short-term,

things get better. short-term, we have a shot. periodget better after a of weeks like that. joe: you mentioned bargain-hunting in recent weeks. are there other areas? michael: it depends what happens next. i look at where some of the emerging-market currencies are now priced, and they are at least compensating you really well for a problem. if you look at a place like brazil, we don't have any exposure there, but you can do the math. you're getting paid high teens in terms of interest rates. it could be profitable. period like this summer does is change the balance of risk and reward globally. you have to sit down and do a lot of work on what's now available and whether or not it makes sense. alix: it seems like some people don't have the time. we learned that fortress will

close. do you expect that to be the case for a lot of other hedge funds, having to go out of business because it was such a crazy august and september, with all the dislocation? michael: i don't think a lot will go out of business. maybe they have to have annual windows. no, i felt some of the worries about, particularly commodity related credit exposure being a lehman event -- i think people stepped ahead of it. i think this is the peak of the credit cycle. we suspect it is. if you get into another two or three years, there is a lot of money in fixed income mandates, but we will have a lot of explaining to do. there will be a lot of explaining to clients why morens were a little bit

than what people would have expected. alix: global liquidity and tightening, coming up next. ♪

alix: i am alix steel. "what'd you miss?" let's go right to mark crumpton. mark: the european union wants russia to stop bombing moderate groups opposed to bashar al-assad. the demand follows days of bombardments. -- russiantion actions are of deep concern and must cease immediately. the intervention could wind the

country's civil war. rezaian has been convicted in iran. the u.s. has criticized iran for trying rezaian in secret. he has been in custody for more than a year. yard is withdrawing officers outside the ecuadorian embassy in london, where julian assange has been holed up for three years. officers have been stationed there around the clock in order to arrest assange if he leaves the building. the cost of the operation is nearly $18 million. assange is wanted on a sexual assault charge in sweden. police will use covert tactics to try to arrest him. in roseburg, oregon, students have returned to class at umpqua

community college for the first time since a gunman opened fire 11 days ago, killing 9 people and wounding several others. oregon governor kate brown was among those welcoming students back. she told reporters, quote, we are here to help students rebuild their lives. back to you in the studio. alix: thanks so much. we are back with michael shaoul. michael, in a note a few months ago, you said "forget about the vicks and the s&p -- the vix and the s&p." michael: we all understand when it has aanks step in, general dampening effect on volatility. it creates a tailwind and makes it easier for asset prices to go up. i would argue there is no great reference between the federal -- great difference between the federal reserve only a treasury

and foreign interest owning a treasury. they were accumulating dollar assets side-by-side. 2002, this really got going. greenspan called it his conundrum in 2005, to explain why the fed was unable to raise longer-term rates. quietly, around the same time, if one13, coincidently, did not drive the other, a number of emerging markets -- market central banks stopped investing. saudi arabia would be quite important. mexico, algeria. all commodity sensitive. inyou look at the numbers, 2013, we had an annual inflation rate-- annual accumulation

of about $1.5 trillion over a 12-year period. earlyat changed by summer, running at a depletion rate of somewhere between $500 billion and $600 billion over a 12-month period. that is a big swing. what that represents is, first of all, a removal of the tailwind, and you are replacing it with a headwind. the place where it is going to be felt is really in fixed income. the obvious place to look is treasuries, but that hasn't really been the problem. but what you had over the summer was net selling of treasuries by global central banks, particularly in august, when the chinese shrink by more than 100 shrank by chinese more than 100 billion.

depletioncentral bank , which led to a significant supply of treasuries. credit yields went up. came down, but not by nearly as much as you would have expected. joe: do you think if yellen hikes, she will be able to -- hikes she will be able to avoid the greenspan conundrum? michael: it is easier for longer-term rates to go up if there is net central-bank selling. i think the fed's view is that, in an ideal world, they don't want to buy any more assets and they don't want to deplete their asset sheet. how are they going to respond if other central banks are depleting their balance sheets? are they going to ignore it or respond? scarlet: there are also sovereign wealth funds who are acquiring assets. they are now unwinding some of

that. is that part of the date of tightening? -- part of quantitative tightening? michael: bernanke called it "credit easing" not "quantitative easing." if you have a bunch of cool an oddity-related -- bunch of commodity-related equities, high-yield bonds, it will have an even bigger impact for the central bank than a central-bank selling treasuries. it does not mean everything goes down all the time. there is an unseen tailwind dampening volatility and rising assets have become a headwind. it's one reason we think volatility will be a factor going forward. scarlet: so many sovereign wealth funds were driven by oil prices, too. michael: one of the good lessons i learned when technology blew up, never commingle your wealth.

i thought a lot of technology equities. a lot of these countries have made that cardinal error. you were making a lot of money doing something. you should not been the investing in similar things on top. it is a classic. i made the mistake myself, so i'm sympathetic to it. alix: i really want to talk to michael about this. michael shaoul. scarlet: coming up, is norway close to taxing its oil fund? our next guest claims that is a myth. ♪

scarlet: we have breaking news.

we told you how fortress said it would close its macro fund. leavel novogratz will fortress investment group. this comes on the heels of the report that the hedge fund will close down its macro hedge fund following two years of losses. we will continue to monitor this story as it develops. for some countries, oil is everything. theirrices dip, so does economy. one country struggling right now is norway. norway may draw down on its sovereign wealth fund for the first time ever. here to discuss it with us is kari due-andresen, norway's chief economist. you say the truth is more nuanced than that. can you explain? kari: we are not even touching the principle of the fund. income from oil activity has been higher than fiscal spending each year, but due to the collapse in oil prices, next year we are expected to have a

shortfall of some 4 billion, but a return on the fund is expected to be some 210 billion next year. even if we use 4 billion of that, the fund will still grow by 206 billion next year. alix: is there a price level of oil where norway would have to tap the principle of that fund? is there a breaking point? kari: i haven't really done any calculations on that, but that would be several years down the road. what we are seeing here is really nothing controversial. this simply happen sooner than we were expecting because of the oil price slide. joe: you are saying this is exactly what the fund is four and this is not extraordinary. this is the whole reason that you bank reserves during the boom times. kari: exactly. we have been saving money since 1996. it is for covering pensions for the future and it is also the cover of rainy day.

here we are. scarlet: last time we spoke with you, you said if oil were at $50, the norwegian krone would have further to weaken. it has been pretty much at $50 and change. what kind of visibility do you have to different currency? kari: at the moment, a lot of weakness is really priced into currency. that's why we see great volatility, but maybe not so much further weakening. going forward, we would expect some further weakening, but a lot of weakness is arctic christ in -- is already priced in. forecast for the norwegian krone to stay basically flat going forward, just to weaken a little bit, but we expect to see very high volatility going forward. joe: oil aside, what is your outlook for the norwegian economy? we have seen manufacturing roll

over, like many countries. what will get the norwegian economy back to robust growth? kari: you can't really look away from oil in norway. it is driving everything. it is what is behind the sliding manufacturing. this is oil-related activity collapsing due to the activity on the norwegian shelf being scaled back. for activity to come up meaningfully, the oil price would have to rise. even then, we don't think that we would have growth rate as we did, because spending on the norwegian shelf was foreseen to flatten even before the oil price collapsed. is what we could hope for maybe some further weakening that would help traditional exports. so far, we've had a 25% weakening versus the trade weighted basket. alix: do you think norway is

being unfairly punished? debt as a percentage of gdp is like -250%. kari: sorry, i did not catch the question. alix: do you think norway is being unfairly punished? kari: no, i don't think so. the krone has been strengthening for many years, basically since we started put money into the fund. now we have the reverse situation. for norway to have growth rates pick up going forward, we need to see the krone we can further. the way that -- the krone weaken further. the way that things are going, we could still have that. --rlet: kari:, thank you scarlet: kari due-andresen, thank you for joining us. alix: when we come back, we will dive into glencore and what it

means for market contagion. i have been excited for this chart for one week. i finally get to talk about it. ♪

scarlet: i'm scarlet fu. "what'd you miss?" let's get to mark crumpton. they will release findings in the crash of malaysian airlines flight 17. bloomberg news reports it is unlikely that they will assign blame. describe thetedly damage observed and indicate what, if any, weaponry might have been involved. the boeing 777 crashed en route from amsterdam to kuala lumpur in july of 2014. all the people on board were killed. chancellor angela murphy -- merkel says taxes will not have

to be raised to help pay for the refugees. the government should have new regulations in place by november to help deal with the surge of some 800,000 refugees this year. hillary clinton will debate her democratic rivals for the first time tomorrow night. the latest survey shows misses clinton has a big lead nationally, favored by -- shows mrs. clinton has a big lead nationally. former governor martin o'malley, former senators jim webb, former senator lincoln chafee will also share the stage. deaton was recognized for his studies of poverty in india. the 69-year-old will receive his award december 10, the anniversary of alfred noble's -- nobel's death.

back to you. scarlet: thank you so much. let's get a quick recap on how markets closed. we are only talking about equities. some modest gains to keep the rally going, then volume -- thin volume. trading down about 30% below average. we want to bring in tracy alloway. you have been looking at copper, which everyone uses as a proxy -- it has become a proxy for china. tracy: that is kind of fair to say. we have a lot of debate right now about the actual work of copper. floors me that we are still -- it floors me that we are still discussing this three or four years on. we are still trying to gauge how much chopper -- copper there is in the world. this is one of my all-time favorite financial stories.

a bunch of commodities traders were using copper as collateral to secure loans. to a large extent, we have estimates from the bank for international settlements saying that this was as much as $1 trillion trade using copper and other metals to finance loans. joe: explain the mechanics. how did it work? how did they make money? tracy: it is usually commodities traders using copper as collateral to secure a loan at 1% or it they say -- 1%. they go out and sell their collateral for a high price and earn something like 10% by using the money they get from selling the collateral to invest in something else. it is basically a carry trade. get a loan at a low rate, invested at a higher rate. this was popular circuit 2010, 2011. circa -- this was popular

2010, 2011. we are still talking about it now. it is tough to gauge demand. alix: the reason this is so cool, this is one of my favorite topics ever -- if you had to unwind this trade and if prices fell fast enough, hey,s -- banks are like, repay me right now. it would flood the market. tracy: and there are shades of subprime here. the reason the banks were willing to take copper as collateral is because they figured there would be continuous demand for copper and prices were going to go up, up, and up. kind of like your average joe securing a second -- a second mortgage. joe: regulators have tried to stop this out, right -- to

stomp this out, right? tracy: when you throw commodities financing into the mix, it becomes more difficult. scarlet: is there anywhere -- any way to gauge how big this is? tracy: it's a really good question. there was some anecdotal evidence in the market about this, but we never saw hard figures here it -- figures. it's not like china was going to publish how much was predicated on loans and sketchy financing. everything we know has come from anecdotal sources and some very brave analysts who were early to point this out in 2010 and 2011. scarlet: thank you so much, tracy alloway. alix: staying on this copper i want to take a deep dive to take a look at glencore. this is glencore, that yellow line, versus credit agricole, the white line.

you have sanford bernstein saying that credit agricole has the largest exposure of any bank to glencore at $841 million. these guys don't track each other at all. guess what happened recently? they started tracking each other. glencore has really recovered. this is where you can feel the contagion. bank of america thinks it could be as much as $100 billion that the financial system is exposed to when it comes to glencore. i love talking about that kind of thing. joe: i love that chart. i'm glad we finally got to show it. this is a chart -- the question is, is the manufacturing global industry about to pick up? the yellow line is a chart of the s&p industrials relative to s&p relative to stocks overall. as we zoom into the last two years, if i can -- there you go.

industrials had been fading hard relative to stocks overall. but in recent months, industrials have been rallying relative to stocks overall. are industrials indicating that maybe manufacturing and global economic activity are going to pick up? and the reason why it might be a sign is -- compare this to the ism. tracking fairly well. as the ism has rolled over, industrial stocks have rolled over, and vice versa. hopefully, that rise is an indication that manufacturing is about to pick back up. scarlet: a leading indicator. that was a great observation. turning back to the breaking news that we had about 10 minutes ago, fortress investment group said to be planning to close its macro hedge fund run by michael no progress -- michael novogratz. novogratz is expected

to leave the firm. put this into context for us. the macro hedge fund was losing money for the last two years. reporter: it got quite a bit more severe this year. there was a loss early in the year on the swiss franc, they lost 7%. .nd it kept going they never really made back that money. you are not going to get paid when you are down like that. you need to start making up that money if you are ever going to collect fees. joe: do we have any other idea what traits may have caused them to get slammed -- what trades might have caused them to get slammed? novogratz talked a lot about macro events at various conferences.

he said in july they expected the fed to raise rates. scarlet: that didn't work out. simone: he has also been quite not --azil, and not has and that has turned out not so well for him. that we think probably caused this, but we don't know exactly. alix: and this brings in how hard it is to be a hedge fund right now. you charge really high fees. there is a push into more passive managing. and it is a very difficult macro environment where trades go against you at all turns. i wonder if this is going to be the start of more. joe: another interesting phenomenon, for the last several years, we had the veteran -- veteran macro fund managers really critical of the fed.one might say it has been because this is a difficult environment to trade

on. the patterns and relationships they were used to have not been particularly fruitful in recent years. even beyond this terrible year, it has been a tough time for traditional macro guys. scarlet: it's ironic that everyone is waiting for volatility. volatility came and nearly everyone went bust. simone, thank you so much for joining us. alix: when we come back, "what edition."s? energy ♪

scarlet: i'm scarlet fu. "what'd you miss?"

a huge deal for dell. the company is making an acquisition, making it the biggest technology takeover ever. it combines dell and emc. alix: anheuser-busch inbev is raising its bid for sab miller, billion -- up about $4 from its previous bid. scarlet: some bad news for the man known as "the bond king," investors pulling funds. analysts say that its performance trailed its rivals. your "bloomberg plash."s s citi is upgrading energy stocks. the reason is twofold.

the first has to do with -- earnings estimates have gone down way too much. if you look at the 12 month return model, it is very negative. why not buy now? the other part of this call is seasonality. this was really fascinating. energy stocks traditionally generate gains from october through april, 1.5 percent return in april, 1.2% in february, so buy it now. my e-mail to you guys, " crazytown call." joe: can you buy stocks because they have historically done well? valuation, with the they say the gain is 15% in the s&p by mid-2016, in part by because of energy stocks -- in

part because of energy stocks. joe: there was a call that the bottom is not in for energy. we've seen energy prices stabilize. inflation, the producer can continue to produce for a while and still be profitable. i wonder whether the calls are necessarily contradictory or whether the stocks look good. scarlet: he is looking at the underlying commodity prices. the call you are referring to is regarding the pricing of the stock. joe: he said that -- alix: he said that stronger prices are needed to sustain gains, but there are underlying valuations that make it attractive. 24 --looking for 15% to 20% more cost inflation? joe: where do they get the savings from? alix: we'll save -- oil services. they can say i don't want to pay

you want -- pay you $1000 for your rig. scarlet: deutsche bank is saying that the leadership we are seeing in energy stocks is premature. don't read into it. valuations are not attractive. they are being driven by market internals, the rotation into energy and commodities will reverse. areaid that 15 times p/e pricing $65 per barrel oil in 2016, which is way too optimistic -- which he says is way too optimistic. is it going to be another 15%, 20% decline? who knows? what is the fed going to do? no one knows. it is better to stay away from energy and industrials. joe: it's going to be one of those huge calls that, if you got it right, you had an awesome year.

if you are on the wrong side of that, that is trouble. i find this debate to be important and fascinating. alix: totally agree. it does really deal with currencies. if you are a producer in chile and your currency is down 10 resent, 15%, 20%, why would you stop -- 10%, 15%, 20%, why would you stop producing? joe: energy stocks still have a way to go down? alix: i know that morgan stanley and adam parker rethought the energy call. he was super bullish for a while. it seems to be a pretty fractured call within the energy stocks. that's why it's fascinating to talk about. scarlet: go in, take a little bit of money off the table or put a little money in, just to take advantage of the dislocation before things equalize. joe: coming up, we dig deep into the danish mortgage system and what makes it unique. ♪

joe: i am joe weisenthal. "what'd you miss?" one thing you may have missed is the unique mortgage market in denmark. i'm joined by my guest, guan yang. he has worked and lived in denmark and knows the system better than anyone. why are we here talking about danish mortgages? what makes it unique? system in the only the world apart from the u.s. where a fixed rate mortgage is really common. and the other aspect is that the mortgage loan you get, the terms are directly tied to the bond that finances it. there is a one-to-one correspondence. typically in the u.s.,

people buy mortgages and they are packaged together. in denmark, there is a bond. house inre to buy a denmark, there would be a bond associate it with the house. guan: they give you all this data about bonds when you get a mortgage and you have to understand on maps to buy a house -- understand bond maps to buy a house in denmark. joe: what are the vulnerabilities in the danish mortgage market that people have identified? full durability pointed out by imf and by s&p is -- the big vulnerability pointed out by imf and by s&p is the high rate of debt to income. the other is, the traditional mortgage when i grew up was 30 year fixed rate, then people started introducing adjustable-rate mortgages. if you had a 30-year adjustable-rate mortgage, let's

finance it by auctioning off one year bonds. after the global financial crisis, we understand that does not sound like such a great idea. what if the option fails -- the auction fails? there has never been a default on a danish mortgage bond in the whole sisterly -- the whole history of the system. there has been a big effort to reduce the use of the very shortest mortgages, the ones that refinance every year. joe: is it mainly interest rate risk, that people would get slammed if interest rates rose globally, or is it something else? guan: there is definitely interest rate risk. if you suddenly lost her job and rates went up -- lost your job and rates went up, that is a big systemic risk. the other is that acutions --

auctions fail entirely. then you would have a mortgage bank that failed. these bonds are 150% of gdp. there are not that many government bonds around. they are pretty much used like government bonds. joe: how does the danish currency peg -- the danish currency is pegged to the euro. how does that play into this? guan: the interest rates that the central bank set are set to maintain the peg to the euro. the central bank will do anything to defend that peg, including, if it needs to, hiking rates, which could lead high mortgage rates. joe: if things were to get very bad, would it limit the ability of the central bank to ease policy, to stave off a downturn? guan: exactly.

i think central banks would be concerned about how it would affect homeowners and mortgage payers. in denmark, it's all about peg. there is some speculation that maybe there is a housing bubble again. the bubble leading up to 2007, 2008, home prices in copenhagen were doubling. even though the central bank has been warning about a new bubble, it does not really look anything like what we saw in the years running up to 2007. and there have also, when it comes to the adjustable-rate mortgages, there was a big and aative fix last year mortgage banks are issuing these new, innovative products that nobody is really quite satisfied with, but which could address a little bit of that funding risk. joe: outside of the peg and the high debt and everything else, is there any particular threat that people cite to the danish

economy that could also cause a default? that the big thing is recovery has been really slow. danish real gdp is still below the peak. a big part of that story is that households with all that debt haven't the leveraged yet -- have not deleveraged yet. joe: scarlet fu has breaking news on barclays. scarlet: barclays says it plans to name a new ceo in the next couple of weeks. formerly of j.p. morgan chase, he headed up the investment bank until a couple of years ago, then moved over to blue mountain capital. he was at one point seen as the , but her to jamie dimon left the firm years ago. now he is favored to succeed at barclays. alix: antony jenkins was a

retail banking guidem. -- guy. mr. staley seems like a shift. back into trading, back into investment banking. that's a curious development from barclays. scarlet: this is according to "financial times." aley might be named as the new ceo of barclays. "what'de coming up on you miss?" ♪

scarlet: don't miss this, jp morgan's earnings are out tomorrow. financials, as we look inside the terminal, underperforming the broader

market. a lot of weakness heading into this earnings around. a lot of banks, including j.p. morgan, have talked about a 5% drop year-over-year. alix: over the -- after the bell, we will hear from

john: don't forget, there's one big wildcard. ♪ welcome to las vegas, site of tomorrow night's democratic presidential debate. first, obama. in an interview with 60 minutes and aired sunday, the president was asked about hillary clinton's unusual e-mail practices. he offered a few words of defense