>> i am scarlet fu. "what'd you miss?" ♪ >> u.s. stocks get pummeled, .elow president said it's time to get off zero. what it means for the market. joe: how fractured repossession rates could affect the fed exit. green,alked to jeff whose ideas of bridging the income gap are getting attention. >> we begin with the markets, another down day. the dow off by triple digits. notable selloff by

commodities. oil below $42 a barrel. looks pretty ugly. with the commodities, it started in ugly. commodities, copper, gold got slammed, a really ugly day. no one is spared. ugly consumer credit creation number out of china last night. it really had to do with oil. it is close to $40 a barrel. s&p, the s&p could not shake off oil. the energy stocks erased 17 points, not as much as health care or financial, but a substantial amount. it was the big names. there was an inventory build.

the selling also happen earlier this week. it feels like a lot of momentum to the downside with no real catalyst. we knew we were oversupplied. they are still short when it comes to energy. joe: at least the energy shorts are making some money. alix: another area is in the currency market. i want to take a deep dive, u.s. dollar versus all major currencies. worst-performing currencies versus the dollar were commodity currencies like the peso, canadian dollar, new zealand dollar, so this is another place where the commodity selloff is affecting markets. joe: it feels like déjà vu from

the summer. i want to dive into the terminal. a long-term look at the ioomberg commodity index, divided it by the broad weighted dollar to a just for the dollars strength. you can only do that too much -- so much. as you can see, we are low these days. were not quite at an all-time low. we were lower in the back late 1990's and early 2000's. it could get worse. ugly howevereally you slice it . alix: the dollar is knowing -- showing no signs of slowing down. it's hard to extract that from commodities. joe: you can only take that so far. commodities are getting crushed.

looks like they go a little alert -- lower. emily: more volatility is more volatile itself. .his is a vix of the vix we have hit this high in mid august after china devalued its currency. than 2008 after lehman brothers collapsed. that is kind of curious given that was the risk of the financial system overwhelming everyone. volatility much more complex, etf's, options. become its own asset class. alix: huge .2 why we are seeing

the markets shudder there. point as to why we are seeing the markets shudder there. daley said that he think thinks it possible that the conditions the committee have established to stabilize could soon be satisfied. >> monetary policy is uniquely capable of affecting the price level over the longer term. that is what jeffrey lacher said. .oe: he is known as a hawk in terms of the limits of monetary policy, does he have a point? >> he has a point. it depends on the differences of opinion in terms of how much of a slowdown has been cyclical or

structural, and that leads to a difference of opinions. likefor a hawkish member jeffrey lacher, at some point we the firstenough to rate hike that even the hawks are in the camp of the fed. everyone is coming in. that weren't as dovish yesterday. are coming to the realization that rates are going to rise, and they will probably rise in december. we get a lot of company earnings to see how they are doing, nordstrom's and cisco. earnings arejusted $.59, higher than $.60 estimated. for the current quarter, to $.55,of $.53

lighter than what analysts had anticipated. 2% growth year on year for this current quarter. first-quarter revenue, pretty much in line with analysts, $12.7 billion. those are the numbers are for cisco. anticipating that chuck robbins would lay out a different plan from john chambers. let's switch over to nordstrom, which just reported disappointing numbers. third quarter earnings per share , $.42, $.30 short of what analysts had anticipated. lighter than what analysts were looking for. ,ere is where you see the mess 9/10 of 1% gain for the third

quarter when they were looking for 3.6%. likely to rise slower. you see the pain in the stock price, off by 17%. is where the rich people are supposed to shop, right? gap betweening a discretionary and nondiscretionary spending. the retail look at names and be worried about the broad u.s. consumer. there are a lot of nuances between companies that do well and do not do well. a much stronger e-commerce presence may be doing better with the millennials driving spending. they prefer to shop online. so we follow trends closely, and broadly speaking, we can't look

at individual company reports and say the consumer is not doing better. we have actually got a fundamentally stronger consumer spending and consumer spending has been growing more broadly a cross income groups. in terms of mix, where the spending is happening, cars, houses, and iphones or electronics, but not apparel. does that make the retail sector stronger or weaker? concentrate on a peril, but apparel dominates retail sales data. it is only 16% of total consumer spending. the fact that we buy automobiles, iphones, that matters and is supportive for the economy. the looking at where is relative improvement in the consumer sector over this year. the lower end. early on in the recovery, it was all concentrated at the high end consumer because stocks were up

and the financial wealth was up and we could see exactly who was doing the buying in 2013, personal aircraft the strongest category in spending. that is not healthy. by 2014, computers and tvs had taken the top spots, and we have seen the biggest boost in terms of year over year gains coming at the lower end. minimum wage increases, wage acceleration for the lower income groups, and yet the stock market is not up another 30%, so the relative improvement will be for that lower in consumer. joe: tomorrow we get retail ales, they are looking for gain of 0.4%. what are you looking for besides the headline number? >> that is a good point. retail sales is only a small segment of overall consumer

spending. i look at dining out the services, the only category included in retail sales. if that category is expanding, the kids are all right. about our finances. the first thing we do is call our friends and family and say let's go out to eat. it is the first category that you will see declines in spending or slowdowns in spending if we don't feel good about our finances. if we had a good employment report, people feeling better about finances, i would expect that category to do ok tomorrow. alix: thank you. you are sticking with us. coming up, is the u.s. economy a global bright spot? i'm not bright spot is huge after, tumbling a big earnings miss. we will be right back. ♪

alix: i am alix steel. "what'd you miss?" terrorislamic state group has claimed responsibility for twin suicide attacks south of beirut, lebanon. 40 people killed, 180 wounded. hezbollah,onghold of fighting alongside syrian government forces. hasuniversity of missouri appointed a black senior administrator as interim president. theael middleton will lead system until a permanent replacement is found. the announcement comes three and after tim wolf chancellor resigned because of the lack of response to racial incidents on and off campus.

sanders, he received his largest union endorsement yet, the american postal workers has decided to back to vermont senator. bad news, sanders is facing a challenge to his eligibility for the ballot in new hampshire because of his longtime status as an independent. a state and a will consider the challenge later this month. a new york jury has reported an aging mobster planned a heist featured in the movie "goodfellas." he was charged last year in connection with the $6 million comes a heist more than 30 years after the crime, involving secret recordings about him complaining regarding his cut for the score. you can get more news at the new bloomberg.com. i am mark crumpton. >> we are back.

like there is a divergence between the market and economist we are hearing from regarding inflation. inflationf expectations, no one sees inflation. economist say that inflation will come back when the oil if x fade. there are other factors. -- economists say that inflation will come back when the oil effect fades. >> even janet yellen has weighed in on that and said that the market thinks inflation will stay low forever. it is inflation compensation. from oilits cues prices being low.

that varies widely from economists opinions because they have to look through that, oil prices are indeed transitory. it is true that if oil prices that is a big criteria for the fed, if you make that annual lap around the base, then headline inflation rises rapidly. at things look through a monetary policy maker's eyes. oil will always be transitory. the fed held off on raising rates because of china. off -- holdld it off if oil prices continue to tumble? conditions is what matters the most for the fed. that has been a very rapid increase in the currency this

year. when the currency is moving rapidly, it linzie too much uncertainty for the outlook on growth and inflation and policymakers don't like to move on race today if they are uncertain on the outlook. there was that sustained sell off in global equities. the fed knows that it is extremely difficult to get an industrial-led recovery. increases in the currency as transitory. they know that will fade. there is no transfer mechanism into the domestic economy. once you have a sustained selloff in equities, that is the mechanism. there is nothing that drives personal savings great higher than when the vix is jumping around. , it correlates

highly to year over year gains in payrolls, retail sales, consumer confidence. that's lower job creation in august and september was delayed hiring plans because of businesses don't higher when there is volatility and the stock market is selling off, so that have the fed worried. heard this morning from mario draghi, expressing concerns about inflation in the eurozone. to us andy talked said he was looking at core inflation. central bankers and seemed to becoming more and line with the federal reserve. do you think their right to focus on core? we will see upward pressure on core going into 2016 and the fed will get closer? >> these are critical questions for global central banks. if the ecb is concentrating on

core inflation like the fed, we would have gotten more easing earlier. draghi isat mario coming out dovish lee with each speech because he is setting up his colleagues to deliver a much more easing as european it,omist characterize throwing everything and the kitchen sink is what we expect at the december meeting. in terms of core inflation, it will be an extremely slow slog .ack to any central banks goal central bankers know that. in their forecasts, they will show us that in the medium turned that inflation magically returns to their 2% goal. if it doesn't, you're sending a message that your policy is wrong. they have to maintain that inflation-fighting credibility. , we havey in the u.s.

never had to fight for that inflation goal from the low side. it has always approached it from the high side. we have no experience fighting inflation when it is too low. alix: the fed will look at those longer term rates. the 10 year is well below the average for the last 15 years. how does that affect their rate hike cycle? >> in terms of long-term rates, we will be in a time of low long-term rates for a long time. when the fed starts raising be upwardre should pressure on long-term rates, but i don't think we get out lot of upward pressure until they bring the balance sheet down, maybe when they taper three investments. that is when you affect long-term rates. when they raise short-term rates , it is to tighten financial conditions and weed out some risks. two, thevorcing the

idea that both have to move together. alix: thank you so much. we will show you one of the strangest things happening in the financial markets now. you don't want to miss these charts. to retailers falling in after hours trading. nordstrom off by 16% after reducing full-year forecast. ♪

alix: i am alix steel. "what'd you miss?" it is repo markets. it is and us what what is happening.

market, the interesting thing happening is we have seen a fracturing of repo rates against the same collateral. bankspo market is where ial other financ institutions lend out there assets for short-term loans. joe: how big is this market? >> huge. trillions of dollars. market, people lending out the same collateral, u.s. treasuries, but they're getting different rates on those loans. this is really unusual. it is something that has not been happening in the market before. what to make of it all? analysts say this is happening -- you can see on your screen. the yellow is the general

collateral rates. they would be against the same collateral. they should be similar, but there is a divergence. scarlet: is less transparency good or bad for borrowers? >> it doesn't necessarily matter. because the federal reserve will be using the repo market when it finally lifts interest rates hopefully perhaps towards the end of this year. reverse repohis facility where it will lend out securities from its own vast and bloated balance sheet in exchange for cash that it is draining from the financial system. where it becomes difficult, if you have a different repo rates, in financial markets people talk about a singular repo great, and the idea here is that the fed

will lift repo rates by offering repo at a slightly higher rates. if it is having to deal with 3-4 repo rates depending on counterparties and constructs, that becomes complicated. it is something the fed will have to consider. how bad will that get? >> one of the reasons people say this is happening is because of new rules that have limited the amount of alan sheets that banks have to facilitate repo trades. towards the end of the year and financial quarters, that balance sheet constriction gets tighter because of window dressing. we good potentially see those get bigger. alix: good stuff. good times ahead. thank you for the ray of sunshine. closing the inequality on we speak to jeff green his proposed plan.

it is unconventional. ♪

>> coming up on bloomberg television, joining emily chang on bloomberg west at 6:00 p.m. eastern time. scarlet: i am scarlet fu. "what'd you miss?" candidatesidential sparring on racial protest at the university of missouri. donald trump called the andgnation "discussing" says the two people reside are "weak". "it's sanders tweeted

time to address structural racism on college campuses." president obama awarded the medal of honor today. he is credited with saving a dozen other soldiers. the former track star was critically wounded when the bomb went off. he learn to walk again after 33 operations. deal is the top honor for bravery. -- medal is the top honor for bravery. today's operation to seize highway 47 in iraq was supported by u.s. airstrikes. sing it was in 2014.errun federal prosecutors will seek a 12.5 year prison -- prison sentence for jared fogle. he agreed to plead guilty to

child pornography and sex crimes. to all be sentenced lifetime of supervision following his release. --ce things -- since sentencing set for november 19. i am mark crumpton. back to you. alix: a quick recap on u.s. stock markets. index fell the most in six weeks. it was a large decline here. in terms of lime, the dow jones industrial average did see a bump for the day. you can point the finger at the route and commodities. copper at its lowest, oil at its lowest. the pain will continue into tomorrow. nordstrom cutting is for your forecast. it sees comparable sales of 2.5% to 3%, where analysts were looking for 3.5% to 4%.

in terms of what moves markets today, it is about the commodity story. we want to take a look at what was driving individual commodities and the impact on the markets. this is commodities ranked returns. in thek 26 commodities index. half are rising, half are falling. $42.y falling below it's not just today. here is where you see the gainers are limited. oranges, cocoa, and sugar. on the downside, energy complex is represented with oil, also industrial metals, copper and silver. strongern is the dollar.

people anticipate a federal reserve increase. alix: the big story about energy is the storage. oil is moving into big tankers not moving because there is no more storage on land. there is a great function in the terminal that shows you the 11 tankers in the world that are being used for this oil storage. it is about 24 million barrels of crude. the one thing i want to focus on is off the coast of malaysia. if you go to "show vessel and you will see what it has done in the last year. longer than the eiffel tower. it is one of the biggest in the world predicament hold over 3 million barrels of crude. that is more than a day's production for all opec, except saudi arabia and iraq. wortharries a lot of oil,

$145 million. you can see what it has done in the last year, nothing. it has moved in circles the entire year. that is how much oil is being stored and not doing anything. amazing function. very cool to see. joe: that is amazing. i should play around with that function. i want to go to one of my favorite charts, the stock versus gold ratio. gold has betting slammed like all the other commodities. late 1990's, early to thousands, everyone loved stock and hated gold. then there was a decline that bottom around 2010, 2011. everyone loved gold, and everyone hated stocks. we have been on this steady uptrend in the ratio. if we zoom in, you can see it is nice and straight up. people are going from gold into

on humanstting over rock. alix: you are a gold hater. scarlet: joining us now is jeff green. next month, his nonprofit organization will convene a conference to address economic inequality and technology driven disruption. joe: thank you for joining us. how do we close the gap? >> i grew up in wister, massachusetts, a working-class community. when i was a kid in the 1960's, you could work at a factory, own a home. you could be a bookkeeper and own a home. what i have seen now is that exponentialhe growth of technology and inequality of wages, many jobs have been wiped out. they are never coming back.

corners,n see around but because of the exponential growth of technological solutions and data, we are going to have much greater losses than we have had up until now. i am convening a group of people , educators, academics, government leaders, and great thinkers. it is called "closing the gap". this is a shameless plug. joe: in terms of policy, what would be the best policy change? >> which you could do now, there is no question. add were president, i would infrastructure spending, $2 trillion to the budget deficit. look at the nordstrom numbers. consumers are running out of money.

there is no question. we have hollowed out the middle class. put americans back to work. those tunnels, rebuild ports, pipes under the roads, put americans back to work. it is an easy solution. that is the near-term solution. alix: it seems like construction jobs are out there. truck driver positions, but not the workers who fill them. >> there is anecdotal evidence of shortages and and balances. they have always existed. my view is that those of the kind of good-paying jobs we need. there is no question that we need massive infrastructure spending could on talking about

the government funding the private sector. look at los angeles. alix: that yellow line is the decline of middle-class jobs. the skilled labor force. the orange line is that rise of the lower income jobs, like sales. there has been since 2009 a structural shift. the what you think about idea of a basic income guarantee or where the government rights everyone a check to avoid the possibility that some people will be shut out of the workforce? socialism doesn't work. we all know socialism doesn't work. i am convinced that the free enterprise system and capitalism will not allocate our national resources equitably. people like me can accumulate enormous wealth, where most other people struggle week to week. joe: would you be open to a policy like that? at some point, if i had to

guess, we will have to do something like that. that is why we are having this conference. i wish i could to you i have the solution. there is no solution. the presidential candidates are trying to apply traditional republican-democratic solutions, solutions being less regulation and more progrowth policy. hillary clinton saying let's have free college. what are those kids going to do when they get their free college degrees. what will everybody due to make a decent living? scarlet: do increase the minimum wage? you lowered? lower it? should that be part of the solution? >> anyone in my community who can live on seven dollars an hour, i don't know. people percentage of

earning minimum wage are supporting a family. if we want a just society and a fair society, warren buffett that we cane best do is provide health care, education, a decent wage. encourage -- maybe an earned income credit is a better idea. we will talk about some more ideas. jeff green will stay with us and discuss real estate next. ♪

>> coming up on bloomberg

television, jon meacham joins all due respect tonight. i am scarlet fu. "what'd you miss?" the biggest business stories in the news now. cisco reading analyst estimates him a reporting eps of $.59, analysts had predicted $.56. $12.6 billion in revenue. the giant expects sales to be flat to 2% growth. the bad news keeps on coming from retailers. nordstrom's the latest to take a hit. reporting earnings of $.37 for the third quarter. analysts predicted $.72. revenue came in at $3.2 billion. the consensus was for $3.37 billion. 41% of its holdings

sold after eight route in developing nation assets. the firm cutting its assets to a combined number of shares. bridgewater was once the biggest investor in the two biggest emerging market exchange traded funds. that is your bloomberg business flash. we are back with the jeff green. we were discussing the inequality gap. you are based in florida. there are two florida sons in the campaign. jeb bush and marco rubio, do either have a prescription for inequality that makes sense to you? >> no, they have the same prescription, which is get government out of our lives, get rid of regulation. it's nonsense.

havee open businesses, but -- don't have to hire american workers. manufacturing almost anything first thing i would do is hire a logistics person in singapore or hong kong, and they will find the cheapest place in the world to be making that product. i will be hiring some marketing people. look at apple computer, look at how many people they employ in america. you once invited for the seat that marco rubio holds. you think he has a good shot at getting the nomination? is theink marco rubio most articulate of the candidates, but i think he is young and inexperienced. i don't think i would want to put him up against other world

leaders at this point. i'm not excited about any of the candidates. joe: in terms of raw political skill, could he go all the way? >> the republican side is wide open. i live two doors down from donald trump. elected, i won't be able to get to my house. they will close the road. he has the lead nationally. barring any scandal, he could hold onto it. >> who are you supporting? i'm a democrat. i will probably be supporting hillary clinton. alix: would you wait for the nominee process before you throw your support behind someone? into bill clinton and i told him i was surprised that i have not heard from them. >> they are watching. >> someone in the clinton

campaign is watching. i will hold off to see how it unfolds. scarlet: investors are watching what you are doing in real estate. you're one of the first to recognize the bubble in 2006. you made a lot of money there. what is the trend you see in the real estate market that has you worried? >> real estate is a local business. if you talk about new york, a lot of people think this new york market is inflated. highu look at the super end properties, there could be a problem. these $100building million penthouse is, and there are so few who can afford them. how many need an apartment in new york? people are building needle in a haystack hynde of developments. people want to come here. -- people are building needle in

a haystack kind of developments. , palm beach, and i think it is in the early stages of recovery. our recovery has been like this. miami shot up because they had that extra investment push from latin american investment. we have not had that in palm beach. happen see our boom later. the west palm beach market will go forward. miami could stall because prices have gotten out of reach. every market is different in florida. in general, a slow growth economy for a long time, low interest rates, low inflation. alix: thank you for joining us. great perspective. scarlet: we turn to china and the latest credit data raising alarm bells. ♪

alix: i am alix steel. "what'd you miss?" a big miss for china credit growth. in new creditss and outstanding credit. of creditst measure was down and well below estimates. pboc has been cutting rates and reserve ratio requirements to get banks to lend, and this was a worry spot. an economy is in overcapacity and people don't need to borrow. they say that financial easing is like pulling on a string. you can see that in the loan demand, the demand for credit has been week.

,f people don't need to borrow why would they borrow for anything at any price? this speaks to the conundrum. this talking about sounding like japan. you have falling profits, uncertainty, higher interest stagnant.this is scarlet: look at china's spending and money coming in. public spending rose for a fifth month. 27% is an acceleration from to 36%. policy hasn't shifted into a program mode, the yellow line. ,he revenue line, the gold line has been faltering. that is money coming into government coffers. you see that in the budget balance as the line goes down. this could reflect official concerns about the efficacy of monetary policy when corporate

bond sheets are stress. joe: this speaks to what economists are saying the u.s. needs to do. when you have monetary policy of limited value, you have to replace it with fiscal spending. probably taking the wise lesson and pumping money into the system. credit growth is everything. money comes from credit. until you see these credit numbers start around, it's hard to feel optimistic. also winds up being everything. andyou take a look at the m1 , m1 grew faster than m2 of the first time since december of 2010.

maybe that pboc policies are working in one part of the economy? scarlet: it's uncharted territory for the pboc as it tries to push on monetary policy when the u.s. federal reserve is looking to tighten. in thembers are noisy world. there was a big miss on credit this month. -- previous months credit has been improving. conversation great about the transportation transmission mechanism, basically what we are talking about. how does it come down to the real economy? scarlet: the reaction function, how about that? alix: you like that. i don't know why they have to use reaction function when they can say "what happened." we will be back with more. ♪

scarlet: i am scarlet fu. "what'd you miss?" portugal faces a critical credit review tomorrow. it is still considered investment grade. portugal loses this last rating, it would no longer be eligible for the ecb's qe. alix: that would be huge. j.c. penney reporting tomorrow. after macy's and nordstrom's, can j.c. penney hold up? joe: something else to check out. the new redesigned bloomberg markets website at bloomberg.com/markets, the place to go to see all the stories we , youd about an older video

can watch what you missed there. it is the number one destination. alix: you don't want to miss that. that is what we call a shameless plug. scarlet: tonight mark: with all due respect to

ted cruz and marco rubio, you guys might want to take this thing outside. ♪ mark: in our playlist tonight, the one with the dentist, the dorm at the bridge, but first, no one with a interesting immigration debate. we have been watching marco rubio and ted cruz getting closer to a head on collision. today, we got a glimpse. after throwing some amnesty