scarlet: i'm scarlet fu. alix: i am alix steel. stocks getting hammered after a selloff in china. scarlett: new regulatory etf's.ls stand to affect cliff,.l falling off a scarlet: the worst start of the year since -- julie hyman will fill in. julie: it depends on which index you are looking at. market and on the see exactly how bad it is going

to be. , or about down 2.44% 425 points, although it has been lower at certain points today. catalysts for the big selloff caused by chinese manufacturing as well as continuing trepidation about chinese market regulation. we also had manufacturing that in the u.s. that missed estimates. how bad will it all be? -- whendow, when is it have we had this poor of a january performance? of1932, we saw a decline 8.2%. for anow we are in track decline of 2.3%, so the second worst start going back to 1992. we have also been looking at volume today. volume overall is about 20% over the 100 day average.

when you compare it to the 20 seeaverage, you still advances in volume except for energy. volume in energy shares is down a little bit today, volume up the most in health care shares, up about 70%. tech and consumer discretionary also seeing a big surge in volume. confusing for me and continues to be, is oil -- alix: what was really confusing may and continues to be, is oil. julie: two narratives seem to be emerging. oversupply that the is so ample that even if there is tension, there will not be as much of a debt. the other is that we are seeing a big risk off environment today

and maybe that was too much, even for some fundamental potential risks to supply in oil prices. i do want to mention as well that we are seeing rotation into things that are seen as safer. for example, we are seeing buying in bonds today, the dollar index higher for the sixth straight session, and gold seeing some buying today. the flow is pretty notable today that we are seeing it out of stocks, out of risk, and into what is viewed as less risky. hyman, thank you for all the superlatives. alix: let's check in on the bloomberg first news. mark crumpton has the latest. kickingesident obama off the new year with an attempt to curb gun violence. said tens of thousands of americans have been killed i gun violence and he blames congress for holding back efforts for that new gun-control legislation.

the last major gun-control measure to come out of washington was a 1994 assault weapons ban which expired in 2004 and was not renewed. hundreds of employees of the san bernardino county regional center will return to their office today, more than a month after a massacre that left 14 people dead. some of the employees have been visiting clients since the attack, but few have gone to the office. the actual conference center where the shootings happen will remain closed. in oregon, and armed antigovernment group is continuing its -- it says it will stay in the buildings for as long as it takes. they are supporting a rancher and his son who had been sentenced to prison for fires that spread to federal land. the fbi is hoping for a peaceful resolution.

saudi arabia has given iranian diplomats 48 hours to lead the protesterster stormed the embassy and set it on fire. earlier we spoke with robert jordan, former u.s. ambassador to saudi arabia. >> there are a number of these weapons languishing on death row for some time. king abdullah had been hesitant to pull the trigger and king solomon is trying to prove that he is a solid leader, despite dissent within the royal family and his population. crisishis is the biggest between saudi arabia and iran since the late 1980's. global news 24 hours a day, powered by our 2400 journalists and more than 150 news bureaus around the world. the 2016 american

economic association's annual meeting is underway. each year, a wholly three-day conference to prevent -- present papers on economic subjects. scarlet: -- alix: brendan greeley is there. i am here at nerd mardi gras in san francisco, the aea conference, mark flannery joins me. i want to start with something you discussed for two hours yesterday, which is with technology, different people can invest in smaller amounts. how does the sec decide what an accredited investor is? >> we just released a 100 page report on what is an accredited investor. court famously said an accredited investor is someone who can fend for himself in the markets. of anyow, the standard

accredited investor has to do with the minimum income or net worth amount. their suggestions or proposals in place to broaden that to certain kinds of life experience or employment experience to be treated as an accredited investor, and have access to a somewhat wider range of investment activities. there was an interesting presentation yesterday by harvard. --turns out that more people people with more money are willing to invest with more risk. actually you do is you shut people with less money out of the opportunity to invest with more risk. >> that is exactly right, and you can do that two ways. you can say we protect people who need a little protection, or you can say we deprive those people of the opportunity to invest in riskier, higher yield investments. it is a delicate balance.

the balance that you are describing, why cannot not be achieved with better investor education? >> that is something everybody would like and it turns out to be very difficult. there is a short set of questions that people ask investors to try to establish a base level of investor education. they are very simple questions, and the number of people who can get three or four of those questions right is appallingly low. it is terrific and also very difficult. brendan: that came out of that campbell research as well. , you know au get little bit more but you are much more certain about the things that you do not know. yes, and so we can use that kind of information about the way people think and the way people assess situations in order to help them understand better what the trade-offs are that are available to them. sec is closely

following behavioral finance to make sure it makes these decisions right. >> the president has instructed everyone in the federal government who does cost than if it analysis to take behavioral implications. a little bit is like the department of knowledge they have in the u.k. >> yes. organ donations in new jersey, you have to opt in to be an organ donor. in pennsylvania, you have to opt out. it turns out the people who opt in or out is the same proportion. i want to talk about investor education, because one thing industry groups have said is that they have worked very hard to educate investors about a leveraged etf, which is a very -- on leveraged etf's. has proposed these

regulations that would curtail some of the leverage on these etf's. why was the investor education not enough? >> i think the question really is, there is a difference between disclosing risks and having people understand what the risks are, informed consent versus the disclosure. that is a difficult balance and it goes back to the question of, for an individual that does not have any particular experience, what kinds of information are they able to process from the disclosure documents. long andhose are very formalistic, in addition to dealing with complicated issues. brendan: so there are two issues, county party risks. believe investors are aware of the counterparty risks? >> there seems to be some evidence they are not. important in the european regulatory system then here, but it is the same issue. the other is this question about

liquidity, the promise that you can sell your security, you can sell your etf shares. andcan always sell them, the question is, do investors understand about the value that they can sell them. brendan: is the sec more concerned -- concerned about the risk for the consumer or the fact that the volatility in the market could be made worse? the consumer, and a large part of that is because the instance of highly leveraged etf's that might have a detrimental effect on prices in the market, they are simply not very big. there are not a lot of dollars in those kinds of securities, so they are unlikely we think at this point, to have a major effect on the stability of the market. brendan: is the sec prepared to rule that would actually shut current market

predictions out altogether? it is very difficult to tell how many market participants would be affected. the role as proposed appears to a having, as if it would have serious effect or potentially serious effect on maybe .3% or mutual fundsing and etf's, and they might be able to find a way around the restrictions. we think that is the upper bound of etf that will suffer a change in their business model. brendan: the sec still in conference on that issue. andlet: brendan greeley special guest mark flannery joining us from san francisco. alix: we want to update you on the markets and the turn for the worst. the dow now off by 400 points. the s&p under 2000. a staggering number.

does not mean anything in and of itself, but they can accelerate selling. the first times the s&p has been below 2000 since mid-october. if you look at where it has been, it is high for this fourth quarter. alix: to look at technically the damage that has been done at the far right on the bloomberg terminal, this is the 100 day moving average. you can see how we just touched their earlier in the day, and a straight line down. broken,chnical level unable to bounce or do anything after that. we will talk about this later on with tom to mark as well. alix: coming up in the next 20 minutes, facebook is making its oculus plans a reality. rift orders are set to start later this week. scarlet: stocks are off to a

rough start of the year, but does this selloff have legs? investment grade specifically. alix: another megamerger underway with shire in talks to assaulter. ♪

scarlet: -- alix: welcome back to bloomberg markets. scarlet: we are going to head over to our markets desk where julie hyman has been focusing on the selloff. stocks, a lot of them did well last year and that is fading away as we get into 2016. we saw somewhat of a fade for the stocks last year. netflix was not one of them.

it was the best-performing stock on the s&p 500. r w baird is cutting its recommendation to neutral. also, baird looking at subscriptions. it did a survey of fourth quarter subscriptions, saying that the growth was flattish penetration and normally there is an increase into the holidays, so that is weighing on the shares. amazon was the number two s&p, and thethe shares are down 5.4% today. about thislicted call because amazon is still making investments in its future business, however he says such investments may deliver less upside. amazon certainly taking a breather today. another one of those that was a momentum stock that really wavered in 2015 and that continues now, is chipotle.

concernsy a lot of over food safety after e. coli was reported in some of its locations. a number of analysts are not optimistic. we heard from a number of them today. stephen anderson saying the company may not see growth until 2019. brian bittner says his rating is going down to a hold. tesla, another momentum name, down 8% after the company said yesterday it shipped 17,400 vehicles in the quarter. that means it reached just over 50,000 shipments this year. this included the model x suv. that is one of the things that will be pivotal for its future growth. there were questions on how it will meet its production targets and now we have the answer. alix: thank you so much. scarlet: virtual-reality fans have a lot to cheer about.

rift willfor oculus begin at 11:00 a.m. on wednesday. we are joined by sarah frier on the phone from san francisco. preorders will start this week that consumers will not get it until march. : developers have had their hand on the break for a while, and consumers will get their first chance for a couple years that it has been on display at gameronic shows, festivals, and people will actually be able to buy it. alix: any word on the price and how much it will cost? sarah: it kind of depends what you mean, because the rift, buying the rift is one thing that people will have to spend thousands of dollars to upgrade their desktop computers. beyond that, fewer people have

desktop computers now, so you have to have a nice computer with a nice graphics card that can run the rift. it might be in the thousands of dollars when it all comes down to it. alix: i think i meant in terms of the hardware, because when facebook. the oculus rift for $2 billion in 2015, the ib -- the idea being of how long to recoup that money. sarah: oculus is in the very early stages of being something that will be successful. to thinkerberg says about it the way he would think about the very first phones that became widely available. this is something, this is a new computing platform. there are many competitors in the market that maybe are not quite as hyped, that this is going to take a wild to become a big thing. zuckerberg said in a recent

earnings call that, maybe we are looking at hundreds of millions of, maybe much less than that. who knows how big this can be. there are not that many computers that can play this thing. alix: thank you for joining us, sarah frier on the phone from san francisco. scarlet: a quick update on the equity selloff we are seeing today, the dow jones industrial average down 424 points. within the s&p, only 32 members are higher. they are bucking the decline, where as in the dow jones all three numbers are lower. might end investors up looking to the credit market to see were stocks are headed, so what is the investment grade market telling us now? it ♪

scarlet: welcome back to bloomberg markets, i am scarlet fu. alix: i am alix steel. the dow having it's worth opening day in 84 years. joining us now is lisa abramowicz, columnist from bloomberg at five. forget about high-yield credit, you are looking at investment grade credit. lisa: people have been repressed -- scratching their heads and saying, has high-yield credit been sending a signal to equities? debt more energy related that is included in the high-yield index, there are other factors at play. it is not necessarily a perfect gauge of risk that can be compared with stocks. investment grade has been correlated much more closely to u.s. stocks, and it has been

showing some strains in the past couple of months. scarlet: exactly, and the issue is -- alix: said investment grade seizes up. how does that translate to lower stock prices? lisa: a lot of companies have relied on borrowing money from bond investors to basically buy back their stock, pushing up their stock values and supporting equity markets generally. this has been one of the main drivers. number two, there is a question of what comes first, investors agencies. in that case, a lot of investors cannot hold these bonds and they will sell them, driving down costs further. exitet: we were seeing an of money from some investment-grade firms. lisa: on sunday, there was the they just weekly outflow in seven weeks.

this is a warning sign to some people. we will have to see if it gets worse. alix: what is the best indication of risk in the market , is it what it is trading at or the spread? lisa: i would say the spread. scarlet: lisa abramowicz, thank you so much. investment-grade bonds. gadfly. from bloomberg alix: still ahead on "bloomberg markets," china the epicenter of investor angst. the dow is off by over 400 points. we will discuss. ♪

when you're on hold, your business is on hold. that's why comcast business doesn't leave you there. when you call, a small business expert will answer you in about 30 seconds. no annoying hold music. just a real person, real fast. whenever you need them. so your business can get back to business. sounds like my ride's ready. don't get stuck on hold. reach an expert fast. comcast business. built for business. alix: from bloomberg world headquarters in new york, welcome back to "bloomberg markets." i'm alix steel. scarlet: i've scarlet fu.

let's start with the bloomberg first word news. mark: the house of representatives returns to work today, repealing obama care once again topping the agenda. unlike dozens of previous bills, this one could actually reach the president's desk. the senate already passed its version. a certain white house veto. the refugee crisis is complicating western europe's long-standing open borders policy. denmark says it will oppose temporary spot checks on its germany.th danish leaders were angered by sweden's decision to impose order checks to slow the number of middle eastern refugees. that could lead to a logjam of refugees in denmark it workers in northeast china have sent down food and other supplies to four trapped miners. they were trapped more than 650 feet underground when a shaft collapsed 10 days ago. drilling ae dr new tunnel in an effort to save

them. onald trump's first tv ad will air tomorrow and i went to new hampshire and focuses on immigration and border security. it never mentions trumps republican rivals. donald trump mentioned he will spend tw $2 million a week on ads. byst word news is powered what than 150 news journals around the world. i am mark crumpton, back to you. scarlet: financial markets starting off in a bleak note and china is that the epicenter of it. -- trading inning shanghai. note disappointing, it is indicating that china is facing a severe slowdown. just how much trouble is china's economy in? with gabriel from boston. hat is new with weak

manufacturing data? is extending its friend that we have seen the past couple of months. good afternoon and thank you for having me on the program today. regarding the numbers out of china, they are still under 50 as you mentioned. there are still signs of stabilization in the manufacturing sector, but they clearly missed expectations on the number reported this morning. inerestingly, they do come line with the official number on friday for december. also, the nonmanufacturing number hit its multi-month high since the spring. there's some evidence that at least the economic numbers that we have been waiting for our destabilizing or improving somewhat. reaction to a lot of stimulus that the government implemented over the last 6-12 months. scarlet: i'm glad you bring that up. pmiave a chart of china's

and some other sub indexes within that report. the white line is the pmi number. month right50 for a there to what is notable in the improvement in other indexes. it ticks higher in some other gauges. maybe it is not the best view, but we are talking about purchases and new orders. at the very least, things are not getting work. alix: what do you make of this 400 points a lot on the dow? this is justified based off of what scarlet fu is talking about? scarlet: similar to what happened over the summer, the shanghai market is not a good indicator for international markets and definitely not for china specifically on what is happening in both the economy and earnings. gabriel: as mentioned before, the transition of the economy from manufacturing to consumer demand, which is happening a bit too slow for some, as the indicators point out, but still happening as expected.

not all is well. think you can see that in certain sectors, but i do think the reaction of international markets, both the summer and today, to the local shanghai market are a little excessive. shanghai market itself does have other issues. for example, on friday, you'll have the six expiration of insider sales by shareholders, which was it lamented over the summer to stabilize the market. there is a lot of supply coming on, also from ipo's. also, the currency weakening through a dirty peg has spooked investors outside of china as well. agree -- the overreaction in august and today will probably reverse or subside as the data improves. alix: we will see.

credit suisse pointed out in a note today that the data that we did get out of china proved that the q3 stimulus from the pboc and the government did not really quite work. do you agree? that would be a sort of longer-term issue for the government. gabriel: i compare the situation in china today to where europe was in 2011 and maybe where the u.s. was in 2009. a lot of government stimulus has already happened. there's more to come in both reserve requirements as well as interest rates. it will're right -- take a bit of time to see improvement on the ground in terms of manufacturing. you already seeing it in the nonmanufacturing side. i also point to q3 earnings, which were very strong in china and certain sectors. i do think there is a lie -- maybe a 12-18 month lag from the beginning of the easing cycle. but you are seeing one of the

most aggressive using cycles that china has implemented. that will inevitably result in improvement in earnings, which we have already seen. scarlet: we are at the start of a new calendar year and have been talking about how it's the worst start for chinese stock certainly ever with that 7% plunge. we also chinese new year in the second week of february. might we see any government intervention or an extra round of stimulus before the weeklong holiday? gabriel: the government has been criticized quite a bit for interbeing so -- intervening soak so aggressively, so i do not think they will appear that exercise, and particularly the amount of money they spent to intervene. but clearly they stop trading today at 7% down. those types of measures might be used to stabilize the market. i do not expect any significant intervention by them ahead of

the chinese new year. you may see further government measures in terms of reserve requirement cuts and interest rate cuts as they happen a current over the last year. -- have been occurring over the last year. alix: what is your sense of the specific tog siste china and the foibles of lifting the restrictions on selling and perhaps more ipos coming to the market versus underlying weakness in asia and china? which is more responsible today -- the technicals or the fundamentals? gabriel: definitely the technicals. there is a reason to be negative on global equities in general. multiples are high. the fed has been tightening fo r not just the end of qb but raising rates as well. it is raising rates at a very odd time for the profit cycle for equities, both u.s. and global. at a time whenit

equities are not at a particular discount in developed markets. china and emerging are on the other side of that cycle. they have underperformed for five years. there severely underperformed in 2015. a lot of that had to do the, out of the cycle, but it also had to do with two factors -- one is decline ind the chinese currency, but also profits. trailing earnings are negative in emerging markets. that is not the case for china overall for emerging. investors are facing a tighter liquidity market globally and that does justify may be reduction in multiples for developed markets. scarlet: what does that mean in terms of what you're doing with your portfolio in emerging markets? what are you buying and selling? gabriel: we run a very specific and concentrated growth portfolio and emerging -- which

means industrial and consumer stocks dominate the portfolio. those in companies reported strong earnings in the fourth .uarter cou they have reported much better-than-expected numbers. they also do not have the leverage or credit issues that were discussed in the price segment. we have shied away from companies that have highly leveraged balance sheets and or week earnings. gabriel,nk you, joining us from boston. scarlet: a lot more coming up on "bloomberg markets." xalta rebuffing an offer, but is shire's new offer enough to change minds? alix: saudi arabia cutting diplomatic ties with iran. what is next? scarlet: an exclusive conversation with cleveland fed president loretta munster. ♪

scarlet: you're watching bloomberg. i'm scarlet fu. alix: i'm alix steel and here's your global business report.

scarlet: saudi arabia cutting ties with iran after an attack on the saudi embassy. what this means for oil? alix: one of the first possible drug deals of the year as shire is in talks to acquire baxalta. scarlet: was it a good year for london-based bankers? details ahead. first, let us start with fiat chrysler, which has distributed its remaining 80% stake in for a ferrari. deliveries about 50% by 2018. a very chrysler has clear scope of activities. it is the second-largest carmaker and has a very ambitious plan ahead. it has a great leadership team. another bigmay be pharmaceutical deal announced as soon as this week. shire is advanced talks to acquire backs off a $432 billion in cash and stocks according to

people familiar with the matter. baxalta turned down a lower number from shire in the summer. scarlet: saudi arabia cutting ties with iran after an attack at the saudi embassy. the head of global research tells us what this means for oil. >> sally will have to choose between cutting production more making the price $50 a barrel, which is a more sustainable while price for the budget or ultimately have to devalue. the choice is ultimately saudi's. brazil is headed for its worst recession since 1901. that is according to a survey of economists who predict that brazil's economy will shrink almost 3% this year. policy makers are trying to control the fastest inflation and 12 years without slowing the economy even more. scarlet: in london this year, investment bankers are expected to get on us is only a fraction of what private equity employees will receive. that is according to a survey from a recruitment company.

london-based bankers expect to get about $36,000 while private equity employees are counting on four times as much. that is your global business report. for more stories, go to bloomberg.com. alix: it was a record year for m&a and this year starting pretty strong. shire and is a vance talks to acquire baxalta for $32 billion and the deal could be announced as soon as this week. jeff mccracken is here now with the latest. why would shire be able to get this deal done now after baxalta had said no and was firm about it in july? july when shire made its first offer, it was not something baxalta was expecting and it was an all stock offer. that was one thing baxalta did not want. they do not want an all stock deal and it was also for a lower value, a value of around $30 billion. so this is a higher offer than

what they were getting before and it has some cash component to it. i'm not sure yet how much cash will be a part of it, but we are going to have some cash as opposed to an all stock deal. alix: what is investor reaction? jeff: you're pretty happy to see this get done. they were probably disappointed that they turned down the deal back in july. if you are shire, you know you're part of a company that is trying to do a lot of deals. last deal forthe quite some time if they get the deal done. investors feel like this might be a bit expensive for pricier than they were hoping to get the deal done, but at the deal makes sense and their strategic logic head,, and get rid of the it will make sense down the road. legal rates this down the road. jeff: if they do this deal and get the humphreys down the effective tax rate will be 15% or 60%. beyond the drug implications or

industrial logic, there is huge tax implications here as well. alix: is their plan b for shire? jeff: not that i'm aware of. they bought a company for $5.9 billion earlier this year. scarlet: that's tiny compared to this. jeff: yes, a $32 billion deal. i think they're really close. as of saturday when we reported the deal, they were most of the way there. the above said tuesday or wednesday is likely when the announcement comes. scarlet: are any activist investors caught up in this? jeff: not that i'm aware of -- not yet. last year was a record year. i think you'll see more activity in general and whether it is active is causing or general consolidation at the senior levels. alix: is it any sense of urgency now that the fed raised rates and they are diverging from other central banks? is that playing any part in the urgency to do this or is this going to proceed no matter what? jeff: i think it will proceed

just fine. it looks like the deal was basically dead. spoke to, it looked like shire would announce they pulled the deal and move onto something else. but they made some concessions and i thinkta -- that's let it be known that they would do the author. baxalta let it be known that they would do the author. here's our biggest deal of the year. alix: jeff mccracken, thanks so much. scarlet: let's head to abigail doodle, reporting live from the nasdaq, reporting on lululemon. abigail: lululemon one of the few stocks to be trading up. a is raised from abide to hold, signifying market expansion opportunities.

wells fargo upgraded lululemon from an outperform to abide. chainements to the supply should help the company overcome 2015's big problem of discounting for the same margin expansion potential cited by jefferies group the stock has been expensive relative to the cost. with a 20% short of risk, the company may need to execute on this possibility to see the stock go higher from here. turning back to the sea of red, j.d..com -- the biggest percentage loser in the nasdaq 100 on its worst intraday drop on record. it was slicing through support of both its 50 and 200 day moving averages. all this comes on sympathy with the big selloff of the shanghai composite index and renewed concerns around the potential for slowing global growth. scarlet: thank you so much, abigail. abigail reporting live from the nasdaq . alix: tensions running high

between saudi arabia and iran could what that could mean for the oil markets. ♪

alix: welcome back to "bloomberg markets." i'm alix steel. alix: i'm scarlet fu. it's the biggest meltdown in eastern relations in decades. and others are downgrading relationship with iran following a med tech on a saudi embassy saturday. . thoughts aired on intelligence early this morning. >> you will not have sunni arab regimes lining up behind them. -- they haveain got by rain but they are basically isolated, including from the united states. this cannot come at a worse time. alix: saudi arabia and iran have long been at odds, but this

latest move could be an ominous sign that something more serious could be at play. what does that wind up meaning for the oil markets? we didn't see 5% bounce in print. -- at 5% in brent. look at my bloomberg terminal for why this is more puzzling. what you're looking at our short positions are brent versus wti. the yellow line is brent short positions. if you max this out, we are at record positioning for short all across the oil market. anytime a bullish headline should assent the market really soaring higher because you had to roll up those shorts and cover, we did not really see that. the percent is not 5% and that is what is really puzzling to me in the markets what is that telling us? scarlet: where is the short squeeze? for more perspective from the geopolitical angle, let us bring in the middle east editor joins

us now from london. make the connection between what we are seeing now and what unresolvedhe issues. >> ties have been seeing bad times since the islamic revolution. the latest tension started around 2011 with the arab spring and protons and with the war in al-assadre iran backed last year, we saw saudi arabia china to spread its influence through yemen through supporting shiite militias. that propelled a militia to try to roll back those gains. what we have seen is a significant escalation, but it happened in the 1980's when ties

were severed between the two countries. it is interesting these days because they are already fighting several proxy wars in the region. moreraises the risk even in this volatile regions at this point. alix: when i heard the news over the weekend, the first thing i thought of -- no way is oil not going to go to $20. we will have saudi arabia continue to over pump oil to put the squeeze on iran. this is potentially one possible expiration for white oil prices retreated. you is the probability that see saudi arabia uses oil as a weapon against iran? the predominant story in the oil market right now was oversupplied more than anything else. producers are pumping. that is slowing demand from china. in thepply were tighter market, you have expected a bigger reaction. in terms of this turning in a war between saudi arabia and

iran, it is not clear who has a bigger leverage. iran has had sanctions and has been under sanctions for a few years. it was less subjected to the drop in oil prices. as it emerges from the isolation after the nuclear deal, any cash that comes in at any price level, you can argue that this is actually welcome. is not easy to think that saudi's will reverse their strategy with iran right now. this is something nobody is predicting. scarlet: thank you so much. next hour, we will talk more about geopolitical tensions with the former defense secretary william cowan. don't miss it. we will be right back. ♪

alix: it is 1:00 p.m. in new york and 6:00 a.m. in hong kong. scarlet: welcome to "bloomberg markets." ♪

scarlet: from bloomberg world headquarters in new york, good afternoon, i'm scarlet fu. alix: i'm alix steel. here's what we're watching at this hour. u.s. stocks are coming to its lowest level since october. you have the dow off its lows of the session, over 300 points. the outlookt are for the u.s. economy to play 16? alix: how tensions with saudi arabia and iran could impact the global oil market. scarlet: but julie hyman has been tracking the losses in u.s. equity today. in the u.s., we have been off the lows and grinding away somewhat higher. higher relative to our lows. julie: it is all relative of it. let's look at the major averages. indeed, the dow earlier was

down over 400 points. a steep drop in the steepest we have seen since september 28 of the major averages. it is still a broad-based selloff as well if you take a look at my bloomberg terminal here at the imap. we are still seeing all the sectors in the red. financials and health care and consumer discretionary are some of the worst performing groups as we start of the year. you as wet to remind look at what is performing poorly today. what is performing the most performing today -- i want to remind you of what we saw last year in terms of the groups. energy obviously was the worst performing group. consumer discretionary and health care definitely seeing a little bit of the rotation effect today were some the better performers last year are doing the worst today. scarlet: you have to wonder what this is meaning like for the rest of the year. todaydoes what happened indicate what will happen for the next 364 days? julie: no is the answer to that.

joel a bloomberg news has a great story out on bloomberg.com and it is basically 50-50 in terms of whether markets go the same way. ofother words, the first day trading is not the indication for the full year. does it give an indication of the underlying concerns in the market right now? is that going to be an indicator for the full year? maybe. in terms of a technical indicator, it is not a predictor. here are the predictors of the s&p 500 from wall street. here are the top-down estimates from strategists -- right around 2200 and little bit of a rally, but not a huge one. these are the so-called bottom-up estimates. if you took the individual price targets for the components of the s&p 500 and calculated, you get 2335. either way, you're looking at optimism here. although it is not huge optimism, most optimists are

looking for a muted one. there are the outliers looking for an outright recession potentially this year and an underperformance of the stock market. this is the consensus right now. alix: think you so much, julie hyman. scarlet: let's turn now to bloomberg first were news. mark crumpton has those headlines. security officials are studying in islamic state group leader to threatens more action against the united kingdom. a masked man speaks with a british accent on the video spyre shooting a reported and the head. the man says the extremist will soon invade britain. for others accused of spying for britain were also killed. present obama plans to carry out his prominence -- promise to restrain g gun violence. he is meeting with loretta lynch to discuss actions he could take it on thursday, mr. obama will hold a town hall meeting on guns. an armed antigovernment group plans to stay at a federal

wildlife refuge in oregon for as long as it takes. members of the group have taken over unoccupied buildings there. they are protesting prince and -- prison sentences given to two local ranchers. so far, police are staying away. the fbi says it is hoping for a peaceful resolution. an earthquake has rocked northeastern india, killing eight people and injuring more than 100 others. the quake had a 6.7 magnitude and struck a remote area. bill clinton has spent the first eight months of his wife's presence of campaign behind the scenes. that changed starting today. is former president headlining to rallies in new hampshire, the states first in the nation primary be in five weeks now. mr. clinton will have more events across the country in the next few weeks. dayal news 24 hours a howard by our 2400 journalists and more than 150 news bureaus around the world. i mark crumpton. that tv -- back to you.

alix: how will the u.s. economy fare in 2016? cleveland federal president loretta munster gives us her insight. as next. stay with us. ♪

>> welcome back to "bloomberg markets." i am at the american economic conference in san francisco. i'm joined by loretta mester. she is a voting member of the federal open market committee this year. this is her first broadcast interview. i keep are taking the time to join us this morning on a very busy morning for the markets. yearaid often in the last in your public speeches that the u.s. economy remains resilient.

that seems to be your word of choice despite disruptions in august and december. we see a disruption again this morning and financial markets. some numbers as bad as they have been since the 30's with the start of the year. do you see that resilience playing out again now in january? underlying fundamentals of the u.s. economy remains very sound. there's want to be volatility in the markets. the news out of china -- they were laced -- release manufacturing data that was weaker that was a downturn and the chinese stock market and that spilled over to u.s. stock markets. i'm not concerned about that in terms of the u.s. economy. as we have seen over the last six years, the u.s. economy has been growing 2%-two .25%. there have been others and downs in time over sectors, but i think the u.s. economy has come back quite significantly from the great recession and the expansion is on solid ground here.

brendan: do you see dangers from china? yesterday you are on a panel with catherine man of the oa tradeho pointed out that with china is really below levels that we would expect. when you see this downturn in trade numbers globally, does that give you pause? loretta: we built in a weakening in the chinese economy into our forecast, of course. that has been going on in china for a while. it is not a surprise. heard, panel as you also it is hard to estimate the magnitude of the downturn in china. it economists have different estimates of it. i think that also is white a piece of data coming out of china can have a significant effect because on any piece of data, the markets are going to move. half forin a weakening china. i do not see that as a significant risk for the forecast, but it certainly a risk. we will look at that. the actual direct trade channel

between the u.s. and china is not that large. we'll have a direct effect on the u.s. economy? i do not bill it as a significant risk to the u.s. economy. brendan: you may know this, but bloomberg intelligence keeps what it calls a fed spectrometer and measures talks on a scale of plus two to a negative two. they have you as a plus one hot. where would you put yourself on that scale? loretta: i do not want to view myself as a dove or a hot. i want to be myself and hopefully other people will view me as an al because i try to be known for making wise decisions. i have said since the late summer that i thought the u.s. economy could actually take a rate increase. i certainly think that the increasesth of rate is very consistent with my view of appropriate monetary policy given my outlook for the

economy. theorecast for growth to 2.5% and 2.75% over the next year, which puts me more optimistic than some in the economy. brendan: that is more than when we spoke in august. what has changed? loretta: we have seen data that than ie in weaker dissipated. it's down slightly, but not that much in terms of resiliency of the economy. we are always continually updating our forecast based on incoming information. that ample, i do believe reasonable forecast is for inflation to go up 2% over time given the most recent downturn in oil prices again. i would push that out a little bit, but i do see inflation coming back up to 2%. brendan: you are an academic and the up and following these models your entire crew. one thing we have seen with inflation is that even as markets have a very slow return

, a2%, way out in the future decade out in the future, the feds models, when you look at the median of all the dots, sees a raptor -- rather optimistic return to 2%. what is the cleveland fed seeing that the markets are not? loretta: let us look at measures of underlying inflation. one of the things that you have to be aware of is that oil price shock effects headline inflation significantly. we have been running of .4%. brendan: we are talking core inflation. loretta: those of the dynamics that the fed models predicted. as oil prices stabilize later in the year after the big downturn starting summer of last year, we saw the core measures moving back up. that dynamic is still there. you're going to have another as i expect headline inflation to stay week for quite a while to come.

oil pricestually as stabilize, inflation will come back. it's important to remember that oil prices do not have to return to their level before the downturn. as long as they stabilize, inflation measures will move back up. brendan: nothing that is happening in court inflation right now gives you pause and says maybe the models and understanding we have a what causes inflation is not as it used to be? loretta: i would say there's not a lot of evidence that the dynamics have changed significantly. , they'reok at dynamics coming out what the models would predict. there is research that suggests that the cleveland fed median cpi measure has moved up. since the beginning of last or, it was 2% and now it's 2.5%. that dynamic is what the models are predicting could but i will say no matter what model we have for inflation, the forecasts are wide. brendan: google that a panel --

we were both at a panel yesterday with the chief economist for the imf. he released a paper recently bets at the phillips curve with relationship between unemployment and inflation is alive, but it's flatter than it used to be. it means that as inflation goes up, we do not have to be worried and a suddenation uptick in inflation the way we had in the past. how does that you're thinking affect rate increases next year? loretta: i am pretty consistent with the median path and the survey of economic production that flc participants came out within. my outlook forecast is a bit stronger than some. i might have a bit stronger path, but basically the median. that is a gradual increase in interest rates. not a commitment to that, but our current thinking is that is probably appropriate policy. with inflation, are you concerned about a sudden accelerations than he used to be? loretta: i don't think i was

about acceleration and inflation, but i think we have to balance the risks. that is why i think it is important to have gradually increasing interest rates. we are so focused on a policy goals, right? full employment at 2%. more price stability. be there going to guiding forces as we go through. the fed policy is going to be data dependent. i will be updating my forecast as we go through. i want to set policy appropriate with that outlook. brendan: an october, you said that you saw some time until the fed should begin reconsidering its investments, backing off on starting to sell some of its mortgage-backed securities, for example. one d c see the fed beginning to selloff some of those investments -- when do you see the fed beginning to sell off some of those investments? loretta: as we said in the december statement, right, i

kind of -- and i agree with this. we kind of want to have some rate increases and normalization underway before we will consider ending reinvestment. to me, that makes a lot of sense, right? our normalization principle say that we are going to communicate policy and run monetary policy through short-term interest rates. we can run that with a large balance sheet and i think it makes a lot of sense not to think about the reinvestment until we have a couple more. but the key thing is not a afterased six months something. it is really going to be based on the same kind of economic analysis that we are basing our short-term interest rates on. brendan: we have 30 seconds left. i cannot let you go without putting you on record with this. how do you define gradual? loretta: i think the median path in the s&p is not a bad view of

the world today. gradual?that mean well, if you look at the long run that run rate at the s&p, that is 3.5%. if you look at the path of interest rates, it is below that for some time. that is what we mean by gradual and that is certainly what i mean by gradual. brendan: loretta mester, think you so much. she is neither a hawk or a dove, but an owl. thank you again for your first broadcast interview since he became a voting member this january. alix steel and scarlet fu, back to you in new york. alix: thank you, brendan greeley. he was speaking with loretta mester life in san francisco. scarlet: still ahead, lots to cover on where we are headed with this selloff. the worst first day for the s&p 500 in a couple of years. for the dow industrials, all the way back to 1932.

alix: the s&p 500 worked its way little higher there. scarlet: plus, general motors giving and lift to the popular ridesharing app lyft. should number be worried? ♪

scarlet: welcome back to "bloomberg markets." i'm scarlet fu. we want to head to our markets desk with julie hyman. there are winners and losers, but we have to focus on the losers. julie: there are more losers by pretty wide margin. the worst performer and s&p 500 .s fossil interestingly enough the watchmaker is extended declines from 2015. fossil downgraded to a hold over at jefferies. analysts there saying the company has once been a near monopoly with an enviable portfolio of brands, but the

company has been seeing increasing competition. it slowed dramatically from its once double-digit growth rate. overall, we are seeing watch sales slow. fossil has been a victim of that was shares down 5.6% today. underperformers today that is sort of fascinating to me has been copper and gold. the reason it has been fascinating is that this is a stock that has already plunged. copper is down once again because of what is going on with china. so it looks like it is once again a victim of that. take a look at my bloomberg terminal. it is argued in a huge underperformance for freeport-mcmoran. call this a one year plus one day chart. and one ofe -- down the worst performers and s&p 500. is down and most of its production is copper versus gold , which it has a smaller

position. gold down 9% over the past year. it looks like the past outlook is not necessarily strong and that is reflected in the shares today. the flipside, another interesting movement is chesapeake energy. chesapeake was also one of the underperformers/year. there were concerns about the outlook for oil and natural gas prices. aboutare concerns also chesapeake's balance sheet. there was even a downgrade today to underperform at raymond james. oil moves lower, chesapeake continues to move higher and is up by 7%. another performer today is baxalta. shares up nearly 4%. scheier is on here as well because shire is an advanced talks to acquire baxalta. that is according to reporting by bloomberg news. the price up to $48 a share. that would still be about $32 billion overall in cash and stocks excluding debt. baxalta over the summer rebuffed an earlier offer from scheier that it rejected as too low.

shares not rising to that potential as well. it is not yet a done deal and one still being discussed at this point. s early as this week as jeff mccracken said. alix: the road to self driving cars is getting more crowded. a $5 million investment in ridesharing company lyft. they will work in creating self driving cars that consumers can call upon demand. scarlet: good to see you again, jamie. jdm makingwhy is this move now? there seems to be a race to pair up between the traditional automotive company and these silicon valley tech companies. we are hearing possibly this week that google and ford will announce some kind of partnership. uber has reached out to tesla

and may be tesla will develop its own product like that. it makes sense for gm to want to get in with lyft. the chairman of ford, his personal fund has invested in lyft. it is clearly a company that has some appeal and ability to communicate with right -- detroit. this petition may change in the coming decades. alix: is $500 million a lot of money in gm? how valuable is the investment? jamie: it's a significant investment. have a capital on that has invested in biofuels, but those have technically been tens of millions of dollars. 500 million is pretty significant. that is half of what would take to develop an all-new platform or build a factory. there's usually about $1 billion investments. this is a pretty sizable chunk, but not a bet the farm kind of situation. scarlet: is interesting here because in the story available

at bloomberg news.com, gm president is joining the lyft board as part of the deal. what kind of expertise would he offered lyft? jamie: what gm brings is the ability to make the vehicles. gm is pretty far down the road toward self driving cars, which is kind of the ultimate and from a transportation or mobility solution. if you cannot cars that drive themselves and you do not have to own them, that can really change the dynamic. how much a car is worth, what people are willing to spend, how they pay for it. gm provides a lot of that technical expertise that lyft does not have. lyft has the app and customer relations that are completely separate from gm through its independent dealers. scarlet: jamie butters, do you see cooper and tesla teaming up then? jamie: we will see. adam jonastion from

at morgan stanley has been that tesla will try to out uber uber. they will develop their own self driving technology and offer their own service. alix: jamie butters joining us from detroit. for more on gm's investment, 'ske sure to listen to lyft cofounder live here at 2:00 p.m. eastern. scarlet: but first, we hear from former u.s. defense secretary on the escalating tensions in the middle east. that is coming up next. ♪ . .

alix: from bloomberg world headquarters in new york

scarlet:, welcome back to bloomberg markets. scarlet:let's get a check on the first four days with mark crumpton at the news desk. obama is kicking off the new year with new efforts to curb gun violence. his actions could come as early as tomorrow. the president meeting today with the attorney general. saids weekly address, he tens of thousands of americans have been killed by gun violence. he blamed congress for holding back efforts to enact new gun control legislation. gun-controlor measure to come out of washington with a 1994 assault weapons ban which expired in 2004 and was not renewed. workers are back on the job today at the office workers complex since 14 people were killed last month. the conference center where the shootings took place will remain closed. the inland regional center served the emotionally disabled. the militant group hezbollah says it has attacked an israeli

armored vehicle along the lebanese and israeli border with the israelis responding with artillery fire. the explosive device destroyed a humvee. the israeli army did not say if there were casualties. the federal government is suing volkswagen over emissions cheating software. the civil complaint filed by the justice department and the epa alleges the german automaker illegally installed the software to make its diesel engines has federal emissions standards when undergoing lab testing. criminalface separate charges. they are negotiating a massive recall of u.s. regulators. global news 24 hours a day powered by our 2400 journalists in more than 150 news euros around the world. i'm mark crumpton. back to you. saudi arabia is cutting

ties with iran. the clash between these two oil producers is not stopping prices from falling today despite an initial jump higher. in store forhat is both oil and the region? joining us his former defense secretary william cohen and chairman of the cohen group. we've seen the saudi government and bahrain sever ties with iran after protesters set the embassy on fire over the weekend. what's going to happen in the next 48 hours that could set the tone for the coming months? william: the world community is trying to call for calm but we are likely to see escalation beyond the rhetoric. a radiance have promised revenge, the wrath of god on the saudi's for the death of the cleric who was just executed.

this is going to continue. the saudi's feel they are under increasing threat from the iranians and the iran nuclear deal brokered with iran. they are becoming less tolerant of any dissent and sending a strong signal that they will not accept anything against the kingdom and see those that do as enemies of the kingdom. this is proceeding down a path that could post a serious threat to stability throughout the region if iran and saudi arabia ever come to a clash. prospect of a clash would be very dangerous for them and the world. alix: we have seen the west pullout for de-escalation. >> we do continue to be concerned about the need for both the iranians and the

saudi's to deescalate this situation in the middle east. we are urging all sides to show restraint and not further inflame tensions that are on display in the region. fromet: we also heard russia and other gulf states urging restraint. if russia offered to mediate, what kinds of risk or benefit might russian involvement create? william: we saw the russians involved to help negotiate the elimination of chemical weapons in syria. at the same time, they were providing weapons for the assad regime to bomb through other means. russia has an interest in becoming a power player in the region and i see this as just another effort to say we are someone you can depend upon to

negotiate a settlement without any bias toward one or the other . of course they have been supporting iran for a long time, iran, syria in lebanon. to becomeey will try a player and very well may try to become a player but, they have interests that are not aligned with hours as they andort syria and the regime now the whole peace effort seems to be coming undone. very dangerous for all. when you look at saudi arabia versus iran, who has the upper hand? iran is still on the terrorist list for the united states and are also on the path nuclear capability, which in 15 years may become nuclear weapons. the kingdom of saudi arabia has

-- sees iran as an expansionist power trying to dominate and take over. leere aligned to military -- militarily and politically with the saudi's since world war ii and that would put us in a difficult position if a clash comes directly between the two. we then have to choose and my guess is we will have to choose the side of the saudi's if it ever came to that, but we are trying not to be pushed into that position because we feel the deal with iran in the long-term will be more beneficial for the entire region. not a healthy position to be an but that is where we are now. we are hoping the rhetoric will come down and no retribution will be taken because it can escalate quickly into direct confrontation. catalyst forthe this was the execution of a saudi cleric.

how is that decision rooted in saudi arabia pasta mastic politics? there has been some argument that they are trying to shore up support for those sympathetic to isis, for example. william: i think the saudi's are saying we're not going to accept any effort made by political dissidents in the country, supported or aided by iran. exercising its power trying to infiltrate into the kingdom and other countries through proxies and they do this to stir up the scent in the saudi kingdom. they have done it in syria and they have been very effective and have been supporting hezbollah in lebanon. iran is an expansionist country and revolutionary in nature. the saudi's see it as a power struggle between who is going to dominate the middle east and

right now, that is what is going on. alix: we know secretary of state john kerry will be speaking to the iranian and saudi counterparts. what could he do to the escalate the situation? william: i think our influence has been diminished. those countries, whether it is or saudire off rain arabia, they see iran is a major threat. influence to.s. persuade them that they should notme more flexible is going to be an easy sell. at the same time, the arabians .ave been taking advantage iran has been doing what it can to poke a finger at the united

states by arresting journalists and looking at ways they can missile and not receive sanctions in return. this is an example where they say they have tested another proposednd they have putting that on and they see the and place aling higher value on their relationship with iran than they do saudi arabia. that's the position we are in now that will oppose great negotiating skills for the secretary of state. us.: thank you for joining former secretary of defense, william cohen. scarlet: coming up, sometimes it's good to be alone. at least that is what the canadian oilsands believe. alix: and the chinese selloff

rippling throughout the markets. the dow jones having its were start to the year since 1932. turning and back salt down an acquisition offer but a new deal seems to be in the works. ♪

scarlet: welcome back to bloomberg markets. alix: let's go over to the markets were julie hyman has the latest. off by 347. a tremendously bad start to the year. julie: that is pretty fair to say. it looks like we are going to have the worst start to a year

in quite some time. how bad it is going to be will depend because we have been bouncing around. 2% on the s&p.wn we kept making attempts at recovering and making lower lows but after 11:00, we have been coming off the lows to some extent. anically, when we have asian-led selloff, that effect can abate as the day goes on. that could be what we are seeing today. i want to look at some of the worst performing groups -- ranking stocks and financial stocks are on the list. some of the larger cap banks on the decline today. abouta lot of concern what higher interest rates are going to mean for these companies. if there is a slowing economic environment, that will have implications as well.

havenes falling as we political implications in the middle east. we have seen airlines continue to fall. we got construction numbers today, construction spending down worse than economists estimated. we still see the spillover effect in these homebuilders. canadian oilsands has the cleared its goal to remain independent following a hostile bid from suncor legacy. for more, let's bring in pamela ritchie joining us from toronto. oilsands really want to stay independent. what kind of case do they have now? it is standard fare right now where we see these slinging comments back and forth. oilsands saying they

reviewed all options. they looked at royalty financing and selling partial parts of the country and by a large, independent is the way to go. is an oilsandse mine. they are mining the oil out of the ground. 37% of the owns property. suncor would like to own 47%. the argument is canadian oilsands does not operate as well as it could. there is not a lot of insider ownership, but i think a lot of people think it is too early to call. thank you very much.

it's going to be an interesting story to live up to because at some point, oil prices fall lower. scarlet: resistance in the meantime. tesla shares sliding feeling their biggest intraday drop since october, coming off of news that they had the low end of their shipping goal for 2015. cory johnson joins us from san francisco with the details. to an extent is this a supply issue or demand issue? cory: that is the ultimate question. give user they did not would have told us that. on the positive side, this is the most cars tesla has sold in the quarter. for most of the year, they said they would hit 55,000 cars. they lowered the midpoint of the range and said it would be between 50000 and 52,004 the year. so the cars they sold in the

abover was just barely 52,000 for the year. their ability to estimate their production is an open question. scarlet: what is their estimate for 2016? given any have not estimate yet. a lot of it will depend on the model x, there crossover vehicle that they have just begun production of. in the press release that came an interesting time to put one out, they told us how many cars they produced and broke it down to say how many models they sold. xey told us how many model they produced but did not tell us how many model s they produced. how much do people want these cars, how deep is the backlog or could we hit what our bloomberg

s.s reporter called peak market for ae $100,000 electric car from tesla and could we have reached that point? well the model x replace some of the sales of the model s? these are big questions we do not have answers to. firstt: i actually saw my model s on the streets of new york. i've seen them in california but have not seen many in new york. a movesk has announced into the energy storage business. to what extent could that be distracting from automaking? to have infinite ability to focus on a million things at once. he is iron man, he can run three companies and start all kinds of

new projects and have a busy family life and do everything. he is the guy who is much admired for his ability to do all of that. i do think the size of that business, the battery source, is an open question for this is this. when you see the analysts with projections going out five or six years and you see tesla unable to hit its production targets even as they lower them and lower them, at some point, the rubber is going to hit the road and it might not be electric power. what part of that is normal -- a car company just trying to find its footing? cory: this is brand-new territory for tesla. we have never seen anything like tesla. it has captured the mind. the ford f1 50 cells more cars in six weeks then tesla sells in one year. it is still a very young company. scarlet: thank you very much.

alix: coming up, fresh worries about china's economy causing a global selloff. what is ahead for markets? ♪

scarlet: evidence that chinese manufacturing is sinking for a six month is sparking a selloff, causing the dow jones to sink 400 points earlier today and sent emerging markets mark -- emerging markets stocks tumbling. guestsarlier, one of our identified the low for the hang seng and correctly forecasted it would rally to 10,900. he joins us now from scottsdale, arizona. where is the bottom now?

tom: at times, it's difficult and at times it is clear cut. we are getting to the point where tomorrow is going to be a critical day. it is surprising when people are told a market bottom on september 7 that the hang seng what rally, it did in fact rally but nobody cared. once the market rallied to and no it turned bearish one cared when we said the market had risk act down to the lows. but we looking at 8765 said the market would take a respite and rally. possibility of 8765 and this is critical -- a lot of people missed the details and just make assumptions because they get caught up in the market emotions. if the hang seng

wens lower tomorrow that will have a big risk on the downside. you are looking at 7933? tom: only if the market were to open lower tomorrow. this happened in february 2014. we turned bearish on the stark market -- on the stock market and people did not recognize or area ofhey had a deep risk and was following the 1929-19 30 model. market declined, people did focus on what we forecast. somewhat akin to where we are right now.

then people extract what was being said to send the markets lower and the market reversed like we thought it would. -- tomorrow'sen open. that could be the level to watch, but what about here in the u.s.? what is the trickle through four futures? tom: when we identify the high in the u.s. markets, we were looking at a downside of early points below where we currently are. and on thewnside u.s. markets open higher tomorrow and come down, they should find support there. we will know in advance because we will be following the far eastern markets. if they don't fall below today's low, there's a good chance u.s.

markets could bottom tomorrow. the openings are critical with followthrough. thank you so much for joining us today. tom is a noted market timer from scottsdale, arizona. talking about the follow-through from chinese stocks, come inside the bloomberg terminal. lot like august. watching those support levels are key. have one more chart to tell you about. david guerrera is up next with bloomberg markets. ♪

david: it's 2 p.m. in new york and 7 p.m. in hong kong. welcome to bloomberg markets.

from bloomberg's world headquarters in new york, good afternoon. here is what we are watching this hour -- a shaky start to the new year. worries about the chinese dow in danger of having its worst start to the new year since herbert hoover was president. general motors makes a major investment in the right hailing company, lyft. the two plan to develop a network of driverless cars. and volume is up because of rising tension in the middle east. let's head to the market desk. since 1932, we have not said the dow fall this far. julie: it has come up a little bit, so we will see if it does come up a little bit. right,