betty: good afternoon. here is what we are watching at this hour. breaking news, tanking again. the third major slide to start the new year as the s&p has its worst yearly start since 1928. the dow off by 400 point -- 400 points at one point. situation,economic is it taken out of context? china may simply have a communications ichiro -- issue with the world. lowest dropped to its level in 12 years. it is just a matter of weeks before we see oil in the 20's. breaking news, stocks are plunging again today. we are coming off of our lows of

the session. volumei am looking at more than 30% above the 100 day average. we are seeing this broad selling with not too many stocks rising today. steep declines for averages. , it has been look a downward trajectory for stocks to heavy volume and widespread in terms of selling and also seeing stocks making lower lows. all of that is not necessarily a good sign for how market participants are feeling. take a look at the bloomberg terminal. worst. doing the industrials also on the list. a steep declines in the various groups here on concerns about global growth. it is stemming from china, but

it has affected almost everything else. >> it has. energy is not the worst performer today, right? energy is down to .5%, not a small decline but not with -- not the worst. thank you soetty: much. mark crumpton has more from the news desk. states isunited calling for new penalties against north korea after the isolated nation's latest nuclear test, hours after kim jong-un's government said it tested a hydrogen bomb. the ambassador called on the council to have a tough pact of sanctions. it was on this day last year that two gunmen stormed the paris office of the satirical

magazine charlie hebdo and killed 12 people. five others were killed by islamic extremists. charlie hebdo's anniversary includes cartoons that lampooned muslim fundamentalists, politicians, and catholic priests. president obama will take part in a nationally televised town hall on gun violence. the executive orders aimed to expand background checks. 8:00 p.m. new york time on cnn the ohio prosecutors telling the ncaa p/e the -- they will not in them jury transcripts shooting death of 12-year-old tamir rice. civil rights officials say they will go to court and they voted last week not to indict the officers involved in the 2014 shooting.

for heat,d levels moisture, and downright extreme conditions in december. the federal weather officials say el niño and climate change was the chief catalyst. oceanic and atmospheric commission said 2016 was the ofrd wettest in 121 years record keeping the lower 48 states. dayal news 24 hours a powered by 2400 journalists in more than 150 news bureaus around the world. back to you. betty: while china is being blamed for the selloff in global stocks, china is not really the problem. dealing with a communications issue with the markets, not a fundamental problem with the economy. they should be focusing on geopolitical risks that could be a lot worse. the chief investment officer, dan, good to see you, as always.

what a way to start the year. are exciting and some year start quietly. it is all good. betty: what do you mean china has a communications issue? what isu look at happening over the ark of 30 years, they are on a particular trajectory of reform which is going just fine. along the way, there will always need to be adjustments to be anchored. a couple things going on right now our circuit breakers on violent selloffs in the equity markets. we have the same ones here. hours, there's are like first at five, markets shut down at seven, second at 13, the market shutdown at 20. that is an adjustment they need to make. they are finding their ways through this.

they expanded earlier today and will be revisiting and coming up with something that works because they discovered the incentives are wrong. what happens to uninformed retail investments is they say i had better cell so i avoid getting trapped, and that dynamic is bringing the market down. they will fix that. the problem, is it also just inexperience here? is that part of it? with themmunicating market. think of how communicative our federal reserve bank has in relative to what the chinese are doing? they are making adjustments as they go. the more important issue, in my view, is what is happening with the currency. you have seen significant currency devaluations. remember we tend to make

interpretations of what is happening based on what we are seeing and how we are reacting. react in the short-term, which tends to exaggerate what is going on. if you think about the currency issue, it is no longer in china's test interest to take exclusively to the dollar. we are normalizing interest rate policy, alone in the world. the dollar has moved up in a significant way. china announced in december, it will move the exchange rate mechanism closer to the market, so it is moving to a trade weighted basket for exchange rate policy. that is perfectly fine. what it has not done a good job doing is communicating the steps taken. betty: does that mean it is appropriate, the moves they have

made, is that appropriate? >> they are trying to get out of the market entirely. as a first step, they are saying, let's track closer to the market realities of our foreign exchange transactions with the world. let's move to a trade weighted basket currency did. that is appropriate in my view. hard time am having a because it seems like two different things. one is china is trying to, as you say, move away from tying itself so closely with the u.s. and with the dollar. but isn't that separate from which is a seeing, fixed and gradual depreciation of currency, which may signal to people that there is a deeper economic problem in china? so. do not think people want to interpret this as, they are devaluing because they need to try to improve

exports and they are defaulting back to the first stage of their reform process. i do not believe that is what is going on. i believe they are doing what and that is move the exchange rate mechanism closer to real market dynamics by moving over to this approach. we, because we are long chinese stocks or whatever, we're skeptical, the new year, whatever, we want to interpret it through our own particular heuristics. everybody is anxious about china. why? because the growth rate will only be 6% when the rest of the world, developed economies are 1%-2%. we are still somewhat dependent on it that it does not mean the rest of the world is entitled to a growth rate of 11% or 12% or

10%, which came with the last phase of china's growth trajectory. while we were humming along at 10% gdp growth because we were building and building, people were coming on and talking about building bridges to nowhere, china is going to zero. which is not wrong. . that is exactly why china stopped. and started the transition and the final phase, which ultimately is the most constructive for the whole world economy. liberalized, we are liberalizing exchange rate policy, we are empowering consumption. pluswe get the one billion consumers from china, it is good not just for china, but the entire world.

betty: can we get the eventual goal, which is good for the world economy, good for china to do this, can we get there without china falling into a recession? >> i think we can and i think there are plenty of things to be including thet economy at home and the political picture, which you in the introduction. i have never seen, and i daresay i have been right since you and i started talking about this seven or eight years ago, i have never seen china as fundamentally off-track. i have always said since two or three years ago, that you should look forward to china's gdp growth rate coming down to about five or sent or even lower. betty: you mean you should actually be happy about that. arehat it means is they doing the things they need to do, not relying on state letter

growth by investment, which incurs debt, but raining that in and for -- starting to focus on consumption. that will take time to build and it is building in a positive way. we should be celebrating not only for china but for the united states and the global economy. betty: i hear what you are saying. my point is you look at china's gdp and it is going down. you cannot just say it was 11% and now it is 6%. you should say why. betty: stay with me because we did not get to the geopolitics that we will after the commercial break and we will talk with the u.s. and what is going on here in our economy. do not forget to tune in tonight for our market special report all around the world. that starts at 5:00 p.m. new york time, 6:00 a.m. in hong kong. let's take a look at how the markets are trading.

andre down on the dow climbing back slightly from the lows of the session. ♪

by 375the dow is down points. basically all 10 sectors in the s&p have been lower basically the entire session. industrials,ch, those are the worst performers. energy has been one of the better performers, unique despite the fall in oil prices. we are back with the cio, dan. morning, david, you

know, essentially saying i am more bullish about the economy. he basically was saying the u.s. would fly into a recession. i wanted to hear what david said this morning. >> im not worried about the u.s. economy, not one iota. be a better year moderately than it was last year. it will be the year where the wolf shows up at the end of the story, where we get the wage breakout. i think spending will hold out well -- hold up well. the fed will probably raise interest rates, but it will be periodic, not three or four times, if they move at all. iron not far off. i'm a little less bullish for specific reasons. i do not see the fed following through and raising very many times this year.

david onnot agree with wage growth in particular because i am concerned about structural and inflation coming from the ongoing transition to the tech economy, specifically machine automation of physical processes typically done by people. to factory.limited even hedge funds are run by algorithms. penetration and robotics. changing huge swaths of industry, including a lot of white-collar industries, service businesses like the law, even werochip verification

touched upon in august where you typically had phd's running scenarios on new microchips making sure they did not blow up the phone. got the data and are doing the jobs without the phd's. betty: why bother raising rates at all this year? dan: i do not disagree at all. as you know from when we spoke last summer, the fed had to raise rates 25 basis points to take the focus off the assumption that there is any more the fed could do. if you listen to what we are saying, which you are, what i'm saying is there are structural headwinds in the economy that go directly to both of the fed's andate, drop growth inflation. job displacing and cost reducing, efficiency improving. that should help profit margins

but it is not helping wage growth, job growth, and inflation as measured by the fed. i do not think the fed will be doing much of anything this time of year. you think fed officials, including who favored raising interest rate in some respects, he is saying this morning, we are on the path for gradual interest-rate increases, annually one percentage point, it seems appropriate given the data. why do you think they are stuck on that? should they be more flexible? dan: the fed should be providing reinsurance. businessstill in that where alan greenspan was in the are business, but they saying everything is ok, do not worry about it. we are data dependent and we will watch the data. we are preparing and basically

warrant a does not rate increase. betty: should they turn a blind eye to death blind eye to the markets? dan: with wage growth and job growth and inflation, they have gotten themselves in a position in the last eight or nine years in the financial crisis of , iaging financial markets think they should be moving away from that but not all the sudden going cold turkey, blind to the markets. aey are weaving and i have lot of confidence in the basic abilities to look at data and do the right thing. i think they have done href a job. betty: we will have much more with dan in the second half hour of the program. our closed, keeping

eye on the markets. a huge decline across the board, including the naz act. losses.ome major ♪

julie: take a look at what is going on with stocks and we are dipping once again to the lows of the session as we head toward the closing bell. just got an e-mail at the new york stock exchange saying there is a lot of selling volume as we approach the slows. it sustains itself for the next 35 minutes or so. joining me is tim, chief options strategist joining me. dayously, it is an active for you guys as well. we're seeing the vix bump up. seeing a lot of hedging volume for further declines here?

>> most of it is actually rolling the positions forward, trying to buy some time. we are seeing the implied volatility being transferred to next week, a monthly aspiration. i think given the fact we had a sharp selloff, the vix not off above that selloff, you may see the new positions being added. betty: where else are you seeing a lot of activity? clean selling off, come -- tom keene has been talking about correlation, this risk scenario, is that what we are seeing in options as well? >> somewhat conversely, we are position ofng to a buyers if these oil stocks dip significantly further, with that implied volatility, a fancy way of saying options. some of the big players i think are using the stock to drop, to

maybe position at levels they feel comfortable at that valuation. betty: one area that has done well today and a little better is retail. you are looking at a retail stock, in particular target. it presumably does not have to do with soul cycle. what is drawing your attention to this stock? that was the first thing. year, one oflast the worst performers last year. 3% yield on the stock. performance is everything, we target off about 2%. i like the fact that relative performance starting to close last year. it is fairly cheap, about 14.5,

trading on a discount with an above-average yield. lower gases should help. .etty: walk me through >> the 3% yield, selling a call that -- out in april where the stock is trading, looking to give a target somewhere around the seven percent level. betty: thank you. we appreciate it. also in target, retailers have been holding up well. more on the selloff next. ♪

betty: let's start with a check

of the headline. mark crumpton has more. mark: police in paris shot and killed a man wearing a butchers cleaver. an explosive device. he was carrying a piece of paper with an islamic state emblem. the incident happened on the one-year anniversary of the deadly attacks at the offices of the satirical magazine, charlie hebdo. the house of representatives will vote as early as next week on legislation posing new sanctions on north korea. and if the -- nancy pelosi promised there would be strong bipartisan support for the measure. similar legislation did not advance in the u.s. senate. officials in north carolina has --eduled two weeks in office bowe bergdahl faces charges of desertion and misbehavior here and he was held by the taliban for five years after he walked off the base in afghanistan.

he could face up to five years in prison. violent storm damage in the united states let -- last month will cost about $4 billion and half of that will be covered by insurance. tornadoes in texas and flooding in the mississippi valley caused much of the damage. --r tax refund may take you may take longer this year but you will get it thanks to the federal revenue service to prevent tax fraud. security could draw out the rating -- the waiting time. a spike in suspicious returns last year. dayal news 24 hours a powered by our 2400 journalists and more than 150 journalists around the world.

-- news bureaus around the world. betty: we are back with dan. even as we are talking now, the dow is hitting new lows here. not blaming you for this, but it is down at one point. the fact we have seen so much theing these days, raises question about whether we are seeing a global recession happening. in the united states or in china. we were e-mailing this morning. george soros is saying he -- it reminds me of 2008. would you agree? dan: if you look at the tape, i guess i could agree. fundamentals, the i do not agree. i do not think there is a hint here of a systemic crisis in any country, and certainly not a global systemic issue. i think what we are experiencing is poor sentiment. there is a lot of gloom, which i

think traces back to insecurity and vulnerability around paris, san bernardino, isis, jihad, saudi arabia and iran, and some china, but i think people, there is a lot of unstated anxiety out there around economic issues. people understand the economy is not quite operating as it should. thele intuitively see displacement of workers, the penetration of automation, and they hear estimates like the bank of england estimated that 45% of human workers would be displaced by technology. our investment here in new york has an estimate that we will lose 76 million jobs. is anxiety about geopolitics, anxiety that changes. the problem is everybody around people who are watching is

reacting with the same they are used to reacting to everything historically by. not a lot of evidence that in the political discussion, the economic discussion, that the ofticipants are taking count the deeper structural changes. betty: there is something to be said that sentiment is extremely important and he almost sometimes wish yourself into a recession or into economic struggles, right? economics is important. dan: people's jobs are there. still aoyment market is lot weaker than the unemployment rate would suggest because the participation rate particularly for people in the core working

years of 25 to 54, it is still only 77%. it is one million point five jobs below the trend of you have got all of these anxieties and evidence that jobs are disappearing and not being created, and that people who are eligible to work are not working. they're not buying the headline, unemployment at 5.3%. they are not buying it. they understand intuitively, the american public, your viewers, people in general, are well educated and have access to a lot of information and they're trying to understand how to connect the dots between the superficial stuff we're hearing, business as usual, like you heard from the fed before, raising rates, whatever, and what is really happening. i turn on the tv in the market

is down 2.5%. betty: the usa today, the dow is down. is the marginal buyer and seller in securities markets, specifically in the stock markets? that is still hedge funds. what is the situation with hedge funds, they have institutional investors who have to respond to their own constituencies, whose return expectations have been disappointed for several years now. everybody is jumpy and i am not whether pension fund should have adjusted expectations for the low interest rate environment, i am not allocating lame. i'm trying to describe what i see happening in the environment, everyone feels like they are under pressure, the only people who are not our people not managing other

people's money or who are with a very long time horizon. michael bloomberg, if he were investing his fortune in the stock market, he would not care if the market were down 2.5%. he would be adding to the position. or warren buffett. not to compare in any way, but even myself. i'm not managing capital right now. not have to face investor questions. if it is down and a company i like, i'm happy. where will it be in five years and not five minutes? betty: i'm glad you raise that. you were frustrated, right? the game were of established. there is no blame for anybody. it is a question of, how can you operate with integrity to deliver the best you can and the strength you have to offer to

anybody? got out because i felt in the current environment, managing money for investors who have a lot of pressure themselves and who have quarterly liquidity, and therefore they need to make decisions on what they will do, and are looking at the same information we are at the same time every day and hour and minute as they watch you, it is very challenging and it is a recipe for a lot of selling positions when you should be holding and buying. you're talking about expectations of a lot of people. betty: right. i know you are not assigning blame, but some of these investors may have to adjust expectations of return from now on, given some of the structural changes you have talked about, that some of the same to --

conditions that sell 10% average return in the stock market might not be there anymore. dan: when i got into the hedge fund is this, the business itself was much smaller. there were still pricing efficiencies. the market was much more transparent. betty: i'm asking you with all due respect. you think the hedge fund itself created some of those expectations, and when the going gets tough, they bailout. a generalnot make comment on the hedge fund industry. the only promise the hedge fund industry has made is that it would deliver absolute returns. which means, whether it rains or it is sunny in the market, over a reasonable time horizon, which is not a day, but at least a year, you will deliver positive returns. in a down market or in up market . a lot of hedge funds have done a good job of that.

some have done a less perfect job and others, i have one very down year. measure.aster by any for my investors, and we worked hard for three subsequent years to recover the majority of those losses. but it happens. investor except the guys who did not have a down year, are in jail. investors have down years. investors have down years in their career and a need the time to recover. very goodt is a quote. only a couple of minutes left and we have not even touched oil. oil prices, i know you do not think we are in a global recession, but why are oil prices at 12 years lows? saying this morning, is

a just a supply shop we're dealing with here? dan: oil is like any other a con -- commodity. saudi arabia a year ago made a specific decision to maintain we willrket share, and continue to produce as much oil. libya is coming on. there is a lot supply. demand is still growing at one million barrels per day incremental every year. there is a lot more supply coming up. saudi arabia thought ok, maybe we could improve the market position by undercutting shale producers in the united states and putting them out of power? do not bet against american ingenuity. they responded so quickly a lot producers down current levels or lower.

here is the thing. saudi's foreign exchange reserve dipped from 750 billion, 100 50 billion down to 635 billion. if they keepates this up, by 2020, saudi arabia will be insolvent. they cannot go on like this forever. think, few years, but i and i know a lot of people who oil,more than i do about including tony, who i'm working on a project with right now. believes thathe in the next year or two, saudi arabia will have to stop taking the pain it is taking an oil prices are going to stabilize. not does not mean there are going to be other problems that affect supply and demand. for example, electric cars will

penetrate in a serious way. oil is on the wrong side of history as a fuel for automobiles. betty: that is long-term. long-term.think in i think what will happen in five years, it will be hard to make decisions about what will happen -- next or even my month or next quarter. betty: perfect day to have you. much more is ahead on bloomberg markets. much of the investing world is focused on china. and tomorrow's u.s. jobs report swing the market in the other direction? claims areess hovering around for decade lows. here is another look at the dow. off the lows of the session, we are down almost 445 points. just about 20 minutes ago. ♪

welcome back. markets in turmoil. .till steadying weisenthal, cohost of what did you miss. we were just talking with dan about the jobs market. there are structural problems here in the jobs market. overall, it is still growing. >> concerns about whether it

would hit the inflation target that there is a lot more confidence on the labor side of things. you have to remember unemployment has been falling faster than had been expected. the fed is criticized for being overoptimistic. there are being pessimistic on the jobs front. with market volatility where it .s, a lot is riding on it the fed decision to raise rates come will people even do more second-guessing about what it was. if it is good, i think people say, it is not that bad. betty: despite the sentiment being poor, we are still creating jobs. wages are the big question. why haven't we seen them move? >> economists are looking for a

year over year gain. that would be the highest number since 2009. the last few months of last year, there started to be an .ptick if we do get a strong number, we might be looking at something that looks like a breakout. that would give people a confidence we are at full employment and the inflation targets, once oil -- >> thank you. so good to see you. coming up in the next hour as they close the markets for us. much more is ahead. the close of trading is on its way. something liket 5% this week so far. over 900 points have been lost on the dow. we are down 2% now. ♪

betty: what a day in the markets

so far. we are 10 minutes away from the close in the trade. julie has more. it seems like what we saw in europe. we hit a low and in the last half hour or so, we are coming back a bit. two things to watch as we head toward the close and overnight. the chinese market open tonight. right now, all three major averages are down sharply but not as sharply as earlier. take a look at the s&p 500 over the course of the day. bounce a little bit of a as we head toward the closing bell. worst performing groups and individual stocks, technology, a big loser today. estimatestest to cut on apple. microsoft, amazon, amazon has .een a little choppy or

it has not been a straight line down. we have seen a lot of week is. financial also week, the yield curve flattening. that is causing concerns for financial concerns. in addition, saying we are seeing consensus estimates as to high andtoo particularly through the big capital intensive banks that will fall, he liked wells fargo that is not helping the stock today. an incredible decline in the 37%, theyay, down were halted a couple of times by the circuit breakers. it is because of the company's new plan to shore up the balance sheet, issuing new shares to buy back debt. it is a complicated plant. analysts say it is too expensive and that is one of the reasons why the shares are down. betty: thank you so much. stay on the markets as we head into the close.

i want to bring in joe, the investment strategist who oversees more than $100 billion, joining us from san francisco. good to see you this afternoon. long, we have been talking about the comments coming up from george soros, saying he sees shades of 2008 here in a glow -- growing global market crisis. do you see something similar brewing here? would see itnow i as sinister. we have got a lot of the same concerns that bogged down carrying over5 into 2016 for global growth fears, china slowing down, policy response from china. add to that geopolitics, which has heightened the level of anxiety over the past week, i think it is manifesting itself into more volatility. betty: it is indeed a the fact

that we are this far down in the first few days of the market, does it tell you that yes, maybe those stock markets were overvalued? in 2015,a big debate are we fair valued or overvalued ? maybe this was proof that we were. >> it will be hard to find anyone who will make the argument today that stocks are cheap. i think valuation certainly are reaching stretch levels. profit margins which are around peak. you have a bull market in the equity markets from back in 2009, up over 200%. the majority of gains in equities i believe are behind us. it does not necessarily mean markets will capitulate from here, but it means we need to manage our expectations for what types of returns we need to expect moving forward. betty: what returns should we expect? >> the majority of gains in

equities will be limited to earnings growth, without a whole lot of multiple expansion, if are given where valuations at, you could probably expect another 2% or so coming from dividends. you're talking about low to mid and single digits. end of thering the business cycle. while we do not necessarily believe a recession is imminent, the economy is clearly maturing. it shows expectations for equity returns. i hear low to mid single digits, i think that sounds optimistic. given that we barely even squeaked out a game last year. not mean to downplay the risks taking place around the world. a lot of things keep us up at night and i believe this year, volatility will persist, now that you have the fed raising

interest rates, especially at albeit gradually. if you take a look at what is happening in the u.s. economy and the consumer services sector, all signs lead us to believe the u.s. economy is doing fine. we are seeing modest improvement in europe. though there are pockets of risk and things to be concerned with, i am not sure we want to beat the risking our portfolios -- -- derisking our portfolios. betty: thank you so much. what did you miss is next. do not get to two -- do not forget to turn it -- tune in at 5:00 p.m. new york time. ♪

>> we are moments away from the closing bell. i am scarlet fu. i am joe weisenthal. "what'd you miss?" i am joe weisenthal. "what'd you miss?" alix steel is off today.

scarlet: u.s. stocks closing lower. the worst start since 1928. --na's market tomorrow turmoil, how long will it last? the worst start to the year and global stocks since 2000. how much does this matter? report, tomorrow's job the data you need to see before those numbers cross. we begin with the markets. what a day. three-month lows, session lows of the day, the superlatives incredible. the dow dropping 350 points.