♪ from bloomberg world headquarters here in new york, good afternoon. i am betty liu. stocks took off at the open, and they are now back in the green a little bit. for the firstws time so far this year. why was there some volatility? blame oil prices. oil plunging to the 20's for the first time since 2003. rebounding before closing, oil has lost 15% in the last six sections. berkshire hathaway's worst years, is it time to warren buffett to change strategies to get his groove back? we will hear from tom, whose firm is a large investor in berkshire and berkshire is a top

holding. we are about an hour away from the close of the trade. it has been a stomach turning day based on where oil prices have gone. julie hyman has the latest. we thought we would keep the gains from china. julie: it did not turn out that way. stocks have been bouncing around all day. right now, major averages are in the green. anything goes. take a look at the s&p over the course of the day. above and below, at least half a dozen times if not more. all this volatility. we look at oil prices. there has been some degree of volatility there but it is a much tighter range and the direction has clearly down. here, 2993 for the price of crude. come back but a

still sharply lower on the day. also off tos, oil, a bad start. today, 17.5 percent. this is on top of the 30% decline last year and a 45% decline in 2014. still a lot of pessimism out there. people keep looking for a bottom and they have not found it yet. the s&p 500 meanwhile for your today, down 5.6%. is there any light at the end of the tunnel? interesting story today saying, could it be earnings? it seems analysts are not saying so but back in 2015, here are the earnings seasons versus the s&p 500. we saw the s&p rally into the earnings season. peak ofought at the each earnings season, timewise, in the middle of the earnings season, you would have gotten

11% return on the s&p 500, much that are than the s&p actually returned last year. not rally into the earnings season this time around as we await numbers this week from jpmorgan, citigroup, wells fargo, intel. we will hear from all of those before the week is out. >> it could be a messy earnings season. thank you. let's get a check of the headlines this afternoon p mark crumpton has more from our news desk. the prime minister says a person affiliated with the islamic state is responsible for a deadly blast today. explosions say an killed at least 10 people and another 15 were wounded. at least eight of the victims are said to be german nationals. cracking down on a number of groups including the islamic state and attorneys are seeking

-- turks are seeking independence. a deadly car crash, out of jail. from a texasond jail area -- earlier today. is charged with hindering the apprehension of a felon, her son, ethan, fighting as edition from mexico. they were arrested last month. vice president biden is weighing in on why he thinks the former secretary of state hillary clinton is struggling against senator bernie sanders in early voting. the vice president tells cnn that sanders has "credibility on income inequality among the primary voters, something mr. biden thinks hillary clinton lacks. he also told nbc donald trump has a real chance of winning the presidente. the vice did not see himself reversing his decision to stay out of the the trump scenario become more likely to paul ryan is blaming the federal reserve for a week economy.

he accused the fed of embracing liberal style policies that, along with president obama's agenda, have hurt the economy. the speaker discussed his plan for growing the economy. mr. ryan: we are going to go on offense on ideas. we will give the country a bold progrowth agenda so they can choose the direction the country will head. matt: the speaker says the president must present a plan for the state of the union address. you can watch that speech live at 9:00 new york time right here on bloomberg television. global news 24 hours a day powered by more than 150 news bureaus around the world. back to you. betty: since the start of the year, you saw china sending a shockwave throughout global markets. rbs is giving investors another reason to panic. economists are telling clients

to sell everything. they say this will be a cataclysmic year. global markets fall by 150 or oil prices could sink to $16 per barrel. rbs economists are not holding back in their doomsday scenario. at as a managing member truth value investor. i know we will talk about warren buffett in a moment. that is just sheer panic. tom: i was going to step off the stage and tell them to sell. anytime the world minds up and it seems like it will just continue to draw a line and that curve,nd you're getting close -- just because oil went from 120 down, the next stop is 16. nature.st human

we processed things that way. iscontinues until there disruption. even in china, i read as much as it sounds like they are wise to the part i just read of china which is both restrictions on gambling and all of the associated activities -- >> the restrictions on luxury, the consumer, yes. >> they have the best start to the year i read on bloomberg. just when it could not get worse, shoots of the next turn. adopt is you have to as a value investor, you might make money over time but you cannot make money on time.

it you cannot deliver tomorrow afternoon. it will happen over time. you end on the companies you invested to reinvest productively overtime. of reinvesting. your returns will follow. i am told 70% of your portfolio is in global companies that have exposure to china. who are they? be athe largest would global leader. a host of other interesting businesses. , and the third one owns a portfolio spirit. those are the main ones.

there is an enormous amount of opportunity. the markets are just being penetrated these companies. it is an enormous amount to drive, demand consumers in his markets. i am not nervous. it has been deplorable. our company is run by families with a long-term horizon have been able to stay the course. turn comes onise one part of the country, we are there. we have not fled or retreated, as business owners to show less impact on earnings. they stayed the course. i think that is the message we have with management. stay the course. betty: warren buffett has been

criticized heavily over the past year or so for staying with losers, essentially. walmart, american express, ibm, a big loser in the portfolio. do you think that was the right decision? tom: i suspect the next element that crosses, that he can -- you would see many of those positions subside. for the moment, there has not been the opportunity. he still has the ability to hold those shares. i don't second guess warned half his ability to pick stocks. i am most impressed in his ability to pick capital. true and also, the

partnership with this group. betty: which has been lucrative for both of them. before thecated stock is getting to the point where it is near book value, not that far off here you expected him to buy back shares? >> we have had a volatile year. i think the market is out 400 per -- 400 points on thursday. i think his share price hit 192. it is very close. bit, i thinkittle it may have grown a little bit. it is awfully close. ironically, i think the market only traded $180 million worth of shares. a fair amount,n but it was not that much activity.

he will need to deploy billions of dollars. doing so at share prices near or around the level is value creative because the intrinsic value per share is so much in excess in the market. hold him backuld from doing that? buying evenmise of in the existing things we have. those would be big. he would rather do that than by back. he said that before. tom: amazing thing is he is willing to do nothing. structure, he just looks across all of the universes and deploys capital. when he found the bargains, he put the money into the bargains than. he can afford to do that. good to see you.

.om, the managing member much more is ahead in the next 20 minutes of bloomberg market. what will be first, $10 oil or $100 oil? down.ns of slowing we get an inventory report tomorrow. from hillary clinton to donald trump. accusing china of currency mapulation. dartmouth business school says hold on, there are a number of falsehoods about china. he explains coming up. here is a look at the nasdaq trying to close in the green for the first time in nine sessions. ♪

betty: welcome back. time for a look at some of the biggest business stories in the news right now. airbus overcame technical struggles and engine delays. year, airbus and boeing are battling to win market share in china, forecast to be the world passes against market in more than a decade. nissan is plaing to battle back against car sharing with more connected vehicles than drivers can personalize. uber and lift will have, he is downplaying it. make cars that are "much more sexy and much more attractive" in order to sell them. uber is looking to expand its services with riders by its

third party at. trips and experiences could include everything from music, restaurant reviews, turning him heat or off the heat when you are away from home while writing your over. that is your update. pushing for an emergency meeting. oil minister to talk to opec about oil prices. a key issue for venezuela. fact oil prices have gone down by so much. oil and gas analyst for bloomberg intelligence. saying, oildent was is at $24 per barrel when you

essentially a basket there. what does he mean? >> it is the type of crude he sells. prices in venezuela are dis-counted. betty: he is feeling even more pain? peter: incredible amounts. look at the cost and venezuela. relatively high. if you look at the debt level in venezuela, it is high relative to what opec produces. they are feeling the maximum pain amongst people in those countries. betty: we had that news earlier that was then refuted, that we would have a meeting, so what is going on here? peter: whenever oil prices tank or collapse, we see the weaker nations with weaker balance saying help me now.

the reaction usually from the leaders of opec and saudi arabia are saying, not yet. so essentially they want to inflict the pain a little longer. peter: exactly. it is june. betty: what will happen from now until then? peter: the mantra for 2015 for the oil markets was lower for longer. i'm sure this is common. 2016, a new phrase is entering the lexicon. even lower for even longer. the question oil markets are asking is how low can oil prices go? looking at the u.s., the north dakota department of resources suggests the shed and of existing production will occur at $15 per barrel. you look at the variable costs of production for other low-cost regions in the u.s., we're talking $20 per barrel range.

it might seem far-fetched now given we are just crossing 30, but it is not impossible to conceive of a scenario where that occurs. betty: tomorrow we have an interest -- inventory report. we will see another build up? we will see tomorrow. one thing to look for is when refiners actually go off-line for regular maintenance. as we go in, you're likely to see storage build. is stored ats it extremely high levels. we could see the levels reach a maximum which would again pressure them significantly. betty: gas prices are lower and costs are lower. still ahead, we have options insight. today's trade involves industrial giant struggling, particularly in china as demand

slumps. ♪

julie: joining me is kevin, the chief investment officer at capital. it is time to talk options. in the had volatility market as of late. it is hard to know what will happen next. from the options perspective, how are you seeing people play all the volatility in the market? they are not necessarily buying the vix. >> they are not. the skewed level over the last years, people have been hedging. with an important stat that has come out since 1990, the average is around 20. you are seeing when it is above 20, the s&p has returned about 5.8% annually. if we cannot have enough even though we have had a down year,

given oil prices, going into a rising interest rate environment, it is just figuring out what will be the best place to we saw technology do well but some of the valuations are extremely high on them. julie: if fact -- sounds like what you're saying is you want to look at individual stories rather than try to make these bets,cro that's -- necessarily. kevin: that will dictate action for the market and that will dictate where the year will end for the market. look at what happened every time the market took a 10% correction, earnings, that is where you will see allocations go. thatost important earnings come out our energy earnings. they have been very quiet. every management has this last earnings cycle. they say they expect $50 per barrel. trade today is not

an energy company, though i would call it energy adjacent. or at least commodity adjacent. caterpillar is what i am talking about. this company is at least somewhat dependent on minors -- ers, selling farming equipment. so earnings wise, there is not necessarily a lot of options for companies like this. kevin: around its neck, energies and commodities. you were talking about alcoa and we saw them co down. we will see sloth from the miners as well as energy producers. they have already built up excess capacity. caterpillar's trading at 18 times forward earnings and they have a 5% dividend, which could probably come down? why buy caterpillar when you can buy microsoft trading when they have a 2.7% dividend? julie: what is the trade?

kevin: the great way to play this and we played energy earlier this way, the same type of trade. onwill buy $60 out caterpillar, sell 50 against it, a 2.83 times selloff ratio and for you it costs two dollars -- $2.83. is not necessarily a no-brainer because the stock is off significantly. people think there could be a bottom here and it is important to buy yields. the flow through will come through and it will be a bloodbath. extra credit for watching so carefully, quoting me back to me. more is next. ♪ we live in a pick and choose world.

choose, choose, choose. but at bedtime? ...why settle for this? enter sleep number, and the lowest prices of the season. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore. so your sleep goes from good to great to wow!

only at a sleep number store... find the lowest prices of the season, going on now. save $600 on the #1 rated i8 bed. know better sleep with sleep number. betty: live, you're watching bloomberg markets. let's start with a check of the headlines. mark crumpton has more from our

news desk. the u.s. supreme court has struck down florida'system for opposing the death penalty, saying it does not give jurors enough authority to decide whether capital punishment is warranted. the 8-1 ruling comes in the case of a man convicted in a fatal stabbing. he was sentenced to death after a jury recommended execution. lawyers for the u.s. army and sergeant bowe bergdahl argued during h -- a pretrial hearing. the court-martial is scheduled to begin in august. bergdahl disappeared from his post in afghanistan in 2009 and held by the taliban and -- tell a ban for five the -- taliban for five years. the united states children's fund is appealing for $25 million in aid money to help put sudan's children back to school. unicef says the two years civil

war in the world's's youngest nation has forced more than 400,000 miners out of school and destroyed as many as 800 places of learning. to ongoinges, due sickout by teachers, it started last week with a handful of schools. teachers are upset over class-size pay and buildings, also rick snyder to deal with debt by creating a new district. the world's largest lottery prize is getting larger. the jackpot for tomorrow night's powerball ruling has reached 1.5 and dollars thanks to surging ticket sales, and the money would be paid in annual installments over 29 years where the winner could opt for a lump sum tame it of 900 $3 million. your odds of winning are 292,000,000-1. global news 24 hours a day

powered by our 2400 journalists and news bureaus around the world. we will talk about how we will spend our winnings. >> payments over 29 years or lump sum. we have got less than 30 minutes for the close and nasdaq is daying to head into it a losing streak. abigail? abigail: that is right. another volatile day. higher on the composite index. down briefly and now the composite index is up .7%, trying to -- all of this on the back of the tech strength. the list in of terms of positive point influences on the composite index are facebook and alphabet. stephen thinks these two stocks plus amazon are likely to outperform in 2016. once again after being top

stocks in 2016. he thinks the long-term investments are likely to drive growth this year and send shares higher. tradingbig tech stock higher, intel up nicely today after j.p. morgan -- coverage with an overweight reading and a $40 price target. plus, operated shares through a buy from a neutral. the team thinks the company's server chips will continue to dominate hyper scale and cloud plus they expect the computer pc market to be less bad. now, the stock is trading quite nicely into that event. abigail, thank you so much. a whole world appears to be blaming china's management of the u.n. for the turmoil, and our next guest says hang on, not so fast. if the governor of the people's bank of china is a currency manipulator, then janet yellen is an interest rate

manipulator. the recent move to fix the price of currency really amounts to currency manipulation? joining me now is the dean of school of business at dartmouth college. thank you for joining us. interest yourreat op-ed yesterday you are saying there are a lot of myths here about the chinese currency. what is the biggest one? what do you say people are getting wrong about the currency? a great question. the basic question a lot of people get wrong is not acknowledging every central-bank by virtue of putting money, you do that and it is counterfeiting and we go to jail. the way monetary policy works is you can to fix a particular price in your country or price in global markets. over the many decades, a lot of central banks, including the united states in the system after world war ii, they choose to fix the price of their currency to something rather

than interest rate. so the chinese central bank, rather than moving interest-rate up and down, essentially, which of course affects the u.s. dollar, you're saying the chinese central bank just does it directly and we should not misinterpret that. >> that is exactly right. every central-bank is trying to control its is this cycle in part with spending businesses. countries that do not have developed capital markets, they tend to want fix the price of their currency rather than try offix interest rate because how underdeveloped capital markets are from central-bank to the decisions of households and companies. betty: that does not protect janet yellen from loss -- lots of accusations including people like donald trump who say she is manipulating the economy through interest rates, and she is helping the president by keeping the easy monetary policy.

central bank has a capital charge. that is the nature of how center -- central banking works. what are the other myths about the chinese currency in the way it works? is the valueg myth of nominal exchange rates, like the one dollar exchange rate is drivesy force that exports and imports between countries. the overwhelming and." evidence is that that is not true. really over time, the deep economic forces of connectivity look for theou united states in recent years, the yuan has appreciated against the dollar 29% in nominal terms.

trade deficit has grown by more than $2 million in that time. betty: how come other central banks have deployed valuation as the economicout of malaise? i was there in asia in 1997 when the thai government decided to devalue air bots and way to boost of the economy. >> a great question and a good example. time for a while, changes in nominal change rates can help influence the decisions of businesses and countries around the world. the key point is when you think over the medium and long-term about what forces create good jobs and good wages in countries, what happens with countries currencies is not major economic reform. it is hard in history to find countries that devalue their way to sustainable prosperity. find someyou were to

fault with what china has done in the past few weeks, do you find any fault in what would it be? isone thing they're learning how to telegraph policy changes in a transparent and confident building way. that is a challenge for pre-much every central-bank around the world given how fragile capital markets remain. part of what the governor and other authorities in china are doing is trying to introduce new market reform at the same time. learning how to do that is difficult. it is like riding a bicycle. you really have to do it to do it properly. the first time, but certainly it is an early stage. what policy should we be worried that how they are managing currency, what are the policies we should be worried about? >> a few moments ago we were talking about starbucks. what is clear is we look at the executives of global companies based in america and other

places, policy concerns they have about chinese growth are real but on a different set of issues. it is about market access to can the company serve that market at all? once they are there, are they on a level playing field? protection of intellectual property. from american companies in particular, talking about intel moment ago, to them, the protection and the ability to deploy their ideas and products in china is a big concern. those things really determine the jobs in america that can be linked. on a more sinister level is the cyber hacking that has an occurring. go, what prompted you to write about the op-ed?

>> really important for this big policy in america, how do we create good jobs and good wages? focus on the we wrong policy issues and it clouds out the ability of our leaders in the united states to bring foreign leaders into a conversation about how we can grow the economy around the world in a way that works for .ompanies betty: much more is ahead in the next 20 minutes. it is getting worse for corporate bonds. the worst since financial crisis back in 2008. why the outlook has gotten so bad. plus, buying momentum stocks has gone out of style as the market humbles. how much does the selloff have to do with the buyback blackout period ahead of the earnings season? a railroad has underperformed its peers in the last few quarters. shares are down.

♪

welcome back. a look at some of the biggest new stories in the news right now. the oil company will cut 4000 jobs by the end of the year and that will bring the number of bp's upstream jobs to fewer than 20,000. the oil slump has cut into bp's revenue and profit. prices are trading near a 12 week low. volkswagen's two-year diesel recall plan. brand'slies to the diesel engines sold in the states from 2009-2016.

air-quality regulations associated with the company passes use of a seat device in those cars. volkswagen agrees the initial recall plan as proposed was unacceptable and says this is a chance to work for better solutions. readyusk says his team is . an air force base in california. he said it will be the launch of the science mission. back in december, nine successfully launched and landed upright on its head. always on a mission. that is your update. corporate america could be facing credit downgrades this year. the health of indebted companies is the worst since 2009. as many as 17% of the companies it covers could be downgraded soon. joining us now is lisa.

the gadfly columnist. how bad is this? lisa: it is not entirely unexpected looking at how many risen.yields have given what is going on, oil prices today plunged below $30 per barrel. this is real carnage we are seeing today and frankly the whole week and the whole second half of last year. not that surprising you can see companies really struggling. they are expecting the number of downgrades they do of companies this year to out pace there perspective of graves the most in 2009. much: this is pretty across the board? lisa: they talked about china, they talked about oil and metals and mining. certainly the carnage we have seen has been somewhat isolated to those sectors. not completely.

there is a question in markets going forward, is this a symptom we are seeing being borne out within the commodities market or is this cause -- the cause? it has deftly hit harder because there was a bubble in the commodity prices but it does reflect a global slowdown in growth that will hit a lot of sectors in retail and in telecommunications, and even media, you're seeing companies struggle. some of these companies have on thed a lot of debt heels of easy money policies. inevitably, a growing number of them are struggling. this is not the end of it. betty: it might be the beginning of a wave of default? an interesting report came out today and said right now, as we look at u.s. high-yield wants, they are pricing in a 44% chance

within the u.s. of one year. that is pretty dire. is could argue it overstating the cause because of the energy sector and a metal and the mining, incredible amounts of distress this and last year, but there is something more going on here. and more and more people are saying what we are seeing reflects something broader than just commodities. >> right. it is not just about the oil market. high-yieldean the market gets smaller? will we start to see it straight -- it strength -- it shrink? for: it has been shrinking you are starting to see the contraction and companies if they can cut their debt and if not, look for a restructuring. phase ofering the next the credit cycle. deeper and auch

lot more pain to come, arguably even more in the commodities sector. betty: thank you. commentary, go on that terminal or search bloomberg s-1 on the web. the trade is just minutes away. here is a look at some of the stocks heavily traded today. ♪

betty: welcome back. that is time and warner, the media giant is the best-performing stock in the s&p so far in its young year. the new york post reported the

-- timener ceo hinted warner declined to comment -- two, to bloomberg. we are looking now back in the green. for the nasdaq, it would be the first positive close of the year. julie hyman has more. we have rebounded. julie: we have after a volatile session. we are in the green. the nasdaq has consistently been the best of the three perhaps because it had been the worst going in today with that egg losing streak betty mentioned. if you look at the s&p over the course of the day, you see volatility you experienced all up and down. it really seemed to be a struggle for investors to do much buying today until we got into the latter part of the session. take a look at the terminal for the winners and losers. telecom and utilities are the only two groups in the red. energies and materials have

turned higher. lessetionary have more or been in the top spot throughout the day. individually, stocks conjuring the most to the gains at the moment include apple, which got a couple of positive analyst calls today from bank of america . exxon mobil really remarkable. the stock is rebounding even in the face of oil prices, a look at that in a second. wells fargo higher after it reports its earnings on friday. an important story today dipping below $40 per barrel right around here. andunding is down 2.5% still its slowest cinders -- since december of 2003. i want to take a look at the 10 year note today. we have been seen the yield at the lowest since october, though it is bouncing along with stocks. in other words, as we are seeing more buying with stocks, we are seeing not quite as much buying with treasuries.

yields at 2.12%. betty: thank you so much. let's stay with the markets. analysts at j.p. morgan are seeing selloffs in equities amplifying. this is due to the blackout on a share buyback. explain the phenomenon and why investors are feeling that. joe, what is j.p. morgan exactly saying here? joe: their famous analyst was back inr his cause august. he made some good calls after the market selloff, the s&p. said, do not call off the dogs now that we will see more selling pressure. more losses. , the marketed faltered in september and he was the head of that. the buyback thing, there is a blackout time leading up to and companies basically

discouraged inside trading or any manipulation with share buybacks and what that has done has taken away a -- the bull market in the seven-year bull market, share buybacks have been really the big driver of share increases when nothing else has been going right. when you remove that, you leave it open to a big decline. going into earnings season now but the last two quarters, earnings contraction march and -- market wide, we seeing headwinds out of china. there is no buyback to fall back on now. betty: doesn't that happen every quarter? joe: it does but the other factors are negative and it does not pick up the slack. betty: it could have affected stocks before when things were better. joe: he also cites quantitive trading, sensitive selling by computer models and other things like that. it is sort of the black market.

the stock market, he sees that as making matters worse and we expect to see more of that this year. betty: that means momentum buying is more in favor. joe: it is the strategy we take the best performers over 12 months and ride the coattails to further gains. have apple is down and facebook is down. the companies are not really pulling their weight so far. year, iftum trade last you were expecting that to keep going, you might be sorely disappointed. we are on the a couple of weeks in and it could regain footing. it is something to keep an eye on. betty: what are strategists telling you about today's trade?

joe: a little bit of uncertainty. we saw gains evaporated in the middle of the morning only to come back at the very end of the day. we are a little more pronounced at the upside today. it only happened in the last couple of hours. people are thinking slowly but surely we are getting back into the green and this route might be over but every day is a new day. betty: exactly. we all are waiting for the overnight news. thank you, joe. that is it for "bloomberg markets." the close is next. here is one last look at the major averages. we look like we are finally going to hit the green, close the green -- close in the green including the nasdaq. ♪ we live in a pick and choose world.

choose, choose, choose. but at bedtime? ...why settle for this? enter sleep number, and the lowest prices of the season. sleepiq technology tells you how well you slept and what adjustments you can make. you like the bed soft. he's more hardcore. so your sleep goes from good to great to wow! only at a sleep number store... find the lowest prices of the season, going on now. save $600 on the #1 rated i8 bed. know better sleep with sleep number. >> we are moments away from the closing bell. i am scarlet fu. joe: i am joe weisenthal. "what'd you miss?" i am alix steel. ♪

>> u.s. stocks closing higher, oil falling below $30 for the first time in 12 years. joe: the question is "what'd you miss?" the emerging market slowdown may be hitting developing markets. joe: we look at how savings have increased and the desire to spend has not gone up. >> the world's biggest oil under $1bought for million in 1933, we will dig into the oil giant. >> we begin with the markets. giving u.s. stock indexes the first back-to-back advances in three weeks.