get inflation up but it has not quite work. we have to look at the oil price and look at the pressures of deflation. george: you cannot look through it. it is right there. draghi is going to he now has apparently the support of the bundesbank and he has the evidence of the slowdown, so he will do it. how would you play the market in this kind of environment? what do you buy? george: i am no longer in the market. i don't know the details. i have become the hedgehog, the

one big idea is deflation. and therefore, since i don't , i shorted s&p, i shorted raw material producing countries and asian countries currencies against the dollar, and i went long on u.s. government bonds. francine: this was at the end of last year, and you were proved right. for this year, when does deflation stop being a concern? what will kickstart inflation? george: i think this year is going to be a difficult year. barron's is on the downside.

bottom, everything is declining rather rapidly, and it will hit -- it hit some kind of a bottom yesterday because there was a give up, the beginning of a panic, and it turned around, but it wasn't a bottom because it didn't have the big shift. today, there is a followthrough. so you can have a bounce. but i don't think this is a good ending point here because thirdly you recover one to two thirds of the total loss. we have almost recovered one third already. , it's have a real bottom

always retested. time to buy, in my opinion. but rather for those who have to sell, sell. do you worry about the u.k. leaving the eu? george: i don't know too much about it. i noticed the currency at a new low. that is probably good for some stimulating. i don't know enough about it. as i said, i'm a hedgehog. we also had the ruble cut. what is your take on russia? george: i think it's very clear that russia is in a very, very

weak position. again, it has enough reserves that it can last a couple of years. big year for it is 2017 when a lot of that comes due. i would say they have to do something now, and in fact, they thedoing something, because , and theyl drop to 6% have to cut it 3%. so they want an overall reduction between 5% and 10% of their budget. violates theally social compact that has made him so popular, which is basically

financial stability and the slowly but steadily rising standard of living. that now is violated, and he has to do something about it. he is acting from a very weak , and that's what makes him an adventurous. risks,why he takes big because he knows he needs to do something. that's why he went into syria as well, hoping that it would improve his condition. actually, you now have the impending collapse of the

, and theconomy actually occurring collapse of the european union. whos a question of collapses more and sooner. , the eu isnately winning that race. why i am an enthusiastic supporter, because that's when you need to do something, when you are in danger. it's a u-turn for him because he is opposed to adding to the debt , but when should you use the debt, except for when you are in danger?

so i am all for it. what is the solution on the refugee crisis in europe? basically, you have to set a high enough target for refugees to be accepted. let's say a million a year. and you have to make it clear that you will keep that open until those who qualify are actually accepted. and then you can demand that they should stay where they are and wait their turn. that way they won't rush as they do now to get here while the door is still open. flow to will reduce the manageable proportions, because

now we have passed a tipping influx reduces the ability, the capacity of the receiving countries to assimilate or to integrate the refugees. so you have a panic. without a common european asylum policy, there is a panic. it's like a cinema on fire without exit signs. that affects the general , the refugees, and the authorities that are in charge of maintaining law and order. so there is a genuine panic. everybody out for

himself. been or blame victor or ordersto protect country under those conditions. i can blame him for perch -- for fusing -- for refusing to participate in an asylum policy. that is the problem, and he's not the only one. we've now got a lot of countries opposed. but this is what you need. you then have to have a comprehensive policy that reaches beyond the borders of the european union, and you look after the refugees where they are currently situated. that is about to happen. we are doing it. there is going to be a summit on february 4 in london cochaired and --ron

this will be directed at georgia, which is a small country, 6.8 million people, which5% of the population is syrian refugees. that is a tremendous number. and now there are new refugees , because theyria russians are bombing the civilian population in the south of syria and pushing them into jordan. -- the plan is now to

open the common market to special economic zones where multinationals and local and syrian entrepreneurs can set up freeesses, and they have access to the european market. that will give employment both and to theefugees local population. to that should help stabilize the situation and make it possible for them even to accommodate the newly coming refugees. so that's a step in the right direction. and the same negotiations are going on with turkey. turkey has now passed a law 10% of companies to

be syrian refugees. so that will provide employment for them. and you also have to improve the education of the children, and then they will not come. so the flow will be brought under control. are you worried about the political future of angela merkel? will she have to backtrack on the policies -- promises she has made to refugees because of the backlash at home? george: she uncharacteristically risks political capital on this issue. she realized that the foundation could tear europe apart. right,nately, she was

and she wanted to stop it, so she risked her political capital, and she lost, because her gesture of opening up germany was not properly prepared. she should have a creep -- created this asylum policy. she has made it possible to speak about accepting a million effectivelycause it , germany is accepting them. way, by making that imaginative response, she made it now possible to have an asylum policy. francine: will we find more of a

solution in the next 12 months, and again, what role does russia have to play in this? george: the situation is not putin, since he is in a race with the european union, he wants the european union to collapse, and therefore he is generating, he is using of refugee crisis as a way disintegrating europe. on.he bombing is going there are negotiations, but the bombing is still -- the americans are trying to find out

whether he is serious when he is talking about political settlement, or whether he is just playing with us. and unfortunately, i'm afraid latter is the case. so because of that, you cannot expect a solution at the root, namely syria. markete: given all the turmoil, china, concerns about deflation, is there anything that would make is hopeful about the next 12? george: -- about the next 12 months? see building stones being placed for solving all the problems, about six of them, with the exception of

greece. do is to puteed to somehow together, because they are all interconnected. together andut it you have to solve one problem. the key is the societal policy. so i've been very much engaged in bringing this about. we are engaged all over europe on this issue. a major always been issue for my foundations. myself, a migrant, for 15 years.

i could study, i could get a job , i had a plan to make $100,000 and retire on the proceeds, and i could outperform that target. all this while i was a displaced person. in all that time, a bit of a statesman. my loyalty is for the stateless people. francine: if you have any questions, please e-mail them. i already have a couple of questions. thesere talking about problems of the refugees often

bursting at the seams. of recessionance because of everything we talked about just now? deflation and the global slowdown makes everything worse. it is a bad background for structural changes. difficultiesds the , but as i say, i see the turnaround afterwards. i see the light at the end of the tunnel, i just don't know how to get there. francine: one question, which is greater, the amount of money you make on your deflation trade or the amount of money you gave away in 2015? george: unfortunately, i didn't , because i give away

a billion dollars a year. it's a smaller trade. francine: what do you think of social impact bonds as a way to fu critical human needsnd? george: they are interesting proposals. i have not been deeply involved in them, but i heard about the proposal that was launched here in davos. i think it is a good initiative. we did not talk about the u.s. elections. how worried are you by the popularity of donald trump? george: donald trump is doing the work of isis. [laughter]

that, alnd before qaeda discovered the achilles heal of western civilization, the fear of death. reason, ands with people do things out of fear, which is actually harmful. mongering, donald trump and so on,ers, cruz are doing the work of isis. listened to the debates, and it's a very simple message. i found it difficult to resist it. elemental. the only thing that stopped me

is the knowledge that it must be wrong to do what your enemies want you to do. people to turn against muslims, treat them with suspicion, and convince the muslim community that there is no alternative x -- except terrorism. it turns the young muslim population into a breeding ground for terrorists, and we must resist that, because we are doing the work of isis. but at the same time, i don't think the threat by isis should be overestimated, because they are very successful in inloiting this fear of death

western society, but they are losing ground in syria, in the caliphate, and they know that their days are numbered, because the iraqi army is going to squeeze them out. , theythink in syria turned the local population against them. is also doing this from a very weak position. so this is the amazing thing in the world today. a competition of weakness. francine: what about the fact that donald trump is not fading, , and still very popular

what are the policies that the voters in the u.s. should be focusing on? george: here i have to confess to a little bit of iis. take that in -- a little bit of bias. to agoing to lead landslide for hillary clinton in , not in thevote electoral vote, because they are -- they're paid political announcements will have a big role. so the electoral thing will be closer, but the popular vote will be a landslide, because she is campaigning for the general elections, whereas the republicans are fighting for the primary, and the primary is a small i nor to of extremist.

extremists.ority of so they are all moving in that direction. while i don't think that donald trump has any chance of being ofcted, he may have the role kingmaker, because he will have -- he has lasted long enough, he will get quite a few votes. francine: so you think hillary clinton a done deal for the democrats? yes, and i do think she is the one who is most qualified, but that is my bias. how does reflexivity fit into the current heme?tionary tea george: i would have to tell you more of the conceptual framework that i use for the analysis.

call it the human uncertainty principle. it's built on two pillars, fallibility and reflexivity. the main idea is that natural science has been more successful natureging the forces of , understanding the forces of nature and bringing them under than we have been able to govern ourselves. ability to, our destroy our civilization has increased, and our ability to govern ourselves hasn't. so we have the capacity to destroy ourselves. obviously global warming,

, as ae change is man-made typical example of that. we haven't got international governance facing it down. that is the situation. , i think we are learning about how markets and societies function. so there is a revolution in the social sciences. for new the institute economic thinking in 2009. i think we have already convinced the world that the

prevailing economic doctrine of efficient markets and rational expectations is false. but we haven't yet produced new insight. but it is now happening, and we are learning about it, and i am hopeful that we learn enough and fast enough that we will learn to bring deflation under control. think, the chairman wrote a book, which i gives the solution,

actually, because he says that the difference between now and we go into a that crisis already over indebted. that way you cannot just increase the debt. ,hat you need to do, actually is to print monti. -- print money. francine: you cannot just print money. george: well, you can, but it is against the rules, particularly in the european union. so you have to find a way around it. and you can do it. francine: there is a lot of theimism in china, but will crisis situation also be an opportunity to push through reforms? george: china is at a crossroads.

they want to impose party discipline and at the same time try to find a market solution. o cannot be reconciled. one or the other has to give. either there has to be political reforms as well as economic the transition will fail. transition.ased we have a great interest that we succeed. so we have to sort of support it we can, probably from the outside. but it is really up for grabs.

it's one of the big economic questions. actually there is a lot of resistance inside china to this tight party control. society, lot of open people inside the government that are putting up pretty strong resistance, and i hope they will succeed. francine: we still have one or two questions. on china, the vice president of china is here in davos and he said they are not actively reviewing the policy of the evaluating the yuan. do you believe him? george: i think they made the xi jinping wasn

in washington, he made the bringment that he will the depreciation of the currency. but depreciation of the currency against a basket of currencies nevertheless brings depreciation , becausehe dollar the renminbi was tied to the dollar. now it is a basket. and if the dollar appreciates, then the renminbi depreciates. and that is still happening. francine: i have two final questions. why do you think: is copying hungry in its politics and political choices, and what will

this lead to -- poland copying hungry. -- hungary. hungary, andopying it is an fortunate. successfulbeen a country, its economy has been one of the strongest in europe, and the new regime has taken the , andook and introduced it violates the laws of the european union. hasthe european union responded to it rather vigilantly, and is now cracking down.

-- i's has downgraded think the polish population has woken up that they made a mistake. they were voting against the previous government, but there was no loyal opposition. there was only a disloyal thesition, so they voted disloyal party into power. at the polish population is very much committed to europe, and very worried about russia. so there is now serious resistance, and i hope they succeed. question,one final what is the biggest threat to society?

george: open society is always under threat. right now you have jihadi extremism, for instance. society has always some excesses that it has to combat. in my generation, it was communism, actually. generation has to go the experience that open society could collapse. how should i say, it's a very .dvanced process

reason doesn't naturally prevail. the fear of death now can really undermine the rule of reason, and that is what is happening. francine: george soros, thank you so much. [applause] >> a wide ranging, fascinating conversation, a bloomberg exclusive between george soros and francine lacqua for the last 45 minutes or so at the world economic forum. i'm betty liu. the markets were essentially fluctuating as they have been all day long. 168dow is now back above points. joining me for reaction from what we just heard from george soros is our executive editor for global economics.

stuck out.things let's talk first about what he said about china and the hard landing. he said i'm not expecting it, i'm observing it now. what did you make of that? >> i think he was saying he is skeptical of the official figures. we've had a raft of official figures just in the last week that showed things slowing down, but not a complete disaster. leaderian central bank thought it was holding up more or less ok. part of the problem with all this stems from some remarks that wikileaks attributed to the premier in china where he said most initial statistics are man-made.

betty: so you pick and choose which ones you want to support your story. he said some interesting things about central-bank policy. some of his comments on the fed, he said the fed is about a year too late in their rate hike and that it would be really hard for them to hike rates this year. in fact, he was talking about a cut even. a dramaticfeels like step, given the increase was just in december. it's a little soon to walk away from the projected increases. really the first chance people may get to hear is the testimony in february. betty: what stuck out to you the most in this conversation? the comment he made to

francine right at the start about the ecb. he said mario draghi had a problem with the markets in december and that expectations were way ahead of what the ecb actually did. today president draghi was very forceful. they will have to manage the communication strategy between now and march much more effectively. communication as a two-way street. that really resonated. beatty: the central bank in china is struggling with communications right now, too. we have part of the press conference with mario draghi this morning. adapting our instruments to the changing conditions. the conditions change because some factors are at play. and we are doing whatever is necessary to comply with our mandate.

surrendering in front of these global factors, actions. betty: do you think the markets misunderstood the ecb, as george soros is saying? daniel: this was about as clear a signal as a central banker is going to give. the reference to technical stuff was interesting. that makes us wonder, are they going to try something more? they could move more wholeheartedly into the corporate debt arena. further down the line, they are probably not there yet. japan is buying etf's, and has been for some time. for beingnk you

with us. the look at the major averages, we are in rally mode right now as we head into the closing bell , a little over 20 minutes from now. ♪

welcome back to bloomberg markets. less than 30 minutes from the close of trade. the nasdaq has been struggling to hold on to its gains. abigail doolittle has more from the nasdaq. another day of intraday volatility. the nasdaq 100 has traded up and

down in a more than 2% range. taking a look at the chip stocks, western digital and sandisk are down. our team did reach out to the chip analyst and he's not seeing anything specific. both stocks down about 25% year to date on strong overall downtrends as investors worry about weakness in the pc market. itsern digital stock is at lowest level in three years, falling for 12 straight days. netflix, the stock is down on what appears to be a cell last year's big winners mentality in the overall macro environment. the comedy did report a solid after therter tuesday bell. initially the stock was up 10% and has been down by the same amount.

than 20%s down more from early december, struggling on tod on to its -- hold the support of the 200 day moving average. betty: when is the right time to jump in? are there opportunities that investors are missing? the ceowe spoke with who manages public pensions in québec. investor,a long-term so we have to think of 2016 or 2019. our performance, the things that they count on, that happens on 4, 5, 10, 15 years. are we going to look for -- the answerto

is yes. we are not in a situation where we are completely risk off. we are being selective and prudent in how we structure the deals. to again, our focus is invest in places where we think we can find growth. >> is now a time to be shopping for bargains? do you feel opportunism? >> we are starting to feel opportunism. there will probably be some rock 'n roll in the markets over the next while. i think it does require some prudence, but at the end of the day, with the focus that governments need to have on building growth, do we think that the world is falling apart?

do we think it is 2008 all over again? we do not think that. much more ahead on bloomberg markets. the close of trade now just moments away. here is today's dow performance so far. ♪

to bloomberge back markets. markets closing in just about 10 minutes. a completely different day today. we are trying to get back to our highs of the session. >> i'm not sure if we have enough time to really get back up there. we did lose steam and we are rising back again. the s&p 500 up .7%. the dow of the most, .9%. relative to where we were at the

500 was up by as much as 1.6%, the dow up as much as 1.7%. definitely off those session the big reason is because of the s&p energy sector. let's look at how that has performed intraday. we are still in the green, up by about 3%. this is still jumping the most in a week. of course that has to do with what has been happening with wti crude. we did get the oil inventories for last week. day by nearlyhe 5%. i just want to point this out right here.

pass the $30 mark about five times. we did pull back from that but we will see where we can go with the last few minutes of trade. taking a look at some of the specific stocks that deal with oil and energy, basically green pretty much across the board. double-digit gains for southwestern energy and kendra morgan. basically 14 of the top 15 stocks on the s&p are energy and oil and they are all in the green. betty: all this market volatility, where our investors finding opportunities? george soros saying he is shorting the s&p. seen the trade today, does it feel like the market

still needs to go down a leg lower? >> it feels like we are not out of the woods yet, for sure. there is a lot of volatility. we are getting there but we are still not quite there. betty: what makes you feel like we are getting there? >> we're looking at three things, earnings in the u.s., china, the transparency of the policy and whatnot, and also the oil market. today there is a little more stability in the oil market. it is hard to say we have found the bottom. earnings are coming along ok, but there is still a lot of uncertainty there. we don't see an earnings recession but there is a cloud right now. last year we had flat earnings in the u.s., driven in part by the dollar, but primarily by energy.

betty: we just got the outlook from george soros and i know you were listening in the green room. i want to play part of that conversation where he talks about shorting the s&p and what investments he is looking at. george: the one big idea is deflation. therefore, since i don't know s&p'srket, i have shorted , i have shorted raw material producing countries and asian countries currencies against the dollar, and i went long u.s. government bonds. betty: fearful, so is he going to make money on those trades? tulio: i don't know. some of those are clearly point that everyone is thinking about. how does it affect emergency

markets, currencies? i don't think we are in the same camp, but a lot of that discussion is purely in people's minds. outlook is that developed market equities in the u.s. and europe should still do ok. we are talking about modest returns. emerging markets, which we got out of last year, or still a trouble spot. year you willthis begin to find some opportunities called low hanging fruit in emerging markets. that is still not the case. remains what happens to emerging-market currencies. be under continue to downward pressure.

the dollar against the euro and the yen is relatively stable. of a perfect bit storm for emerging markets and continues to be so. betty: we have this map that shows how emerging markets have been hit so hard. japan is in a bear market. take a look at this, many of the countries that have been is fuelingn oil, oil their it economy. look at canada. they are all in bear markets. >> it's not just the oil countries, it's commodities. australia. that's still the pressure point. betty: and why isn't anyone predicting global recession? u.s. toxposure of the

china, the u.s. to what is going on in the commodities world. less than 1% are exports to china in the u.s.. that is pretty low. it's hard to place since then make -- systemic bets. betty: what does the fed do then? ando: the fed has to wait see how this whole thing if all. this is looking more like the first half of the year, the fed is probably on hold.

what changes is if we get a whiff of inflation in the next weeks or months. that would change the whole thing. forecast, but our if there is a wild card in this whole thing, that could be it. betty: that is it for bloomberg markets. what did you miss and the market close is next. here is another look at how stocks have traded on this volatile thursday. ♪ . .

scarlet: we are moments away from the closing bell. alix: i'm alix steel. joe weisenthal is on assignment.

[closing bell ringing] alix: u.s. stocks closing higher after yesterday's global selloff. scarlet: the question is "what'd you miss?" walk -- are our locked in bearer markets around the world. we will show you which markets are getting hit hardest. alix: oil trading between $20 to $40 over the next six to nine months says goldman sachs. we ask what is spooking investors. -- doesvaluation limbs currency intervention really work? begin with the markets -- u.s. stocks paring their gains by the close. banks give up some their early gains and energy losing steam with mario draghi's promise of more stimulus ahead to stoke the rally. the new normal is triple digit point moves on t d