[closing bell ringing] s&p turning negative for the year and the dollar exiting its longest winning streak for a month. we ask rick reader how to invest in a world of negative rates. scarlet: and the st. louis fed president questions the wisdom of following the dove plot. tracy: and the three charts that could tell you if oil has finally bottomed. with ourwe begin market minutes. not a lot of economic data to give us much reaction, so drifted lower. the s&p 500 turning negative for the year. it was the worst day for the dow jones industrial average in two weeks. eight out of 10 groups down with energy and materials leading the way. tracy: it was a short-lived

journey into positive territory. like four days? dow is still in positive territory for the year, up almost .5%. but it was the story of oil 12in with chevron wiping off points and in terms of the worst leaders, you had devon and chesapeake, the worst performer on the s&p. overall, you had lower gas and an unwinding of risk that we saw. we saw safe havens rally a little bit and saw them come down later, but u.s. treasuries are definitely rallying. japanese 10 year government bond. it has reached a new all-time low in terms of its yield. check out the chart of volatility. it is at a 17 year high because the doj is buying them all up.

we get trades, they tend to be quite volatile. you talk about safe haven -- the dollar continuing to build on its rally. day for the fomc announcement, the malaysian currency on a tear. 5.4%.much as the reason is you can see crude oil, brent has stabilized. see that correlation pretty clearly. alix: and this all leads me to commodities. across the board, selling off. old was down, copper was down. boostwasn't anything to commodities sector.

oil in particular as we know leading the charge to the downside. stockpiles rising 9 million barrels last week. is reductionesting was down by 30,000 barrels and that was totally unnoticed. of bullishy kind impulse. scarlet: we want to take a deep dive now into the bloomberg and you can find all of the charts at the bottom of the screen. alix: i'm looking at oil and what kind of rally we have seen. this chart at how much of the rally was due to demand. he found only two dollars ever since that february low is due to demand. he uses the model like ben bernanke have used and other

currency versus the dollar as a way to stimulate what demand would be. beentells us the rally has about supply which shows how important it is we continue to see supplies shut in. is an interesting chart because we've seen a lot of people doubting the strength of the recent rally not just in oil. speaking of the recent stock market rally, i something a little different for you. this is shares outstanding of the velocity shares daily short-term extreme -- short term exchange traded note. betting on a return of volatility, basically ping into the etn.

shares outstanding go up currently at a record. quite a few people are trying to hedge or are not trusting it. scarlet: you just don't know what they're positioning is. alix: for my deep dive, -- scarlet: for my deep dive, i'm looking at the one year breakeven rate. above 2% last week and has held above that level for five days now. inflation expectations is not the same as an actual reading of 2% in measured inflation. it is noteworthy the bond market is being pushed that direction. alix: part of the rhetoric was dolation expectations matter. it's not the core pce but expectation is important. chiefeader is the

investment officer of global fixed income at blackrock and joins us now. stop typing on your phone. one could argue the federal reserve is close to filling its dual mandate. you say it may have a third mandate and that is global financial conditions. why is that? rick: i think the dollar has taken on a significant amount of importance and i think one thing the chinese situation at the beginning of this year brought markets haveng been about 60% of the gross in the world and china is intertwined with the rest of the emerging world and asia. the dynamic around the risk around capital flight and the deflationary dynamic was profound. when it looked like china was not going to devalue, that is when inflationary expectations began to pick up.

keep financial conditions stable and how does global growth continue to be buoyant? the impact is significant. part of why the fed talked about it in the statement. tracy: walk us through the importance of the dollar all little bit more. is there a commodities connection that feeds into stuff like credit? rick: you are spot on. 43% of the world is loosely egged to the dollar. you think about the impact the dollar has from that perspective and you think about the dynamic around what happened the last three or four years. they grew through leverage so much of the borrowing is taken -- is taking place in you think about the countries that grew and the holes in the ground that

were dug on the back of leverage. the dollar has such a big impact that it will continue to do so. does that mean the fed is going to tolerate over inflation to keep it tame? rick: i don't think it is black and white, but i think they have made the determination that the risk of letting inflation run a bit hot certainly outweigh the risk of if the global economy is softer, there are so many tools the fed has to break inflation. they will let it air on that side and i think that's a big deal. i have heard it said many times from fed officials if you have a 2% goal, use and halftime above it and halftime below it.

that's a big deal because we haven't seen above it a long time. you talk about the importance of china through the deflationary channel. can we import inflation and would it be good inflation? rick: that's a lot to talk about. the thing i think that is so onmatic, you take the impact the percentage of consumption growth on things like nickel, copper, aluminum and zinc, it's about 100% of the growth dynamic. how it influences inflation the world -- the big component of growth in the world. think that is a big deal. the other part of your question -- there's a view in the world we get to 2%. we look at good inflation versus bad inflation. things like used-car prices and

housing prices, you want that to accelerate higher. you want that inflation coming down, so i don't believe to is the number. you want the bad inflation to come down. i would argue for the economy generally for consumption is a good thing. the knock on effect of not having that is the advent of negative rates. that blue line we've seen over the last year and a half, it's a staggering chart when you think about it. tracy: you are in fixed income, how are you dealing with negative rates? the investmentor

paradigm, if you are running an thewment or foundation, more you have negative interest rates, he think of how do i hit my liability stream when you have more negative interest rates. the only thing i would argue is low rates are different. to that, does your margin of propensity to invest move up? i'm not sure it is an elastic. i would argue low interest rate are a big deal. quantitative easing does a very different thing. some of the things draghi did in terms ofnt funding the banking system, those things get directly at the demand dynamic. negative interest rates, no companies and no mortgage rates

are set off and i don't think that transmission is that robust. tracy: i have a feeling we will be talking about the effectiveness of the rates. ♪

mark: let's get to first word news this afternoon. secretary of state john kerry is heading to brussels on friday. he will meet with belgian and european union officials to discuss ways to counter international terrorism and express condolences for the deadly terror attacks in brussels yesterday. that stop all is a trip to moscow. and dr.sident biden

jill biden went to the belgian and the sea in washington today and spoke with the ambassador and signed a condolence book paying tribute to the victims of yesterday's attacks. news, airports in tokyo and seoul are increasing security following the brussels violence. the airport in seoul says it will add 700 additional employees to monitor security and check for explosives. security officials will check restrooms and garbage cans. in tokyo, they are beefing up searches for suspicious objects. carol maloney wants to know how cyber criminals stole $81 million from a anglo -- central bank account. brought 30 ofed the 35 orders to transfer funds bank. the a central banker resigned last week because of the scandal. global news 24 hours a day powered by archway 400

journalists in more than 150 news bureaus around the world. we are back with the chief investment officer at rock rock. i feel like we can't have a discussion about fixed income without talking about liquidity. you make a slightly different argument and say there's a lot of liquidity out there in bonds. take a look at this chart and that it is a scapegoat for market volatility at the moment. rick: it is a multifaceted question. there is liquidity in part of the fixed income market. because liquidity is not what it was, people say that has created volatility. there's no doubt when trading activity is lower that you can create some volatility. the bigger issue is we are on a very different risk paradigm and people are not making a lot of return on their folios and

conviction levels are low. market,e parts of the treasury -- treasuries, currencies and some commodity markets. they are trading quite a bit and are has happened is people saying i can trade a lot of rates and do a lot of currency these other instruments and some of them you use for carrie and hold them for a long time. i wonder whether people are confusing correlation with a lack of liquidity? rick: i think that's right. when you think about the world we have lived in for the last few years, you have an extraordinary central bank in the fed doing qe. you have current account reserves we are building and you

have incredible numbers of buyers of assets. every time the market softened come he had buyers come in. today, you have more equilibrium and so you can create what i would argue is a much more matched in terms of their buyers and sellers of different assets. it is a very different framework. alix: if you look at oil versus the high-yield market, it seems to move in tandem even though oil does not account for that much of the high-yield market. one school of thought is that perhaps this correlation is masking the vulnerability of the high-yield market. rick: i would say a couple of things to that. no doubt there is pressure in parts of it whether it's monti's or materials in high-yield market. parts of the high-yield market are trading unbelievably rich. high-yield has become bifurcated

into points of stress and then much of the high-yield market is trading unbelievably full in terms of valuations, so i don't know. i think it points that we live in a world where growth is slow and technology is changing. that can go down and your --overy rate can be a are can be a fraction of what it used to be. i think the market is pretty healthy. the flows have been tremendous and the industries are incredibly well bid. just bifurcated. that allu pointed out is inflows into corporate credit can end up having a negative impact on growth because you end up increasing leverage and company struggled to refinance the debt. years,n the last few

think about what big multinationals have been doing. multinationals, there are so many aspects to this. the way multinationals grew, some of it was on the back of emerging markets. the technology changing any topline revenue is up, so how do you do that? your margin is compressed. how do you keep your return on equity? the leverage going in wasn't that high. i can increase my leverage, buyback my stock, keep my return on equity -- a deal. you can't just keep doing that and that is what of you -- that is part of what you are driving. president obama was in

argentina, meeting with that country's president. we discussed how they approached the recent terrorist attacks. ♪

scarlet: several people possibly linked to the deadly attacks in brussels are still on the loose. a manhunt is underway. 31 people died in the bombings. officials say the numbers are likely to rise. president obama addressed the terror attacks in argentina. president obama this is my number one priority -- i have a lot of things on my plate, but my top priority is to defeat i sil and defeat i

eliminate the scourge of this barbaric terrorism that has been taking place around the world. scarlet: joining us the a skype to discuss these attacks is a vice president of tactical formers for stratford, a special agent for the state department where he focused on terrorism. says heetary of state is going to brussels on friday. as a former special agent at state, you have some insight into what role the u.s. might play fighting terrorism in europe. what do you think he's going to be proposing? the biggest thing is to help with cooperation there, not only between the americans and european allies but helping to pave the way for a better inter-european cooperation. acting as a middleman to help facilitate that. clearly, there's a need for more coordination globally but also inside europe and i'm sure that

will be on the forefront of everyone's mind. alix: it seems like the was thisng question is related to paris or something separate? what's the risk of further terror attacks as the police sort that out? nowt: it's becoming clear that it was. we had one of the bombers at the airport believed to be the bomb maker for these attacks, but also the ball maker from the terror -- from the paris attacks. what we are seeing is this homegrown jihadist problem, what we call grassroots jihadists. it occurs in places like elgin and paris, but we have seen it in the united states, in canada, and it's a very difficult thing to root out. but what we have seen here that is a little different is it looks like we are seeing some of these jihadists word trained in

-- were trained in syria in things like lawmaking and that's why brussels was so deadly. brussels was the most deadly bombing attack we have seen since the london seven/seven bombings. tracy: would you characterize this as an advanced or simplistic attack? it's slightly more frightening than a planned attack. scott: it is both. when you look at the planning and a sick it was pretty simple. and it wasn't optimal. comes to the specific tradecraft element of making, that is where it was sophisticated. the bomb maker was able to fabricate dozens of pounds of difficulte, a very improvised explosive mixture to work with and it's also very dangerous. synthesizet he could that quantity of material is

troubling and is something we have not seen in the past. we have seen smaller bombings like the london bombings and in the u.s., we have seen bombers who struggle in their efforts to synthesize those materials. the fact we had someone who is able to fabricate this material and to do so successfully and in industrial quantities is quite alarming. what kind of new national security legislation will be announced in the coming weeks and months and how effective can it be if it's not done in coordination with their neighbors? what will bes interesting. i suspect we will see the europeans tried to follow the american model. the tools american agents have is the material support for terrorism statute. this allows agents to arrest and legally charge individuals at lower threshold.

scarlet: next up, we debate the dots.

>> the authorities are searching for the ringleader of the terrorist attacks that wounded and killed people. the numbers are likely to rise. the airport is likely to remain closed until saturday. the attacks have led to an increase in security at airports worldwide. the department of homeland

security said there are the civic threats. law enforcement personnel have assigned.de -- a signe joe is dead. in theed eight seasons majors. 80'spt working into his and served as an analyst for the diamondbacks. envoy said they have agreed to a cease-fire. each side has accuse the other violating terms. we have the news 24 hours a day and they are powered by our news bureaus around the world. i am mark crumpton. tradingning and slow

gains.g up paul allen is in sydney. >> we have the declines following wall street and they are down overnight. income is the lowest since 1999 and it was better than what analysts have been expecting. reform is on the way. looking tompany is be a strategic holding company and they will spin off pipelines into separate businesses and say there won't be front-line job losses. >> that killed plans for a gas project in australia.

is that right? project a $40 billion run by a company along with royal dutch shell. say it is very difficult to invest in this kind of environment and it is back to the drawing board. i am paul allen. >> what did you miss? dot debate. mike and tom spoke to james about his distaste for it. wondered about the efficacy of the plot. for guidance through that and i wonder if that is

counterproductive, at this point. we put were at zero and out this forecast, this was considered forward guidance and helpful. you are off that and projecting that over the next increase, you the are giving forward guidance and i am not sure that i am come double giving that in this environment. if you look at the greenspan federal reserve, they never give any reference. focus and let's market expectations move around. we now have a plot with lines and i am not sure. >> they should get rid of it?

>> i find myself unilaterally pulling. you have a lot there. i think this is an important issue. and we have a communications committee that talked about it a lot. this is a promise about what is going to happen and he says, "absolutely not." it depends on how the economy develops and it could be interpreted as forward guidance, which is why i'm getting concerned about what we are doing with these policy projections and if it is really having the effect we intended it guidancer if it is a

for what might happen in the future, as opposed to a commitment to how they will behave. it is not a commitment, at this juncture. you can see why they would t that way. i >> this became a main topic after the meeting. joining me is steve and luke. into people jump being against more communication. why do people want to kill the dots? >> there is no nuance and, for example, his face case could be interest rate hikes and there is a reasonable chance you have two or four. or, one and five.

it is all focused in a single do t. they are not all created equal. this is the outlier and they have a dot. janet yellen has one. what her was, that would be meaningful. a greenlighted tracks the dots. median. should not be endorsed as committee-endorsed. dumb. markets are being could be a case and they have been off the mark for a long span of time and consistently above where the

euro dollar implies policy rates . when that happens, it is rates fedthey have implied the will pursue a policy pace of tightening with curve flattening. >> i hear there is a fan model that could happen. retired fan charts. >> is this more useful? janet yellen talked about where policymakers think it would be. if you cannot do it through words, i do not think a chart adds clarity.

this is a reaction function in the president of the philadelphia federal reserve function manaction this is how we react with the inflation expectations and i think that the problem was that same economic data we are making that. >> was this useful with lift off? have they gone past the expiration date? >> i've heard the argument and themheard the opposite

and itded significance comes near the end of the year as projections and they eliminate that and it becomes more tactical. >> i want to emphasize that i am of the only one who sympathizes. hasave a columnist who recently written about the dots and he says there are perception problems.

versus a belief. about more and more transparency and there has not been a single innovation that has been added that has not been taken away. be would otherwise just reducing transparency. >> i feel bad for them and i am announcing a campaign to save the dots. save the harmless illustrations of forward guidance. thank you. good to see you guys.

will hear from donald trump and his take on the terror threat around the world.

donald trump, the republican, wants respect for the west. is this effective to manage the tensions. talked about being at war with the west and what is the long-term plan to make it better? trump: get them to respect the west. they have no respect for our president and our country right now. >> you are asked if you would rule out using tactical weapons?

trump: i would be late, compared to my opponents. >> you would rule it in? >> i will never rule anything out. even if i did, i wouldn't tell you that. at minimum, i want them to think that we would. you do these interviews with everybody and you ask questions like that and everybody is so honest. you know, we need unpredictability. we need energy. is, we need unpredictability and when you asked the question, it is sad to have to answer that. the enemy is watching and i have a good chance of winning and i do not want them to know how i am thinking. with that being said, i do not

rule it out. i would say that nuclear weapons are a last resort. >> there are people who say that america needs to be the leader of nato. more than us.em now, we put of a lot of money we a lot of countries and defend south korea and germany. owe $19 trillion dollars. things were different then. we had nothing but money and power, more than we have today and i think that we have to really examine nato. it does not really help us.

other countries and they do not appreciate what we are doing. >> i just want to clarify that you want to see the united states pay less money and that it is possible that nato is obsolete. >> it is possible and i will certainly look at it. trump speakingld with mark and john. you can catch the interview tonight. bloomberg politics caught up with ted cruz and that will be on "with all due respect." three awesome charts and make you ask, "how did oil bottom out/" ." ?"

>> it is time for a look at the biggest business stories. looking for more. the equity firm says they will look for a builder. he began investing in 2014. virgin america is pondering a sale. richard branson is reaching out to potential buyers. and, that is a bloomberg business flash. >> what did you miss? three charts that prove this. more than 25 years of trading and dan.

longs added as s are covering. >> it is amazing how much i have been a proponent of this. more with the fundamental inputs at times and ity tend to go down and starts to go along with the they wereng up and covering it and it was time to get nothing but a straight rally since. >> the argument has been that the prices have to go lower. prices andwer oil the conversation has now turned.

you see profits have actually the loss is and near five dollars a barrel. that havee the rates gone up and it has to do with a demand picture in europe and asia and a second thing happened that a curve of prices shifted and there is not as much going forward as it used to be. let's break that down. this. can see >> i know you love this stuff. we will try to make this simple. making a hugeare difference and it has been shrinking. >> you can pump oil.

you can manage to put it away for six months at the price it is selling for down the road and it still may be worthwhile to pump oil now. isin, what we need to have aoduction coming off-line and carry trade and oil and you pump and still make a profit going down the line. as this starts to flatten, this goes away and the things that are pumping stop pumping. 's that is a steep curve and nine barrels more.

chart was the only thing i looked at to determine the bottom was in. flatten, wed to started to rally from the low. >> doesn't it matter why it is with prices depressed in the future? wethey are both going on and have a number of commercials going out into the future and edging into the future. the future production starts to disappear and you cannot or beats thisill

down the line. >> won't this incentivize production down the road? they are seeing big and midsized hedging now. very strong amount very few producers are going to make a profit here. i know that there have been a lot of talks about the it is nonsense. they are using a lot of silly them look likee they are lower than they are, players need 55-$65

a barrel. as long as there is a continued rolloff in production, it could be a little slower. it will still continue to go down. >> the curve is flattening. it is good to see you, as always. up, what you need to know for the trading day. profits beat analyst

>> what did you mess? do not miss this. >> do not miss this here in the u.s. with the goods.

thee finally have manufacturing

if donald wants a character fight, he better stick with me, because heidi is out of his league. john: props where they are due. for pointing out ted cruz' homage to the