vote both politically and financially. ♪ i'm matt miller. vonnie: i'm vonnie quinn. david: i'm david gura. here is what we are following this hour. stocks continuing to slide after the brexit code -- vote. vonnie: we hear from william janeway on the consequences and the wake of the vote. thinking has the fed's changed? we dive into that question at the bottom of the hour. but first u.s. markets will close in one hour and we are at session lows. let's head to the markets desk. >> we are indeed just about at session lows. these are the numbers with the

nasdaq. the biggest laggards down 2.8%. the dow jones almost pushing that. walk you through some numbers. of 700pushing the loss elliott dollars last i calculated. in the past two days we are $1.8ng about a loss of trillion from our three u.s. major averages. that is the biggest two-day drop since last august when we saw the flash crash on august 24. this is the imap function. red.10 in the financials accelerating gains. utilities as well as .elecommunications

down in the past two days. worst two-day drop since 2011. let's take a look at specific equities within the financials to see how they are performing. 6.4%.f america down i did calculate the total today losses and it comes in a total of about $54 billion wiped off of their value in the past two days. also losing ground the airline industry. down nearly 12% here. worst two-dayts drop since 2011. is in part happening

because of a note from deutsche bank saying the brakes it creates uncertainty for many u.s. airlines and it may have potential for downside. all seeing 52-week lows. 6.3% of the market share from the u.k. for american airlines. let's get a check of the headlines on the bloomberg first word news this afternoon. john kerry says last week's brexit vote want change the relationship between the united states and the united kingdom. following talks with diplomats in brussels and london today, secretary kerry stressed the importance of the european union. there are ways to make certain we are trying to chart that path to the future serves the interest and values

that brought us together and keep us together even now as there is a political decision regarding one country's membership. that doesn't alter the fundamental interest and values we have serving in governance. s&p global ratings have cut the uk's top greg craig -- credit rating by two levels. s&p cited a less predictable policy framework in the u.k. and said there were constitutional issues arising from the majority of voters in scotland and northern ireland having voted to remain. elizabeth warren joined hillary clinton on the campaign trail today in cincinnati ohio. the senator offered a harsh critique of donald trump. >> donald trump believes poor sad little wall street bankers need to be free to defraud

anyone they want. [laughter] hillary clinton believes we need strong rules to prevent another financial crisis. yes. hillary fights for us. mark: mr. trump wrote on hillary saying crooked and goofy elizabeth warren. it's the end of an era for one of the world's greatest soccer players. lionel messi says he is quitting argentina's national team. the announcement came after argentina lost the final for the third straight year. messi is argentina's captain and career scoring leader with 55 lows and 113 international appearances.

i'm mark crumpton. this is bloomberg. back to you. vonnie: stocks are continuing to selloff today after the brexit vote. the dow is down 300 points. joining me now for some insight on whether the volatility is carried, author of the recently published book even the odds. it was all supposed to change once the federal reserve started raising interest rates. it seemed to have happened. what do we do about diversification? >> that's the big topic we have been hearing for years about how important it is to be globally diversified and asset class diversified. it wasn't working particularly and now it very much isn't.

so i would tell clients and i atld tell anyone who asked the time it seems absolutely the worst. you do not want to throw out every idea of diversification. on the other hand, trends last. if we think about real estate as an asset class that has worked, there is no reason it's going to stop working today because interest rates are staying low and lenders have an advantage. i think you can still play the u.s. lenders, companies that can be brought out -- bought out are more of in a way because acquisitions are going to continue to happen at low price. if i were looking for financials which are selling off like crazy i would say u.s. ace financial service companies might be a good place to look. if we try to find the sectors where we have characteristics that are strong but are getting killed because of their proximity to other parts and

sectors of the market that are falling apart maybe that's where we should look. david: to what degree is uncertainty becoming a macro trend? yourself toosition combat kind of uncertainty going forward? >> there is always uncertainty in the market. if we look at increased levels of uncertainty, 9/11 would be a good example. from that time on there was a discount in the market for external events that could relate to terrorism. now we have other external event about people exiting what was thought to be a very hard-core institution. we have to live with that and currency risks have increased. that doesn't mean it changes the dynamics totally. we will still find fundamentals in countries and sec or's and currencies that will work for us. does the central banks

willingness to qe for the fed, bank of japan going negative, otm possible helicopter money from the boe, does this all change the pricing of risk? i think someone -- somewhat. vonnie: what is priced into the market now? is it just a purely visceral reaction? will we see a different market in a couple of weeks time? or is this pricing in the fundamentals of economic growth around the world? >> think about the last 1.5 years. the market has traded up and down 12% about six times. people forget about it but we

have had dramatic moves up and down. the last time it priced down 12% was the china scare. it came back. we could go down 12% on this and it will come back. if we are at 15 times next year's earnings with interest rate and inflation this low i don't think that's excessive. i think we have adjusted risk to a level that seems to make sense given this level of uncertainty. place inven the u.s.'s the global economy i'm curious how long you think this is going to be a factor in the u.s. economy. is it going to be superseded by other kinds of data? >> i think the u.s. will be less troubled by it. the u.k. is 5% of our export trade. we're not talking about big numbers. we are talking about people who speak english. they are the people over there we can talk to and when they

speak americans can hear them. it creates more risk with the polls, inn following believing the oddsmakers. it's questioning on of these institutions that we feel are reliable. when we can't trust reliable institutions we all day, who can we trust? we back off and say maybe we shouldn't invest. it slows investment and it probably will slow the economy somewhat. david: thank you, karen firestone joining us in new york. up next, william janeway on the impact of brexit. ♪

matt: live from london this is bloomberg markets. i'm matt miller. david: i'm david gura with vonnie quinn. for some perspective on the political market followed, i'm joined by william janeway, a longtime venture capitalists. last week carmen reinhart spoke about de-globalization as a phenomenon. i wonder if you are seeing evidence of that. extent to which the free movement of people and capital has reached possibly an unsustainable limit. first was evident in 2008 when the subprime housing problem in the u.s. triggered the biggest global financial crisis since 1931. now the consequence of

upheavals inom the the middle east but also more broadly, a recognition of the potential for free movement. and people have also clearly contributed not just to political tension and stress in the u.k. but across europe and even here in the u.s., where as you know, net migration from mexico has been zero in recent years. as many mexicans have been leaving as have been coming in. immigration has been made an issue in the u.s. these stresses are clearly and expressed politically and they spill over into the financial markets. we have seen this movie before. i would just site for you -- cite for you. a great professor of history at

princeton, "the end of globalization." he's talking about 1900-1910. roderick wrote a wonderful book called "the globalization paradox" which is clearly evident today. the trilemma he defines is very simple. you can have national autonomy, representative government, and deep globalization. two out of three. vonnie: matt has a question in london. matt: if they are really going back to mexico, it's a dangerous country now. they might want to think about now. don't you think the immigration problem in europe is a much bigger one? onrge soros in his op-ed saturday said that while it was a nice gesture from angela

merkel that it wasn't thought out. it seems that is what has led to the brexit vote. >> it certainly has. when you try to read the details usual note, it's as so simple. voteher words, the leave was heaviest in areas that have very few intimate -- immigrants. the vote clearly reflected a sense of people feeling left out of the economy. we saw something like that in the republican primaries. independent or whether -- of whether or not immigrants were to blame for it, immigrants were blamed for it. there is a complex coming together of different themes here. and of course there's always the potential for political entrepreneurs to exploit, understandably, the opportunistic ways in which they can seize on movements that are

real. stresses that are real. and translate them into political capital. vonnie: i have to ask you, you have about 150 companies in the portfolio and only five are in the u.k. terminal andn my see the share prices and how far down it has gone and the fact that that deal may now be in trouble, are you seeing that because of this vote? i don't speak for warburg pincus. i'm a senior advisor to the firm. i have been for 20 years. warburg pincus is very broadly majorified with investment commitments around the world across industries. we are probably the most diversified private equity firm in the world. we have seen of said in different areas -- upset in different areas from brazil to the chinese market last year. strategy is independent from --

put it the other way. every time there is one of these discontinuities including the -2010, forof 2008 long-term strategic investors these create opportunities. david: let me ask you about london as a place of innovation where companies are being established. do you worry about that trajectory changing? that london will no longer be an attractive place for companies to start up? >> different kinds of startup. my hometown is cambridge university. the cambridge phenomenon is the most intense center of technology base, both biotech and i.t.-based innovation in europe. it shares with the u.s. however a very common characteristic. and that is most new companies today whether they are founded in cambridge university or for that matter out of stanford university are born to be bought.

marketseally across all the most interesting post.com bubble phenomenon has been the radical decline and closure of the ipo market to venture backed companies. we had the unicorn phenomenon in this one subsector of the plant form -- platform for digital web services that can potentially touch every human being in the world. seeingthat, what we are are both new contributions to the innovation infrastructure, the cloud computing infrastructure, and new applications that exploit it. companies that are very imaginative and creative and are acquired by amazon, google, microsoft etc. and that's happening in the u.k. it will continue to happen in the u.k. just as it's happening on the west coast, east coast and in between. big pharma is sort of a model

for what's going on across the innovation economy. vonnie: an optimistic view on the free movement of academics and labor i guess. william janeway, warburg pincus managing director. thank you. today's option insight with all the turmoil in europe. will the markets hold up? ♪

david: this is bloomberg markets. i'm david gura with vonnie quinn and matt miller. ramy: joining me for today's options inside is jim of mk m holdings. always good to see you. markets are pretty much at session lows. about $1.8 trillion. your gut reaction to this? there is a selloff. >> gut reaction is this still

has been a relatively mild event in volatility terms. really short and longer term -- ramy: i thought you might say that. >> short-term what folks have to appreciate is a fairly mild inversion of the fixed futures --ve -- fixed futures curve curve. vix futures curve. in the very short term our message is get protection on. get long volatility but don't be too cavalier about what could be a rolling shock and one of what should -- much higher magnitude than what people are expecting. ramy: people have to understand

the short-term as well as the long-term. walk us through the short-term. we shifteder term is into a high volatility regime last august. every significant shock in u.s. equity markets for the last 30 years had a curve with high volatility environments. people need to look back to 2007, 2012 for analogues. 2010 flash crash. vix abovebove 40 -- 40. 2011 was after that. u.s. debt downgrade. perhaps not dissimilar to this sort of environment. significant shock. spike in vix. we don't see that has to happen here but certainly the 11% range in the s&p 500 and measures in

the vix. 40 has to be kept in mind. ramy: this is a brazilian etf. why are you looking at it and what is your trade? >> in an environment like this we want to find relatively cheap implied volatility. we take the most actively traded etf's in the u.s. we look at performance and this is really an outlier. an environment of elevated risk broadening contagion. all we want to do is go out to august. pay about $.90 for those. your long volatility. ramy: thanks so much. bloomberg markets coming up next. ♪

scarlet: this is market. i am scarlet fu in new york. joe: i am joe weisenthal.

matt: crimson is in the newsroom. madeleine albright says she is not sure the british people understood what they were voting for when they decided to ask the european union. albright tells bloomberg television at least one road leader is happy with thursday's outcome, vladimir putin. could -- mr. putin is pleased with what happened at brexit. this works to his advantage. one of his agenda items is to cause disruption to the european union. i think the important part is how nato will continue to whation together and also signals there are for what the eu generally will be doing. mark: secretary albright called the current wave dangerous and said the same trend brought about world wars one and two. prosecutors in paris have manslaughter inquiry

into a crash that killed 66 people. authorities say there is no evidence linking the crash to terrorism. investigators decided to start the probe before analyzing the flight data and voice recorders based on evidence gathered so far. the plane was in route from paris to cairo when it crashed into the mediterranean's knee. two big ruling from the u.s. in court on the last day of its current turn. a vote of 5-3, justices struck down a texas law that threatened three quarters of the state's abortion clinics here the first decision on abortion and almost a decade. the court also backed a law barring firearm possession -- 6-2. majorities of blacks and hispanics think president obama has tried to make u.s. race debtor according to a new pew research poll that says 62% of americans overall think the

president has tried to improve things but only about half of think the president has done so far were tried but failed. said the president made race relations worse. global news 24 hours a day powered by more than 2600 journalists and analysts in more than 120 countries. int miller, back to you london. matt: thank you. the u.k. has lost its stellar credit rating. they cut the u.k. top rating by two levels after they voted to leave the european union last week. the agency cited the risk to economic aspects, fiscal and a the roleerformance and of sterling as a preserve currency as well as risks to the constitutional and economic integrity of the u.k. if there is another referendum. bloomberg's u.k. economy reporter joins us now with more.

not a surprise but what about the fact it was a two notch move and it was a negative outlook still. >> as he said, not a surprise. they told bloomberg last week that this would happen. various legal requirements whereby they have two give notice. delay. why the matt: they have to give a toy for our notice of the country cannot really change its mind after the vote has been cast. lucy: exactly. it was really a process they had to go through. possibility but they only said it would partially come down to political outlook and over the weekend, we have seen that deteriorating in the u.k.. it is a big deal. in the country, we saw with italy in 2012 during the debt crisis, --

matt: italy had a aaa rating? [laughter] since the vote, we have seen the ftse 100 all. now we have seen a downgrade. is there a sense on the side of people who had been campaigning as, the, we told you so, we were not bluffing about the ramifications of the vote that we warned of? has in a fair amount of that on social media. on the political side, they tried to move beyond that. this is the result we have and a matter how much you would like to change that, and there are various petitions and protest otherwise, -- scarlet: at the same time, when we look at the 10 year yield falling, what kind of practical effect a they have on investors?

i continue to pile in on government bonds. lucy: they were a haven asset. a 10 year yield for the first time ever today. look at the stocks, not as they should be here. matt: we saw that in the u.s. as well. what about the funding issue? that is something mentioned to us and we have heard other people talk about this. a concern this would be a funding crisis in the u.k., they are not talking about the government, right? lucy: it is important to have overseas trade and funding. invest is not a big deal.

that is something else the s&p has mentioned. whilst they always talk about where the credit ratings actually matter, it is really important if nothing else and it could be the first of several. for sure, we tepidly see all of these things happen in threes. lucy, thank you for joining us. you're from bloomberg news in london. voteet: the u.k. brexit has downgraded the u.k. to aa. analysts and economists are reconsidering global growth forecast. everyone is looking at what the fed does next. downgrading the global growth or cast, across the region. isi saying the eps has an downgraded by one $.5.

-- $1.5. let's bring in ethan, bank of america merrill lynch global economy. shock or ane-time start of a prolonged time of risk off? will take it will be a risk off for a while because nothing will get resolved in the few months. they do not have clarity around who will run the new government as your guest said. that he does parties have leadership battles going on. they will not start the process of renegotiating until october. this will hang over the u.k. for a long time. i think the spill over to the rest of the world depends very much on what happens with the rest of the world. if we start during about x talk in other countries, this becomes a more systemic problem with the global economy. .t looks like mainly the u.k.

if we start hearing more exes tories am it becomes much more a concern. >> it seems clear in the short-term or medium-term there will be a confidence shock decline in investment and the real economy. to what extent does the weakening pound helped cushion that? does that merely just reflect the rush of capital the exit? soft offer. hit, the pound is falling because of the collapse in confidence. in london, expecting a three-quarter long exception and gdp growth of 2.5%. a folder session. the pound helps a little bit so in terms of parts of the economy hurt more than others, trade oriented companies may do ok with x words. on the other hand on anything

related to long-term purchases, consumers in terms of auto sales. -- there is an uncertainty shock that causes a wait and see economy that is not bit for growth. matt: what does that do for the state of confidence here that looks at not just the negative rates of the boj, but real rates debt,n 10 year government you can see we are still slightly positive here. british real rates are negative one wi-fi percent. it is moving massively down. what does that do? lower interest rates and negative interest rates do encourage people to move out of asked income invest in, away

from the negative earnings at its into riskier invest it's like this market and the credit markets. clearly, there is a double message to investors. on the one hand, you want to move out and on the other hand, the fact that rates are this negative makes you worry the world is an unhealthy place. there is a negative confidence component to this. when central banks move their nominal interest rates into negative territory, the negative confidence effect the much canceled out the effect of the lower interest rate. situationallenging for central banks, note western. -- no question. end ofhere do you see a this year? 1.5% or less of the u.s. 10 year? >> our forecast would be for some rebound or reverse of the very a grass risk off trade we have in the global capital markets.

that is assuming the crisis is contained and it became clear over time that it is still over in terms of global growth being small. it is also assuming that rings come down in europe politically. that the u.k. be recession is actually a compelling object case for everyone else to look at and realize may exiting from europe is not such a great idea and that would come down some of the politics there. in the environment where politics come down a bit and the economic aftershocks are moderate, yield interest rates go up again. thank you so much. i appreciate your time. ethan harris, bank of america merrill lynch. scarlet: grexit is called a terrible outcome. that is next. ♪

♪ matt: this is bloomberg markets. it is time for your is in/come a look at the biggest is the stories in the news right now. george soros, the billionaire whose 1992 wager against the history and did not repeat on friday. a statement says he did -- did not speculate ahead of the british vote to leave the eu but due to his own bearish outlook, he profited from other investments. he was long the pound. the supreme court refused to list a lower court order that said samsung must stop using some features an older model galaxy smart phones and tablets.

a $399 had challenged million award one by apple. a jury found that samsung copied apple's. designs for iphone and should turn over the profits from its sales. the last time the supreme court took up design patents was in the late 1800s over cases involving spoon handles and carpeting. thrive market, a startup aiming to become the online equivalent of costco for healthy food said it raised $111 million in new finds a -- new financing. the round was led by the investment firm. other existing investors, including great crop partners, also took apart. the company says it shifts the more than two ushered thousand dollars with a good the day. todayds -- worth of goods -- a day. former federal reserve

chairman alan greenspan says things will get worse before they get better. here is his conversation with tom keene and mike mckee. the fundamental issue is the fact that it has to a hold.ound we're running out of people and everyone is very pleased with the fact the employment rate is rising. that we needll us more and more people to produce less and less. that is not a prescription for a viable political. iswhat we have at this stage stagnation. i do not rank there is anything out there that suggest a recession but i do not know that. ,hat i know is the money supply which has always been a critical time,tor is for the first going up remark we steadily, six

or 7%, almost a straight line. is tilted up in the last .everal months it has added one percentage point or two. i think -- the thing we should be worried about now, which we have given no thought to whatsoever, is that this type of economic environment ends with inflation. historically, it has always ended up that way. >> i will get a lot of letters from people saying what is he talking about, there is no inflation, futures indicators and markets see no inflation. how do you defend that? are you an inflation asked? all i am saying is i do not know when it is coming but if you look at human history,

time and time again, we thought there was no inflation and and ihing was going i'm basically say, wait. this is not the way this thing ordinarily comes out. prices are soggy and the oil price has been terrific and has had a terrific impact on global inflation. it is not about to emerge quickly. surprised toot be see the next unexpected move on the inflation side. you do not have inflation now. respond to paul krugman's's essay the other day that there is a glory to simple models? that, but like you,

from a different angle, i am going to lump in greenspan with krugman, which has never been done. but if i take paul krugman and out wouldn't greenspan fossey's cry, we want simple models, is there a solution now to think simply or is there a value to the complexity of globalization and the complexity of institutions? which way should we turn? to have as simple in model as you can get that actually captures the complexity of the forces played. , slim them down, that is easy to do but it may not work. said that the models you use, the fed model, do not do well in incorporating financial markets into their models. alan: that is correct. rbus modelords, the f

works exceptionally well, i have many inputs myself, i worked closely with them. people onth the everything else like that. the financial model was awful. it captured nothing and did not grasp what the issue is. what i to reproduce would do. that what wed have, implications. topic. per se are not two thousand bubble collapsed, we could barely see a

change in economic and committee . on october 19, 1987, the dow jones went down 23 percent in one day. he will not find a slightest indication that that collapse and that level in the gdp numbers or in the industrial reduction or anything else. i think you have to basically decide what is causing it. -- causing what. i think the models have got to be capturing the bubbles. bubbles are essentially part of the fact that human nature is not wholly rational. you can see it in the data clearly. >> that was alan greenspan speaking with tom keene and mike mckee. we will be right back. ♪

scarlet: welcome back. look at are taking a stocks and there is a massive drop today p are we saw barclays fall two days in a row, 17% each day. the royal bank of scotland not far off, very similar moves, 18% and 12%. huge drops not only in the price but also price to book. very important to look at that. we see the index estimated pe, the blue chick -- blue-chip stocks, the dow jones, if you will, of all of the eurozone,

and you can see the pes -- has dropped substantially. the question is, when do you get in here and buy some of these bargains, especially if you are a dollar investor because remember, you got 10% off because of the pound, or do you take caution and try to avoid catching falling knives? keeping an ion valeant trading below $20, at a six year low. most risk isys the the currency risk. it creates uncertainty for a couple that gets about one third of it sales from overseas. , bloomberg hasg a focus across all of our platforms. we are going to keep drug companies and bio techs. i am looking at gold because in the wake of that brexit vote, everyone is rushing for the international safe haven.

here is a look at the orange bart chart up top, exploding in the wake of that vote. surging singlee dollars --round one $20. paying a lot. it is all about the gold right now. if -- after a five-day selloff. that does it for bloomberg markets. take a look at where the u.s. stocks stand. as 338 pulling as much point. the utilities gaining for a second straight day. ♪ . .

scarlet: we are moments away from the closing bell. joe: and i'm joe weisenthal.

i matt miller. alix steel is on assignment. scarlet: u.s. stocks losing more than 1% this afternoon. the s&p 500 at its lowest since march. joe: the question is "what'd you miss?" scarlet: we take a look at market moves across the aftermath -- across the markets. joe: what was the role of the ecb affecting the turmoil in europe. matt: and we look at what brexit means for the u.k. real estate market. we begin with our market minutes. the s&p 500 at its lowest level since march. the now, s&p, and nasdaq all losing 1%. in terms of gainers, the bonds and utilities climbing for a second day. you had telecoms slightly higher, so defensive names