said because -- something that i mentioned that has happened in the last hour has been an incredible spike in volume. that has stopped. now we are seeing a 52% gain. it is an unusual day. the unusually talk to scott about options and how they are protecting themselves. modern, whatabout are you looking for? sell moderned to stipulation, what are you looking for -- as i talked to to you about talk

stipulation, what are you looking for? >> that is where you see people holding on looking for the quick snap backs saying i'm out. i've seen this happen in the equity space. that does not mean we will see a quick snap back. is now signals to me we're going to see this market level off and sideways trade back-and-forth. we may see the market down 300, i don terms of the vix, think we have hit that point. i'm just looking at some

notes here. >> i think we will see a little bit of a mindset. instead of the trading range being knighted in a half or 12, we saw the elevated a little bit. we saw the market big in the morning, but what happened? vix was also up. that was kind of the key that maybe something has happened here. i'm looking at that in an opposite way. i'm kind of seeing signs that that may just be coming down a little bit. >> [no audio] [no audio]

in the meantime, i wanted to --nt out is julia mentioned -- ou look at the chart, we had the biggest one-day decline since december of 2008. it has come back a long way. no matter what, it is the biggest loss since the president was elected. also spiked asas well. it gives you the sense of how much selling there was, at least in the last 15 or 20 minutes. treasuries, itat

is interesting there as well. that isa lot of concern what was driving the selling. we are seeing where you have this rush to safety. -- >> it is not just bond yields. unchanged level for most of the trading session. artainly, it is -- it has direction. the move is deathly what we are observing here.

for more on some of the statistics come of the trend we are seeing, let's bring in abigail doolittle. >> it is certainly an extraordinary day for selling. than 1000wn more points, the worst since 2008. the question is, when will it turn? about --u were talking it is certainly what traders are looking for. the s&p 500 up 20%, its best month in january. these huge gains suddenly

turning quickly on a dime. this is 3701. here is the extraordinary rally. dow had been the overbought for quite some time. now simply spiking below. the dow -- if we look back, lessers move up -- if you look at a monthly version, the selling action could continue.

action,ive to the dow's we are taking a look at the big andrs including boeing goldman sachs. going had been on pace for source day since 2001. the stock is still up more than one is percent. it really goes against the idea of sentiment and on shifting certainty. .ates may be dropping on the year, take a look at the 10 year yield.

thinking perhaps inflation entering the picture. this is causing a massive risk and therefore, a sentiment for volatility. -- this came from our segment last week. he made the strong point last week when there was not a spike that it was likely to produce a huge move to the upside. you could make the case it would climb even higher. the chart makes the case that that is possible. >> we are certainly keeping our i on it.

you can see at the end of the chart, the recovery is what we have seen in the last 10 to 15 minutes or so. when i look at the rest of the market, there are more than 10 for every one that is advancing. by that measure, the selling was worse on friday. -- for more on the market action, we want to bring in a chief global strategist. when you see the price action, that's fellow stipulation

question mark -- stipulation? >> i think we are getting there. the s&p above it support level which is is almost as high since the last two years. all of this volatility midst of context.stood in the -- i don't think we would get there in two hours.

-- i think the bondion is ultimately the market is spiraling out of control. think the foundation of the current trend i don't think is really different. >> you broaden an interesting point about the bond market in recent days. selling --ultaneous does the existence make people a little more comfortable that at least some of their hedges will work? obviously some of the

emerging markets etf. the consolidation here, we consolidate the hundred and .oving average >> the most actively traded stocks are all declining. you don't have any gainers until 57.

part, declines all across the board. >> to go back to the idea of price action as well as individual sectors. ,here were all sorts of stories in addition to whatever else is going on. saw inme that to what we the flight to quality. how important a driver is the rates market? this.ould say obviously, higher rates mean higher quality capital. equities have to compete more aggressively and decreased earnings visibility. i think the real bogeyman here

.s inflation i think that is a big assumption to make. it is really going to drive more uncertainty about what central banks are going to do. break assuming the tenure the output gap smaller. tohink we are more likely have a higher range. the markets have to understand that. seens the calm we have

calls us to get our calibration off for what is a fairly standard selloff? >> i think the market was so you want to call it that. if that was is that is a got in the market leading into that is about 3% above the hundred day moving average. when you see risk assets raising digits. high single

maybe this will be a tiny hiccup. strategist,f market what is the strategy going forward? >> -- like technology and financials over a lot of other sectors. you have to be very thoughtful about how you .tructure your options

you may want to sit by and not you thinkg unless there is a fundamental shift here. i think that is a very make.sive assumption to slowly starting to build positions. >> thank you. we want to continue the conversation on the market action. also joining us by telephone, chief u.s. equity strategist. let me start with you by phone. assaw the dow lose as much 175 points. what were your clients calling

about and will you telling them? >> people are looking for narrative to explain this. there is nothing that warrants simply, isient asked this a buying opportunity or is there something we are missing? >> the underlying economics looks like this is something you want to buy into. >> we are hearing both sides saying nothing has changed. the wage data we got friday was pretty strong. you disagree? >> i totally agree with what you're saying which is thursday and friday of last week, you had to reports coming out which said inflation risk is higher.

this is something we knew was a rift. we have been talking to clients about it for months. at aconomy is moving healthy clip. we saw that in the jobs report last week. what i'm saying is if you look , theremarket move today is no particular catalyst which is information any different than what we had last week and we are probably not going to have additional information on inflation for a while before we get another report out. >> thank you for that. >> i think to some extent,

there's something to that. , aboutt the peak 40% of the decline is happening between 2:00 and 3:00. >> we were talking to you on friday. >> run after three caught him,

there seem to be a selloff in equities. >> i think you have to and time -- entertain this idea that some .eople are trying to evaluate so much does the story driving the treasuries of the show. >> that is the story and i think there's two parts. there is the general move in rates and then there the is -- there is the underlying cause. in terms of shows yields, that that is supportive of stock prices. what the market doesn't like is a very abrupt move.

the markets seem to get a little bit of indigestion. if we did not have these later in the week, my guess is the market would not be as concerned about the rise in interest rates as we are seeing. issue, thelogical move from focus on return has been very swift. we are up six plus percent and now we are down on the year. investor, in a sense you will be in a lot of trouble if you don't lock something in. >> at what point do you go we have a real problem? the vix 10's to overshoot.

you could argue we are already .t a point usually, when you get a spike , if you look at the ratio from the first of the third, it is very sharply inverted. basically, it is the most it has been. theou are willing to take leap that we are not on a financial crisis, that is consistent with a short-term selling agenda. >> are you hearing anyone blame the selloff on anything like etf's for instance? >> this vehicle has not really been tested in a market downturn . >> people have issued with that underlyingis not the security. >> we have done a lot of

reporting on the fact that they were pretty narrow in terms of what they were investing in. toanother thing, we have talk about this and how it was divided. >> will resolve in january to a certain degree was a big question by a lot of people in what we have seen over the last 45 trading days has backed that up. finally see the dollar -- not a massive spike up. while, first time in a they suggest some of the selloff was at least the flipside which is that by everything. >> i think the dollar rallied

today and is indicative of a broader theme. is when tend to see there is a spike across assets. you reduce all positions. >> you have not seen it very , itn, but historically would send a row of dominoes where the stress and one market would lead to liquidation from one market would lead to liquidation in another market. >> look at the two-year treasuries. next -- >> how important is the close the phonetion mark >> answer is yes it is important.

out that ao point chart that illustrates what you're talking about. the start ofow and january 2018. it took 18 days to get to the record high. . >> i think there is a psychological effect. the that,e to with that could rattle them. what you put weight into what you see in the last hour or anything like that much more >> not really. there's roomusly

money being made or lost right now. i think the point about the close is there will be a ton of trading so it is possible today will be better or worse. i agree this is going to flesh itself out in the aftermarket trading in the teachers trading and tomorrow morning so it is very hard to know what market is going to do. it is the largest move that is going to matter. >> thank you for your perspective. [indiscernible] rick too happy with this. your thoughts today?

>> i think long-term that has not been used a lot as the try to define what is happened. it is a lack of perspective. we've seen problem in the markets right now is a lack of perspective, meaning the majority of portfolio managers have been in the business are less than 10 years. believe the majority of equal don't understand that a good economy is good for stocks rated the majority of people have only been in the business for 10 -- fundamental bottoms up,

earnings growth, things like that. we have not seen one since the mid-90's. days like this are normal. we never like to see the lose money. but, it is the role of big numbers. again, we're not trying to belittle anyone's opinions, but this is pretty normal. notmajority of people have been doing this at a senior level for more than 10 julia: you are saying a lack of experience of the problem here,

but doesn't that increase of periods like this? on the downside, people tend to panic when we see red arrows. is a point and it provides opportunity for investing because when we see the upside of opportunity, people are buying the same stock in the same trade and lots of volatility. you aske careful what for, because people are asking where's the pullback? caution people, the scary story is the story that is out, take a deep breath. the stock market is in the best condition in over 50 years, earnings are strong and consistent, balance sheets are stronger than they have been in 50 years. the cash flow continues to go up, don, dropped the mic. just because stocks go down,

doesn't mean so our wages. we don't have contagion then, and we don't have contagion now. joe: i want to ask you something about -- important, economic data and the market. there is an idea that the economy can overheat and how an overheating economy may be bad if it is through the federal reserve channel or margin channel. somehow good news can be bad news, are you essentially saying that? >> people are not doing the research, we published a piece talking about how stocks will and should go up. slowest, most the boring economic recovery in the history of recoveries since 2008 and 2009. people don't get it at interest rates can go up -- the mid-90's was a great time to be an american when stocks went up,

ponce went up, dollars lineup. institutional investors were not around in the 90's and managing money, and the once water around are at bigger firms, or running their own shop on their own. we have a lack of perspective here. bottom line is that earnings are good and it should be good for the stock market. ofhave been so disposed venues -- but we should know that the news is really good news. julia: talk to me if this is a good thing, the fundamental of stock markets, how much further do you wait before actually looked and go, i can get my toes into here? >> here is the good news from a classic sense. we have been doing this for a long time and have seen these types of moves. and peoplead friday

were freaking out, you had a it anden, they hammered try to bring it back another day, and then hammered it again. market corrections are defined -- but bottoms are made on mondays and tuesdays. i'm not saying today and then tomorrow is the bottom, but for the last three years, all my competitors out there have been calling for the top, today is the top, tomorrow's the top, next week is the top. now today is the bottom, tomorrow's the bottom, but the reality is no windows with the bottom is. if you'd by great companies, i ornk a year or two from now five years from now, you will be very, very happy. joe: what will make you change your mind and think we are in for some tough times ahead? >> i think you need to see a reversal in economic data and

see the fed say what i like to call a billy madison moment. that, income keeps slowing down and went to go the other way in interest rates, out.maight freak people we are acting that way now, but that is not going to happen. scarlet: thank you so much. julia: huge perspective there. scarlet: for more on today's global chief strategist for citigroup private bank. stephen, thank you. we are seeing what some people call capitulation. you think this is what capitulation looks like? >> these are fast-moving markets, and what part of this is human and what folks are

really doing the last you minutes of trading and the impact on markets -- over the short run you can sell all you want. i agree with the last guest that fundamentally things to do not change over the last couple of days. i think we fundamentally misjudged the amount of volatility in the marketplace and spent four weeks saying nothing matters, but faster economic growth suddenly best something else mattered on the interest rate fund. that helped define the bottom, and if you don't see high interest rates and a lot of the fear generated -- you will have lower asset prices and better returns. joe: so we need to see a bit come into the bond market to get people comfortable, is that what you are seeing? >> we are seeing that, but what we are seeing is that it has to be tested if stage -- if prices are at a price discovery. this is clear with the federal reserve allowing its banas --

balance sheet to shrink. with international investors having to take for exchange risks, we have to renegotiate the price of ons and yields and what the impact is on other financial conditions and other asset markets. i think it is going to stay volatile for a wild, but the thing i need to see is that ultimately we are not going to have a crushing bond market selloff. i doubt that we will. julia: we can talk about a load of things here with cap the list saying higher treasury issues, the wages -- >> bitcoin. well, we saw in europe as perhaps even more in the last six sessions, but the optimism -- that is interesting.

>> what we saw in emerging markets thus far has been really mild on the downturn. what we see in europe is that we see issues with the elections -- we are not up as much to begin with. those are closely aligned markets with u.s. equities. when: you're my postings your secretaries -- u.s. secretaries become an issue. >> we will separate asset prices and don't look like this market every day. how far it goes down, you tell me. this speed of decline you cannot keep doing this day after day after day without finding some sort of impact or bottom rather quickly. we found it pretty fast on the way up, how far to go, and it was very robust and will find it

very quick on the down here that we will find our bottom. scarlet: how will you know when you hit capitulation? are there concrete signs? high-volume signing and ridiculous options trades. attention for 50% down -- those sorts of things. those kinds of things. all relative to what are the spillovers to credit, does it look like on the credit side. things --the types of the problem is we rallied an awful lot very fast and we were doing a 100% annualized return in january. that is very quick. joe: we are talking about technical things -- ignoring for a second what we see in price and go to fundamental, what we see in economic data.

what we see and earnings data, if you were blind to what the market had been doing, is there anything in either of those areas that would make you nervous? >> no, you have to worry that this is contemporary -- i can look to asset prices to tell me where the economy will be. that clear difference from being a portfolio where you are feeling around in the dark and trying to ascertain where things will be in the future. what we saw fourth quarter, 14% for profits before tax cuts, it is going to be a very up your for profits in every likelihood. -- we have seen in the rate how much, and what is the feedback on acid clashes -- asset classes? i think this kind of selloff today, this disorganized selloff

is only going to go on for so long before some but he steps up and says, wait a second, there is an opportunity in the selloff, and i don't think it will be long. determined bylso traders who don't have experience in selling off in a downturn, do you buy into that too? thatere is a part of this this is not a human decision that this is the price that it is right now, 5% lower than this morning, for example. investors and companies change the way they behave and change the way they use their money to pull their cash because of a disorderly selloff that we saw earlier this afternoon? >> they take advantage of this in terms of share purchases, but usually they moved lessen the markets. the markets are going to exaggerate, and bull and bear markets are in exaggeration by

definition. ofre is this emotional side fear that takes everything to extremes, and we had a bit of both in the last month. scarlet: so they step back? will not be changing their planning quite as much, the federal reserve will not be changing. was there a peak we have to worry about in the american economy? it looks doubtful. we've gone a long way, but you want january the employment data, 330,000 new jobseekers -- the capacity to grow. people are worried about inflation suddenly, but we are going to have to percent growth in labor -- there is no way. you want to not this whole thing down right now because inflation , we saw a lot of money -- minimal wage gains. the policymakers can play a role perhaps in smoothing things, but i think they should be careful and playing a role of taking too

much volatility out of the marketplace. joe: i was going to say that maybe we should feel back from a media perspective of blowing up proportion.out of so i wouldn't feel too bad. talking to our last guest, he said this idea that there could be too much good news for the market. you buy that -- do you buy that? demand can exceed supply, and you can have exuberance of how much you produce, these are the sorts of things that recessions are made of. i don't think the real economy is in imbalance right now. areumer goods prices falling at an annualized rate, service prices are moving ahead modestly with wages, this does not seem like a fundamental overheating. you have asset values in huge

that canreliabilities, happen from the u.s. economy. julia: we will come back to this very soon. thank you for that. i think you have some breaking news, scarlet? scarlet: we do. i don't speak french ray well, but he abruptly resigned from yoga wear maker because the company said his behavior did not live up to his standard. he resigned from the board of directors as well. they weren't specific about this misconduct but the board has begun search for a new leader. ceo has abruptly resigned and his behavior did not live up to his standards. 3%, andreater than after-hours trading, the are in the search for a new leader. he has also resigned from the board of directors. julia: the company has

reaffirmed that guidance provided on january 8 -- anymore headlines will bring them to you. you can see the stock down -- retracing some of the losses we saw. the pledge in stocks went beyond a normal reaction to economic circumstances and had elements of liquidity selloff that landed on markets in 2010. that is according to one analyst, head of portfolio strategies joins us now by phone. can you explain your thoughts? --sure, ask for having me on thanks for having me on. algo -- the bottom line is that it is smaller than it has ever been, so when you have a macro stress meet a market stress, the macro

potentialng a increase in inflation much higher than expected rate hikes, and stronger economic growth -- your volatility increases. quants adjust to that, it creates the potential for lots of orders going in one direction to offset that. and wead hints, close that lows, negative five .4% on the index is a significant move. joe: i am glad you brought that up, it is worth noting that futures continues to slide in after-hours action. we have been talking about this issue since the flash crash years ago related to algorithms -- are there things that still opt to be done from a market structure perspective to make things more orderly, or is this how markets are going to be her

from time to time will get these incredibly fast breaks? what should be done is not my area of expertise, so until such time something is, and i'm not sure what it will be in the start pull world, how do you regulate that? gime we areea going to live in. that, we should expect more and more volatility going forward and potentially more flash crashes across markets. i think it is a equities phenomenon, treasuries, etc.. there was a treasury lash crash years ago, and there was a sterling flash crash post brexit. julia: how do you recalibrate for that though? we see this incremental increase in stock markets could again, how do you recalibrate and make an assessment and how to react in that environment on forward?

>> not to be good, but don't sell volatility -- not to be g lib. julia: that is how the markets are, unfortunately. probably something that is a way to avoid this come up the other way is hedging one volatility -- besides that, it is difficult. the main question we have to ask is has something permanently shifted? is it more than a flash crash? egime?a volatility r but we do the case, not think that is the case, but it is something we have to look out for. scarlet: this conversation reminds me of one we talked about surviving the last five to 10 years meant short volatility.

the question is how do you unwind short volatility trade in an orderly way? it is a crowded trade and we have seen volatility creep up, and no one necessarily at the time we spoke is doing that, perhaps that conversation is coming to the form and people are unwinding that trade? >> i completely agree. volatilityrt-term trade, and the implicit short volatility trade which is being in a long-duration assets across which is chinese real estate, chinese tech companies, -- theng-duration growth implicit short volatility trade is across asset classes. it is tough to imagine that will unwind in an orderly fashion. joe: the implicit short volatility trade -- we are assuming that savings and 401(k)s anything like that --

most of us at some level are .mplicitly short volatility there is extra juice you are talking about in addition to normal portfolios. >> that is exactly right. one potentially nasty outcome is to offset the short volatility trade, which is long-duration assets and yields below, funds have shorted volatility to raise income. say, is was going to -- a return onft capital to a return of capital? do go to the traditional trades here like gold, yen, treasuries? >> i'm not so sure that shift has officially been made. i don't want to make too much in one day as dramatic as it was. we will see in the coming weeks,

the at the end of the day, andings are very strong, even though inflation is moving higher, it should move to a level that should create a higher recession risk or some type of shortening of the business cycle. i would say the messages don't panic. that being said, cash, might be an option. julia:aha, good point. scarlet: now that we have volatility and people are caught off guard, and where calling it a flash crash, is this something that could be good for banks and their trading divisions after the not so great numbers we saw out of cap the markets in the last quarter? >> i think it is very positive potentially for banks across asset classes as easy volumes increase -- it is good for active management, which is an important point. managementy bad for

continues, people have taken passive management or etf's to me less risks, but that is not the case. it assumes that everybody has infinite holdings, and people need money tomorrow. julia: we've never seen greater regulation towards passive funds, to what extent is that driving the bisection, and to what extent are going to see it going towards to? >> it is tough to pen the short-term action if it is etf driven or passively driven, and it looks like a tremendous amount on the day, but it is something i think on the go forward basis to the extent people question the safety if you will of investing, then it could be a sustained shift at of passive funds. somethingamused by you said earlier about cash for the first time in ages is

actually paying something. at the beginning of the year when people were dumping dollars like crazy, it was the first time in a while where you could get paid for holding dollars. ignoringff aside, today and yesterday, is their starting to be a case for structure early holding more fixed income given higher yields? to your rates are higher than the s&p -- 10 year yields before today were almost 1% fully above u.s. dividend yields. there is a case if you can get a two-year bond above that of the , and you don't have future earnings for us, then there is the case of volatility increases. forward, when clients call you and ask you what they should be doing in the days to come as they wait for -- dust to settle settle, how do you advise them? >> there is two ways to look at

it. one is that the last few times, we have seen spikes in the vix, it happened when the economy was much weaker and does constraint on monetary policy were greater. you had immediate fed responses, but i will big drug what to see that, so that means you have to wait for exhaustion, and unfortunately that is hard to do. clients will wait and see if there is a risk parity whale. scarlet: what you mean by that? inthere is worries out there the market that parity funds are coming under pressure, and other short duration trades -- short etc., ify trades, there is four quants that is going to bring a whale to service. it is tough to get that information, but i sure as heck

i'm not going to advise -- i think you should wait to see where the dust settles, and i think will settle in the next few days. if no whale surfaces. julia: obviously we don't want bycreate greater alarm -- definition, when we are looking at asset prices at the level the tightat and credit spreads we have seen globally in particular, is that make investors and markets more sensitive to a pullback or rise in rates that we have seen just on the valuation basis? yes, absolutely. the one thing about valuation now, which is so difficult, we are so outside the normal bounds that it is tough to anchor.

so, if we were to return to normalcy, which means returning to normalcy to the vix, consumer confidence, etc. point.that is the key thank you so much. head of portfolio strategies at ever core. scarlet: let's stay with the selloff, we bring in julie hyman , and let's recap some of the numbers for you. 1175 pointss losing on the day, that is a 4.6% decline, and it is down for the year. the s&p 500 losing 4.1%, 113 2018, off -- percent for and nasdaq is still higher in the year -- despite losing towards 73 points, or 3.8% on the day. eventhe nasdaq wins again

with how crazy the year is. still, nasdaq is winning. don't you like the live shot? i am not able to scan my fingerprint, poorly my fingerprints have burned off. [laughter] this is what janice was talking about, before today, the recent rise in yields, the dividend yield of the s&p 500, or the earnings yield -- either way you slice it, you are seeing more yields competition. that is one of the many things that contributed to today selloff. joe: i remember the early days of the show, in 2015 we used to joke about people buying bonds for the capital appreciation and equities for the dividends. that is essentially what you are

describing, that situation has finally reversed. you're not getting paid that much in equities and you can get a dividend on the bond. julie: i thought also that ben carson, said on twitter that when you have a day like this, everyone tries to grasp at what caused -- what happened? scarlet: looking for that narrative. julie: there is no one reason that there is the selloff, there are little things, or in some cases big things that contributed to it, but this is one of the reasons why it is hard to predict when it is going to happen. it is not the sort of thing that slaps you in the face that is so obvious before it happens. we see the action we saw this afternoon with steep, quick declines, it is difficult to know in advance. doing humans duty, trying to login to her bloomberg. julie, thanks so much.

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to first world news. as her trump is praising his tax overhaul, telling workers in ohio that america is once again open for business. mr. trump turkey day manufacturing company -- third his first year as president. -- turn in manufacturing company. before the think is dry, companies were announcing thousands and thousands of new jobs and enormous investments to their workers. >> president trump told workers at taxes are going way down and

u.s. factories are coming back. the clock is ticking towards another government shutdown deadline, this time on midnight thursday. house republican leaders were in closed-door sessions in a move to avert a showdown. they're working on a strategy that could last up to six weeks. that is the time to make progress. in the meanwhile, brexit negotiator michel barnier and brexit secretary met in london today to resume talks for the new year. u.k.lle barnier warned the if it plans to exit the single market. --without the customs union foride the market, barriers --de and goods and services the time has come to make a choice. >> prime minister theresa may's

office has made it clear that britain will not remain in the customs union with the eu after britain breaks the 28 nation bloc. federal investigators spent the site of a deadly train crash and south carolina were an amtrak train was sent off the main track onto a part for a train. the crash killed two people and injured more than 100. the investigation to take years -- could take years, eight critical factor may have caused the passenger train the barrel down the wrong track. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. this is bloomberg. let's get a recap of today's market action. where do we start? here is how it ended. by dow is down for the year

1.5 percent, the s&p 500 a similar story, also down on the year, and the nasdaq clinging on to its 2018 gain despite losing 270 points. it also outperformed other indexes as well. joe: tech keeps winning. scarlet: if you look at the other sectors, and all 11 sectors in the s&p 500 declining. the bond proxies doing better as bonds prices rose and yields can down, so utilities and real estate trusts are off by 1.7 percent respectively, but you look at some cyclical sectors -- financials off by 5%, all caps off by 4%. julia: that is different to the price action we saw the prior five days. with the most pressure, and defense is losing least. that very much ties to an

anomaly with the rates shift that we saw. scarlet: despite higher yields. catching up to the two-year. we'll keep you posted as futures gets into trading, but a bigger look of the federal reserve. jerome powell has taken over the helm of the central bank and inherits the u.s. economy in its third extension record with employment and inflation low levels. the question is, are there complications on the horizon? joining us by skype is university of oregon professor raise -- doesed jerome powell job fundamentally change and his outlook on is iny change now that he charge versus janet yellen given

the selloff and turmoil we have seen in the last couple of days? i don't think we have seen enough in the market have an impact on policy at this point. i don't think that -- as far as margins is concerned, that it is going to do rail the federal funds. julia: talk to me about the data we got on friday about wage growth, and i know you have to stories analyzing it. if you look at the annualized reading and four of the last five months, the story here is the significant increase or exhilaration and wage growth, and surely that is expected that is playing to the reassessment in the rates market in the past several sessions, not just today. we had ahink that wake-up call in the last week, we are betting against the the fed is going to

have three rate hikes this year, and it is evident now that that chances higher than last week. , anddata is moving along you are pushing to a point where you can arguably say it is full employment -- and that raises the additional question of how , and it is moving faster than anticipated. we need to have a reassessment of what is leading the economy right now. joe: is it plausible that people are suddenly overrating the prospect of inflation? otherf wage growth -- in a while,once people are saying this is full employment or something else. is the case made or do we need to see more evidence to come to a verdict? >> i would not say the case is

made, but you are getting closer to that case. several months of solid wage growth -- i think inflation numbers in recent months will add to that case. but i don't think the cases there yet, but i think it is much or to say that the fed is going to raise rates for four or five terms this year. it is getting ahead of where the fed is, but i do think that, maybe the are not going to get to that rate hike, it is more of a question of rate hikes. julia: thank you so much for joining us. up next, cryptocurrencies keep sliding as bitcoin continues 2018 and the red. are there more concerns ahead? from new york, this is bloomberg. ♪

julia: the bitcoin slide continues as digital currency decline for the fifth straight day. comes the growing number of credit card issuance holding purchases of cryptocurrencies on their cards. genghis to discuss is the white america's blockchain leader -- angus. great to have you on the show. so much news flow related to bitcoin specifically in recent days. what do you make of the price action and what do you make of the move by credit card issuers saying that we can't accept this? any asset that triples in

price, you've got to consider as fairly volatile and has the chance to do the opposite. the only thing you can really say about the market right now is there are more sellers and buyers, and anything else is a motion. with regards to credit cards -- there has been a lot of discussion on that. it is a volatile asset to put on credit, it is hard to tell how much there has been there. i am not sure that is necessarily going to play into the price action. the ability think to buy cryptocurrencies on credit cards was a big part of it? >> it may have been a part of it. both stories coming out of people taking out large loans to invest and get on the rampart, it is always risky. is much that played a part

hard to tell, but certainly a lot of consumers came in that weren't in before. joe: the last time we have you on, things were going up, but the story at the time was about all these new institutional ,nterests -- hedge funds technology to allow hedge funds to keep their corns in custody. is, d.c. these plants having been shelved or is the long-term project that people have to get people exposure to the space. ahead in your view? ahead in your view? >> anything that was happening was on the cards before three months ago, and such a change is on to really change that strategy. that, we have seen thatents -- it is unlikely

the changes that come up at question comes up. if we are providing access to customers to such a volatile product, do we need to look at our risk differently? quite interesting, what they proven in the last few sessions, bitcoin is not an alternative over gold or other assets. the whole arguments about the coin especially in were spikes are very hard, it is really about stored value. how do you make a case in light of what we have seen? >> not a very good one. julia: a leaky one. it is an a technology, and when people talk about value, is

that something that can be going forward when you get broader adoption when you have a larger market where there is more liquidity? it is one of those things like with the internet in the mid-90's, it was email and creating your own webpages, i think changes like that will be the same for this technology. interest investment in blockchain, that underlying building blocks here, desperate to point out that the coin is separate from whatever it is their interest is in blockchain. noiseink the regulatory sense sentiments in the underlying technology here or is it quite relevant? irrelevant? is seen that, it they will merge, but it is seen as separate. we spoke last time, there is a

long-running sentiment of blockchain and not the corn, and a lot of people in the bitcoin world say it is all about the going -- we don't see the price sentiment in the blockchain piece. likewise, going the other way, movement in the blockchain space don't touch the prices. scarlet: do you see a connection between that rapid decline with what we are now seeing in u. s. equities. perhaps that led the way are paved the way for u.s. stocks to correct as well? >> it is too young a market to correlation, and such movements can happen quickly with a small number of traders. joe: i have a chart here showing bitcoin and futures -- it makes me wonder to some extent whether

it matures we're starting to see correlation rises a low bid -- a little bit. >> right now, to be told, it is a speculative instrument. scarlet: if you were to see u.s. stocks recover quickly, sharply rebound, could that brink bitcoin up? >> again, too hard to tell. julia: emotion driven. >> correct. joe: still to come, the market close. this is bloomberg. ♪

scarlet: it is time for the bloomberg business flash. bridgewater is calling the most weeks -- recent market drop minor corrections. it has crossed over to several overseas markets and tenure treasuries. on a link than post, it went on to say that there is a lot of cash on the side and what comes next is most important. warren buffett's railroad is getting off the blockchain wagon , joining the blockchain transport alliance, saying freight and logistics companies including ups and federal express. digital technology for vehicle maintenance to focht up action t.

porsche meanie mission capable of traveling 400 to 600 miles on a single charge is expected in 2019. the starting price, around $75,000, similar to the model s of tesla. baking is over the last hour, lululemon ceo has that down effectively -- breaking news over the last hour. the search continues for a successor, and lululemon says to holdect employees himself to a standard and it here the guidance. and that is your business flash update. back to the market selloff here that we saw today, extending the decline from the end of last week. let's bring in luke powell, you have been blogging about this,

please tell us your thoughts. for so long we have been wondering about these short volatility products, and people are saying it is going to go up, stocks are going up, the tail will never went the for so longn wondering dog, but today, it looked like the tail whacked the dog. right around there where you see 30, so, wow. that: you see a bit like is how dohe problem you go about tackling those? >> all i can say is that it looks like if you are looking at some of the etf's and short volatility etf's that are popular, just looking at the premiums. it looks like there is resolution out there that is in

favor of lower stocks. this short volatility strategy, and you talk about them a lot. it has been the most consistent moneymaker in the world, but the drawback is that it could and in a minute and it could be all over. tell you selloffs, you don't bottom out markets on friday, and one of the reasons for that is but don't want to hold a short order on the weekend, and it manifested this time. you have this incredibly narrow spread to now negative between the second month and front month vix futures. the more you have to build up in that short volatility trade, the first to you have third, second to first, the more potential powder you have to explode to the downside in a way we saw today. it has been building up.

julia: just to get back to what you are saying of what you can see at the moment suggest there is more downside potential in stocks, explain that quite clearly so that viewers understand what you are saying to make a judgment call. areor example vix products presumably trading closely in line with the net asset values, howsome of them even admits terrible the unwind was today, the price they are trading at is still higher than their net asset value. vix termking of the structure, you sent me this basically that bottom bar chart is that spread between the second month and first month. you can see we haven't had a move like this in quite a well,

this chart goes back several years. i think the last time was late 2014. what is the showing us? >> it is showing the short pain -- the longest time, vix was low, but the board was steep, you have the benefits from the roll down from the second month contracting priced higher than the first. consider the into the future, and now the market is saying this is a big event, there is uncertainty in the near term. it essentially is the biggest tell and you have, and the biggest reason for a market structure that has blown up. joe: looking at the acid standpoint, credit spread, high-yield, we haven't talked much about that.

the things appear to be holding their own? >> the moves there are less dramatic. you still have the bloomberg high-yield spread average widen brexit, soost since we have a lot of superlatives that we can say about the backside that shook off today, but the eye-catching news is in stocks, and that suggests that it is short target funds contributing here. scarlet: you started the conversation with that, trading that gives-- xiv, you the sense of the explosion in volume. limited downside to the security or is the downside unlimited? xiv is?hat the scarlet: it is a short-term etn, so there is risk involved. >> because of the way it is

-- such a, there is a way of termination, it is rigorously back tested to make sure you withstand some of the worst flash crashes. we'll probably withstand this and be fine, but people holding it today, what is the difference to them? day --it had a tough they've had a tough day. joe: coming up, what you need to know about tomorrow's trading day. ♪

u.s. treasuries on like the most was that today -- and a succession. that does it for "what'd you miss?". julia: they make australia's next. joe:

>> us stocks plunging the most in six years, the dow falling more than 111 points, the s&p 500 work that january's gains, rising concerns that inflation will force interest rates higher. treasuries popping, sending 10-year gilts down, the dollar remaining steady as the yen is up. however, don't panic, is unlikely to hurt and economy enjoying solid gains, unless