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tv   Whatd You Miss  Bloomberg  February 6, 2018 3:30pm-5:00pm EST

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officials at the white house, president trump called for tougher policies for the influx of criminals in the united states. president trump: if we don't get gangf these loopholes -- members, we are talking about ms 13 and other gang members we don't mention. we will do a shutdown, and it is worth it for our country. to see a shutdown if we don't get the stuff taken care of. republican congresswoman said at the meeting that a shutdown wouldn't be necessary because bipartisan support exists for a crackdown on violent gangs, but the president interrupted her saying that we are not getting support from the democrats. taiwan say to people are dead and more than 140 injured after a 6.4 magnitude earthquake struck the
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island's east coast. there are also reports of people trapped inside a hotel. a french prosecutor is asking for a four year prison term for a man accused of hiding killers and islamic state attacks in paris. he knew he was harboring criminals and that there wasn't enough evidence to prove he was involved in a violent attacks. he is called for the maximum five-year sentence for knowing who the men were and what they were plotting. the attacks killed 130 people. calledassange's lawyers it warned to be revoked after a sexual assault case against him in sweden was dropped last year. assange has been living in the ecuadorian embassy in london since 2012 when the war was first issued.
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global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. ♪ julia: live from bloomberg headquarters in new york, i am julia chatterley. tradingre 30 minutes on -- into the close, and big volatility index retreating from yesterday size. -- yesterday's highs. scarlet: why the demise of to vixindexes normalized -- indexes. get immediateo
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company to report first quarterly results. what to expect, coming up. turmoil of thee recent days, markets are trading. abigail. abigail: we have a huge rebound rally from that s&p, dow, and ondaq, opening much lower the opening, gyrating between gains and losses on the day, and now we are looking at the gains for the major averages. the best they since november of 2016, the s&p with the best they since march of 2017, so a big rebound rally. if you look at the today chart, it speaks to the volatility. yesterday we had the worst day
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since 2011, opening lower than yesterday's low, and now this range appears to be breaking to the upside right now. we still have the dow and s&p 500 down since the all-time peak, suggesting there could be more pain ahead. in theook at that chart moment, but first the rebound winners on the day. we are looking at apple, microsoft, jpmorgan, high-quality companies that investors are buying the debt on. it will be interesting to see whether or not the strength does last, and if we hopped on to the bloomberg, one of the biggest stories is volatility with the vick having the biggest one-day spike ever. is not a perfect chart on the relationship but it gives you an idea on the long-term that the s&p 500 in orange, and the white invictus, shows they converge after falling apart.
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90, and theyent to reconnected in 2011 and 2012, and we had this massive divergence, and we see the s&p 500 started to take down and the vix trading higher, perhaps to 90.owards that 2008 hi of perhaps will seek convergence after all. going into the close, a rebound rally, the bulls and charged -- bulls in charge. of focus ony volatility after seeing the biggest spike yesterday. overing session highs, 50 points this morning. tied to the rate
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index, for more on these products we are joined by the head of market strategy and securities -- four macro risk advisors. to start with you, pete, you sent a note out earlier and said that st. louis fed said is the most predictive market selloff of all time. the question is, are we done here? we are not done, it is going to take a. of days -- period of days. vix upside is not a surprise, i am surprised actually it is not lower, but no surprise in the weeks to come. julia: in terms of equities and other classes in particular? >> if you look at equity volatility, that is the big standout.
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you look at other measures of volatility, you will see that equity and the fix in particular was a standout because of the short volatility products spain beingthat -- products wiped out. it also caused a market dislocation of event. forced liquidation of short volatility exposure is exactly what you were seeing yesterday. if you look at what vix futures were doing, they were up over 50%, and effectively these products represented 3 billion of value as of two days ago, and they were wiped out and maybe there are 100 or 200 million. i want to see the entire short volatility has been wiped out, but short volatility has certainly been wiped out, and most importantly, an important source has been wiped out.
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gone, i ambuying is not saying gone entirely, but the source of demand has now disappeared. scarlet: but the question is when you know how much is tied to the trade. we can guess but it is a stab in the dark. of what heast month observed in the markets -- some loose sense, if you observe somebody in the market today, they survive at five to 10 years. sometimes that is explicit, we call them volatility harvest there's, people who sell volatility, and others have an implicit form. some are more self-aware than others, and that is the critical issue. how'd you unwind that in an orderly way? scarlet: this was clearly a crowded trade, selling
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volatility and generate extra income. who was doing this? >> i think it is across the board, individuals, call overwrites. calling over equities and statistic -- sophisticated products. there's a problem of picking up nichols in front of a steamroller, and it is clear this target trigger was in place, and when that happened, this is what we wound up with. joe: you are looking at the , andsion of vix products when this happened you are probably one of the least surprised out there. is up again, are you surprised there isn't more of a ripple effect this morning? >> no, not really. i wouldn't be surprised if key -- they are rallying so
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much today, so it is a bizarre world. i think the product miss be wiped out for the health of the market. i don't know how many times you have come on here and with asked you again and again about the low volatility environment and never seem to pick up. we talk about it for months and years on end. whichan event like this, you expect the volatility regime at all to be materially different than throughout 2017 or 2016? >> there are a number of factors we can think about. what is the macroeconomic picture? it hasn't changed from three days ago, earnings are still great, but if you look at how equities are doing in particular, momentum is
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outperforming through all this. to me this seems like a more technical selloff. orn if you are in a benign positive environment, you can experience -- the technical selloffs along the way. i do think the volatility environment has meaningfully changed. so take longer for the vix to get back to 11 or 12, probably, but i don't think the market has changed. >> we've been calling this a market structure selloff, and fundamentals, nothing has changed. structureis a market and there is this product that you can look at the ripple effect. everything emanated from that vix volatility trade. the more volatility in volumes you have, and that means to clear the market a little bit to normalize, and that is what
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we're working through right now. julia: how long? long,o think it will take maybe in a few days, maybe it is already done. scarlet: so sixth-inning? innings, that is where the volatility comes, and then we can move on and focus on the good stuff. joe: i want to focus on the demise of these products. are these products bad if people know what they are doing? to break down etf strategies, there are good strategies and bad etf's. i don't like etf stec enforce trade and have rebalancing at the end of the day that will push in the same direction that it did before. infix products, i don't understand why you take a product that was a desire to be traded in a percentage and traded at a percentage. goes to 11 or 12, it translated to these products. julia: was that we need
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regulations here for inverse pots like this and to leverage etf's, -- >> think it is great, but there has to be better selling tools to make sure people understand what they have. scarlet: gentlemen, thank you so much for a great conversation. now we have breaking news. lodging for the first time, you are looking at live pictures from the kennedy space center. how exciting. it will follow its first landing attempt, the world's most powerful rocket suffered five years of delays, and it is equipped with 27 engines. elon musk considers this a success if the rocket didn't
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blow up on the launchpad. he is the billionaire founder of spacex and tesla. i'm going to go there one day and take a look at this. scarlet: there is a tesla roadster on the payload, and this is elon musk level drama. joe: there is a car inside the rocket? that is incredible. julia: it is the most powerful rocket. they sold out of vip viewing packages. scarlet: not only is there a car, there is a safe driver and an astronaut. joe: so they are doing anything they can to get ready to pretend they're going to launch? inside.here is a tesla winds have the latest,
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it was supposed to go on earlier, but the winds got in the way. after five plus years. joe: 12 seconds now. here we go. julia: it's coming. four, three, two, one. julia: blast off. incredible.t is wow. joe: that is pretty awesome. you are watching live pictures of spacex.
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the major launch from the kennedy space center in florida. five years worth of delays and now they have launched. this is the world's most powerful rocket here. engines, all of these numbers are so impressive sounding. elon musk considers this a success if it doesn't blowup at launch. julia: i am very excited about the prospect of space travel. once again, this is live. looking at the rocket launch behind -- elon musk
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saying this is a success if it doesn't blowup at launch. weeks, this feels like a success. elon musk is standing by, watching. he was playing david bowie's space odyssey and the roadster. falcon heavy is supposed to carry a payload -- fully loaded with crew, luggage, and feel. -- fuel. bringing the prices down, which is critical. -- that can tell heavier payload, you feel this is a bigger deal to go out there. only the saturn five
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moon rocket that was flown in 1973 delivered a heavier payload into orbit. julia: just to be clear, it is carrying a dummy payload. you are able to see the roadster, it is no dummy. people areny watching that saying, ok, i am ready to give this a shot. want to watch it. at some point, sign me up. scarlet: julia is first on the waiting list. at the pictures, how perfectly timed. we are reiterate, looking at live pictures of the spacex launch that appears to be in orbit. the world's most powerful rocket
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in use. hear the excitement and the voices in the control room talking about this. there is huge excitement in that room. scarlet: we are going to continue to keep an eye on those images, so exciting. and will keep an eye on the markets as well. points,is up almost 500 just off the best levels -- minutes of over 10 the trading session of what has been a volatile trading session. the dow traveled -- joe: there is the roadster. the showmanship. else,ition to everything elon musk is the best businessman. it is so well done. three cheers for the
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spacex crew and elon musk. very exciting. in the meantime, back to markets, shall we. the threat of higher interest rates in fear of inflation. how central banks respond. jerome, give us your perspective on the turmoil that we have seen in equity markets in the u.s., europe, asia, and what that might mean for central banks as they consider the next move? centraln't believe that banks will react to the market selloff, although it is starting to stabilize in some way. some investors are considering selling, but we stay volatile in the markets in general. what is interesting for us, we
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are seeing crowded this and there are short strategies, but the fundamental driver that led to market to that -- we have been vocal of the fact that we are seeing the market underpricing inflation risk. discussedhs ago we looking at different dimensions of inflation showing notistently that inflation only in the u.s. but europe. the market has to digest that. we think central banks will soon normalize, and that is what will happen. joe: so you think we are in a fundamentally new regime? pillars,based on two the growth, and that pillar has not changed. inflationtion that
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will stay low for a long time is something that is really at risk. you have to live in that world -- you have to incorporate more inflation expectation interest rates and all the implication it will have for other asset classes as well. julia: so this is an appropriate realigning? >> we see interest rates are starting to go down again. we went to that selloff driven by interest rates -- if you think about it, it is not related to inflation expectations, and then it goes to a market selloff due to extreme positioning in the market. clean, i willmore say better positioned and less toreme -- but we still have figure out what we are doing with inflation expectations and rising interest rates as well. julia: do markets get over it? it is an adjustment.
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and we have economic growth and other positive elements to the economy. it is a good thing. >> inflation can be a good thing -- it could be a good thing for equity, we still believe equity can be good, but it is a matter of pace and expectation and a matter of how the market will react. we think is better positioned to the start of news. joe: we see rates on the 10 year of move,lying the risk closing at 2.79% -- is this portfolios that worked in the -- 6040, 5050, they seem busted and not working well. you're not getting that hedging,
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is as part of the new macro regime that people thought of as a diverse portfolio? >> we think investors have been lucky because the portfolio had something protecting a downturn. they were offering a return as an investor will have to find other ways to diversify their portfolio. joe: what are those other ways? >> there are two types of approaches. strategically have to go into a larger set, including some kerry strategies. carrye trying to find -- strategies. scarlet: putting volatility. -- including volatility. >> that is a broad sense of strategy. on top of that we believe you have to be more dynamic, and one of the improvements you can make
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to your portfolio -- return and risk profile in the future. you need to manage your risk proactively ahead of events rather than reacting afterwards. see in the market at the moment is too many investors are reacting after the fact and it leads to the form of a break market crash. in his to be more active. the volatility and the moves on the talks we have of short volatility positions and anti-going forward? >> we don't see that in a real money investor. we don't see a huge reaction to these movements. view of buying opportunities more than anything else, so we don't see that form of reaction. julia: is there a hedge for market volatility? >> that will depend on the
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investor, if i look at the market, the market is more long theed an short-haul, so market stress events is a good way to reposition the portfolio. scarlet: how much money is waiting on the sidelines to get in here. to get into risky assets? >> the company itself, we know they have cash and they can jump in to some form of m&a. for an investor, i think investing in equity, but having cash available. this might be a good time to do that. but it isn't as simple as that. julia: a knee-jerk reaction. scarlet: it is good to know what type of ammunition is out there. thank you for visiting us.
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next andt close is believe it or not, we have a big rally, 544 points. this is number. this is bloomberg. ♪
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[applause]
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julia: stocks doing an about turn from yesterday's steep selloff. i am julia chatterley. scarlet: i am scarlet fu. joe: i am joe weisenthal. we begin with the market minute. what a difference to four hours 24 hours makes. we are still waiting for the members to settle down, but it looks like a 2% plus gain for the dow, a gain of more than 2%. the s&p 500 laggard -- joe: incredible day. scarlet: if you look inside the group movers here, we have to be brought in this rebound.
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tech, andterials, consumer discretionary's, and on the downside you have the rate --sitive bronc proxies of bond proxies of utilities. it a quick check on the vix, thathe spike in the vix sent short volatility etf's to tumble in after hours trading yesterday. let's split up right now, a inent to as high as 50 trading this morning before the market opened, but shortly after the open, it plummeted to the low of at session at 22 and has now settled at around 30. ofve been thinking about it late because of short volatility etf's and how they could be terminated if they dropped more than 80%. to put in percentage terms, the
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vix rose as high as 35% and fell as 40%. joe: lots of people massacred in both directions. 2.80%, sor yield at does the fly in the ointment in what hasally which is sort of been giving people the anxiety. we see that again today, it is a classic risk on move with the 10 year yield at 2.8 percent, and the two-year yield at 2.11. thea: let's take a look at jumped-- remember, we -- justere two week want to show you what is going capex.ar as
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it ties really with what we are seeing in treasuries as joe was mentioning there. taking a quick peek at that, it tells the story of the dollar the dollar versus turkey higher versus the u.s. dollar. joe: finally commodities, read today but not huge by any stretch. oil is holding up -- and is stille raleigh, it over 63 and speaks how volatility has been contained to some extent in equities around the world. gold, that safe haven machine down about .83%. those are today's market minutes. let's begin a chief economist for deutsche bank, and
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chief strategist -- cameron, let's start with you quickly. how is the selloff and recovery today different from august of 2015 or early 2016? >> so far there is much less contagion as you just pointed out in terms of commodity space and affects space. it was categorized by china depreciating are evaluating its currency, so it is an fx trigger to risk aversion in asset classes. income more of a fixed move. joe: our last guest was talking new environment here, inflation is happening, it is for real, bond rates are moving higher, you agree with that from an inflation standpoint that this is not the goldilocks we saw for years? >> we are in a situation where the market is trying to think
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about what you do about that. bond markets for a while have we are back up-- to expecting three hikes, which is exactly what the fed has been saying, and in the long end, it is pretty wild. current sees didn't move at all, so one thing that is unusual is that this is something in that inflation and rates space that is moving around, and that is good news. it doesn't feel like a recession, but it is an overheating and what the nature of that overheating looks like. julia: cameron you make interesting observations on the yield for the s&p 500 -- give us an exact explanation because this is fascinating. he was perspective on the markets here and how we tie-in from the fundamentals. >> it is the inverse of the p/e ratio -- the yield to yield
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stocks and what they earn over the price. it makes it easy to compare that with other instruments like bonds. i thought it was interesting to compare that to the volatility of the stock market. what we have seen is that we are even though the key ratio was high -- volatility was so low that that ratio was at its highest since 1995. even though it seems you are paying a lot for stocks, the price action indicates you weren't incurring a lot of risk. in the last couple of weeks that ratio has unsurprisingly plummeted as volatility picked up dramatically. you are now below the levels of the post crisis average. from an investor perspective, it was a one-way march higher, and others to a price action which might encourage investors to's
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and require a bit more risk training in the future. julia: below the post prices average, eye-opening. scarlet: we have some breaking news. disney reported results, beating the consensus. it is higher than what analysts are looking for, and beating the highest analysts. there is tax impact and the change in the tax line how it impacted it. it is better than expected, but revenue missing the mark here -- -- the medianumber giant having a number of businesses. cable networks in particular, the operating profit of $858 million is higher than what analysts anticipated. lineue is pretty much in of what analysts were looking for. creatorame of thrones
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-- joe: the quarterly new star wars announcement. julia: a new trilogy is being planned by the last jedi director. scarlet: your game of thrones fans. julia: and star wars. joe: the market selloff today -- we rebounded. at what point the market selloffs translate to real economic ramifications? where does it have to go before it shows up in consumer behavior? relief --s a sigh of the market is finding out that stocks not only go up, but on top of that, we eliminated a significant amount of shortselling, which was essentially a proxy of picking up yields, which is inflation
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rates below for quite some time. is short answer to question for now, it is early and i don't think the implications are significant. the market else also telling you -- youeak even inflation will see that break even expectation as moved much on the back of the last few days. most striking is that we have seen a significant reversal in the s&p 500 that isn't coming back. the five-yearhat is not moving fast, so that tells you the market is not anticipating that this is going to be a recessionary or dramatic impact. inflation expectations with have also been crashing. julia: you called it a game changer. what did you mean specifically? cameron, you wrote in your piece that everything is not -- i am trying to find the line here, it would be wrong to call it -- do
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you remember the quote? it would be erroneous to suggest it would be a game changer. >> it is take to say everything's changed -- it is safe to say everything has changed. we are moving from a midcycle of low volatility to wringing about, this is a late cycle, which is consistent with the policy challenges faced by the fed. if it becomes more of an issue moving forward, that means the fed might have to move, not only because they have to -- want to, but have to. what is important about that is that investors use to have six or seven years of the environment where interest rates were sets of there strategies that work well, and what is a wake-up call today's is that now you need to figure out what are the new strategies.
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europe interest rates in and the u.s. behind, and you are being equities and that alignment. we should be higher, and it is a normalization of those trends, and that is the change we have seen. means isk what that that you never have to worry is going sort of -- it to reward a more active approach in terms of market timing and in terms of stockpicking. my statistic is that we want 54 days after dekes giving without a 1% move in the snp, and s&p futures had 20 different 1% moves today. if you think anything has changed after hearing that, then you note nothing. >> now you are seeing a region were inflation is one of the big factors, and of something pops up, then you should no longer buy everything.
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you should differentiate, and is good --entiation we have to have investors were skeptical of asset classes and not by everything. julia: guys, great conversation. thank you so much. we showed you be deal earlier of the launch of the rocket, and here is video and pictures of the space rocket landing. joe: this is cool because we have seen for decades rockets launching, but to rockets anding, -- two rockets l this is incredible. julia: can we rewind the tape? scarlet: not at all. [laughter] thoughts ong up,
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the markets and bitcoins tough 2018. this is bloomberg. ♪
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scarlet: we have breaking news from snap, the parent company of snapchat. muchh-quarter revenue higher to what analysts have been looking for. they anticipated hundred 52.8 million. daily active users also beat analyst averages as well. the bottom line number, the adjusted loss first to share was
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$.13, analysts were looking for a $.16 deficit, so that was a narrow loss than anticipated. snap shares jumping in after hours trading. job, butat is a huge the headline here is interesting, application redesign, the cost affect not fully determined yet. it looks like there's going to be a significant application redesign for snap. who knows what that looks like. joe: i think it was last quarter and they were like, oh yeah, things are not working, so we have to do a big overhaul. until then, we see a total change after hours with the stock up 20%. scarlet: that is a good point. julia: that is more than topping analyst estimates. scarlet: just to point out how small the audience is, 180 7 million, which is tiny compared
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to facebook and twitter. joe: now up 30% after hours. the critical importance of advertising for these guys, apparently it rented at prices, but offset by a higher number of ad views and customers critical as always. scarlet: the audience we are talking about is young people, there are talking about a lot of growth potential and a half to stay ag and with this audience that has already cut the cord -- edgy. anda: the critical audience issue for these guys has always been, and we joke about this before, whatever they do facebook can do it, and unfortunately, facebook can do it better. there are seemingly trying to improve their advertising generation -- that is a positive. it is a momentum in the advertising business.
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the stock is responding and is up more than 25% in after-hours trading. will bring you more details on snap. in the meantime, let's get through this week because u.s. stocks have seen quite a few last two days. they had the big tumble yesterday and quite the recovery today, and it doesn't end here. let's get your take on the turmoil on the markets. >> very interesting. specific, this is august of 2011 -- not august of 2008. what do i mean by that, 2011 we had a huge selloff, 6% the day the u.s. sovereign downgrade was announced. what happened the rest of the month is that it bounced up and down and it closed down 1%.
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what happened yesterday is not a big deal. what i think you saw happen yesterday was a combination of etf's,queeze on inverted which i'm sure you talk a lot about today on the air because everybody has talked about it. the structuraly, impact of systemic trading strategies driven by algorithms that pick up signals, fundamental decisions, and drive the momentum way beyond where it needs to go -- if you are a fundamental investor, that is great. it offers huge opportunities. -- i was's was buying buying. what goes on in the real world is that earnings are good, the economy is doing fine, that is global secret eyes growth. things are pretty good. joe: what were you buying? >> oh, different things.
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to be specific, i was consolidating my book. i was exiting names that were close enough to target that they weren't asymmetric anymore to my upside target, and i was adding to names that had strong double-digit upside. there were some terrific bargains, like my current favorite investment. i was able to add very significantly. positionmparing some -- marginally,y added i didn't subtract by design, i wasn't going to be like i am coming to ground and reducing exposure. that is a mistake in an environment like this, you have to look at the fundamentals and not what is happening today. julia: we talked about the short squeeze in volatility and we talked about the last couple of hours.
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to what extent are you recalibrating your approach and risk and how you take risk and high volatile environment? >> higher volatility environment is a great thing. uncomfortable with the continuous grind upward. a recent every once in a while is a good thing, provided the markets react rationally to the reset. what we saw is that the market reacted rationally, everybody calm down, but ultimately, people came to their senses, and that is what needed to be done. very reminiscent of what happened in august of 2011 when everybody was spinning around and in come down. it was called the most predictive selloff in history. scarlet: what can you do in this regime that you could do two weeks ago? >> you can wait for opportunities to buy.
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if you are inclined to trade, we can trade when the ball comes down, but that is not what i do. wait for opportunities to add, and when i go back to figure it out, i probably didn't add yesterday. joe: you said is more like 2011, and you said in 2011 we got that downgrade. it was a catalyst for people to freak out a little bit. is there a proximate cause our catalyst that you are paying attention to that you are saying, you want to keep an eye on? had him talking about inflation and the risk of inflation, i don't subscribe to because iof thought don't see inflation as a very serious concern. we have talkeds, about this for years now, every couple of quarters i think we are in a broadly disinflationary
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environment driven by technology improving efficiency across the board. i don't see inflation as a big issue. we have jim bullard this morning talk about the unemployment rate -- even a tight job market is not necessarily indicative of inflation. i think what he was trying to say is that the unemployment rate coming down is nice, and the tightening job market in certain sectors where there is difficulty in filling jobs is a consideration. broadly, the labor market doesn't particularly like to be in good shape. athave a participation rate 62%, which is where was in the 1970's and the worst it has been in 10 years. scarlet: that is a good point. you are sticking with us and we are going to get on bitcoins big selloff and your take on that. in the meantime i want to get
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back to snap, shares are soaring at almost 30%. want to get more insight over of snap, andump joining us is "bloomberg technology" reporter, sara, i think this is the first time snap has reported revenues that top analysts numbers. talk about what drove that. everyone was pessimistic that this company cap not made up on its promises and the last few quarters, but here they are reporting a huge revenue be. estimate,ion was the but they posted 258 million, so this company has been transitioning to a more problematic system that has cut at prices -- ad prices. advertisers are looking for
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alternatives and they are coming to snap and spending there. they were able to put out a good quarter. abouthere has been talk overhauling that at because people my age don't know how to use snapchat and find it confusing. trajectory, how urgent is it to overhaul it? could it be that people overrate the challenges they are facing, or is that still crucial for them? it is ahe overhaul, huge aspect of volatility in the future. the company thought they have to overhaul last year, but it only rolled out in a few countries and the city will be done sometime in the next quarter. there's reason to believe that can change. saidput out numbers that publishers are reacting well and people are spending more time on redesign.
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i am skeptical because i feel like if you don't have friend content, what is the push to get you to look at the media content? that is the model for social media until now. it is a? question mark, but this company is still young and trying new things, and so far they have good instincts. facebook on its earnings call said that the story is going to be the number one way people share on social in the future. snap, whether or not is the underdog, has been inventive in this market. beia: am i allowed to skeptical here, and we have had a problem here and that wherever these guys do, facebook etc. and it's on with it. has anything changed that they have beaten expectations?
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i get everything you said with better engagement with advertisers. >> i think the market dynamics are tougher snap. stories a keyade part of its products, and instagram has been on a tear, growing internationally and introducing people to a product that's that invented. for is extremely concerning the future, and i do believe that advertisers want an alternative to the facebook and market, butated snap has to prove to advertisers that they have a return on investment that rivals those big players. so far their average user is a fraction to what facebook makes, so there is room for growth. many challenges along the way. julia: important people in the industry tell me -- it is fascinating.
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twitter gaining 3%. from new york, this is bloomberg. ♪
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mark: i'm mark crumpton with first word news. officials in taiwan say at least two people are dead and more than 200 injured after a magnitude 6.4 earthquake struck near the islands east coast. at least seven buildings are reported to have collapsed or tilted. the earthquake followed one over the weekend in an area known as the pacific rim of fire, nose for seismic activity from alaska to southeast asia. the u.s. ambassador to a u.n. conference says the entire world can see through what north korea is attempting to do. robert wood's came during a meeting in geneva or a north korean official also accused the white house of exacerbating the
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situation. >> the situation on the korean peninsula has not changed. the regime continues work on its ballistic missile and nuclear programs. what i would call a charm offensive is frankly fooling no one. the international community should be highly alert to the wrest controlto based on the america first doctrine as expressed in its nuclear review and trumps state of the union address. mark: the charges and counter charges as the two koreans seek conciliatory measures during the want her olympics which begin this week in pyeongchang, south korea. $45 billion a year is how much the pentagon says the afghan war is costing american taxpayers.
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lawmakers in the senate foreign relations committee grilled the trump administration today about the direction of the war now in the 17th year. the costs are significantly lower than during the high point of the war from 2010 to 2012 when the u.s. had as many as 100,000 soldiers in afghanistan. the price for american taxpayers surpassed $100 billion a year. work crews and russia are trying to clear roads and restore power after heavy snowfalls over the weekend. the associated press reports that russia's meteorological office says that more than a months average of snow fell on moscow over the weekend with the height of snow now reaching up to 22 inches in some parts of the russian capital. snowfall soow, the bad that local authorities asked the army to send in the troops and truck's to help clear out the snow. global news 24 hours a day powered by more than 2700
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overalists and analysts in 120 countries. i'm mark crumpton, this is bloomberg. >> let's get a recap of today's market action. u.s. stocks rebounding from yesterday's violent selloff, the biggest rally in 15 months. up 2.3%, the s&p 500 recovering as well. technology, materials, and consumer discretionary. automakers and retailers leading the gain in the s&p 500 but it was not a straight up move. it went up and down. little change. but in the end, we closed kind of near the high. miss? what did you we spoke a lot about the near-term price action we have seen over the last several sessions. what about short-term and longer-term? dan, what do you see? break it down in terms of that structure. dan: short-term consensus is,
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and i agree with consensus, economy is good, earnings are good, the run should continue fundamentally apart from these disruptions. medium-term risk has to do with the structure of the market. we talked about algorithmic systematic trading and the risks associated between going one direction or the other. fundamental risks that i see are into areas. one is the long-term labor market. displacement by automation, low participation in the employment market. it continues to be a problem that needs to be addressed. the treasury department should convene. it doesn't cost any money. thinkers, thought leaders, economists, and technologists think through the likely pace of jobs. and to define the new jobs in
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the nation's economy. that is something that should be done. we need to start thinking about the displacement that is coming and planning for it. second, i believe the fiscal situation over the medium-term is a very serious risk. of only the $100 trillion off-balance obligations the country has. in the short-term, it is necessarily going to be revenue neutral. it will probably be added to the deficit. julia: what is come running in the -- what is coming in the inflation market? dan: treasury rates are going higher as a basic matter of supply and demand.
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you have a maturity schedule for the treasury market coming forward. and as that maturity schedule comes, the treasuries will have to rollover. -- the fed is out half of the $6.2 trillion is owned by china, japan, and saudi arabia. all three of those sovereigns are likely to be buying fewer treasuries in the future. their ownjapan have problems. their own sovereign credit markets to deal with. and saudi arabia is only buying treasuries as a result of the deal that was made with them in 1977.
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julia: tie this to what we saw in the market. the wage gains that we saw on friday, the shifting, the reassessment that has been talked about. we also have the treasury announced that they will be issuing far more treasuries going forward as well. 2018,s a sense of the what you see. many are talking about curving versions. joe: it seems like a long -- dan: i don't buy the curve inversion story because i believe fundamentally in the short and medium-term economic conditions are positive. economic growth is good, so normalization, apart from the fact that central banks can't do anymore, and frankly, what they did, from 2000 nine forward with extraordinary monetary accommodation was not especially successful for the real economy. it helped levitate financial
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markets because the banks use the cash to invest in financial markets. so markets went higher, but the beneficiaries of rising stock are concerned not the middle last, for them -- the middle class for the most part. so to weave in the concept over time, we are kicking the can down the road from a physical perspective. the tax reform act has been a constructive thing bringing capital back in spring further investment in the united states. it should be helpful for growth, but it's not enough. theave to deal with entitlement issues and the unfunded liabilities that are accumulating and they will be accumulating an accelerated fashion. why'd you think concerns about the labor market still have not shown up and a sense that there are lots of complaints about inability to ? dan: i believe labor
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productivity is rising, but for the wrong reasons. is more output per employee because there's less need for employees as a result of automation. the reason why we haven't seen , as always,ers is our minds work faster than reality takes place. we are going to have stock markets in russia and 20 years later, it hasn't quite worked out the way it was intended. there is always a lag between the comprehension and the implementation of the things that are going to take place. but this job displacement is real and is starting to happen where the labor market is tight, it's in certain areas where there are really not enough qualified workers to fill certain engineering and eight a
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coding jobs. we need education. we have heard it all before. do what wed is to say we need to do. dan argus, thank you. coming up, we will be looking at yesterday selloff and the fundamentals driving equities. this is bloomberg. ♪
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julia: what did you miss? volatility is one of the big stories of the last two trading days, smashing out of the equity selloff. strategist ando
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investment group joins us from carolina,lem, north with more. great to have you with us. as you point out, the selloff wasn't driven by volatility here, but that became were a lot of the focus ultimately generated. the increased volatility and the vix in particular, especially given the short trades we have seen a squeeze on here. >> to be honest, the bulk of the impact has passed and it was passed at about 7 p.m. last night. the wipeout was so large yesterday, that there was no positioning to continue driving the market today. after we saw some of the initial moves this morning, it was pretty clear. the huge shortfall position that have been racked up over about a year leading up to yesterday's
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selloff has been cleaned out to such a large degree that i think i think the price action is good evidence of that. >> do think the market is now neutral volatility? george: much closer to it. hard to say exactly where things stand but compared to large imbalance of the short volatility positioning from retail. for some reason, that money has been lost. it's gone now. there is no position left to drive things. it has cleareday out, others say that it has room to grow. we just don't know when it is going to crop up. have a charger that pointed out, the degree to which the volatility is really confined to the equity markets. if you look at the vix measures for other things, rates,
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currency, oil. see the sharp up line in the white line and basically everything else is hardly budgeted at all. how rare is this? george: extraordinarily rare. especially markets that are so fungible across asset classes like they have been for the last 10 years or so. this is the exact opposite of a number of different volatilities. some of the worst of the recent equities have been driven specifically byproducts that have not spread out to other asset classes. there is no one perfect measure, but i think this chart pretty much speaks for itself the rest of the financial markets outside degree,ities and, to a
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global equities, are not panicking by any stretch of the imagination. scarlet: the reason perhaps that people want panicking is that fundamentally, things are for the good. but just in the u.s. economy but the global economy. i'm looking at the dts and revenue beat rates in the companies in the s&p 500 and it has been an upswing at the end of 2017 into 2018. the percent of companies raising guidance. 73.9% and it is more impressive they are leading on revenue. is a lot of in the going to this. at the end of the day we have relatively elevated earnings x locations and we are coming through in time where forward earnings expectations of an elevated and companies are still crushing estimates. that is not an exaggeration.
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so whether it is the weak, higher commodity prices, the uptick in global activity, u.s. companies are seeing much better profitability and that is against already high expectations. with that backdrop over the last few months, it is hard to imagine a/damage selloff that rattles across a bunch of different asset classes and is a permanent impairment on equity valuations. as opposed to a much-needed breather that has happened much quicker than people would like, but is a realistic pullback from expectations. whether it is mornings, economics, cross as a potential, and the short volatility trade is a position. is it time to buy? george: you look back over historic examples of large equity selloff. a 7% or greater decline and that
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is what we have. isically, what you see markets make a marginal lower low or a similar closing -- closing level. and a resumed rally. that dates back to the beginning of the current bull market, to use that frame. the one exception would have been in fall in november of 2011 when markets plunged and immediately spiked back up. in our view, the baseline scenario should be seeing relatively elevated levels of volatility but no massive double dips and eventually a resumed incline as things get processed and stabilized. scarlet: perhaps the worst is over now. news, this is a bloomberg scoop. the $2.2 billion unconstrained bond fund fell .8%.
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specifically, 0.83%. the gross is having a good 20 until he wasn't. mildonounced the onset of bond bear market. yesterday was not a good day for mr. gross. continue to keep you posted on any further developments, but that wing, a loss of .4% from a gain. and looking at a snapshot of one day. put it in perspective, a relative treasury move that we saw on those particular days. coming up next, we told you earlier that disney reported first-quarter earnings and beating analyst estimates. avatar tohy they have thank for those results. this is bloomberg. ♪
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scarlet: disney reported first-quarter earnings beating analyst estimates and shares are higher in after-hours trading, up by better than 2% on the news. the ceo had theme parks to thank. we are joined by head of north american research court. we are so accustomed to crediting the star wars franchise for disney's good result, but this time it's not star wars. it's avatar. paul: the avatar theme park or the attraction they opened at one of their theme parks. every single year, it turns out high single-digit low double-digit earnings. the unsung hero. invest ainue to
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tremendous amount of capital. the returns a very solid. some news on disney's plans for espn, the digital offering. what did we learn from their? paul: 499 for espn plus which will give you highlights, scores , if you are an authenticated customer, you'll get -- scarlet: you can't have cut the cord then. paul: it will give you the sports program and the live games that are not on the espn networks. they say they have thousands of hours. this is just the beginning. julia: we can do a breakdown of the individual business here and we can talk about the theme parks. that is the only does the business.
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weaknesses, the concerns that we have in the broadcast tv segment. one of the big areas, they -- exactly. particularly on the film slate. all the star wars owns, more marvel films. it was a relatively low output year for calendar year 2017. coming out of the film entertainment business. scarlet: and will bring the crowds coming as well. the film business aside, it is a hit driven business. identified.eally
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>> he re-out for a few more years. assets, century fox also you a big part of my company but i want you to run a for a few years. bobble be there for a few years. this is something the board has not done well. and for bob, is to close the ,cquisition of the fox assets and help that fuel some of these direct to consumer over the top offerings. that is the future of this company. they have to execute well. black panther has been heavily advertised and the presales are outselling any other superhero movie. black panther has nothing to do with pink panther. but this is a superhero movie ? i had no idea.
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i have boys, too. julia: i will keep you up to speed with this stuff, scarlet. joe: what you need to know for tomorrow's trading day. this is bloomberg. ♪
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scarlet: a sharp recovery in u.s. stocks with the dow gaining 567 points after that 1175 point debacle. coming up, central bank set to cut borrowing costs for an 11th straight time. joe: and i will be watching the economic data, eia for crude oil inventory data coming out tomorrow. julia: 20% three foxx and tesla, they are reporting earnings tomorrow. and teslantury fox are reporting earnings tomorrow. joe: this is bloomberg. ♪ we use our phones and computers the same way these days. so why do we pay to have a phone connected when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet. you can get 5 lines of talk and text included at no extra cost. so all you pay for is data. choose by the gig or unlimited.
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and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. >> i'm alisa parenti in washington and you are watching bloomberg technology. let's with a check of your first word news. president trump says he would welcome another government shutdown if democrats don't play ball on immigration.
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don'tent trump: if we change the legislation and get rid of these loopholes where killers are allowed to come into our country and continue to kill. gang members. we were talking about ms 13. there are many gang members that we should mention. if we don't change it, let's have a shutdown. we will do a shutdown and it is worth it for our country. i would love to see a shutdown if we don't get this stuff taken care of. the white house chief of staff john kelly said the president will be briefed today on the democratic rebuttal of the gop memo alleging bias that doj. ei and doj -- fbi and he has until friday to block the release. and an infrastructure proposal next monday, hoping to generate $1.5 trillion in ending on roads, bridges, airports, and other public works. on

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