buyleesa.com today. you need this bed. >> hello come everybody. let's get to first word now. special counsel robert mueller says a white house injury with former national security advisor michael flynn lied to internet agents was conducted properly. he is saying that the claim that it was deceptive is wrong. he is preparing to be sentenced after pleading guilty to lying to investigators back in 2017, telling a judge that investigators lured him into a false sense of security. british prime minister theresa may launched a rescue mission for an ailing brexit deal today, after the european union rebuffed her request for a divorce agreement so she could win over love -- hostile

lawmakers at home. they are showing little interest in resolving her brexit impasse, well she said the parliament must make up its mind first. an ambitious outcome of the u.n. climate talks will pave the way to curb global warming and protect the world's most vulnerable nations, according to 40 ministers today. they're urging delegates to sign a report that calls for keeping global warming at no more than 2.7 degrees fahrenheit through the century. back in the u.s., talk about a jack. thanersey police say more half a million dollars spilled from an armored truck onto the highway and $300,000 is still missing. two bags of cash fell off of a truck near metlife stadium thursday. drivers stop there vehicles and hopped onto the highway to grab that money. the chaos caused car accident. police are asking anyone who still has some of that cash to

return it or risk facing dredges. global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. ♪ >> from bloomberg world headquarters in new york. this is bloomberg markets the close. i'm scarlet fu. >> i am caroline hyde. . volatile day, a down week the s&p 500 currently off to the tune of almost two percentage points. every single industry in the red, led by the health care sector. it more legal battles to fight. money moves into the havens. they have been moving into the dollar. the dollar is generally higher, because we have a better day in

terms of retail sales in the u.s., but a poor day around the world. this has pushed forward the risk aversion. a poor day in china and the eurozone. scarlet: that is why you're seeing the euro lose ground as opposed to the yen. within the dow, you only see caterpillar and proctor and gamble out of the 30 members. health care pulling it down. this is the best performing sector of the year, but you're not seeing it today. off by 3.5%. whether you looking at brett are nymex, both are down for oil. people seem to be ignoring that. they're looking at u.s. shale and it is about the demand side of the equation today. time for our top calls. let's get some perspective on the big movers. first up, price targets cut to $280 per share.

declines in near-term iphone sales. gamble, proctor and upgraded to overweight. the price target raised, citing rod-based market share momentum. finally, cisco downgraded to neutral. shares are trading at a ties to multiple since the resection last week. -- since the recession last week. let's bring in tony dwyer, chief market strategist and vince.s by phone of course, you are looking at the different ways people are searching out safe havens, but i want to go to tony first for his read. is this just people not wanting to be long before the weekend or is there something greater at work? tony: it is really an interesting time. he call it a market with no structure, where you don't have special market makers, you do have the volcker rule -- which

has taken part -- banks out of the equation. when you get into these drops, especially on friday before the end of the year, who is your buyer? that is really what the market is suffering from. i've talked to institutional economists. it is not that they are selling aggressively, there is just a lack of buying and waiting to see what happens with the kneeler investigation, more commentary out of china and of course the mother of all meetings next week with the fomc. talking about not rushing to the exit, but in some measures they are. bank of america is an interesting story. data saying investors rushed out of u.s. equity funds by the second biggest weekly exit on record, more than $27 billion on at of u.s. funds. what are you seeing in the trading data? vince: we are seeing a lot of people moving into futures and out of equities.

it is looking like a very ugly close. one of the other data points today that has gone really quietly is the inventory data. real tale and inventory spiked last month from .1%, to .8%. it does not really look good for the fourth quarter. maybe people are waiting for the black friday numbers, maybe they're waiting for the last bit toward christmas to take the inventory off the hands of retailers. if that doesn't happen, we are not set up well for the first quarter, even though retail sales are looking good. scarlet: does data matter now? that business inventory was from the month of october and things are moving quickly where when data does come out, we will say that doesn't factor in the developments in trade and the volatility in markets. weirdif you look at us, data dependent. the bottom line is, if you look at the inflation breakevens, the

recent inflation numbers overall, the economic data, the sentiment ratings, the bloomberg sentiment ratings. everyone is coming down from the august peak. things that vince talked about in terms of the equity fund flows coming out. these are not things that happen at the top. when we identified a mark that was right for volatility in mid-september, everybody thought we would -- everybody would be comfortable and continue on. you had 61% of newsletter writers bullish. you were in an environment where you are ignoring all the news out there. it seems a clear in the opposite now. that doesn't mean you can predict the low, but you can predict around the time when the risk reward is getting a little better and some of that is getting discounted. scarlet: i'm looking at the moment of the world currency, money mood -- money moving into the yen.

the dollar is moving higher against the g10 currencies. the previous currency trader, does the dollar remain a haven when we get the fed taking the foot off the pedal, when we get a signal they will not be hiking as aggressively into 2019? is that a haven in the yen and the swiss franc? vince: not so much the swiss franc, but the yen most definitely. with the sentiment weighing on europe, that is going into 2019 as money out of europe and into japan, given the medical situation in france and the budget situation in italy, the comments today were cause for concern for the economy. japan's economy being operated by the bank of japan. likely downgraded, but better than expectations. yen is looking like a better place to hide. it is a big market, you can take

your money in and out. there is a lot of liquidity. not so much in the swiss franc. over thetake the yen swiss, and definitely not the euro. scarlet: it doesn't look at there is much place to hide when you look at equity. all other groups are down. utilities are falling less, but still down. todaye your case earlier and he was saying the decline in the stocks tends to be ahead of a decline in earnings. he sees some big problems, notably the spread between the price earnings ratio of reported earnings and the price earnings on a cyclically adjusted basis. what did the fundamentals look like to you? tony: they look like they should when the fed is raising rates. things are supposed to slow down and we forgot that. my number for 2019 earnings has only been 45% increase since we

put it out this past summer. we made the mistake of assuming that everybody else thought the multiple would be able to stay high. that obviously is not correct. i don't think it should be a surprise that we are slowing down. i think what is really exacerbating that is the trade situation between china and the u.s.. this does a good job of highlighting some of the key -- you have got paris is a mess. the italian budget situation is a mess. brexit is a mess. the trade situation in the u.s. is a mess. ,hese things are all worrisome but the peak came when all these things were not worrisome. they will be a point in time where some of the gets overly discounted. just like good news gets overly discounted to the upside, nervous news can get overly discounted to the downside. we're approaching that point. scarlet: the pendulum swings from one side to the next.

thanks so much. this is bloomberg. ♪

scarlet: china taking another step to diffuse trade tensions a 25%he u.s. by removing retaliate territory on -- retaliatory tariff on cars. this would seem to be good news for the markets. investors not taking it as such. one reason why may be beneficiaries are not who you expect. >> there is some intent -- some unintended consequences. the biggest exporters of american-made vehicles to china are german automakers. bmw and mercedes both build suvs in america and export them to china. they will be to biggest beneficiaries of these retaliatory tariffs coming down. caroline: i am looking at how the stocks performed in europe

and auto parts are the worst there. 1.3%. to a certain extent, maybe this had ordered been factored in, but what are the long-term ramifications for the auto sector? why is china doing this? is it because it has been so bleak, the amount -- the demand for autos? keith: certainly, the chinese market has slowed down. president trump tweeted today that the market has slowed down. he feels like he is winning this trade war but there remains an imbalance. as china takes off the 25% retaliatory tariff, the remains a 15% tariff. it is still hard to make money exporting cars from the united states into china. that has to be addressed in talks with china. scarlet: talk a little bit about whether there are still tariffs in place between the u.s. and europe. that was something we thought was going to get sorted after the rose garden ceremony between president trump and jean-claude juncker. imposedhey have not yet

the very large tariffs on fully built cars, but you're still seeing things like steel and aluminum to how tariffs on them. this is causing them billions in lost profits. chinahe situation in caused the detroit automakers to cancel plans to export vehicles from china to the united states. it has been a very messy trade war and there are no clear winners and losers. caroline: there are potentially winners in china in the long-term. should be think about the markets opening up? sure, and the other factor is united states automakers are planning to build more plants in china as a result of the trade war. i talked to be head of lincoln in they are trying to accelerate plans to build chinese plants so they don't have to face tariffs and longer. scarlet: keiko specter -- caroline: key perspective and we thank you for it. the u.s. market close is minutes away and looking ugly. the s&p 500 has been off about

2% the last few hours. money moves into the yen and out of the pound. even oil is lower. demand is the key concern. this is bloomberg. ♪

caroline: this is countdown to the close. i'm caroline hyde. scarlet: i am scarlet fu. joining us is joe weisenthal. d.c. the market moved to the upside and downside. -- you see the market moving to the upside or the downside. joe: something i've been thinking about all day and we'll talk about this more is how divorced this market seems from any economic data. it is not like the news has been that terrible, it is not like there is no -- caroline: france up 50, china

looking uglier. france, some 50 pmi, that is not a reason to sell stock. personal spending or retail sales really solid. industrial production solid. yesterday's claims solid. this is a market that feels like it is selling no matter what. scarlet: trade headlines were not terrible. curious that when you look at the sector breakdown in the s&p 500, you really have no gains. telecom is barely clinging onto again. are the centerts -- other savor sectors. caroline: they are down, despite relatively good trade headlines. scarlet: on the flipside, let's look at some of the losers here. this is a defensive group, pharma, growth stocks and a lot of tech names. all of that leading the declines

, off by more than 4%. this has been a global decline. the horizontal -- vertical line shows when trading began. we picked lower and on the all country world index, we ticked lower. the blue line shows when the u.s. open for trading. has been a steady grind lower. caroline: this particular index since 2017.this low this is the lowest since july 2017. the s&p 500 is the lowest since april. we are testing some of the technical levels as well. that get more perspective here. let's go to our markets team standing by for a dive into the action. what are you watching? >> i think we are on the same page, joe. i am looking at something that i think traders are whispering to themselves, trying to convince themselves it is true. the stock market is not the economy. now, we are seeing a disconnect between the economy and the stock market that we

haven't seen since 2010. you referenced the good data we got yesterday. we had initial jobless claims come in over expectations. when you see that gap, we have a 10% to climb this quarter in the s&p 500. forecast fored q4 growth is running on 3% after the retail sales. we have a situation in which we have 3% growth and 10% to klein in stocks. that hasn't happened since 2010. we went on for the next 12 quarters for double-digit gains in both quarters. i think what people are hoping is that this is just a temporary phenomenon and if you see the stocks that are not been hit as hard today, they are more domestic sensitive stocks. some transports, even regional banks. the has were -- that has really happened. this gives you the sense that u.s. stocks might be the ones that pull us forward. >> i'm taking a look at an individual stock.

that is starbucks. they had their investor day and management can out and lowered their long-term forecast but sales over in china came in much lower than analysts had expected. the one-day move going back since june. interestingly enough, analysts came out of that investor day a little more bullish on the stocks. they said these lower long-term growth targets are more reasonable and doable. we will be able to achieve those and if there is any positive over in china, there is an alibaba partnership that should be helping the stock going forward. on a one-year basis, you have starbucks overall this summer take a big hit. they are trying to come back and of course today, underperforming. saying, beysts are patient with this stock. starbucks is working on cost-cutting. they are working on engaging digitally with new and existing customers. in the u.s., you need to focus on foot traffic. china, look at those new

stores and delivery in china. that will be the key going forward for starbucks. lisa. so much.nk you i'm looking at one culprit for one equity swing today, baby powder. johnson and johnson plunging the most since 2002 after a report saying the company new that there was this pestis in some baby powder for decades. johnson & johnson came out and said this is not true. the reuters report is false. we had analysts coming out and saying, we have known about this for a long time. this is a liability, something baked into the stock price. yet, the state -- the shares continued to drop. we want to take a look at some of the johnson and johnson debt, although not nearly as much. ,rom a credit market standpoint it didn't seem to be a material hit to johnson and johnson's bottom line or credit story. kind of an interesting diversions. it is strange when you have the

analysts saying this is not new news and the company saying this is not true and the stock still declines. thank you so much. let's pick up where lisa left off and talk about health care. it had been they go to sector over the past couple months. certainly this year, it is the best performer, up 7%. no longer the case, at least today. health care is leading the way down. ,et's bring in our reporter sara. j and j is the trigger for the sector falling, but overall, this is an area where people piled their money into. we had seen a lot of money going into health care recently. because you have the growth component in biotech, but also the more defense area and health care was the best performing sector. that race is nearing between health care and utilities. still a classically defensive way, but we are seeing this narrowing between health and

utility that is interesting. it is up 7.2% and utilities is up, so it won't take much for that slip. joe: i was thinking about, what was the utility out in california that got hit? ,ven within the safe sectors people can risk pretty severe hits to their portfolio, even in johnson and johnson, thought to be classic safety type of stock. they can stumble. sarah: exactly. i was talking to the live blog today and he was joking around that you are at the end of the year, what are the funds saying to their clients? what if someone went into a defensive area like health care, bought a name like johnson and johnson, and all of a sudden you have a day like today? it is a must like joe: you can't know for sure. joe:that just scares you off of everything. caroline: let's get more perspective as we head to the market close. let's bring in eric davidson, chief investment officer at wells fargo.

where is to hide in the equity market right now? investors sentiment has certainly changed as we go into the close. there are so many things that are weighing on france, the political environment. we have seen a change in sentiment in recent weeks with investors. joe: can you recall another period of market selloff in which people were grasping so hard at narratives and not finding a clear story of what is behind it all? eric: that is a good point. it is hard to say. i think that is probably the best indication that the

sentiment has changed. good news is bad news and bad news is bad news. we talk about the china news, industrial production and retail sales. it is troubling, but here in the united states, we have the same data and that is industrial production and retail sales came out better than expected. people are just not seeing that. scarlet: who is the buyer in this kind of environment? we were talking to tony dwyer and he couldn't pinpoint one. who should be buying when we see these moves? eric: who should be buying? i have always said a prudent investor should be buying. when you look around, investors wake up in the morning and see so many things to worry about, but there is a lot of good things going on right now and unless you really think things are going to go off a cliff next year or soon thereafter, this is a great opportunity. .5 times earnings now this is probably a golden age for the consumer, in terms of wages and jobs. housing has recovered. inflation is low. money is cheap. unless -- of course investors are already thinkingabout, is tt gets, there are still good times to come. average volume at time

here and we are not seeing a huge spike. despite the big losses on the major indexes. it is barely above the 20 day moving average. caroline: there was relentless selling into the last few hours of trading. down almost two percentage points across the board. industryor indices -- -- index lower. the nasdaq is a laggard. tech is underperforming. scarlet: and it was a weekly loss as well. the eight weekly loss in 12. this has been a trend over the last weeks. say somehe catalyst to of the way is clear. joe: on the bright side, the dow didn't quite fall 500 points. scarlet: they go. joe: and s&p 500 didn't quite fall 2%. the s&p nevertheless,

500 closes at its lowest level since april. all other risky assets get taken down as well. the etf that tracks longer dated treasuries is higher. let's take a deeper dive into today's action with our markets reporters. luke? have good news into the weekend on a bad day for stocks. let's talk about what has been working. you are blurring beta stocks. that means you are shorting the more volatile companies. now, when we talk about there being a big rating in the u.s. not paying ashem much for earnings, this is not something this group is seeing. we have was procter & gamble's forward pe. one thing that played out during

the selloff is traders are running for diapers, staples, procter & gamble and bidding up those shares to levels they have not seen in years. talking aboute although the large caps and volatility we see today. i want to take a look at the small caps. wer the last three months, are around 18% and approaching the crucial 20% mark where you would be an bear territory off of the recent highs. it is not this concern about u.s.-china trade policy, but a lot of this is uncertainty over monetary policy. that is weighing the most on small caps. more percent of the total revenue comes from the international market, which is putting pressure on the small caps. relative to the large caps, if you come into my terminal, there was a little outperformance this summer, and they are falling

faster and further than the s&p 500. that's causing more of the jitters as well. this is a classic trump trade. when he was elected, that is when we normalized it. erasing pretty much all of those gains. some of the uncertainties starts to wind a little but -- unwind a little bit. >> i want to take a look at the week in credit. it's not surprisingly that you saw money go into one of the biggest investment grade broad market bond funds and you have money out of high-yield etf's. if you want to take a look at what we are seeing here, that is credit spreads. you saw both of them decline. i find it most interesting. you saw buying on the margins in some of the riskiest and safest that out there. as you talk to more big investors, they are saying, after the selloff over the past

few months, you start to see opportunities. by the see that perceived creditworthiness and proving into the end of the year. caroline: maybe some opportunities there. our entire marketing, thank you. joe is bringing up a great fact that investors rushed out of u.s. equity funds for the second-biggest time on record. davidson'sric perspective. can the fed stop the bleeding? eric: it's interesting you ask about the fed. all eyes are on this coming week. when you look back to when did the selloff start and when did the correction start, that was back in september. that was the first time in many years, almost 10, where we finally had negative carry on the s&p 500. for the past 10 years, you have been able to borrow and cover

that with a dividend yield. now, bond crosses a higher than the dividend yield. i don't think that should be underplayed. that is pretty serious. a rate have certainly hike next week and see how things play out in 2019. the fed is -- this is getting serious that the fed is trying to spin two plays. they're trying to raise the rate and unwind the balance sheet. eric, the datas, is not giving the fed the caution sign. we had the lanza family go tracker out today at 3% growth. i mentioned earlier in the show, strong data today. what you make of this divergence? eric: you are right. for a data dependent fed, the data indicates full speed ahead. given that, and likewise probably trying to prove himself not necessarily responding to

pressure from the administration, so the default would continue forward with these hikes. point, the yield curve gets so flat and the market gets to talk back to the fed and they do that through the yield curve. scarlet: the market is waiting for the fed on wednesday. what happens between monday and wednesday when we do hear from the federal reserve? investors don't want to be long heading into a weekend. they are liable to look at any set of facts with a half glass empty perspective. what is monday and tuesday look like? eric: that's probably of the little -- probably a little bit of the weakness today. who wants to go into a weekend with anything that could develop regarding china, trade, or with brexit. wednesday, and it will be interesting to see what the fed says, but there are possibilities. the mindset of investors these

days is that the risk is the downside. we are decidedly in correction territory with the risk. we could touch the levels in early april or early february on the s&p. caroline: financials in a bear market. what happens after wednesday? finished, the fed people over in china pickup. we get chinese leaders holding an annual policy discussion as of december the 19th and 21st. they are saying relatively positive things like they are toking at managing to pay the mood music of the u.s., and maybe they will help with the ip fight and technology flows. can anything come out of china? current situation isn't cutting it. eric: as difficult as

negotiations may be, and there are probably still more rattling to come, it is possible. now we have ip on the table and china has more patents per year than we have here in the united states. that's becoming increasingly important to them. lookingny investors are at what could go wrong, a true investors should look at what could go right. we could get through these in a morens and be fair trade environment on the other side. it will be a while before we get there. joe: a little earlier you heard caroline mention the stats we just saw, one of the biggest investor outflows from u.s. equity funds in history. the second-largest. is this something one should watch for when you look for capitulation? this kind ofn that selling is getting closer to the

end? eric: i think so. we have had to bang corrections this year, -- two corrections. 11rections happen every months and bear markets happen every four years or so. this is now the longest equity rally in history. there could be a little complacency built up. people see volatility and they see back-to-back corrections. people could be throwing in the towel. scarlet: the indication today at least, maybe for the short-term traders, is that they seem to be. eric davidson joining us from chicago. that does it for the closing bell and for me. romaine bostick will be stepping in for me on "what'd you miss?" this is bloomberg. ♪

caroline: breaking news. a rough close to the week. here is how u.s. stocks end of the trading day. the s&p 500 closing sub 2500. acrossa selloff the board. joe: a continuation of all of the ugliness we see now. what is going on in the market. big picture today and everything else. i want to bring in the head of macro strategy at macros technology. we ask everyone, why are people selling and why is no news helping to put a bid under this market? do you have an explanation? >> that is putting me on the spot right there. i think the number of things at

play here, one thing important going into december, typically see -- you see a run-up. rallys, itarket takes on momentum of its own. on the other side, it's sort of does this reverse effect where you are not incentivized to be buying, you were incentivized to be closing down and backing things away and coming

even on a day with no news, that is likely to be the trend. whatever the established trend is, that tends to be the trend in this environment. romaine: when you look out into 2019 and a sea of the trend will continue, and you look at correlations in the market, is there anything that gives you concern? mayank: one of the things that has been coming up quite a bit is a lot of companies are thinned under this idea of stock bond correlation is negative and will remain so. is that this correlation has been the same now for about 20 years. in a very interesting chart, if you look at it over the last 50 years, it goes all the way around. joe: i think we have the chart here. mayank: this is fascinating stuff. sawou were in 1999 and you a big move, you would say what is going on. if you feedback into what are the reasons that drive this, my favorite explanation is based on inflation. inflation whether you attribute it to the fed or economy, we got to about a 2% inflation level and have been

there for the last 20 years. that's in an environment where the market does not need to be compensated for inflation. the risk premium on bonds and equities going up at the same time is unlikely. that is what underpins this relationship. unless you have a strong view that inflation volatility will rise sharply or level of inflation will rise sharply, the correlation will continue to be there. romaine: the last to bang times we flipped from positive to negative on anything in 2013 and in 2006 i believe, we have pretty sustained correction following that. mayank: sure. i'm thinking more from a termegy, longer perspective. correlation stays on one side of the zero line. you can have movement.

an environments ripe for volatility. if you're using bonds as a work. it might if you are in an environment where you are unsure, where will you go to? least cash is giving you something. i'm interested in your view on volatility. have we got it? it, butdoesn't show everyone says relative to earlier in the year, yes it is volatile. i think that's a fair point. we run a fundamental volatility model. it's completely dependent on economic and fundamental input and gives us a sense of what the biggest line of volatility is. we think it should be in the mid teens. us itdel is not telling

should be 25-30-35. i would concur with you that markets are more volatile on a relative basis, but neither fundamentals nor on an absolute basis do we think we could be more volatile than now. joe: i want to go back to the calendar affects you cited in the beginning in terms of who wants to be the buyer. therefore an opportunity for any type of investor that does not have to write a january letter? anically, if you are individual or a really rich person or a pension fund with a tenure view, does that phenomenon mean you could take advantage of the fact that you don't have to worry about it? mayank: absolutely. sometimes i call it a time arbitrage. people have an advantage where they can take a situation like this and react based on what their longer-term view might be. our view, going into next year,

is one of cautious optimism. sectors,n defensive but not get out of equity markets, because we don't think the fundamental data supports a view that is entirely negative. it's cautious for a number of reasons, but if you take a view longer than january, it might takingnse to nibble into on more risk. romaine: do you think that opportunity will present itself soon? that only as we get into 2019, we come into an earnings peering -- earnings period. what is the opportunity? if you moved to the sidelines to underweight equities, what is the opening to maybe go back overweight? mayank: earnings is a very interesting period. with aket could do well bunch of earnings reports telling us what is going on. a big reason the market is so weak is because not because we have bad data in the market is

trying to pry something that happens, it is about what might happen in 2019. what might happen to earnings? if we do get earnings and they are ok, that might be the one thing that supports the market because you have data coming out, as opposed to fretting what . is happening in the future for they ok in the third-quarter -- future. caroline: were they ok in the third-quarter? mayank: these companies talk a lot more about what they could experience in q1 and q2. we ran an analysis on the mention of the word tariffs, mention of the word uncertainty. we saw a big spike in q3 relative to q1 and q2 even though delivered earnings were fine. caroline: we thank you for your guidance. mayank seksaria, thank you for being with us.

it has been the worst year for global credit in 10 years. we will tell you how traders are boosting defenses against an imminent liquidity crunch. this is bloomberg. ♪ ♪

romaine: the worst year for global credit in about a decade, and some traders are trying to take a defensive position against the possibility of a liquidity crunch here. for more is lisa abramowicz who has been following the story. how are you going to guard against this crunch? lisa: cash is number one. the other aspect is that people are increasingly turning to credit swap indexes. basically derivatives where people that on whether or not a specific credit or broad basket

of credit will gain credit worthiness or losing credit worthiness. a lot of people have traded more frequently, so they want to get stuck with their bet for too long. of the say it is one worst years for credit in a long time. on an absolute level, what is priced down? lisa: in other words, are we pricing in a recession at this point? joe: yeah. as ithough it is as bad was precrisis, in terms of the rate of change, we are not at extreme levels in terms of people thinking it may collapse. lisa: right. i was speaking with the chief investment officer of pimco and they said they were bearish into credit even though they see specific opportunities. here's the strange wire that a lot of managers are looking at. they say the selloff has captured credits that others

wise -- otherwise look good. given the excessiveness of the rally in credit, over the past decade, we have a lot more to go. caroline: yeah, not good enough. lisa: we want to see. caroline: you talk about people getting into cds and credit swaps. have they got that opportunity to get into this liquid flavor of credit? lisa: you have to have certain regulatory's as far as counterparty signoff's, but it's a popular instrument used. the question is, what are people waiting for? what is the indication that they are looking for that now it is time to buy? that is my main question talking to people because we see a selloff, and they say a lot of people are selling. they want to see someone caught in a position where they need to unwind and they are forced to

sell, and they want to step in and be the buyer. until there is that forced liquidity macro or micro with a specific event, they want to be the one to swoop in. romaine: i feel at we could have had this conversation in 2005 and 2006. people were saying the same thing. keep calm and carry on. there was liquidity crunch. why is this different? lisa: there are more trading volumes. there has been changes in the clearinghouses that make this more reliable. derivatives are inherently levered instruments, and if you're not getting any type of liquidity in the underlying, they could move fast. bigle could incur very losses, and they have to make sure they have the risk hedged appropriately. i think what is more interesting to me is the short-termism when

it comes to making larger bats. ?oe: how bad things look ex-oil oil, for its own issues, is having a rough time of the last few months. in more traditional cyclical sectors, it is it -- is it better? lisa: it's not totally oil driven. , ande been watching oil energy junk-bond the spreads, it and they have not been diverging for the rest -- from the rest of the pack as i would expect. you have your outliers, that those are broad-based. tire foramerican example but swapped 80% of its value this year, and of course you have your oil names. i think what people are looking at next year, is it may not be the end of the year. you're going to get an increasing number of these potholes where -- joe: across the industry?

mayank: yes -- lisa: yes, across the industry. caroline: so when it comes to cash bonds as well, it is about single names now? lisa: if you take a look at trading volumes in cash high-yield bonds, they have fallen. they are the lowest rate since 2014. if people want to bet on single name cash bonds, they might have a problem getting in and out the way they want. we will see if it will work. caroline: let's see if the abbott liquidity -- if they add that liquidity. caroline: coming up, we look at new products and see how well it will really protect you. this is bloomberg. ♪ ♪ there's no place like home ♪

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"activecore, how's my network?" "all sites are green." all of which helps you do more than your customers thought possible. comcast business. beyond fast. >> let's get the first word right now. robert mueller says the white house interview in which michael flynn lied to fbi agents was conducted properly. in a new filing, mueller said flynn claimed -- flynn who is prepared to being sentenced after lying to ofestigators in january 2017, told a judge investigators would him into a false -- wooed him into a false sense of security. chris christie has taken himself out of the running. governor said this is not the right time for

him or his family to take on the job. top picke president's to replace john kelly. authoritiesron says are working to clarify how the suspect in the christmas attack was not stopped before he could act. he has been on the watchlist for radicalism before he allegedly killed four people and looted several others -- wounded several others. they tried to arrest him earlier .n the day he posted a picture to facebook and september, and more people may have seen them than you intended. facebook's is a software bug gave outside developers broader access to photos of millions of users. fixed, but been facebook says as many as six point 8 million users and 1500 apps were involved in the glitch. global news, 24 hours a day on air and on tictoc on twitter,

powered by more than 2700 journalists and analysts in more than 120 countries. this is bloomberg. caroline: robinhood is a stock a stock in unveiling trading option yesterday. brian chappatta writes it's not a typical checking account. brian joins us now. you say it is a clever rebranding of the very foundation of financial markets. brian: the key here is that it is a checking and savings offering. it's not an account because it is not. that is getting them into hot water. we were on top of the story and and said ihe head didn't see this coming, i'm not sure we protect this. that's a real concern has this was supposed to be an ultra safe investment.

so they say it is a savings and checking offering versus an account, that seems like the the thing is kind of that should not be allowed. brian: that sort of like the disruptor type angle. it's a different kind of account, but basically a money market fund that you have perks you could use your debit card and withdraw from it. but being disruptive with your of money versus my money is. two separate things if i give them $100,000, what is the guarantee that i will get back my $100,000? brian: that's the interesting thing. typically you are guaranteed up to $250,000 insured. one thatis the ensures securities.

though, how don they get to their percent? it's above a typical money market offering. that could be a money loser for them, but they are trying to drum up business. caroline: so if we see a fed pause, at some point of the fed cuts rates, you probably are not going to get your 3%, right? brian: right. there wasas much if an economic downturn or didn't raise rates back, we would probably have to send out the knee mill saying 3% would go down. caroline: why is their demand for this product at the moment? brian: we have been talking about the risks in the market whether it is credit or weakness in stocks. there's a demand for cash. cash pace something. people are starting to realize that maybe the stock market has reached the top and may credit is showing signs of weakness. herself --nt to part we want to park our self in a

place that gives us something back. caroline: would anyone really know how to access that? say someone you are someone [over talk] is everyone able to do that? someone that is 20-25 years old that has $1000 to put to work. maybe did you see the opportunity. brian: i think it's a nice opportunity for young people, people just starting to get investing, to think about i should look for a potentially high-yielding place to park my money. checking accounts at the major banks have yielded nothing for long time now. joe: setting aside robinhood or whatever else, could there be the beginning of pressure on the major banks to start increasing theirown rates to reflect

own risk of funding? brian: there hasn't been such a demand for that. there are products like one from golden snacks -- goldman sachs. savingse online accounts that have low maintenance but have 2% interest rates which is not nothing. it keeps space, but you are not losing out. it's a good question. if there was any high-yield checking account at the major bank, that would jump a lot of interest. caroline: i want to see the pressure on u.s. banks to not charge a fee at atm's. --s isn't a fee in the u.k. a thing in the u.k. why do i have to go to a certain bank atm over here? it is super annoying. [over talk] --t's what are been heard what robinhood's offering, right? brian: will they have very few

costs. they are running a very lean operation and the question is, do you feel safe -- how much money do you feel safe parking in a lean operation? caroline: certainly when sipc says hmm, red flag. great reporting. brian chappatta, thank you. it's time for a look at what stories are trending. terminal users are reading about a coming crunch in the new york area housing prices. prices arelling hedging demand. the market is shifting in favor of buyers. while this may be a good time to buy property around new york, a lot of people are getting out. themberg.com is looking at migration away from expensive metro areas like new york, chicago, at lake, toward more -- l.a., toward more affordable places. tictoc on twitter is reporting

on an experiment with a small start time in seattle. -- a different school start time in seattle. the results were students on average got an extra half-hour of sleep and grades and attendance improved. you can follow all of these stories on your terminal, online.g.com, and there is an etf for that, we look at the one that lets you triple down on the best-performing sector this year. >> the direction daily health care bowl etf trades under the ticker cure. just that.s been some investors navigating the volatility, returning more than 20% this year. outperforming the s&p 500. it's a leverage fund that offers

three times exposure to health care companies for one day. investors use it as a short-term trading tool. this is made up of 60 plus cap names that are weighted. this, cure to overlays derivatives to generate triple daily exposure with $170 million in assets. basis points. they get a red light due to their heavy leverage and daily resetting. caroline: you can catch up with scarlet's show every wednesday in new york. joe: coming up, even the corleone's were forced to open some dry cleaners, but now you don't need to have a storefront to launder money. that story is next. this is bloomberg. ♪

caroline: quick check of the latest business flash headlines. lvmh has agreed to by the operator of high-end hotels in new york. willwner of louis vuitton buy the belmont. below, canada goose getting the gold -- cold shoulder. opening oflaying the its flag store in beijing. canada has been targeted for a boycott of its brand given its prominence in the canadian label. miners in canada's

diamond ever found in north america. the chicken egg sized a. -- sized egg. that is your business flash update. joe? joe: armed couriers and hundreds of thousands of dollars may be coming in and out of your local corner store. bitcoin atm's keep spreading despite this year's crypto slump offering a perfect vehicle for blundering money. bash laundering money. -- laundering money. one of the people who wrote the story joins us now from washington. tom, thank you so much for joining us. if one were to buy bitcoin on a online or on these wallets, you have to provide a fair amount of identification about yourself, standard anti-money laundering

techniques. is it easier to buy bitcoin in a secret manner from one of these bitcoin atm's? tom: in theory, you are supposed to be having to submit the same amount of information when you walk up to one of these machines. finding ise are that we are looking at a new universe of people entering the btm's and a lot of them never owned a financial services company before. some are better than others. some you can get away with no id necessary per transactions -- for transactions, and we found some are easily spoofed into people using identifications that were not their own and able to buy bitcoin. romaine: so when we talk about the type of people who use this, what is the volume of transactions going through this? were not talking about tony montana rolling up with sacks of

cash. tom: i'll give you one example. one of the examples in the story is from a bitcoin atm in an impoverished area in detroit. that machine in six months, took in 808,000 dollars in cash. demographic,and that seemed like a significant amount of money. we are looking at that type of ,olume as opposed to something a duffel bag cash going into a machine on one occasion. caroline: your story is so visual, it is great to read. what are basically ask army guys going around to collect these moneies -- moneys. who are the people who own these sorts of companies? tom: the one i think you are referencing is the largest atm

operator in new york city. they are currently operating without an official license from new york, but they are able to do that while their application is trending -- pending. the individual who runs the company, is linked in page does not have any reference to the btms. of out a senior flame artist which is a pyrotechnic computer program for commercials and such. another individual had a criminal record from arizona involving guns and drugs. at the same time, there are a number of legitimate players in the space. -- those of battles kind the battles are going on at the moment. joe: so if you could buy bitcoin at an atm without providing full ideas, that is easy to understand how that could open up avenues for money laundering,

do we know it happens in practice? that's a lot of money flowing through obviously, but maybe people want to speculate on bitcoin or are holding it. do people think this is becoming a serious avenue for this kind of illegal even asian -- legal invasion? -- evasion? one man was brought on to test machines and he told us that they are finding people trying to launder money on their machines. theoes out and tests controls on other people's machines to see if you are able to transact in large amounts without identification. caroline: one thing that also threw me was the transaction fees on these atm's. high -- superhi

high. tom: and it changes at a moments notice. some websites track the different portions and fees. as being asexamples , when new york initially lay down the tools on who could operate the space. you could make a lot of money. caroline: it's clear you can. tom schoenerg, thank you very much indeed. you can read his full story in the latest issue of businessweek out now. coming up, selling high-end cannabis accessories and a premier shopping location. that's next. this is bloomberg. ♪

caroline: the cannabis culture is settling in one manhattan location.

higher standards, which sells cannabis accessories, has been in the high-end market last year. the store will be profitable in 2018. giammonang in craig who reports on the cannabis industry. >> this is quite upscale. from where i said, it's another example of cannabis pushing into the mainstream. this is not a head shop. this is a swanky retail location where you can buy a bong. can't actually buy cannabis in new york city legally, but it's the idea that no one is really worried about getting busted that you can buy paraphernalia? craig: i think that's the idea. prosecutors are not taking the cases and setting up shop in a market that will be massive, when and if it opens up.

brands want to be here. they think legalization is coming. romaine: but new york is a pretty -- when you look at what is socialng nationwide, the stigma was always attached to cannabis and marijuana, it has -- marijuana,d has that dissipated? craig: i don't think everywhere. if you go to las vegas or l.a., definitely. they buy day it is coming out into the open and becoming mainstream. a polite dinner party, somebody is not going to whip out a joint in new york, where that might happen in l.a., but you never know. romaine: it depends on who you hang out with. joe: one of the things i heard about when cannabis becomes more legalized is the racial angle. you look at who is imprisoned for having sold it, a lot of minorities, and now people are glass -- $5,000

glass bongs. now that it is legal, there is a whole different demographic that sells it freely. this story really throws that and makes it clear. craig: so many states are trying to address that. historically, these laws have been used against black and brown teens. you see places like new jersey and massachusetts trying to address it. it's a difficult thing to wrap your arms around. a lot of people aren't comfortable with that piece of how this industry is developing. romaine: didn't we see canada try to do that when they got to the point of legalization and try to create an amnesty program? craig: new jersey is trying to expunge the records of people. we think we could get the boat. there is a gridlock between the governor and the president and state senate, they cannot agree on the tax rates.

i think it's a very important issue and something social justice angled. politicians want to address the history of racism when it comes to that industry. caroline: are any of these companies addressing it as well? craig: i've not seen that specifically. so far, it is in the nascent stages. the state is saying we will have 100 licenses and 25 percent has to be held by minorities. those are a little hit or miss. some of the states have tried to do that with cannabis. joe: judging by the stock market, there is a lot of and busy as important an abyss companies, that they might become the huge consumer brands of the future. is it possible the licensing will set up like, no, you can't be a mega brand. we will only let small sellers from the -- it will not be the kind of thing that goes corporate like tobacco

and alcohol. craig: i don't think so. it's not a slamdunk that we could get true interstate commerce. you already see guys with wall street checks of hundreds of millions of dollars a rolling up, so it is a free market. there's no way to allow the mom and pops to control those licenses. we could see a lack of interstate commerce for many years as this develops. caroline: great story. a $6,000 glass pipe in the shape of a skateboard. romaine: times have changed. caroline: the fed announces its rate decision on wednesday. joe: and i will be watching other central banks. the bank of japan and boe announcing their decisions on thursday. romaine: and the numbers for u.s. gdp on friday. the potential of a partial government shutdown. caroline: that's all for "what'd you miss?" romaine: "bloomberg technology" is up next in the u.s.. joe: have a great evening.

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emily: i'm emily chang in san francisco and this is "bloomberg technology." next hour,n the apple's stock it's a seven month low. ofe analysts joined the core skeptics warning about the prospect for iphone sales. we hear from one who cut his target. 2018 was a year of techlash. what does 2019 have in store? we will look at the possible big tech ten