good place. joe: it is all good. caroline: for now monetary policy is in the back rearview mirror. we will focus on trade, will they or won't they on a phase one deal. in the rest of the market. joe: definite risk aversion. and you definitely see it in the rates market. it is not like this is a big selloff. scarlet: having said that, the s&p 500 falling .4%, the biggest drop since october. caroline: says how lacking in volatility we have been in the last six weeks. let's dive deeper into the action. abigail, what were you watching? abigail: would that whopping move lower in the s&p 500 been the context of so many small moves recently, i would like to look at this volatility chart. in blue is the s&p 500, in yellow the vix, and white we have the skew index, often called the panic index.

the reason i wanted to look at that index ahead of the fourth quarter volatility last year, months in advance, the skew index had been elevated sharply while the vix was basically sleeping. a big tell on the volatility we sought to the downside. then the fourth quarter happened, stocks fell, the vix spiked higher. this year we see volatility indexes basically stuck in a range as the s&p 500 is at or near its all-time high. we have the skew index back on the rise. the reason i point this out, it was rising well in advance of the asked years volatility. something to keep an ion, especially when we have basically been in a period of strong complacency. sarah: i have been watching the all telling yield curve. when you look at the spread we are seeing a flattening today for the 6th straight day. that is the longest streak of flattening since all the way back in august of 2018. not even those most -- this most recent august. if you look at the spread right

now, roughly 15.5 basis points. still healthy in positive territory, however we are starting to get towards the lower end of that range that we were in for a while before that intense flattening we saw at its most recent august. where is this coming from? it is being driven by the long end of the curve. look at the short end of the curve, that is more anchored due to fed expectations being on hold. at the 10 year right here, really under an immense amount of pressure. bond buying over concerns of hong kong, uncertainty over age phase one trade deal. we have seen the 10 year treasury yields now fall 20 basis points alone. with record highs earlier this week even with some pullback to that you looking at valuations that are near those cycle highs. aboutterminal it is all that forward ratio coming in at

17.6. all the way back to february of 2018 to get a ratio this high again. was notingly, r.b.i. all scary news going into the earnings season. on the price side of things, third-quarter earnings have been very solid in the past few years. that is expected to move the numerator higher on the dominant or side of things. they were looking for earnings-per-share growth drop of 3.8%. all of those factors means that forward p/e ratio is still climbing a little higher. scarlet: fantastic roundup. thank you so much. still with us is doug ramsey, and bloomberg news fx reporter katie greifeld. katie, when you look at what is going on with the consumer, it looks like the retail numbers came in and it seems to suggest if you have the right strategy, consumers will continue to flock and spend. on the manufacturing side, there

are still questions on where things are. we get pmi data on friday. it is not -- it is market numbers. how critical will this set of numbers be? katherine: when i talk to people i often hear a lot of, we already know we are in a manufacturing slump and it is global. i think there is a higher sensitivity to those retail numbers, but after that october ism report i believe it was, it sent such jitters through the bond market, people have been looking at the market pmi's a little more. it is not the ism, but people are so focused on the ism that any hint that the market number can provide, they will be looking for. again, i get a lot of, we already know we are in a manufacturing slump. joe: doug, talk to us about what parts of the market you like. you like small caps. they underperformed a bit today. big picture, they have underperformed for a while over the long-term. what is this moment right now that makes them attractive? i emphasize it is a

relative call. we are not optimistic on the market here over the next one to two years. what is intriguing i think about small caps here is, i mean, the relative peak in small caps most recently was 8.5 years ago. they participated in this bull market but they have lagged for 8.5 years. what the has accomplished here ave seenrly 2014 is we h relative pe multiples. we like to normalize earnings, ala robert shiller. on that basis we have seen our small-cap universe though from a in 2014,% p/e premium coincidentally when the taper started by the fed that year, all the way down to 10% to 15% -- i am sorry, they have gone

from 840% pe premium to a 10% to 15% discount. that is a massive revaluation relative to the large-cap universe. premium blewhat pe up, if you will, in the first half of the decade when qe was in place. although the fed will deny it it is buying assets again. i think for the chance that you see some of that pe premium on small caps restored. so i think there is less relative risk even if we are in for a difficult period the next couple years because of that valuation discount. caroline: it is all relative. let's get a quick check on some earnings. fourth quarter loss per share $.28. fourth quarter revenue, $294 million. the estimate was $289 million. making an acquisition of an ai-related company, a voice chat.

up .9%. this company has soared in terms of share prices year to date. katie, your perspective in terms of rotation and what we are seeing. of course you look at bonds and stocks. are we seeing more of this appetite go outside the u.s. and where the u.s. is going to be winner takes all? where you look at where the dollar might be going in post fed minutes, how many people are saying it is time to get exposure outside of king dollar? katherine: you are hearing a little bit about that. but we are entering crunch time for the u.s. and china trade negotiations. you look at the dollar, u.s. treasuries, they are still the ultimate safe havens. there is a little bit abutting optimism about europe, about maybe japan. is the next round of tariffs scheduled for december 15, which is fast approaching. still getting negative headlines. when i talk to investors, i still hear a lot of cautious, a

lot of, let's keep our exposure to u.s. treasuries. scarlet: going abroad depends on the trade situation being resolved. doug ramsey joining us from minneapolis, and our very own fx reporter katie greifeld. thank you. that does it for the closing bell. next we will look at the most anticipated date of public impeachment hearings yet. this is bloomberg. ♪

here is a snapshot of how we market is today. joe: the question is what did you miss. caroline: washington getting involved. --gress plans to day for a public impeachment hearings in the most anticipated witness takes the stand directly connecting president trump to ukraine's quid pro quo. and coming to crypto near you. zero commission trading first swept through funds and now entering the cryptocurrency. romaine: value stocks have been frustrating for decades. now is notest says

the right time to bail on value. rob arnott joins us now from newport beach, california. also joining us is sarah ponczek. rob, value investors had a good bit of a run over the last couple months. i guess the overarching question is is this sort of outperformance we are seeing in value, is this going to be a consistent theme going forward? rob: my short answer to that question is that there is absolutely no way of knowing near-term whether the turn has already happened or whether this was a head fake, a bear market rally in value stocks. but what we can know his value is trading extraordinarily cheap relative to growth as compared with all historic norms. and that when value got as cheap as it is today, it subsequently beat growth by an average of 6% to 8% per year over the next five to 10 years.

so, i'd like to think if you are crossing a stream, forget the eddie's, the short-term eddie's, look where the current is, enda curran has been adverse for value, but value is so cheap now that the current in the coming five to 10 years is likely to be relentlessly beneficial. what exactly does your fundamental index strategies do differently? yes, it has been a brutal year for value over the past 10 years, but you guys have been leaning further and further? rob: first, let's define fundamental index. fundamental index simply says why should we weigh stocks according to their market value? to be more expensive the stock is, the more money you have invested in it. if a stock doubles in price, you have twice as much money in it

as you did before he went up. that means with cap awaiting you are assisting -- assuming that after a stock doubled its future upside must be better than it was before. that makes no sense. why not wait companies according to how big they are, their economic footprint, their scale on the macroeconomy. look at the stock's share of all publicly traded company sales, all publicly traded company profits, all dividends, all collected book value or net worth. you can take a blend of these and you end up with a nice measure of the economic footprint of a business. it looks like a value index, but it has a rebalancing mechanism that is very different from most value indexes. as value gets further and further out of favor, we dive deeper and deeper into value. as value recovers, we take on a shallower and shallower value tilt. joe: in order for me to intellectually get comfortable with this idea that now may be

the time for value, i would like to know what is your theory or explanation for why value has underperformed for so long? because obviously in theory, cheaper is better when it comes to investing, except that has not worked for a long time. so i am curious what it is in your view explains underperformance for so long and what it is about these conditions that would say maybe now is a good time for it. rob: the underperformance of value goes back to 2007. there was the crash in early august of 2007 in which value stocks, momentum stocks, small-cap stocks all crashed at the same time. three days of horrific performance. but what is interesting is you go back to 2007 and you find value was expensive. that is to say growth is always more expensive than value but sometimes the gap gets pretty tight. it was in 2007 setting the stage for it on --to underperform.

thehe gap gets really wide, likelihood of it rebounding gets greater and greater. the flipside of that is the process of getting cheaper is a painful process when it inflicts pain and losses along the way. and so investors get scared. they want out when they should be wanting in. sarah: i have to ask you, because you have been warning about the risks for crowding for so long now. we are all starting to see some traction on wall street, across wall street for the value factor. could you ever see a point in which you start warning about value somehow becoming crowded? rob: absolutely. and givenk on 2007, the work we have done in the last decade, the signals were manifest that value was expensive, was becoming crowded space.

one of my early mentors in this business liked to say whatever is easiest to sell, do not buy it. what was easy to sell into thousand seven was value, leveraged value, leveraged small-cap, anything with small value orientation and momentum. oh my goodness. double down and triple down. that is a crowded trade. and that would have been a good time to go easy on value. if we get back to those kind of valuation levels, then yeah, i would express some serious caution about value. at the time i was expecting caution not serious caution. yesterday we were talking about the frustration of talking across purposes about what value actually is and what growth actually is, but also that both can go down, even if value does outperform relatively. next year we could see both selling off. where do you think the outperformance will come?

the positive were to the negative? rob: it could be to the negative. we have not had a bear market since 2008 on that. we have had six corrections in the intervening decade, but we have had no bear markets. so, we are past due for a bear market. sometime in the next two or three years we will get a bear market, no question. when you get a bear market, it tends to take all segments of the market with it. ath growth trading remarkable valuation levels, the likelihood is a bear market would be very savage for growth stocks, especially the fang-type stocks. happens, we would outperform by going down less. the place where you find actual .s.,ains is in non-u especially european and emerging-market stocks, on the value side. avoid the trendy tech stocks,

even in international markets. but value in emerging markets is trading at barely 11 times earnings, and fundamental index in emerging markets is trading at barely nine times earnings. wow. if you can get $11 of earnings for every $100 you invest in a zero yield environment, that is a fantastic opportunity. there by dent of emerging markets have suffered, underperformed significantly getting you to these cheap levels. there are no bargains in the absence of disappointment to set the stage for it. romaine: rob, always great to have you on. and of course our very own sarah ponczek in new york. we have breaking news right now crossing the wire. paypal, the company is set to require honey science for $4 billion. honey science is a company that does a lot of those coupons and rewards programs through your browser extension. the news is paypal acquiring the

company for about $4 billion. caroline: i have seen them advertised all over the subway. meanwhile, they live up to the disappointment in terms of an 86% fall and earnings-per-share for the third quarter. the estimate is in line. we are seeing sales of $2.68 billion, down 3.5% year on year. it really is victoria's secret in terms of direct sales falling more than 5%. bath and body works continues to outperform, up 30%. the stock sold off by more than 70% -- 7% today. this is bloomberg. ♪ is is bloomberg. ♪

caroline: general motors has hit

fiat chrysler. it has to do with a bribery scheme that has sent united auto workers and officials to jail. gm says it cost $1 billion. gm alleges the late fiat chrysler ceo used bribes to corrupt the bargaining process. they had denied that executives -- amazon preparing to open stores. expansion could include licensing technology to other retailers. the new store format could launch as soon as october next year. uber reportedly will allow audio recordings of rides in the u.s. it is part of a new safety push. the feature will be piloted in some latin american cities next month. users will be able to report an incident and submit recordings to uber.

that is your business flash update. joe: u.s. ambassador to the eu gordhan sondland testified today in front of the house intelligence committee on the hill, saying the president and really giuliani -- and rudy giuliani's dealings with ukraine constipated quid pro quo. >> mr. giuliani demanded that ukraine make a public statement announcing the investigations of server, election, dnc and marie summa. -- burisma. mr. giuliani was expressing the desires of the president of the united states and we knew these investigations were important to the president. joe: for more on what we learned from sondland's testimony we welcome josh, who joins us now from washington. the big headline was that line quid pro quo, which has been at the essence of all of this. poke holes tried to

in this claim but they never made a statement entered into the investigation or anything like that. nonetheless, what did you find to be the most compelling and expect beyond that headline of ambassador sondland's testimony? josh: you are right. that clearly was the standout point here with sondland. but the other piece that is important here is that sondland pointed the finger basically at the highest ranking people in government. he connected these allegations to the president directly through conversations that he has had personally with him. he said he had a conversation about this with vice president pence in warsaw in early september. byjustified his own actions saying that secretary pompeo was aware of what he was doing all along. john bolton, national security

advisor at the time. the list goes on and on. thecally giving him authority and suggesting that he was not part of some shadow back channel to ukraine, but that was official policy. romaine: one thing i found interesting about this whole affair, specifically the way that sondland laid it out, but so far he is pretty much the only one we have heard from who really was not a career diplomat or career politician in some way. he was basically just a businessman, a hotel developer who fell into this job. he does not appear to have too many political loyalties. what is your read on that, and do you think his testimony could be a pivotal moment in these proceedings? josh: first, i think his testimony is definitely a pivotal moment. he was in a unique position among the witnesses that we have directrom to have that

line with the president and also with the president of ukraine, where he was carrying on first-hand dialogue. as you know, part of the republican strategy up to now is to consider everything secondhand information, hearsay, because they could not put it together. as for sondland's background, that is a really interesting point. it was fascinating today because you could tell, most of the times when people come in, even as they are career officials, one side, either the democrats or the republicans, one side is friendly to them and the other is hostile. that is generally how it goes with these witnesses. and you would expect that for someone like sondland, who is a republican appointee. but today he did not know who his friends were because he was getting it from all sides. caroline: bringing all sides to us as well. josh, thank you. coming up, a mega share sale. alibaba raises 11 billion in hong kong.

we discuss that next. this is bloomberg. ♪ this is bloomberg. ♪ here, it all starts with a simple...

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>> i'm mark crumpton with first word news. as we have been reporting throughout the day, gordon sondland told has impeachment investigators today that he worked with three giuliani on ukraine at the express direction of president trump and push for a political quid pro quo with kiev because that was what the president wanted. thatschiff told reporters ambassador sondland's testimony shows the veneer has been torn away. today's testimony is among the most significant today and what we have just heard from ambassador sondland is that the scheme, the this

conditioning of the white house meeting, of the security assistance to get the deliverable the president wanted, these two investigations that he thought would help his reelection campaign was a basic quid pro quo. schiff added to the knowledge of this game is pervasive. president trump is narrowly leading in matchups against top democratic candidates in wisconsin. a university law school poll out today gave the president a three percentage point lead over joe biden and bernie sanders. five points over elizabeth warren and eight points over pete buttigieg. last month, biden, sanders and wharton all had leads over president trump in the same poll. efforts come up short for weeks after benjamin netanyahu was also unable to form a government

in the wake of september's deadlock elections. israel could soon be headed for its third elections in less than one year. days after the united states reversed 40 years of foreign in the west bank, the u.k. says its position is unchanged. today, britain's ambassador to the u.n. said the settlements are illegal and a violation of international law. as he rose the ability of the two state solution and the prospects for a lasting peace as reaffirmed by un security council resolution 2334. we call on israel to end also met activity in line with its obligation as an object -- occupying power. spoke in new york on behalf of the european members of the un security council. nato foreign ministers are in brussels to prepare a leaders summit in two weeks. the preparations, amid tensions

over emmanuel macron's complaints about the death of the alliance. the secretary-general told reporters today that nato has no intention to put weapons in space. we are defensive alliance and our approach will remain in line with international law. domain will a new help ensure that all aspects are taken into account. i'm mark on july the first word news. -- i'm mark crumpton with first word news. >> president trump is touring an apple plant in austin, texas. we understand steven mnuchin is there also. this is all about being made in america. >> my hometown kind of. i guess it's sort of demonstrating that high tech can

be made in america. quite this is a political move. tim cook has gotten a lot of praise from investors. despiteowing that apple making a lot of products overseas is still an american company and they can do things here in america. let's also bring you breaking news that we had a little while ago on paypal. the company agreed to acquire another company essentially a coupon technology business that they are buying for $4 billion. this is a massive deal for paypal and honey science which raised $40y that had million in its seven-year existence. that's a big payday for early investors there. let's move on now to another big company. billion in ang $11 hong kong stock sale. a hong kong stock

sale. always good to have you on. great to get your insights. a lot of money floating around. some people are making it to the public markets. alibaba showing how to get it done. >> they are going public twice. they raise ipo that in 2014 was the entire proceeds for togetherpos this year including over bank. -- including over. --ber we have never seen a company go public twice. the $11 billion would have been the biggest tech ipo in the u.s. by far. alibaba has not done that well. it has done ok. has your analysis changed since

then? unprecedented? in terms of what you are seeing yourreport since then, company breaks down -- now you have all of these earnings to look at. ask if you look at their performance, it's great. marketplace companies this is the promise of the marketplace company. you're supposed to have fantastic margins and growth. what we see is that when companies get into that size, there is a mega cap category. disproportionately a small knot of companies have -- to point,

the law of big numbers means how much bigger can a company get from a valuation standpoint? >> almost rubbing other companies face in it. i don't even need the money. billion iny have $30 cash already this is just making the point helping please the chinese authority. >> it is gilding the lily for sure. >> what is the talk here in the u.s. in terms of how to go public? we had door -- yesterday. how frustrating is this for the banks? >> the bankers will be fine. the argument for a direct listing is about lockups more than anything else. if you're a venture capitalist and you own something at $.25 per share or $.50 per share, you

need the max value. something with think is funny is that people object to the pop. it deflates the argument for listing.ected >> direct listings, they are even seem popular despite how much we talk about them. we obviously have flag and spotify. large direct listings are out there. >> i think there are clear pros and cons. takeg an investment bank you on the road and market eugenie shareholders so you can change out your shareholder base in an organized way comes with

lockups. it is a tried-and-true process. at a direct listing, -- it would be trading with think like a lot of the other companies. they have done a regular way offering. where you sit and where you enter the company and if you're coming versus going, it has a lot to do with whether you think direct listings very good idea. may lock him up president trump is still touring the apple plant in austin, texas alongside tim cook. there you see them. there is some technology. >> what are the making? [laughter] this is bloomberg. ♪

selloff is bitcoin entering its third week. the recent slump is not slowing down this investment company. today, they felt to make its first digitalthe currency investment product to be regulated by the fcc. now is our guest. it there's like the holy grade -- grail a bitcoin etf that doesn't exist. your fund is the closest that for this vehicle and

buying bitcoin. tell us about the next step. how does that move the ball forward. this one has been quoted on the market since the middle of 2015. thes consistently one of most liquid securities there. what we are seeing from investors is tremendous demand submittingproducts this form can do three things for the product.

it also speeds up the liquidity timeframe for some of our private shareholders. about theu talk investment firms potentially getting more interesting, how are the democrats exchanging with regard to the types of investors you are seeing? year saw a early in the more institutional interest and that has only gained momentum through the year. q3, 84% of our inflows were institutions. hedge funds, endowments, everyone except sovereign funds. are seeing investors come across the entire suite. we have a product for the quite etc.. >> it's interesting that you are not the only one seeing this desire to get in and get exposure to liquid assets within crypto. that galaxy isg also -- has been highlighting. to put out their own competitive product that will be slightly cheaper they say.

how competitive is out there for you? divvied upe against or does it get bigger for all of you? >> there are a lot of seats left and food at the table. kind of demand we are seeing on the institutional side as well as trading, there is going to need to be other firms out -- accessring assets to the asset class. the more that are out there to open those gateways for investors the better. >> just like the traditional finance space, these are collapsing for bitcoin trading. end, is this going to go the way of everything else whether it is an etf for a trust or trading, there just isn't it whole lot of actual money to collect in fees? >> the early days of where we are in this asset class, we are still in early days. you are going to see business is ramping up. there are substantial costs.

legal costs and custodial fees. i think over time, she -- these will get compressed. but not on the near term. >> by then, your bitcoin holdings will be so much -- [laughter] >> breaking news on tiffany and lvmh. a bid last month for tiffany and tiffany rejected it. now, the bid has been raised. $130 per share. they and tiffany are in discussion right now. >> let's move on to smart charts with abigail doolittle will be look at the topics through the charts. you are honing in on the chip sector. >> yes we are. to talk to me about chips is the founder and president of chart smarter.com. today is an interesting day.

we have had the slow melt up. today, we are looking at the biggest drop in about a month but it is still small. what do you make of this? >> thank you for having me on the show. the chips technically speaking have been acting very well and on a fundamental basis, it is backing the story up. in a market where people are questioning the quality of earnings, we have seen great numbers from qualcomm and others. they have been keeping the majority of those gains. havep in mind, all three good dividend yields. people look at them for more exposure. you can't go wrong with the apple suppliers. names like cuervo and others. not surprisingly, your chart of the chips versus the software, we starting to see some app performance. until just recently. >> absolutely. you can see first of all, this is a ratio chart with the chips

smhared to software, the over the i gb. these two groups are the most important within technology. we're seeing a nice break out here in semiconductors. this is coming after a long downtrend that was in the favor of software. of 2017.ck to november we like this breakout. we are more impressed by the force and followthrough about move. we know the best breakouts tend to work right away. we're very pullout -- bullish. want to be overweight in semiconductors versus software. >> it looks like would pull back a little bit. i see the pullbacks starting. i would use that as an opportunity. >> one of her favorite names happens to be the top name on the s&p 500. amd up more than 100%.

>> if you would ask me where what i put my money, this is probably my favorite in the chip sector. well-defined very bullish ascending triangle. it stopped at 35 level and was pushed back and rejected plenty of times. the bears got pushed aside during a six-week winning streak. i think we can enter this name or 39.llback toward 30 i have a price target of 55. >> if we were to polak higher -- think there isu a chance this could be a false initial reaction or du really like it? you would use any weakness as a buying opportunity. a it is not uncommon for breakup to be retested. this will come back, i don't know it's going to come back to 39 looksvel but 38 or like a good place to start .

this stock was not participating at all in the chip rally early this year than it just exploded recently. butas a little confusing this move, you cannot argue with the price action. the buyers are trying to take control. thank you for joining us. great commentary on the chips. it from new york, this is bloomberg. ♪

>> now to asia ahead, the u.s. is expected to vote on the bill soon. china is threatening to retaliate if the bill is passed into law. shery ahn is joining us in beijing. china is criticizing the vote. what can they do?

look at a response be? >> we are seeing the u.s. house is about to pass this legislation. the key is, will president trump sign it when it gets to his desk,? beijing has repeated their threat several times to have serious consequences against the is enacteds bill into law. this is what the chinese embassy in the u.s. tweeted. they quoted the chinese spokesperson saying the hong kong human rights and democracy appliesects facts and double standards and blatantly interferes in china's affairs. is an serious violation of international law and basic norms. we know that in the past, when

the u.s. has put sanctions on chinese officials, because of violations or even the blocking and blacklisting of h fang, , they have been measured in their response to any u.s. action. we will have to see what they actually do aside from just harsh rhetoric. you are currently in beijing. what is the move there? -- mood there? about what happens with the trade negotiation. that continues between the u.s. and china. the violence and hong kong that we have seen in the last few days is really not helping that mood. it could potentially be signed into law by president trump.

form, ithe new economy is about the shift of economic power from the west to the east emerging markets. the conversation right now revolving around what of these trade tell us just -- what these trade tensions will do to the emerging powers around the world. we do have a huge high-profile lineup of guests. we're talking about bill winters who is joining us in a few hours on daybreak asia. we also have the aii be president, the goldman sachs ceo and the 3m ceo who is joining me this afternoon here in beijing at 2:00 p.m.. we look forward to it. coming up in beijing, we just heard it sherry is speaking. interviews.eat you saw them all lined up there.

goldman, ubs and others. that's all from what you miss. have a great evening. this is bloomberg. ♪

>> welcome to daybreak australia. live in beijing at the u.s. economy form. -- forum. here at top stories we are covering. the house of representatives prepares to vote on a bill supporting protesters in hong kong. lawmakers are defying angry warnings from china. over a make ooms