this whole liquidity on an illiquid asset class looks really alluring. you think you can get in and get out. investors are little bit late to that trend. i agree with your other guests, you can run into problems further down the line in the market can get very gappy in funding outflows. the price that will be offered as we get further and further into that liquidity crunch in etf's and loans could get pretty nasty. certainly one we are watching very carefully. jonathan: kathleen? kathleen: i could not agree more in terms of gappy. etf's are important, but you have foreign investors and the clo machine that has really been most of the appetite. when that changes and you see supply demand come out of balance, who are you going to attract? there are a lot of new investors in, and the ones that are going to come in are probably more like me, total return, that are looking for much bigger discount than that market has seen since 2008. jonathan: gershon? gershon: there is another factor at play. i have heard high-yield has done better than loans on the upside,

this whole daily liquidity on a illiquid asset class looks really alluring.ou think you can get in, get out, and most of the time you can but the investors are a little late to the trend. i agree with your other guest. you can run into problems with liquidity further down the line. actually, the market can get very gappy in funding those. price that is going to be offered as we get further and further into that liquidity crunch in etf's and loans could get pretty nasty. it is certainly one we are watching very, very carefully. jonathan: kathleen? kathleen: i couldn't agree more in terms of gappy. the etf's are important but you also have foreign investors. and you have the the clo machine has been most of the appetite. -- and you have the clo machine that has been most of the appetite. when that changes and you're seeing that supply/demand come out of balance, who are you going to attract? there are a lot of new investors in and the ones that are going to come in are probably more like me, total return, that are looking for much bigger discounts than that mar

isit is deemed illiquid, it 48 hours. the problem is the types of reporting.uid stocks, i think it needs to go further in recalibrating that so we can get more bonds onto the liquid ladder. in terms of larger trades, or illiquid bonds, that's causing a problem because it's not very good transparency. the reason being is that when you have a large bank running capital up to trade, before mifid ii, the traded not have to -- that trade did not have to report on the screen. now, it has to report in two days. ultimately, transparency is good in some parts of the bond market and negative and others. -- in others. nejra: the trade reporting requirement, was it too ambitious? mike: i think it was. for bonds, the idea was that the european commission said, make the bond market more transparent it,don't equitize don't do too much too soon. if you look in the mifid ii, there is supposed to be a report, an annual report, and you go back to the european commission and say it is ready for more transparency or not. that report starts to get written in january and we will see

the problem is it is about the flow, as it always is with these instances and illiquid asset classes. will support the market when it starts looking cheap? i think as you continue to -- flows, there is a risk. it will be lower before you see the institutions stepping in. the settlement is at issue, the legal issues are difficult. these are not easy instruments and they tend to be issues because it is cheaper than the issuer rather than good for the person lending the money. jonathan: i think you just to find 20 and much of what happened with loans with that last line. gershon: absolutely. you are technically correct that they price off libor. in reality, they don't. a libor has gone off 200 basis points and alone has gone up over a hundred. when people are throwing so much money -- it will not happen on the downside. you don't get the full increase on the upside and you do on the downside. jonathan: it is a really good point, thank you for bringing that up. gershon distenfeld, kathleen gaffney, luke hickmore. we want to get a market check. yields up just a couple of basis points, thre

it was not that the fund was high-yield, but it was extreme the concentrated and very illiquid assetsf a lot of loan funds as well. i hope it does not happen because it would not be good for the other markets. that is the market we have to watch. happen and prices dropped radically, there will be a lot of bargains. investors will be able to take advantage of that. alix: gershon distenfeld is sticking with me. tina davis, good to see you. pondernia officials breaking a pg&e after wildfires er lines. the powe this is bloomberg. ♪ alix: time now for the bottom line, three companies worth watching this morning. joining me now is our bloomberg deals reporter. i want to look at nissan. they finally change some corporate governance due to the court -- carlos ghosn thing. two companies you cannot hold the same kind of stakes. why now? where were you before? to gets about time, nice it done before the end of the year, before proxy season rolls around. that is about all i can say about that. what they are implementing enough to stop what happened with carlos ghosn, allegedly? >> they will say i

this -- itke to feels like this nervous illiquid environment. , and notown the s&p much conviction and the smoothness in the market today. all kind of things conspiring to make people jittery before tomorrow. caroline: caution ahead of the fed. watching, mike? >> i'm looking at the russell 2000 small caps. they had a drop of 20% to the tysons august. today looks like it would bounce back with as much as 1.5%. that faded. there's more concern about small caps. people like to see the sector be strong. it's good for investor confidence a cost all asset classes. the russell 2000 keeps coming down, down 6% from its peak. we may not destabilization in the market intel the price action and earnings estimates stabilize for small caps. take a look at the s&p 500 and what it has done in the months leading up to a fed rated hike -- hike. interestingly enough, the s&p that's fallen 10% from the last meeting. this could relieve equity markets perhaps suggesting it could hike -- what it means for the bond market, it's a little different. since the last fed meeting, we have had some portion of the yi

i don't see that -- it doesn't mean they can't be left holding the bag with some illiquid loans, folks having a difficult time unwinding. the high-yield markets have essentially shut for december, i don't think there has been one issuer. that's never good for the price of risks. investors are forced to step back in play hedges, even with the mixup. we have been spending a lot of time talking to people -- how do you find an economical hedge? it is difficult to make the case that the vix will revert back to 15 anytime soon, we are in this period of trying to absorb the uncertainty in the markets. >> do you feel like you have any visibility? do you anticipate that a year from now we will be talking about buying opportunity? i'm just looking at some of the valuations and how much they have come down. >> it's a great point, and it certainly could be. the economic data itself becomes very important. we will get the fourth quarter january andlate start to see the base economic statistics. there'sinly could be, absolutely some more compelling share prices on valuation that they don't buy on va

you do tend to see a little illiquidity. yields have dropped 15 basis points in two weeks. where you are used to seeing some kind of concession we didn't get that today. i think you will see when we come back in january that demand rebound. havene: we're going to more sales at a time when the fiscal situation appears to be deteriorating. the economic condition appears to be deteriorating and demand appears to be deteriorating. >> it's going to be really tricky. i'm watching the funding market because when dealers have to hold more of this paper on their balance sheet they have to finance it. agreement isrchase where we are going to see some trouble and hiccups and that's what we have to watch when we are looking at financial conditions. treasury did say it was going to the options inng the beginning of the year. they will have to offset anything with t-bills. you also have the debt ceiling is going to be reinstated come march. they are cutting the amount of treasury bills into that deadline and it gets reinstated. you get a

it is true that the technical levels arll played a part into increasingly illiquid markets, tomorrow,markets close. : sandra, thank you. you will stay with us. up next, we will show you what is going on with these markets. is off 1.2%. it is down again. all of these groups are falling, led by financials, industrials, and energy. this is bloomberg. ♪ we now have a pretty clear model of what trump does with world leaders. he declares the greatest deal of all time. he leaves the details to everyone else and he relies nothing has really happened and you are right back to where you were before. bitt may be helped a little two months,ed his trip but we knew there was no resolution. there is a troublesome trend in the jobless claims of the last couple of weeks. i saw the ten year down to 288. that is a concern on growth. >> the bond market is missing out more growth weakness. flattening of the yield curve. >> financials are trading below book value. --ess you are enterting entering a recessionary environment, it's a low point for financials. anna: some of the many views on the grinch that st

were totally baffled by the move that came out of nowhere, with mnuchin asking if the banks see i illiquidity issues, and the ceos saying no. kate, it's reminiscent of those emergency liquidity calls made during the financial crisis. the banks are saying, look, there's no crisis. these calls came out of nowhere and they're just not sitting well with investors, kate. >> very clearly, monday many things. alison, thank you so much. >>> as the markets tumble, so dogs t does the secretary's status with the president. president trump has claimed that treasury secretary steve mnuchin hasn't done enough to stabilize the market and that he recommended jay powell as chairman of the fed. as alison was just talking about, especially after his bizarre calls with the country's largest banks. >> reporter: that's right, kate. as alison noted, the stock market not really being reflective of what mnuchin was trying to do and find a sunny side to all of this volatility. a source familiar with the calls that mnuchin had this weekend with some of the country's top banking ceos, they say they were totally baffled

markets are so illiquid. we're completing this selloff and i believe we're bottoming.he bottoming process is exactly like you're seeing lots of volatility we're at the end of the year soin ve so investors can continue to take tax losses into the end of the year once you clear things out we'll have a better look back at january. when fundamentals don't work you have to rely on the technicals friday and monday were almost put call days. new 52-week lows that's get me out of everything. anything that's glued -- >> what was yesterday, get me into everything? >> at some point, you rub on ouf stuff to sell. you run out of inventory to sell you get these huge snap backs, and then pullbacks off the snapbacks. we'll see where we are you don't know where we'll be in a couple hours when the market actually opens up. >> that's an important point the one thing -- even with yesterday's gains, the biggest point gain of all time, great percentage gain, it's still the worst december for the dow since 1931 this is not as much people wanting to sell as simply no buyers if i'm trying to s

gives opportunity to asset managers who can be active and take opportunities when the market becomes illiquidynamic. anna: think you very much, stay with us. neil dwayne at allianz. let's continue the conversation. what's coming up, let's take a quick check of the markets. the overall picture, we are a little stronger. waiting for the fed is the big headline. up by nearly 6% this morning, climbing the most in more than 10 years as they do a deal. they say the benefits outweigh the model. we talk more about this tie up in just a moment. this is bloomberg. ♪ matt: welcome back. we are 11 minutes into the trading day, still looking at a mixed picture in terms of what is going on. we have gains across of the core, but losses in some places in scandinavia. let's go to annamarie with a look at some of the stock movers. >> let's kick it up, just short of 5.5%. one of the biggest gainers this morning. it creates the world's biggest supplier of over-the-counter medicines. the u.k. company will be the leader in this. downside, us to the one of the biggest losers down more than 6%, the french banking bu

rush to redeem shares by open in a mutual fund investors could lead to large sale of the relatively illiquid holdings which could further exacerbate rice and reticent. the default rate on the victims has been at the low end of historical range and perfect credit condition up in favor with low interest expenses and vote expected default rate. if spreads were to rise sharply or economic conditions to church significantly we could see downgrades refinancing charges comprising the frequencies and loss to investors. it is therefore particularly important to keep track of a backdrop of generally elevated valuations which you can see from figure ten which provides a summary measure that i should note stops in q3 so it hasn't been updated for the last few months. even with recent market volatility a range of asset prices remain high relative to historical benchmarks. yields on high-yield corporate bond relative to treasury's remains a unhistorical basis. despite recent increases. although they've moved up in recent months, leverage loans remain in the low end of the range that the financial crisis w

also don't let the market become anymore illiquid than it already is. stop with the 50 bs. feel the market. don't go by meaningless numbers. good luck. i asked the press secretary sarah sanders about that tweet earlier today. watch here. the president talks about the fed? is he just venting at this point or is he genuinely worried there is a rate hike tomorrow that the economy will slow down? >> the president is stating his opinion which he is perfectly within his right to do so. i think that is one of the reasons people like him is because he does that, he does it regularly. he has been very clear about what his position is while at the same time he understands the fed is an independent agency. that doesn't take away the president's right to state his opinion on a particular matter. reporter: watching two things here in washington, what happens tomorrow with interest rates and what happens over the up coming hours and days as it relates to this possible government shutdown that needs to be hashed out by friday. where things stand at the moment? it is all very fluid. we kno

yes, we prefer a liquid assets -- illiquid assets. matter of alpha. alpha generator asset class. for this reason, we prefer to overweight private equity. yeah, we've talked to so much how difficult it is to get returns in 2018. how are you going to do it in 2019? ben: focusing on our processes. we anticipate a challenging year, may be better than people expect, but there will be volatility and it will be tough. it goes back to focusing on good companies, good balance sheets, not egregious violations, and putting that together. what we've seen is fairly indiscriminate selling, people moving from sectors to sectors, a more factor based driven approach. what we will see in 2019 is whether companies deliver. that will be the key. it's ok to place premium valuations on companies, providing they deliver. if they do have those business models that can grow in a secular, a cyclical way, 2019 shouldn't matter that much. but those companies have suffered quite a lot. nejra: using tightening financial conditions will affect credit faster than equity? christophe:

also, don't let the market become any more illiquid than it already is. stop with the 50bs.the market. don't just go by meaningless numbers. good luck. so at this time tomorrow, we will know the path the federal reserve takes as chair jay powell announces his decision on whether to hike interest rates. "wall street journal" chief economics commentator greg ip has an uncanny ability to read all kinds of tea leaves with the economy and the fed and he joins us now. glad to see you. first give us your guess, will the fed hike or not tomorrow? >> i think they will raise rates tomorrow. they have had plenty of opportunities to sort of steer the markets in a different direction and they have not taken those opportunities. the real question that everybody is wondering about is what do they say about the future. they have this plot that implies two to three rate increases next year. that could change. i think it's more likely that jay powell, the chairman, is going to try and give the following message. i have nothing to tell you about what we are going to do next. the economy and th

also don't let the market become more illiquid is already is. stop with the 50 basis points.eel the market. feel the market says the president. don't go by meaningless numbers. good luck. as we wait for sarah sanders, bring in from money nap press, technical strategist dr barton and bellpointe, david nelson. you know the drill. thanks for coming on. you could be interrupted by the press secretary at white house any minute now. that is literally the way it works. dr we see a bounceback anticipating what might happen tomorrow? any chance tomorrow is is the the day to "the wall street journal" editorial page point we should see a pause? what do you think? >> i'm guessing not. analysis not. if we look at the fed funds futures rates where investors are putting on insurance against such thing, about 73% chance we'll, that we will get this hike. i think the market already has that baked in. any volatility we see will come from the statement. if they give us a great goldilocks statement. not too hot, not too cold. we could see calm in the markets. anything else we'll see big bounces.

be 10%, now it's 20% there's no question thabout that on the flip side, the market itself is more illiquidke to two months ago addressed what effect that would have on the market >> growth product, the growth of systematic trading and machines more involved in what we do, all those things are untested over any duration of time with severe stress when we see stress, you can see reactions that might lead you to believe that with more risk and significant stress that could play a role. when you look at last week, some of the selling is the result of problematic selling, because as volatility goes up, some of these algorithms force people to sell >> overall bank ceos, no question their own liquidity is fine when you see big moves in the market, it defines the point we're not as liquid as we were >> the topic of liquidity takes us back to the financial crisis. but when we talk about the markets themselves, it's a separate issue >> i think from my take on reading this statement, yes, secretary mnuchin says the banks are fichblt mene i feel like this call was more made because the markets have be

how reliant they were on overnight short-term wholesale credit, financing gigantic portfolios of illiquid assets. so i didn't understand that the shadow banking system was vulnerable and then the core banking system would be vulnerable to the kinds of runs that we saw with lehman, with bear stearns, nor did i ever imagine that there was an aig out there that was selling enormous amounts of insurance that made investors comfortable that they weren't taking on undo risks. so i didn't realize that this had the potential for a full-blown financial crisis like we saw. >> so this sounds a little bit like the story i tell about my own, which was that i saw the housing bubble, didn't realize that it could trigger the banking crisis, but you're giving me a level of, you know, color to what was going on in the financial markets. this is the -- the fed system is, as you say, talking to people, should have been -- people should have had their hair on fire, but they didn't. you're saying basically that you are seeing this, it was alarming but it really wasn't bringing enough bills. >> it didn't ring b

yep illiquidity did as another writer we must be careful that we do not take serious to me grand larceny a good article has no corruption on it or anywhere else knowing that what you say anywhere let me know if we're going to get any time i just said you know ok we're running out of time i do a little something i do want to discuss something else in the show very important let's talk about boko haram festus was there a mistake for president bihari to say back at the start of this year that boko haram had been quote beaten because several hundred nigerians have been killed by boko haram in suicide bombings and many other attacks since he made that claim let me first of all i've missed the fact that boko haram is detaching from lives you forgot people are still dying after results of it after mexico or is not a literally the numbers are not under a tree that's not me my interest is far cry from where we are coming from this was both around that took this route that developed to talk to pass on that you were out of the all of government of what of that did you think to try to come back to p

that crystal clear its the fed is unwinding portfolio, and he says that is making the stock market illiquid this was echoed in a wall street .ournal editorial trump seems to be painting the fed into a corner because if they hike -- partly because they want to show they are not bowing it causedtrump, but again, people could say they buckled. let's look at more of the facts on the table as the fed has this important debate. why should they hike? you have low unemployment, 3.7 percent, wages rising slowly but rising. interest rates at these levels still accommodative. consumer spending looking good. confidence still high. gdp growth will be slower next year but still well above potential. why should they cause? global stock markets, not just the u.s., under big pressure lately. strong dollar could hurt manufacturing. one of the big focus is, of course, let's say they hike the key rate. the summary of economic rejection will be updated at this meeting. what is important is that second row of dots in from the left-hand side of the screen. there is a near consensus for three rate hikes of next ye

if you take away bitcoin, it is market.very illiquid we were operating through discrete exchanges.at only exchange, and one was a crypto only exchange. so we are consolidating them into liquid and him betting different participants in order to provide that liquidity? mike: does bitcoin have a chance of getting back to the record level, 19,500? mike: i think it will surpass it. stephen: by when? mike: i would say by end of next year, i think it will surpass the all-time high. stephen: by the end of next year? mike: yes. mining difficulty shows that that will be. stephen: thank you so much, mike kayamori, thank you for having us in your headquarters here. stephen: that does it for now, we send it back to you. yvonne: stephen come great interview there. thank you. coming why this ceo is charting a strong course for the rupiah. this is bloomberg. ♪ ♪ ♪ rishaad: a bit of a recovery ,tory for the indices in china coming off the lows of the day. hang seng index just seeing positivity. on the csi 300, h shares also improving. let us have a look at some of the movers. tencent last night com

he was also fined $300,000 for conspiring to hide illiquid real estate loans -- delinquent real estatecharges against the bank were dropped when it agreed to pay a $44 million civil fine. rishaad: article sales, beating estimates reflects the company as it transitions to the cloud. revenue at $9.5 billion in the fiscal second-quarter. weve the forecast product, are looking at $.78 for the analysts. oracle facing cloud challenges from on his on -- amazon. yvonne: let's take a look at some of your movers in japan. just before the lunch break, we are getting some lines from the finance minister speaking about reducing the purchasing tax when it comes to cars. they will be extending housing loans tax exemptions. they are saying these purchases tend to be volatile around a tax hike. there may be some positive effects and we are seeing a mixed bag when it comes to seeing these carmakers today. takata as well, after the takeover. stock down more than 6.5%. this is bloomberg. ♪ paul: 10:29 in hong kong. i'm paul allen. china's holding treasuries dropped lower in 18 months as lawrence currency

they can be illiquid up to a point and that should give them a return advantage over long periods ofl they have gone into these very complex, very costly, they're paying out a lot in fees, they are propping up a huge investment network it's not flowing back into these institutions >> another good one, jim, thank you. >> sure. >> jim stewart of the "new york times." >>> the "new york post" publishes a story that the pink that -- new york stock exchange used its own staff to make the trading floor look busier than it was it's alleged that members of the regulatory team were ordered to head to the floor by then-president tom farley to make it look more populated and this was captured on snapchat by a former employee. the exchange responds the new york stock exchange is one of the most transparent workplaces in the world with news outlets broadcasting live from our trading floor all day long, all nyse employees are welcome to visit our trading floor and do so regularly to celebrate momentous events that happen everyday of the week, including our opening and closing bells and large ipos >

also, don't let the market become anymore illiquid than it already is stop with the 50 bs.e market. don't just go by meaningless numbers. good luck. the president saying to feel the market i presume that means he doesn't want them to be data dependent but something else in terms of their astuteness about what's going on on wall street today, guys so the president making his views known here no indication from the white house when the last time the president spoke directly to jay powell was i've asked a few times haven't gotten a straight answer to that yet. we'll see if they pin down whether the president's relaying that message directly to jay powell. >> larry lindsey is piling on. we'll talk to him shortly. eamon, thank you very much we'll just over 24 hours from the big fed decision steve liesman is here. >> kelly, by now it should be over all the shouting and everything. but i think it's still going on and i think we'll be arguing over what the fed should be doing until the last minute. let's show you the fed survey. 43 respondents 98% think the fed hikes tomorrow this

now, there is some flexibility when the pension funds can do that, but with illiquid markets it can get extremely volatile, both up and down, but i would err on the side of pension funds need to be boy, so this dip could be bought back in the next couple of days. >> jim grant, you'll hear a lot of talk of is the fed making a mistake in are the markets saying the fed is micking a mistake? if the fed is really making a mistake what are the market implications of that >> they were set out by sunday's "wall street journal" piece. they contended that the fed is about to make a major policy error, and as evidence they cited the chaps in oil prize, for example, and other indications of weakening growth, not just here but especially abroad, and to tighten in the face of this they contend was a big -- if they are right. >> is that already in the market because the expectation was that they were going to tighten today, and we've already seen that sharp slide in oil and stocks and everything else in. >> i think what kevin and stan were saying is that the worst of it is still to come. after all, th

liquidity it's hard to look at volumes we do and the lack of gap pricing, wilf, which when we get to illiquidarkets, stocks go from a dollar to 50 cents or they shutdown no sign of that in almost any market i've seen you get blowouts in cbs spreads. if i look at the latest quotes on the bank cds, a measure of bank default concern i was here and covered in detail the financial crisis there's nothing that's been going on that shows that failure of people to remark essentially how orderly this rather steep deline has bed decline has been in the markets. >> i don't think any treasury official or secretary would disagree with you. they weren't concerned about liquidity going in that's what they hearded from the bank ceos and they told the public that. why are you pinning that directly to the selloff? what's the worry >> they issued a statement that makes it seem like they're not the adults in the room that people thought they were it's a remarkable lack of understanding, i think, of the role of the treasury and also this idea of the continued attacks by the fed they're trying to walk it back that'