stephanie: if i am janet yellin and i look at the market yesterday and there is a 15% knocked hundredlion dollars worth of market cap off the face of the earth, what does that mean to janet yellin? some would say we are back to a more normal market it is this a sign that she acted too early? the s&p 500 at the end of last year before the drop the price-earnings ratio was 40% higher than its historic average. i guess it's now 38% higher. it's moving back toward normal but still way out of line. i think you can say that about a whole bunch of asset classes. >> which ones? >> commercial real estate, long-term bonds, the spreads beat in high-grade and high risk bonds, emerging-market debt. there is a general reaching. that's just a view on low growth and low allocation? >> i'm not saying a misallocation of capital. you've got mispricing. if those prices adjust way, there will be a lot of substantial losses on the scale we started to see yesterday. if that happens, if there is a demand for it, doesn't that they take the prize? >> it's priced for today's interest rates. atthe short rate wil

ben bernanke that communicated, i would say very well on a difficult period to right now we have janet yellin where some people question whether she fully understands proper communication with the market. and i think in the chinese leadership we have very strong officials who know how to consolidate power and they know where they want to go. but in erm its of their capital markets experience, they're still learning. >> i mean i would put it more simply. there are three areas, one is you need to have policy transparency. one day they say they're trying to-- the currency markets. next day they vanished. that disunt help investor kf disens. they need political transparency. we had today another billionaire suddenly vanish. there say real clampdown that is making business people quite nervous. and data transparency. i mean the statistics are terrible. nevsky capital, a $1.5 billion hedge fund, a very successful hedge fund based in london announced this week they have pretty much shutting down its fund because the markets in china are now so untransparent it's very hard to actually invest in a rat

isn't the lesson that the world has changed and when, for example, in the fall janet yellin said i'm not raising rates because i'm worried about china, the market actually fell. if they came back and reversed the rate rise, wouldn't that send panic through global markets? >> well, i don't know that it would calm everything down, but step away from the market for a minute, even though it's our livelihood. they've got to worry about what happens with the economy, and they can't really allow us to slip into another recession because to some degree their gun is empty already. i think they might in desperation cut back and go back to zero in hopes of saving the economy from slipping into recession. >> but to pick up your point, the markets are down very heavily. do you see an economy that really is hurting that badly? i mean, through the prism of the markets, it looks horrible, but actually you can argue that growth is really quite robust. the employment data has been really robust recently. >> well, again, i don't want to keep arguing the same case, but if you look down underneath the da

does janet yellin move away from the boldness of the recent weeks m or doesario have to look at the moonthink it will be janet. they are three years late. continues and you will see increased volatility. you said they are three years to late because they had -- because of they race, savings would having complete. >> they should arguably be easing now it the idea that the ecb and federer diverse -- francine: are we headed toward a recession? >> i think so, i think you will see gdp closer to 1 rather than 2. tom: we have to go? our time is up. make a note that tomorrow morning, you and i will pick it up on mark carney. there is never enough time. francine: the third day the pound is sliding. tom: mi and london friday? yes! i'm bringing an empty suitcase. strong weekrd for there and howard davies join us next week among many esteemed guests. loverow, stephen sawell, having him on. stay with us, more on "bloomberg surveillance." ♪ >> chinese stocks are plummeting again before circuit breakers shut down the chinese market. wpi is trading attitude doesn't -- wpi is trading at an all-time low.

janet yellin needs to be much more hesitant in increasing interest rates because of the market turmoil that's wrong. there is a reason for the f moc interest rate hikes having to do it lower inflation. the asset markets are not a justification. that peoplerap worry about it it's possible for asset markets to correct without it being terrible for the rest of the world. francine: will the dollar start feeling off? on yen-dollar and it's about flight to safety. i don't see any world in the next six months where the dollar goes down a lot. how much does it get that further by the safety concerns? flow set --s centers around christine lagarde. you have come out in defense of her imf. what is she doing right that others cannot do? >> she is telling the truth. when you have the necessity of a haircut of debt to make the bailout work, the germans were not willing to stay. may have made it unpopular and it could have cost her. this is a world where people have to get away from politics. you have to have someone who has to say this is what is going to happen. she says it's not popular. angela me

every time the stock market wobbled for the past six years, janet yellin would come out to say, we've got your back. she can't say that anymore because she committed to hiking rates. >> olivia sterns, you'll keep an eye on this. we'll be talking the next two hours. now to our colleague at cnbc, sue herrera. we'll talk about the oil prices at lows. just when we thought q1 couldn't get worse, now we are witnessing the continued fluidity. >> we sure are, thomas. and one of the things about markets is when you start to get momentum to the downside, it tends to continue until you get what is called a washout. and right now we're not seeing that. and every investment bank on the street is jumping on the bandwagon saying we see oil prices significantly lower. friday alone, i counted five investment banks that all downgraded their price of oil. so that kind of creates a ripple effect. and as a result of that, we came into this session with heavy pressure in the oil market. as olivia mentioned, that's decimating the energy stocks and the commodity stocks alike. and in addition to that, it's cr

if janet yellin does not raise rates, what does that mean for the equity markets?does, we are doing well. if she doesn't, it could mean we are reversing and she could come back with a safety net. >> you are not sure what you will get because the knee-jerk reaction is things are less well and people will sell the equity market. they are acknowledging that the market is not ready for an interest rate hike. on the flip side, if you have a weaker dollar and you see in europe strengthen, that will. help u.s. corporate and their earnings plot says 4 but the rest of the market says 2. why not just price that in? a lot of people would say the fed is not a good forecaster . this place view that of a kind of take their own guess at things. theou look historically, fed has gotten in front of the u.s. election. this chart shows the right line is the fed funds rate. it was stuck at zero for a long time and they raise rates here coincideses -- and it with net income. over the last five years, we have had some growth but it has not been tremendous. but little s&p net income, all