mohamed a. el-erian, let me start with you. so the dow was down 1,000 last week, almost another 600 today. what is driving this? >> two things -- the market is trying to get to terms with, first, lower global growth, particularly out of emerging markets and china and, second, the market is worried the central banks have run out of ammunition. so put these two things together, and then investors are repricing the market lower. once you start moving lower, then the trigger of all sorts of things. people have to sell so they sell

olivia: thank you so much, mohamed el-erian. prolific writer.is most recent piece about the anatomy of a market a lot just crossed wires a few moments ago. alix: new tech very stable in this volatile scary day in the market. olivia: that doesn't for me. i am going away. alix: time to go home and get some sleep. much more coming up bloomberg the dow off" on the by 670 points. the downside toward the close. we will be right back. ♪ ♪ alix: welcome back to the i amberg "market day." alix steel. we are going to julie hyman who is looking at the bloodbath on wall street. picking up down side. julie: acceleration of closing -- selling as we get into the last half hour of trading. a look at what we have got, the dow 700 point down. looks like this could be the sixth worst point drop in the dow on record. above 15,000.tten the nasdaq down 4.2%. one,u take them one by look at the s&p first of all, and 87 point drop right now. at the lows of the session seeing the biggest declines. trading at the lowest since october of last year. -- the dow, the vicki bi

mohamed a. el-erian, let me start with you.he dow was down 1,000 last week, almost another 600 today. what is driving this? >> two things -- the market is trying to get to terms with, first, lower global growth, particularly out of emerging markets and china and, second, the market is worried the central banks have run out of ammunition. so put these two things together, and then investors are repricing the market lower. once you start moving lower, then the trigger of all sorts of things. people have to sell so they sell to winners and losers, they're just trying to raise cash. then you get spreading melee throughout the growing market. that's what we have. >> woodruff: haven't investors known china was in trouble and had time to get prepared for this? >> you always think markets will get prepared burks people like staying in the trade. why? because, for years, now, we have been able to sustain prices well above fundamentals because central banks have been the markets' best friends, so markets have started to rely on central b

where the backstop comes from, mohamed el-erian is in china. it has to be there.eople will be watching. >> china, the other fact is the local central banks and politicians will be under increase scrutiny. that's like places like the turkey and the lyra are getting beatennous out. their collisions are under turmoil and nervousness and the response has to come locally. yes, china is at the center of this. one other key difference between then and now is these economies are much more closely tied to china. >> that has been the growth engine for these economies. >> there has been a black tuesday. in australia and new zealand they called 1987 black tuesday it was a different day. back if 1929, it was a black thursday. it was followed by a black friday and a plaque monday. one thing to remember, 508 points in 1987, 23%. 23%. >> versus about 3.5%. >> it was different shades. >> black monday is trending on twitter, though, right now. >> yeah. >> in china that was certainly the case. cumulatively when you look at the last four trading sessions things are getting ugly. >> w

with me on the phone, someone who can help us put this in perspective, mohamed el-erian, former eerlybally renowned and respected investor. your take on this in terms of the fundamental and nervousness and what investors at home should do right now. >> this is a financial issue, not an economic issue. the u.s. economy is still in good shape. it will continue to produce jobs. it's not at its key velocity but it's doing better than elsewhere. it's a financial issue. it reflects we have overrelied on central banks and central banks cannot deliver genuine growth. they can buy time for politicians, but they cannot deliver genuine growth. this is right now a financial issue. it becomes a real economy issue if the circuit breakers are not triggered. >> richard quest, question for mohammed. >> good morning, mohammed. richard quest here. sir, you talk about the wider issues at the moment for emerging markets, currency imbalances, commodities, low oil prices. how concerned should we be that the emerging markets could lead us towards a 1997 scenario again? >> so 1997 and 2008 were very particula

joining us live, mohamed el-erian.ur words, you said the classic market overshoot is developing. what do we mean by that? >> it happens in emerging markets. we see currency pegs fall and emerging markets weaken. that sends shock waves to other markets. it starts first in the emerging market world. then, it starts spreading and what that causes is heightened risk aversion. now, what happens next is more of the same. it would create interesting investment opportunities in future. in the emerging market world, everything is being treated the same as if it is exactly the same country in the same place. that's not the case. so good names are being hit as well as bad names. there are going to be opportunities there. to begin with, in a few trading sessions and weeks, it will be an absolute trade. similarly, as it spreads around the world, corporate bonds versus equities. another interesting opportunity. you are going to see lots of opportunities as this location spreads. how bad is it going to get, mohammed, the pain in emer

joining us to discuss is mohamed el-erian. great to see you. thanks for joining us. ot a 3.7% read on second-quarter gdp this morning. if the fed does not hike in september, how do they justify it? mohamed: it has never really been about the u.s. economy. u.s. economy continues to recover and heal. 3.7% is somewhat of an overstatement because of inventory. this is an economy going at 2.5% solid. the reason why september is a question mark and why dudley said the case is less compelling is because you cannot be the great house in a fluid neighborhood and ignore the neighborhood. the fed will look at the rest of the world. the fed will not want to add to national instability. the fed will wait until december because of that. pimm: let's begin a bit about oil prices. they are rising today. what implications is therefore the economy? mohamed: there were two positive froms for the u.s. economy the last week of crazy market moves. first, lower energy prices. second, lower market interest rates. those things are supported and will help offset the negative impact of the wealt

mohamed el-erian said investors should not count on the fed to ride to the rescue. market has been conditioned to view the central banks as their best friends, so whenever there is a hiccup, people look to the central bank. i do not think this time around the central bank is going to respond. the fed has reason to not do qe4. a new poll shows bernie sanders is now with hillary clinton and iowa. he has picked up 25 percentage points since january. he opened about his growing momentum on cnn. bernie sanders: all over this country we are generating enormous enthusiasm. people do not understand why the middle class of this country is collapsing at the same time as almost all of the new income and wealth is going to the top 1%. another poll has donald trump in front at 23%, followed by ben carson, ted cruz, and scott walker. berkshire hathaway has made its most significant energy investment in two years. it has a $4.5 billion stake in the largest oil refiner in the u.s., phillips 66. phillips is up almost 8%. apple is at odds with its silicon valley neighbors over new te

francine: that was mohamed el-erian with his thoughts on how market volatility will influence the fed'sate rise decision. manus: let's bring in guy de blonay from jupiter. sane, sensible words from mohamed el-erian. do you see any possibility -- touched on earlier -- the fed would move? are they going to have to do more stimulus? is it up to them to save the day? guy: it is clear that the market lowow pressing in -- very probability that any rate hike could come this year, even in december. and most likely something will come within the first half of next year. the idea here is that if they do basis point is september or december, it will be a symbolic move. then perhaps nothing for a year or two. depending on the data and the global macro -- as i said earlier, central banks need to talk to each other. china needs to push for quite a forceful stimulus going into the end of this year into next year. without that type of scenario, it will be difficult for the fed to do anything this year. francine: back to the pboc, something that has been troubling me. you say they should be doing more.

katty: for more on the wild new -- the wild lives in the market, we spoke with mohamed el-erian. he joined us from california. nobody was expecting this to be a fabulous day, but were you as surprised as everyone else stunned bye and as those traders as what happened? guest: i was. it was a crazy day. you open almost a thousand points down and then you sell off again -- all of this in the context of heavy volume. today is going to go down in history as a special day and it tells you that the market is trying to regain its footing without any external anchors whatsoever. katty: was it the volatility of the market today you were watching as much as that final number of 600 points down? guest: we had to fundamental drivers. one is the market is pricing and lower global economic growth. second, the market is worried about policy ineffectiveness -- the inability of the central banks to boost asset prices one more time. what then happens is human behavior took over. what you saw is everyone trying to rush through the door and then everyone rushes back into the room. then when the buyer

joining us on the phone is mohamed el-erian from allianz.cross the globe, is the selling over yet? >> not yet, kelly, because we haven't seen one of two things that we need. either we need better economic news to calm concerns about an accelerating global slow down and/or we need some policy intervention but not from the fed or the ecb. that's what is different this time around. we need policy intervention that holds in the emerging world because this crisis is emanating from the emerging world. >> mohamed, the very source of funds just evaporated. let's look at crude oil which dipped at $40 a barrel. china was a huge source of income. if you say other countries need to spend in order to prop up their economies, where are they going to get their money? >> that's the problem. the american world is being hit in one of two ways. one is demand shock and two in terms of trade shock. they are commodity exporters and commodities have come down. a little bit was because of supply issues, particularly in oil but now we have a supply shock and demand

mohamed el-erian wrote in "financial times."hose who have invested in markets outside their comfort zone feel an urgency to retrench to their own markets. what does that mean for the u.s. dollar? >> that really depends on how strong home bias is right now. , there has been the perception that the u.s. was going back to a growth economy. home bias is strong. in switzerland and japan, home bias is strong for all the wrong reasons. despite what is going to happen in september with the fed, if the u.s.' growth trajectory is back on track, there is every reason. tom: your research note every morning is arguably the most read on global wall street. about theritten quality of reserves nation to nation? should we believe what is on the balance sheet of russia? should we believe malaysia? reserves,, quality of as to what they are actually invested in. this applies to a lot of middle eastern currencies, as well. -- their assets are stellar themselves, but it is not something you can liquefy quickly to support your own growth. secondly, it

>> it was interesting to hear mohamed el-erian for the focus on the chinese central bank to act. they have done a lot so far, but needs to try to get growth going again. they have not had much bang for the buck. much traction.ad going forward, they have a number of tools left. the question is how effective they are. the pboc could cut interest rates, take steps to encourage buyers to lend more into the economy through the reserve requirement. of course, the government could .tep in again they could add more support if they wanted to. of course, for the macro side of things, they could ensure more fiscal stimulus into the economy. the question is whether it will work. how is the rest of asia reacting? the rest of the stock markets, a more mixed picture coming through. the chinese market is still considerably weaker. things look more mixed elsewhere. a number of these countries have deal with the effects on their own currency of what the chinese did just a couple of weeks ago. how is the rest of asia reacting? >> that is right. the most interesting comments came from the japanese f

obviously, a couple of pimco.go, the heyday of they had bill gross and mohamed el-erian.ll able to -- is pimco still able to recruit and retain the kind of talent they were able to when those two were at the helm? mary: that is a great question. it always took a little more cash to lure people to newport beach. it is not quite the cultural it was. there is still this academic leadership, intellectual place, and that attracts a lot of like-minded people. but how do they continue to attract those people if the muted?prospects are olivia: promised them they will make a lot of money whether or not they perform. what are you looking at next for the company? mary: i think they are trying to kind of lay low and let their performance speak for themselves -- for itself. will look at how they are read shaving their thinking for the next however many years. thank you, mary childs. still ahead, a look at the markets in the last hour ahead of the close. don't go away. ♪ olivia: making a comeback in a big way. selloff,er the massive they are all well into the green. netflix is making a

olivia: in the heyday of pimco, they had bill gross and mohamed el-erian.ill able to recruit and retain the same kind of talent they were able to win those guys were at the helm? mary childs: a great question. it took a little more cash, and more compensation to lower people to newport beach. it is not the cultural center of the new york city is. mbas pushed back when they were trying to get them over there. it is this academic thought leadership, it is a very intellectual ways, and that attracts like-minded people. the question is how they continue to attract the people at the growth prospects are muted. olivia: finally, since your next for the company? -- since you are an expert, what is next for the company? mary childs: they are trying to lay low and the performance before itself, and they really like setting the agenda and saying new neutral, and new normal. olivia: catchphrases certainly help. thank you so much. in more what is happening the u.s. equity markets right now i want to go over to my colleague julie hyman in the newsroom for a check of the

to read you something from mohamed el-erian and he made some sense of china's devaluation.e says that the chinese policy decision is one of the largest economies is no longer in position to play the locomotive of global growth. what do you think about that? this china now in that position have they abdicated that? john: that position was gone. this is not a preemptive response. you can listen to the global company conference calls. you can look at copper. you can look at anything that points at china and it's down. they lost that engine of growth. this is a response and reaction to that. if this is a way to reinvigorate their labor market, 2-5% is not going to do it because this currency has been pegged to the dollar that has appreciated vastly more than that with her impeding currencies. -- competing currencies. there is a long way to go. betty: mohammed also mentioned in that piece that mark talk about that in the short term this is going to be very ugly and china will be very volatile. but in the long term, john, these are the right moves that china needs to make to beco

mohamed el-erian discussed the state of the chinese market. >> it's very different. with housing and years ago, they created a bubble in the stock market. they believe that greater ownership of shares was a good thing in terms of that transition. it went too far. on the finance side, they had bubbles in various places where they will have to find a way to deal with it and they are trying to do so. now is theng me global director of economic research, michael mcdonough. how do you view the chinese markets? >> there are deftly some problems in china now. -- if you a step back are in china and were a domestic investor in china, what are your options to put your money? , you is a savings account have property which has been doing very good but has stalled recently and you have stocks. stocks had traditionally been doing pretty bad and suddenly, there is a perceived bubble in the housing market so the government says we don't want these prices to go up so they started saying let's look to the equity markets. suddenly, you had this herd mentality and everyone jumps in. thi

trish: you and i agree with mohammed el-erian who was on with maria this weekend.n to this, guys. >> my gut feeling they won't go in september. there is too much global uncertainty as much as i would like them to go earlier i think right now they will not go in september. trish: he would like them to go as well. everybody is saying, you know what? we can handle it. >> yeah. trish: you about the fed is saying i'm not so sure. i wonder, jason, is this another example of central bankers trying to tinker with the economy and may be in the process, not doing anyone any favors, rather creating a new kind of bubble out there? >> well, you know, honestly, here's the thing, at the end of the day it is really all about inflation, okay? there is all these theories about the fed and central bankers and blah, blah, blah. the bottom line is this, one of their two mandates is price stability. the reason why they haven't raised rates since the crash is there's been no threat to price stability. inflation is not 5%, you know what i mean? but here's the thing, but here's the thing,

mohamed el-erian has an opinion. >> is certainly reduces the probability significantly and understandably so. if the volatility continues, which it will, then the fed will be very cautious. it will not want to fuel further volatility. in such circumstances, it will most likely weight and not initiate the interest rates cycle in september. vonnie: betting the fed will push back the rate hike. fallen to 26%. another day, another media feud for donald trump. this time the republican presidential candidate got into it with univision jorge ramos. ramos stood at a press conference and began asking trump about his immigration proposal. down.use me, sit you were not called. said down. sit down. sit down. go ahead. >> [indiscernible] >> you have not been called. go back to univision. >> [inaudible] >> sit down, please. you were not called. >> [inaudible] >> go. >> i have the right to ask a question. >> excuse me, sit down, you're not called. sit down. sit down. sit down. go ahead. later let backas into the press conference. he argued with trump for about five minutes. the pentagon is given oshkosh

we go to mohamed el-erian to see if he has an opinion on it. it is believed that he never took a swing at bill gross. let's look at our data check. this is the carnage we are seeing, the news happening right now. s&p futures deteriorate in the last 20 minutes, -23. ever sol, a rally slight in oil. look at the yields. julie hyman mentioning the 10 year yield getting in the vicinity of 2%. the dow, 17,400. the german 10 year, quickly i want to go to the mac terminal, the bloomberg terminal, and i want to douse the "it is just 1998" malarkey i have heard over the past few days. the headline is, we have gone through that weakness, new weakness on a quarterly chart. if you go long, you can compare. we are nowhere near the angst that we saw in 1998. brendan: to twin that with some of the politics, there has been an announcement that there will be a cabinet reshuffling. here was an assumption that was going to get rid of oil structure -- of oil subsidies. tom: we have markets on the move. dollar,nminbi, .enminbi, showing speculation all else will figh

mohamed el-erian talks about being worried and an ugly stock market close in the u.s. the u.k.the 11th day. miners back at levels we have not seen since 2009. francine: so, we are definitely in a correction for the stoxx 600. i will call it technical terms -- it is zigzag. that brings us to today's twitter question. given the market rout, given all this zigzag and we have seen on the market, which central bank has the circuit breaker? is it the fed, is at the pboc? what can the ecb due to defend the value of the euro? manus: willow bay -- will they count for more q.e. for longer? i think it is hashtag trust. and there seems to be a lack of trust in the ability of the pboc. we are there. ♪ . . manus: shaken and stirred. after a volatile day of trading, chinese stocks extend the worst five-day drop since 1996. francine: no respite for europe. indices across the continent are in the red. anus: all bets are on. the latest consolidation to have gambling industry. good morning to our viewers in europe. good evening to those in asia. a warm welcome if you're waking up in the united st

they'll be asking mohammed el-erian why he thinks this is a perfect storm for crude oil. >>> call it phone slowdown. consumers are buying fewer devices. manufacturers and suppliers are getting hit. it's leading to lay-offs. former apple ceo john sculley is going the opposite way making a big bet on the affordable smart phone space. first, tomorrow the first day of september and federal reserve vice chair stanley fischer says a rate hike could still be on the table. we'll hear from richard fisher. (vo) me? i don't just wait for a moment. i watch for the perfect moment. the one nobody else sees. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus, powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours. everyone is looking for ways while to cut expenses.s unique, and that's where pg&e's online business energy checkup tool can really help. you can use it to track your actual energy use. find rebates