Economistewinning says it should be outlawed. All that to come in the next 30 minutes at first a market check. Fang not doing well, nor are semiconductors. A very interesting divergence for the major averages. The dow up 2 10 of 1 and the tech heavy nasdaq down 1. 7 with the s p 500 down fractionally with a divergence between the s p 500 and the dow, on the one hand a huge selloff for the nasdaq, down 1. 7 . The chip index down 5. 23 , the worst day since brexit in 2016. Seeing a big selloff for the fang and in the chip stocks. A look at the nasdaq 100, big tex is getting hit. Getting hit. Here is the chart. A steady decline on the day, down 2. 2 on pace for its worst day since august. Someone thinks it was not triggered by janet yellen but by bearish or cautious research out of Morgan Stanley, including a few days ago. Lets look at the drags on the nasdaq 100. Apple, amazon, facebook, nvidia. Nothingmazon, facebook, to dismiss nothing too specific outside of cautious comments but in video, a Morgan Stanley analyst was cautious which is taking a toll. And an analyst on the street talking about that cryptocurrency, the chips used from nvidia maybe in less demand in 2018. A big slide and pulling on the nasdaq significant and the nasdaq 100. Lets look at volatility. 3506. S a ratio between the nasdaq 100, the measure of volatility for tech stocks in the s p 500 vix. It is fighting to highs last seen in june. Highs last seen in june when we had a tech selloff out of nowhere. Or excuse me, early 2007. Lots of volatility for tech stocks but the overall market is low. Interesting to see whether this is a tell of more volatility. Take,an had a different saying this is a rotation out of growth into values. One of the drivers is the 10 year yield, rising rates, moving higher as janet yellen talked about the gradual rate path that will likely be held by the fed. This is helping some of the banks. Red for tech stocks and banks rallying, helping to offset the weakness. S p 500 down modestly and the dow, actually up on the day. Vonnie thank you, abigail doolittle. Lets get the highlights from Janet Yellens testimony before the joint Economic Committee which may have been her last congressional testimony as fed chair. Michael mckee, our economics and policy correspondent is with us. She said if inflation is depressed on a temporary basis, which we believe, the fomc, are monitoring, a gradual move toward neutral is warranted with no change from what she has been thinking, even know inflation is more depressed. Michael this was a greatest hits concert. She repeated the things she has said many times and that wall street wants to hear, the fed will continue its policies of gradually raising rates because the economy has gotten a lot stronger and unemployment has come down. What is missing is inflation here in she is suggesting it is now going to go up. Shery she was grilled on secular disinflationary things Like Technology but seems to dismiss that. Michael not as much this miss a say they are not sure as she thinks the phillips curve is a useful framework is looking is good and you should see prices go up because of the more scare something is, labor, the higher the price should be. It is just not working that way right now with no good explanation from them. The absence of an alternative explanation, they will stay there. Vonnie the effects of crude oil prices, onetime downward trend in mobile phones plans prices, food, at what point will they be transitory and the permanent parts of this inflationary trend . Michael we do not have a timetable and that will be jay powells decision. See suggested that we believe the inflation rate will go back up over the mediumterm, which generally is thought of as a year or two. She left open the possibility they could be wrong. Something jay powell mentioned yesterday. It is surprising that inflation is so low and the do not know why. At some point the fed will have to confront this, either inflation starts to rise because the employment rate stays so low , or they have to rethink their framework and nobody has a good new framework. Mckee,thank you, michael our International Economics and policy correspondent. Vonnie our next guest says stocks could have very little investment appeal in the longterm and there might be shortterm appeal. Doug ramsey joins us. I have to ask you about the fang stocks not performing so well, why the turn . I do not know. They have had wonderful momentum all year long. Technology, not necessarily the fangs, tech is at the top position in the tactical funds. We see a lot of appeal, valuations. I will not argue they are cheap but on a relative basis in a market in which everything is expensive, i think the valuations look ok and there are a lot of momentum. Think this sector, not necessarily saying that fangs, but the sector will be the leader to the end of the bull market. Vonnie you have been saying are you how concerned about the drop in the nasdaq and the possibility a can continue tomorrow and the next day . Thet could happen, given incredible moves we have seen to the upside this year. I think more broadly but we are impressed with, granted, it has been a wonderful year for growth and momentum overvalued. , virtuallyays high everything we would look at as a precursor of a major bull market high, all of these bellwethers were at new highs yesterday. That includes value. Even though it is lagging year to date. Financials, utilities, go up and down the list. Midcaps, small caps, growth, across capitalization tiers, this is incredibly broad, the move to the upside. Everything would be wonderful if it were not for those pesky the ratios. Ratios. In terms of longterm investment appeal, this market has shorter term speculative appeal and will move higher over the next 3, 6 months. At least. We have a hard time making the case for anything above a low singledigit nominal return to the s p over the next 810 years. That does not mean the party is over. That sorry matt has been the state of affairs for some time when it comes to u. S. Stocks but we have upside fireworks. Shery you are talking about value, is it wise in this extensive market to go after expensivestocks market to go after these values stocks . Our thinking is, this is backed up with a lot of work, when there is a real obvious value at this point in the cycle, i think, in sector land, that would be energy right now. There is probably serious structural issues going with within the sector or industry. That is our conclusion. We do a lot of quantitative work and energy is not by, despite budged, this fight underperforming year to date. I expect the overspending because of the fracking boom has not worked his way to the system. That does seem like a lower risk approach. Historically, value typically does very poorly and the very last phase of a cyclical bull market. I assume we are in the very last phase. I am not sure i can quantify that. We are in the eighth inning or ninthinning. Hink value bill shine value bill shine during the next bear market on a relative basis and coming out of the next market bottom wherever that may be, value should do extremely well. Vonnie Semiconductor Equipment is one of the Biggest Holdings for you. Homebuilders also. What do you make of the data today that better than forecast with a pick up and pending home sales . That should be favorable. The inability to print a higher wage number each month with the employment report. That keeps rates low enough to keep the housing recovery on track. It is not normally a group i would be expecting to hold at this time in the cycle. It has been a very unusual cycle. Typically, an earlier cycle group and here we are in the 19 of an economic recovery. In a ninth year of economic recovery. The Semiconductor Group is our largest holding. They are having a tough day. We still see a lot of fundamental and certainly technical merit in the group. Vonnie our thanks to doug ramsey, the chief Investment Officer of leuthold. Mitch mcconnell says the senate will vote on a procedural vote on a tax bill and we could see a full debate tomorrow. Seeing theolns rechristened and of its topselling suv ahead of the los angeles auto show, the foreign owner brand is changing its suv name to novelist, not a list for david novelist westin is standing by. We are fortunate to have the ceo of lincoln and the chief marketing officer for all of ford motor. Thank you for your time. Lets start with the lead. Ilus, how different is this from what we have seen from lincoln . It is one of our it is our bestselling vehicle in the u. S. , performing very strongly in china. We thought it was time for an update with new design language ill,the new lincoln gr effortless for customers. We thought it was time for a new name. David how autonomous is this . Vehicles are getting increasingly autonomous. How autonomous is this one . We are building semiautonomous futures with Cruise Control which means the vehicle will speed up or slow down as the vehicle in front of you speeds up or slows down. It has lain assist with. You center the vehicle and keep it centered in the lane. Gentlydraft, it will move the vehicle back into your lane. It has both features that makes driving more safer and also more pleasant for our customers. David lincolns explain role within the ford motor company, what do you seek out of lincoln as far as your repertoire of cars . It is an iconic american brand that is been around for over 100 years. Presence in the luxury market in the United States and several other countries. It is our way to participate in a really vibrant and growing market in china. China will be the Worlds Largest luxury Automotive Market very soon. The lincoln name is very highly regarded their. We launched the brand in 2015 and sold about 10,000 units. Two years later, 2017, we will sell over 50,000 units in china. Great growth, participation in luxury marketplace, which provides great deals for our customer and important for the company, higher margins in the luxury space. David it is a rapid growth in china. As you draw out the lines, when do you expect lincoln you will sell more lincolns in china than in the United States . I do not have a exact date, david. Like i said, our growth is very rapid. For reference, we started in 2015 and will sell over 50,000 units this year. We will sell 100,000 units in the u. S. Icon, and theican Chinese Market is growing and will most likely pass u. S. Sales but i do not have a time frame. The profitability of ailing can luxury automobile as opposed to a ford of a lincoln luxury automobile as opposed to a ford . We do not compare their brands were several reasons, the rent for several reasons we do not compare the brands for several reasons. Infrastructure cost and the assembly plants, it is difficult to split it out. The margins, the contribution marches, pure revenue minus cost is higher in the luxury space than mass transit vehicles. The role ofave chief marketing officer for all of ford motor company. Business is for autonomy and electric vehicles. Some would say that there is at least a perceived that maybe ford does not have a leadership position and is a half step behind the competitors. Do you agree and what do you need to do to establish yourself as a leader in this new growth area . I do not agree with it. We have great plans for electrification and are investing over 4 billion to electrify our vehicles with 13 new electrified vehicles in the next few years. As far as autonomy, we are committed to putting an autonomous level vehicle on the market just in the next three years to four years. Within the organization, we formed a company that is 100 focused on developing autonomous technologies and announced the formation of team madison, completely dedicated to developing battery electric vehicles and other electrified vehicles. It is a small team within our company that can move much more rapidly and responsible for product and strategy, and responsible for creating some really unique of vehicles and experiences for our customers. Very committed to electrification and autonomy. David you mentioned that lincoln and ford are iconic american automobiles. Another word for iconic maybe old. What challenges do you have in marketing in this new world of electrification and autonomy against the tesla . Do you have a challenge with the consumer who believes tesla is more cuttingedge . We firmly believe, in the end, the of brand fits in the public psyche. Weyou ask people today but stand for, the words that come up still are words like strength and progress and innovation. Given that kind of brand strength or our brands, i think electric edition will be a natural fit for us. The key will be how we executed products and how we create experiences in the vehicles and outside the vehicles for our consumers that truly love leverage these new technologies love these new technologies like autonomy and electric vision. David you have a new ceo out of michigan, my alma mater, how has he changed your life . Jim brings really creative thinking. He is a big fan of Design Thinking and pushing the entire organization to embrace that form of thinking, be more thoughtful, be more customer focused, design things that are truly humancentered, because that is what our consumers need and want. With his help and the rest of the for leadership team, that is ford leadership team, that is where we are headed, crating products that are human centered and a huge benefit for our customers. The head of lincoln and runs the marketing for ford motor. Thank you, good to talk to you. Shery thank you, love how you asked him about his boss. That was david westin. Todayn reaching new highs , 11,000, the big question is is it a bubble and when will it pop . This is bloomberg. Vonnie this is bloomberg markets. I am vonnie quinn. Shery i am scarlet fu. Vonnie bitcoin has it 11,000. Someone sound alarm in an interview earlier. Bitcoin is successful only because its potential for circumvention. A lack of oversight. It should be outlawed. Vonnie joining us to discuss is our editor at large cory johnson. Usually skeptical about these things, i would imagine he is skeptical you are skeptical . Bitcoin is not widely understood by of skeptics and people buying it will expect a greater full to buy it. When we look at financial instruments, we have to appreciate the differences to see what we are talking about. Sometimes i get assigned these things because i am of dutch descent. It was about bidding for a bold bulbup with a white with a rare genetic deformity which led to insane prices. Understanding what bitcoin is get people excited to get the bubble going. People figure out if they are bidding for bitcoin or statements against bitcoin without understanding it. Shery someone will launch the futures in december. That could help support the price. It would mean it would allow for the ability of shortselling. People would be short the products and now the short bitcoin which does not drive down share prices. It provides a four, when people covering shorts and an equity for a security falls in value, they could provide more stability for Bitcoin Trading and covers for shorts. Vonnie how much the polls push the price higher when there is an outlandish call. Andaw the 10,000 figure suddenly we passed 10,000 and now 50,000. Numbers are thrown out. It is hard to understand what the Intrinsic Value of bitcoin may be and there is Intrinsic Value. It is potentially a useful expression of currency and a way to move money that reduces a lot of the friction around the transfer of money. If you go to another country and try to get money out of a bank account and see the charges, if you look at the work wall street who workot of people on wall street are responsible for the movement of security or the nominal notion of security from point a to point b with every stop in between taking a couple of pennies. Those functions disappearing from a currency market are attractive when you understand how currency actually functions and how money actually moves in our economy. That is what makes bitcoin so interesting. Shery especially if it acts as a safe haven. That is when you get into the greater fool theory and Warren Buffett calibrating the farmland in the u. S. Is less than the value of all the known gold in the world and is not crazy because farmland is productive and gold is not. But is true of bitcoin people are getting with some notion it has value but perhaps in inability to calculate the Intrinsic Value. Vonnie what we see a regulator . Our editor at large cory johnson , thank you for speaking to us on bitcoin. First show, the solely focused on opportunities and risks in the etf industry at 12 30 p. M. In new york. This is bloomberg. I am scarlet fu. Iq. Is bloomberg etf scarlet new incoming Federal Reserve chairman means passive funds outsized real estate companies. Have to doax reform with etfs . And a surge in commerce benefiting a surgeon for street