Days. The eurodollar slightly weaker, that uptrend to seems to have been broken with a stronger dollar over g10 with the exception of the yen. Its a buy treasury single after the big selloff we saw yesterday and goldman doubling down on bullish commodity bets. I want to take a quick check on the safety Asset Classes. I mentioned dollaryen, portugal if you want to take on risk, go to portugal. The yield there is down by eight basis points with a lot of buying going across the curve over in europe and the vix at 29. Gold is up by four dollars now. The vix at 29 feels like the different world. David people werent buying gold. Alix gold is really liquid, its not surprising saw some selling if you needed to get liquidity. You covered gold, back and forward. , the new york fed president space of the European Chamber of commerce in new york city at 10 30, crude Oil Inventory data will be released and 21st century fox and tesla both post earnings, coming up today. Terms the first take, the stories were really focused on. The wild ride of the equity market and where were going next. How regional investors took a hit because of the vix based products that seemed like a sure thing at the time they bought them and washington comes up to another break on funding with the house, the said, the white house in very different places the house, the senate, and the white house in very different places. Alix the vix is the hot story but a one touch on whats happening with the equity market. Rsi is the Global Equity index. Over 70 rover bought and below 30 rover sold. We just got to the 30 level yesterday meaning it is basically a buy signal. Luke its a conversation that is certainly coming out, not just goldman, but also this morning. 2018 fargo upping the price target and the spike in the vix come a contrarian indicator with a good seasonally been telling clients to edge slowly into the market and now we are telling you are free trade and hop in and get long. Rich . His credit to the yield curve is not blown out that much . People are saying fundamentally nothing has changed. You have very strong earnings and you go back to the story which is positive for credit and positive for stocks. We had this freak out driven by a couple of vix retail products. Yields are much higher. Heels, benchmark yields, treasury yields. Steven mnuchin is saying he doesnt have anything to do with the fact of whom u. S. Is going to be increasing the amount of debt they are selling to finance the deficit. Other people say that does is something to do with it. Who is going to be buying that . That story is not gone away and that is a plan to stop the credit. David on one end, you have risk off, certainly less risk than there was in those are very liquid markets and then you have credit markets that are less liquid and that you dont have a signal saying is a lot of risk on. Of the might be part reason people are unwilling to sell into a falling market and try to figure out what these things are worth. Say, just looking at supply dynamics the treasury market versus looking other markets, ig corporate, we are not supposed to a lot of issuance this year unless theres an m a boom, so maybe this is a case where a lot of supply of u. S. Treasuries, a lot of supply of corporate debt coming online, maybe that is the supply demand dynamic that is buffering credit right now. David one of the place with all of the value disappear is in short volatility product that i didnt know that much about before. Yesterday was all about credit about 300 more had million in stuff and they took it down by 96 and then came out and apologized. Had to say. They we sincerely apologize for causing significant difficulties to investors, this is a list of products and we believe it can be bought by both individual and Institutional Investors. It can unwise, but they didnt do so well. Luke it these products and , the products to survives, lives to fight another day, they will say the products did what they said they would do, with the perspectives said they were supposed to do. You didnt read the perspectives if you got burned on this. That will be their argument in response to this. We will see in coming days how these things were marketed. Alix what are Retail Investors doing in these products that mirror the inverse of this one index that mirrors basically the weather of Financial Markets . It tells the broader story on the search for yields. To fight yields somewhere and that in theory drove them to these kind of product. Luke the answer is up until a couple of days ago, they were getting rich. They are making over 100 . David why is that like the mortgage crisis in the terms that real estate will always go up and were the vix will always go down. On theseas not focused products and knowing they were there. How does a worker at walmart know about an inverse fix etn that they can buy and get rich quick . Who is talking to them about this and whose responsibility is to sit down with them and say hi, getting rich quick, the schemes to work. Alix a mothers Financial Advisor put her in a Leveraged Fund when she was 69 years old. I just found this out a couple months ago i was like what . It was like you need returns, this is a great idea. David you are going to see some lawsuits coming out of this. Another is not going to sue. There are still people will be damaged. David lets go to the mess that is washington. They are not sure theyre going to give the government going after midnight tomorrow and the president yesterday came out and said he is fine with the shutdown. I would love to see a shutdown if you dont get this stuff taken care of. If we have to shut it down because the democrats dont want safety, but an unrelated but still related, they dont want to take care of our military, then shut it down. Lisa, the president says it is fine to shut down. Lisa oi. [laughter] my opinions coming up later, but you have for are public and senators challenging trump and saying we do care and frankly, especially people who represent a law to federal workers saying it does matter to people. I think within the rankandfile, it seems like there is a great desire not to have a shutdown. If you look at the Treasury Bill market, where you can gauge what he will expectations are for a shutdown, it doesnt look like people are expecting a shutdown but they are getting more jittery because President Trump does enter into they create volatile factor. David they are getting concerned because of the debt ceiling. That is coming up sometime in march, we are sure exactly when, but House Democrats said we would punt on this question in the senate there saying we want a longerterm fix, which they might the markets might be interested in. Luke i cant think of anything thats been more inverse to what whate them kind of saying it is easier to sell this longterm problem and have one big bill, about the history of how they have been solving this problem. Ceilingcomes the debt issue, thats when markets get concerned and thats when markets care. Government shutdown, nobody cared the last time, nobody cares that nobody cared. It was a complete nothing burger in the eyes of the market. Aerospace is a big and events etf has been a persistent outperform or and it is part of the trump trade defense, the idea of looking defense spending caps could be a good thing for this product. On the margin. David everyone agrees on reason defense spending. Lisao bloombergs abramowicz and luke allah. Kawa. E alix about the vix, what are you trading . Luke the threemonth onemonth spread. It started coming down after the shock china deval, thats been coming in nicely. I think what we are going to start seeing over the next several sessions is it comes back to her and for that fixed ofve to start showing signs recent evening, which will help establish market bottom in the s p. Alix if you dig below what happened the different Asset Classes of volatility, you take a look at the difference volatility between large caps and small caps, we see much more volatility. Its unusual. If we see a shakeout, its a small cap story. What happened . Theresheres a luke a case to be made at some of the stuff that went up the most went down the most, but its about when you were discussing a few moments ago with your colleagues, which is the short volatility is really focus more on the vix and the s p that it is the russell 2000, so i think when you have that short squeeze, it was really about the s p vix asset class. Alix it is a technical luke i very much on that page. Volatility in europe versus the u. S. , a weird distortion, because typically in a market correction, your point of getting hit and we havent in the volatility in europe pickup like we have in the u. S. Luke within the session you thought incredibly tight correlation of euro stocks falling and the vix for the euro , thes, the actual levels highs on the vix will far exceeded the highs and the euro imagineall and for that for that matter, the european market. Industry is a key factor. Alix favorite trade . Long emerging markets. We saw impressive price action yesterday i think we get a lot of followthrough there. They have an interesting safe haven, playing great defense. Michael purves will be sticking with us. Bill daley, former white house chief of staff and former secretary of commerce. This is bloomberg. Alix this is kaylee this is bloomberg daybreak. Ceo ofve wynn has quit wynn resorts over a Sexual Harassment scandal. He will be replaced by the companys chairman. The parent of snapchat has delivered its first upbeat Quarterly Report since going public last year. Snap said fourthQuarter Sales rose a betterthanexpected 72 in the number of daily users rose, which has snap shares soaring in the premarket and softbank signaled he will be increasingly focused on investing in startups such as uber. He revealed his plan for an eye for his Telecom Operation in japan that was separate softbank into investing in telecommunications units. Thats your Bloomberg Business flash. Be in the powers that washington seem to be taking us to the brink of yet another possible Government Shutdown and President Trump yesterday suggested he might welcome it, saying in a meeting with lawmakers in the white house, i would love to see a shutdown if we dont get this stuff taken care of. If we have to shut it down because the democrats dont want safety, then shut it down. As chief oferving staff to president barack obama and secretary of commerce under clement under clinton is with us in new york. You have been there and you have seen this. What do you make of this brinkmanship yet again in washington, was now the president saying he is fine to shut it down, disagreeing with you and members of his own party . Mr. Daley the president was probably expressing a sense that he won the last brief shutdown the democrats lost. Considering whats going on the last couple of days with markets and uncertainty, i dont think we need another layer of uncertainty in our economy around the markets right now. I think the president ought to if you just contain himself a little and keep quiet and try to make this a deal work. Washington seems to be only able to kick the km. Can kick the can. David they said. The funny thing to lose weight of march, lets get defense spending through september. Lets duck the questions of daca and immigration and the debt ceiling. Is that a reasonable approach . House, itsor the probably the only thing they could pass on the senate will be very different. This will be the fifth or sixth with a of the can continuing resolution. Democrat and republicans both want to fund the military, but lets really funds them over time and not just saying were going to fund the military and cut all sorts of domestic programs, which are is vital in many ways as some of the military programs to people who are hurting in america. If they just sit down together, its ironic that the president is not himself had a bipartisan meeting for the last three weeks since that one meeting around immigration that seems to blow up for him. It would be real leadership for the president to call people back together and try to get a deal done and not just keep criticizing both sides on the hill. David this has happened again and again and again, but there is some thing whats going on with the markets. Until now, stock markets have been on a steady march up and now theres a lot of volatility a lot of people lost money. How does that affect the position of the white house, what they say in the policies they espouse . Would givei hope it them a reason to be more cautious what they say and how they say it. This president is very different than any other president. Most president s when it came to the market when there were difficulties kept very quiet, if anything only comments were made by the secretary of treasury and even he, then, would be rather contained. Visit administration is very different and i think the problem is for the markets, nothing is mattered over the last couple of years, whether it is brexit, the president s election, spain, greece, it didnt really matter to the market. Nothing matters until it really matters. Forward, comments, fight in washington, possible debt ceiling problems, all of these things are going to be looked at differently by the market then they have over the last 18 months or two years. When nothing seems to matter at all. Uncertainty,eres with the policy of the fed is going to be, is inflation really roaring back and what impact that will have an Interest Rates . Theres a greater reason for the white house and policymakers to be cautious in how they say things around the economy and politics. David one of the things theres uncertainty about is the dollar and was Steve Mnuchin saying its good for trade of the dollar is weak and other people saying were not sure the Dollar Strength is good in the long term. What is our policy and what should the white house be saying or not saying about the dollar . Thedaley in davos, secretary said what you said in the president corrected him, that sort of uncertainty is not viewed positively by the market. I think it just shows a confusion and our friends around the world in other countries around the world that are trading partners with us worry that what mnuchin said his actual policy of the with government and i think the president is trying to step on that, but whether you pull it off or not, im not sure. Weaker dollar has effect on trade. In trade flows, basically. Is it possible that this is sort of a surreptitious policy in the sense that the president can make progress on balancing trade by weakening the dollar . Trade numbers are right is right analogy but much of his Campaign Around trade, but he still negotiating on nafta and he hasnt taken a strong steps to the asian trade difficulties that he spoke about so much. I think he is dealing with reality and what bothered many of the economies around the world around mnuchins comments is is is a policy where we criticize the chinese fermented feeling their currency for trade purposes, and are going to do the same thing and are we then in this trade war using our finances as the weapons . That spooks many people around the world. I think those comments, not saying they were the cause of the last couple of days, but all these things are coming together along with very Strong Economy around the world and a sense that inflation maybe roaring rates have toest be reactive. Are a banker as well. Talk about inflation and what we have seen go on with volatility . If the good news, bad news. Wages seem to be going up and people feel very confident, consumers are roaring back in the think youre going to see policymakers have to react to that. We celebrate that, but then when positive numbers came out late last week, the market reacted like all my god, inflation is back and on the horizon for sure, which we havent seen in quite a long time. Policymakers will have to react to that and there will be a reason of the rates. My sense is on volatility that all of this has come together dnd we had a very unusual perio for almost two years were volatility was at historic lows and stay lows in spite of many things going on, the market were running back in the trump trade over the last year has been remarkable, and so have a economies in asia. The World Economy has been very strong in there has to be a reaction, its been years since the 2008 crash. Andpolicymakers, the fed others will have to react to this. David one of the big changes has been the tax cuts and the stimulus effect that has in the on inflation. Yesterday the white house was saying white house was saying tax cuts only to inflation. The tax cuts are going to be seen in 2018 for individuals as they file returns. You are seeing some reaction, the positive reaction of the corporate world is seeing u. S. Rates taken down 20 , which is unheard of and makes a six family competitive. But it can get al qaeda comes together at a point where we sat as the world with nothing mattering and now, all of these things are going to begin to matter. In the conversation in washington around the white house which has been ignored by the markets in many ways last year i think is going to change going forward. Bill daley, former white house chief of staff and secretary of commerce and current head of operations for argentiere capital. More on we can expect from the markets today. Live from new york, this bloomberg. Alix this is bloomberg daybreak, im alix steel. We futures down by. 6 , could see a lower open but nowhere near the carnage we have seen over the last few days. Down, and byr,. 2 peripheral bonds in europe, that seems to be the trade of grew downward, even though goldman is doubling down on bullish bets. More on the market and earnings and fundamentals versus technicals, next. This is bloomberg. Alix this is bloomberg americas. Im alix steel. Overwhelmingly the call from the stream is to buy does it. Dow jones futures off by 78 points. Nowhere near what we saw in the last few days. European stocks also on the front foot. Stocksying european usually underperform in a correction but this time could be different. Other Asset Classes, dollaryen is slightly lower but welloff lows of the session. You have a broadly stronger dollar story in the g10 space, buying coming into the treasury market. Combine in the european market, peripherals, lots of supply coming online today. , everyone is watching after hitting 50 yesterday. Crude drawdown. 6 . I dont know how you could possibly make a call for2050. David 114 a barrel, wow. Alix total crapshoot, throwing darts at a board. David lets get more on headlines making news outside the business world. Vice president mike pence is in japan where he is threatening north korea with the toughest economic sanctions yet. Hes put after meeting with the japanese Prime Minister shinzo abe. Meanwhile, in and has named his sister to represent north korea at the olympics in south korea. On capitol hill, the house has passed a temporary spending bill that would revert a Government Shutdown tomorrow night. That would lift but budget caps to fund the military to september. Leaders in both parties say they want to end the cycle of temporary budget measures. In germany, the way has been cleared for Angela Merkels term. Her block has reached a deal with the social democrats form a coalition government. Social democrats will run the finance and foreign labor ministries, merkel will get defense and the economy. Partycial democratic still has to ratify the agreement. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I and kailey leinz. This is bloomberg. Alix thank you. What i find interesting, the euro did not rally on that, which means maybe we are looking at a europe trend that has not broken. David this coalition probably reinforces the eurozone. Interesting, it took them so long, but they gave up both Foreign Ministry and finance. Alix those are the two big posts. And what kind of mandate does merkel have after that . David spd will have a lot to say about it, the. Alix in the markets, it is about by the tip. Morgan stanley says stocks are on sale. The dip. When you see a big spike in volatility like that, it make make people cautious, maybe they are looking for a second or third order effect but certainly people are looking at this as a buying opportunity, which is why you saw the Market Reaction tuesday. Even with the large declines integrity prices, we did not see a spill over into Asset Classes, market functioning. Europe has interesting value, a highway to in financials, oil resources, and utilities. With us is megan green, menu like chief economist, and michael purvis. Yesterday, itte is not the economy, stupid. Megan nothing has fundamentally changed in terms of the macro picture. Part of the reason yields spiked is Inflation Expectations when it, but im not buying the argument, even though we had a good weight growth number. If you look under the hood, it doesnt look all that fantastic. The number of hours worked fell. If you reduce the denominator of any ratio, the overall ratio will go up. It mainly affected the bosses, not the worker bees. It is not clear that this is a great age of weight growth. David that wage number fits together with others. Today, buting up there is a growing number of the indications out there about inflation. It is not coming out of left field, also a Commodity Prices have been on briefly, so that could feed into it. But all of that will be offset by bigger global drivers and disruptors. The fact that we are in a globalized workforce, we have cheap labor, should keep pressure off of wages. The gig economy, technology, all of this means we are in a low environment. I do think that inflation will not go up as much as the markets seem to have been expecting. I also think the risk premium is a big reason why yields spiked. There i think there is more validity to that. The head of every Major Central Bank will be changing over over the next year. These are the architects of the modern monetary policy, so uncertainty has gone up. We haveir point, but not seen on volatility reflected in other Asset Classes, so i wonder if that means it is yet to come. The blue line shows the volatility of treasuries. The yellow line is fx volatility. We have not seen that volatility spread, but do we have to . Is this a oneoff . Michael you look at the forwardty of 10year breakevens, but they are still in the bottom 20 percentile going back as far as that metric exists. Much more volatility in inflation breakevens, treasury, bund futures over the last several years. This volatility star keeps getting back to some of the solicit specifics of the vix in the short volatility industry. We clearly have to be careful about our breakeven will explode higher that will be destabilizing to equities on an enduring basis, for sure. One, to what megan said. I have been focused on this correlation of china ppi with the u. S. Market based Inflation Expectations, correlations soared after december 2016. That correlation does not have to stay super hot forever, but china ppi print something coming down a lot. I think that is something to take into consideration for we get too excited about inflation exploding. Alix the other thing we are looking at is earnings, holding up, supporting equity prices. Megan, you are looking at a chart looking at equities versus earnings. In that respect, we wind up seeing earnings rolling over a little bit coming off of the highs we have seen recently while equities grind higher. Do you see a negative disconnect there . Megan that relationship seems to be breaking down, as well as liquidity being pumped into the system by Central Banks. That suggest this could be sentiment driven. Soft data look fantastic in the u. S. , but the hard data is not really keeping up. Are weaning we ourselves all the central bank stimulus, even as they pulled ,ack, they have primed the pump and companies can keep growing. The relationship between earnings and equities has also broken down, so it is the two in combination that make me think that maybe it is sentiment. That based on most metrics of fundamentals, stocks seemed pretty frothy. That is worrisome. Alix michael, i talked about what is on your shopping list. Your number one was long em. What else is on sale for you . Michael you can look at the s p 500 is on sale. What has happened over the last week and have, volatility unfolding started with extremely overbought conditions, that was turbocharged by the strong wage. Ains, payrolls report as megan points out, they were not that strong when you go through the whole report. Then you have this vix liquidation story. We have gotten to the 100day moving average, like in august, we are consolidating around that. The only difference we were nine 100 day moving average, this time around 3 . The magnitude of the move is in line with the prior trend. When you go back to every debt spike over the last 40 years, there was a real fundamental story with each one. 2016, china shocked eval. 2011, you had the eurozone crisis. Early 2016, you have the earnings recession. All of those are real fundamental stories. I dont see what the fundamental stories are here other than the digestion story. Alix great to get both of your perspectives, thank you. Snap posting a fourthquarter revenue meeting, also say that daily active users was ahead of estimates. Wasbro reporting that stars wars merchandise did not sell as well as expected. David sticking with disney, the Company Announcing its firstquarter earnings yesterday. They Beat Estimates on earnings but they narrowly missed on revenue. Crockette now barton who has a neutral call on disney with a new price target of 125. He liked what he heard yesterday. Take us through disney, what were the highlights for you . Barton first, the tax. We knew that disney would be the biggest beneficiaries of tax. The numbers are coming in better than we thought. That take this stock to a 20 treated at ach had premium to the market to a discount. Hat changes the evaluation that was positive. The other thing that is great about disney, their parks business is just on fire with green growth in the quarter, great forward view in the march quarter. That is wonderful. A little bit light on the Consumer Product licensing front, as we heard from hasbro, but on balance, a good story for disney, and a great story for fox, who is buying disney. Putting up a graphic that illustrate some of what you said. Parks and resorts up 21 in operating income, down a bit in Consumer Products. The one that jumps out at me are media networks, down 12 per year. I understand the cable part was flat. Broadcast was down 25 . What is going on there . Barton that is just lumpy. They sell tv shows in broadcast and syndication. Later periodsp in as they sell content and other timeslots. There is ratings pressure driving down at revenues. Espn had some tough timing of college bowl games. That is not a normalized trend, that is more of a timing thing. The tv Network Business is clearly a source of concern and i think disney is investing in the over the top initiatives to mitigate that. The jurys still out on whether that will be fully successful, which is one of my cautions, why im not recommending it, recommending a cheaper flight play through fox. David is that being held up because of at t, time warner . Barton it has nothing to do with that. I think the deal review will be sometime this year. We should get approval. The antitrust risks are containable here because, unlike at t and time warner, if justice is push back on any part of the deal, disney can make divestitures. At t cannot from time warner without blowing up the deal. We think it is highly likely to go through. If it doesnt, we think there is a backlog of other people that can stuff up and buy some or all of the assets. David thank you. Coming up, we turn to wall street beats. Taking a look at winners and losers coming out of that volatility in the last couple of days. Live from new york, this is bloomberg. Kailey mrs. Bloomberg daybreak. Coming up in the next hour, gary berntson, korn ferry ceo. David we turn now to wall street beats, where we cover three things wall street is buzzing about this morning. Number one, some early winners and losers from the market shakeout. Calls on volatility sorted out the haves from the havenots. Theer two, it turns out reason lawrence toes see left they wantedecause to go public. Joining us now is jason kelly, our new york bureau chief. We want to start with a Hedge Fund Winners and losers. That is where we can really separate what has been happening. Figureing how you can this out, the speed of information on wall street. These are pretty massive here,ences, as you see longtail l five, up 100 . I would call that a winner. Then you see some familiar names including man group down 7 . A student of the Hedge Fund Industry would say this is how it should work, you should have winners and losers, ultimately you are betting on things going one way or the other. When we have seen in the market these past few days has been so extreme, it will continue to play out not just through hedge fund results, bank earnings, and other elements. We had a lot of reporting of this on bloomberg, but this was almost a hidden industry within wall street. David we will see how this sorts out over the longterm, but that suggest to me, that looks very unhedged to me. Alix aside from a fund betting long or short vol, you have volatility control funds where portfolio your according to that. Still hundreds of billions of dollars of selling as they have to rebalance. I think that is mary you see the difference between the winners and losers. Jason thats right. The other element of this, and this is the most read story on the bloomberg this morning, volatility inc. I think you will talk about this later in the show. It sort of takes you inside how these products, series of products are built up within wall street. Wall street tends to invent things to make money, surprise, surprise. They are taking this as an 8 billion business, which is not that massive in the scheme of things, but david as a Retail Investor, you spend a lot of money. Nomura apologizing for losing the money. Interesting, to your point, that this was not something that was limited to smart Institutional Investors who do this for a living. This really did filter pretty meaningfully into the retail investment. David one of the people that lost money is bill gross. Janus unconstrained fund fell, not a lot, but for someone keeps on talking about the end of the bull market and bonds, an interesting development. Jason talking his book and bill gross are synonymous. David airbnb, we knew that lawrence toes he was out. Now we know more detail about why. Jason the reason we care about the story, lawrence was, as you recall, the cfo of blackstone, out west,est went like we see with so many wall street guys. , from a lot of the reporting coming up from our own reporters, lt, as he is known, had a strong difference of opinion about taking the Company Public which also started to involve their big investors. In the article, he started a hedge fund in airbnb . Is that normal . Jason i dont think so, not for a housing company. David this is a big chunk of their business. Jason what is interesting to was atere, too, when lt blackstone, he did setting similar. He had control of the treasury within blackstone and was able to do this. Alix that was his job, right . David but blackstone is in the business of investing money. Jason you could argue he was the cfo, it was his job to make sure the companys finances were good. They were making 5 million a month based on this, according to the story. Alix steve wynn, we were talking about a few weeks ago if he would be forced out. Guess what, he resigned. See what thel market does today, i dont think anyone was super shocked that this happened, as there was this continuous drip of reporting. In lashe was legendary vegas, but they also need him for macau, massachusetts. I dont know if this 42yearold who stepped in will be able to fill that out. Alix i was struck by how chinese regulators came out in full force against steve wynn. That surprised me. Jason and it doesnt seem like that story is over yet. One of the things mentioned, in macau, all of their clauses around how their casino doestors need to behave not just involve the consecutives, but also shareholders. Steve green is still a massive shareholder of the company that he created. David i think 11 . Jason that still plays a meaningful role in what operators do. David many thanks to jason kelly. Coming up, the secondmost want live stream in youtube history. Yesterday, spacex launched the Worlds Largest rocket in 45 years. That is what im watching next. This is bloomberg. David this is what im watching, tesla. Most powerfulthe rocket ever yesterday, and they launched this model three up in space. Amazing radio we can show you. They also announcing earnings after the ballot. Extraordinary video. Alix what i love about this, what we are watching, is this, not cash flow at tesla and how much they will have to borrow from the markets, which will no doubt be the conversation. David you think that is an accident . They are expected to announce a loss, although expected to be narrower than they had. They are having lots of problems with the production of the model three. I guess they have one made, because they got it in space. Where are they with deliveries, the giga factory, how well are they making batteries . These are the questions that will be resounding on the markets. But who cares . Two. 5 yield, no problem. David they interviewed elon musk, why did you do it . Just for fun. He claims it will be up there for millions of years circling the sun, that is the theory. You have to give him credit. Alix hopefully, he can turn on the model three production before that. David before the years go by, exactly. Alix coming up, we will speak to jay pelosky. Futures off by 80 but it looks to be a little softer open. Nowhere near what we saw the last few days. Snp the lowest of the bunch, down by. 4 . Some selling in asia but you are seeing buying in europe. Other Asset Classes, european bond spreads, parochial bronze bond spreads are peripheral bond spreads are widening just a bit. Still a dollar story. This is bloomberg. We certainly dont think this is the start of a sustained bear market, more of a shakeout in the secular portrait. Alix it is technicals, not fundamentals. Goldman sachs as buy the dip on equities. More apologies after investors were wiped out on a loan military product. What is next in that space to drop . The house passes a shortterm spending plan, hopes still high that a longterm spending agreement can be found in the next 48 hours. David welcome to bloomberg daybreak americas. Im david westin. You love this buy the dip. Alix it is super fun. A little bit softer in the futures market but we dont look for any disastrous open like we have seen in the last few days. Story, stronger Dollar Dollar euro down. 3 , unable to get a lift from the German Coalition. Here it is all about buying treasuries on the margin. Billions of dollars worth coming online later. Sachs doubling down, still bullish commodities. No help from crude, down. 5 . In other Asset Classes, buy parochial debt in europe. Spreads beginning to narrow after that German Coalition came through. Dollaryen slightly lower. The vix stable at 29. Gold getting a movement up. It was all about selling liquidity in some respects. David time for the morning brief. President of the will be speaking at the European American chamber of commerce here in new york. At 10 30, crude oil data will be released. Century fox and tesla report earnings today. Alix we are keeping up on the latest in the market selloff. Here is what some of the experts have to say. Higher volatility is a great thing. I think everybody felt uncomfortable with the continuous grind upward. So a reset every once in a while provided theng, markets react rationally to the reset. When you see a big spike in volatility, it may make people cautious, maybe looking for a second or third order effect, but certainly people are looking at this as partially a buying opportunity. The size of the wipeout in short vol products was so large yesterday there was no positioning to continue driving the market today. After we saw the initial moves in stocks at the open this morning, that was pretty clear. Position that vol have been racked up over a year leading up to yesterdays selloff has been cleaned up to such a large degree that i think volatility products will not be what drives. Prices going forward. Even with a very large and rapid declines in equity prices, we did not see a lot of spill over into other Asset Classes or let alone market functioning. In washington today, at the federal reserve, there is probably a relief that the market is finding out, stocks are not only going up. On top of that, we eliminated a significant amount of the selling in short vol also, which was a proxy for picking up yield , also a reflection of low Interest Rates. You have some interesting weight inigh financials, oil, resources, utilities. Alix joining us now is jay pelosky. Good to see you. Jay happy to be back. Alix looking at technicals, this is Global Equity looking at the rsi. Over 70, you are overbought. Are you buy the dip . Jay absolutely. We had our monthly portfolio meeting last week and it was amazing. Impossible to find an attractive equity chart anywhere in the world in any sector, country, other than fixed income related stop. We cleaned out a lot of that overextended market in the equity space. Now you have a chance to refocus and look back into the fundamentals. Alix there is a rhetoric out there that when you have risk parity you have controlled funds that need to rebalance, you could see hundreds of billions of outflows of equities. Do you think thats coming . Jay investors are overweight in u. S. Assets. I want to go outside of the u. S. , particularly to the proverbial markets. You mentioned the peripheral debt markets. The u. S. Is expensive, over waitcycle. So the opportunity is outside of the u. S. Still definitely over owned. This cleaned up volatility but has not cleaned up peoples positioning in terms of being overweight. The dollar would show you that, the action. The dollar has strengthened over the last week so it suggests you have not seen for an selling. This has been a homegrown environment, and you can look at how emerging markets, gold and other assets have done. Alix in terms of volatility, you have the vix, fx vol. The blue line is treasury volatility, the yellow line, fx volatility. Has that really spread to other Asset Classes. What do you like outside of the u. S. On this . Jay i like equities in particular. I like what i call my go south strategy. Going south to the country that have lagged this bull market since 2009. That is pretty much everywhere outside of u. S. Within asia, the americas, the Southern Tier of each region has underperformed. Let me give you an illustration. Greece, spain, portugal combined up 20 in dollar terms since 2009. The u. S. Market is up 400 . Southeast asia, also of roughly 20 . Latin america, up 100 versus the u. S. , 400 . These are the countries and economies that are leveraged to a continuation of the Global Growth recovery because they have more room to recover. You have a leveraged laggard, which is the best opportunity in the world. Yes, i buy the dip, italy and greece on monday. Asian a little bit. They have all had moves up in the last month or two, but on a fundamental talk, multiyear basis, your opportunity set is in these leveraged laggards. David take some of the big laggards, what is causing it . How do you tell whether it is because you are smarter than they are, or you are seeing they are something they are not . Jay i dont want to say that i am smarter than they are, that is the kiss of death in this world. Europe was in crisis right up until 2013. There are cover is only three years old. The fed is tightening, the ecb is slowly moving, but moving behind. Inan, asia, all the action asia has been in japan and china. Cominghe real growth is when you combine those countries, malaysia, indonesia, philippines huge growth going on there. Im very excited about brazil as well. What you are having, you have a collapse of inflation and that has led to a decline in the real Interest Rate structure in that market. That is forcing investors to finally think about something other than domestic government paper. On 30 dayan get 12 government papers as you can in brazil, you never want to go outside the country. 500 basispread is points and you are starting to see the beginnings of an allocation shift in brazil outside of, away from debt to domestic equity and offshore equity. I think there are a lot of opportunities in the world. Alix and the Brazil Central Bank may be cutting rates today. Jay pelosky will be sticking with us. We will look at some of the etf flows the what it means for volatility. Is there more shakeout to happen in the exchanged traded products . We will talk about that. This is bloomberg. Kailey this is bloomberg daybreak. Doing a casino mogul steve wynn has quit as ceo of wynn resort over a sexualharassment scandal. He will be replaced by the companys president mathematics. The parent of snapchat has delivered its first upbeat Quarterly Report since going public last year. Fourth Quarter Sales were up better than expected, 72 . The number of active daily uses rose 17 . That has shares soaring in the premarket. Maybe in a galaxy far away star wars toys are a big seller but thats not happening here on earth. Fourth quarter revenue fell 4 missing estimates. The Company Blames the bankruptcy of toys r us and sluggish sales of star wars merchandise. When you have a millennial falcon, you dont need 17 more. You didnt see the movie, did you . David the most recent one, no. And turning to the markets volatility, nomura has apologized to customers who bought those exchanged traded notes tied to the vix, apologizing for causing significant difficulties to investors. This is a list of products that can be bought by individuals and Institutional Investors. Joining us now is jay pelosky and eric balchunas. Eric, if you look at some of these products tied to the vix, the assets they have, where they were a few weeks ago, a tremendous shift. Is this she got done . largely have the assets are done because of the inverse side. The long still doing fine. Traded in billion dollars on monday. That statement was interesting because it is basically apologizing but then saying we think its ok for individuals. I think these should be labeled or made clear that these are more for, i call them power tools, you can call them exotic. There are couple that made the news this week, but there are about 300 etf that are leveraged. I even put oil futures in this category of products that use derivatives and are harder to understand. A large majority of etfs are Investment Products and these are trading tools. That is the distinction that you see blackrock trying to make right now. David if you look at Credit Suisse, they had a statement that said, this will ultimately be worth nothing. This is not an investment, guys, this is a trade. I have seen the sec with its recent respect is, trying to put that information up closer. A couple of examples on that. These products are clear, you could lose all your money. But who is reading that . David sooner or later, it will be zero, it is just a question if you sell it before that point. Eric there have been a couple of cases, 2011, a few similar inverse volatility products that had that inverse clustered. In this environment of the etf category, you have seen these products have issues. Had an issue a few years ago, its premium went to 98 . As far as this area is concerned, it is unique and different from the mutual fund etfs. David is it unique and different . For those of us that are not as sophisticated as eric, we hear about all of these etfs, etps. For the average investor, they are thinking, maybe i should get nervous about these things . Is a classic example of the old market adage of picking of nichols in front of a steamroller. At some point, youll get rolled over. People have been picking up nichols, this was an easy trade, everybody got on it. Everything with social media hyped these things up. Shift in theinto a market psychology, very sudden, quick. Also emblematic of the way the current world works. People got rolled. Its a classic example of the steamroller affecting markets. I would also add, this happens on lesser levels all the time. There was a currency hedged etf craze about half a year ago. About half of that left once the trade stopped working. I refer to this as the shiny object moment. When something is going up like this, people rush in, it goes up more, and then there is a fall down. Over 90 in a day, that is definitely extreme. The big point here is that it is good. Not good for the people that got hammered, but good for the markets. We had an unsustainable situation developing. Could not find a single chart in equities that look attractive. Now we will unwind some of that speculation and it will allow us to refocus on fundamentals. Just like i think a little inflation is good for the World Economy, a little volatility is good for Financial Markets. Alix where else do we run this kind of risk, what other products are so levered and kind of bananas that we need to Pay Attention to them . You have these triple leveraged etfs, they have been through a lot of stuff. Alix nonmonetary policy will you are coming off of zero bounds. Everybody knows the etf s do a daily rebalance. People try to get in front of that. Vanguard brought it up in these products. Im not sure the evidence is that great. Vix futures everybody is down on these products. They are really in the dog house right now, but what about vix futures, should those be ok . Should we have any instruments tied to the vix . The futures market is way bigger than these products. David in this sense, whenever i have asked people who defend derivatives say, they are giving us useful information about what is going on in the company, economy. Do we learn anything about the economy or companies over the last two trading days . Jay good question. It is such a tight window, it is hard to assess what we will learn. Have learned this is primarily within the Financial Markets, not spreading into the real economy. I think we realize this is u. S. Centric, not global. The rest of the world is outperforming the u. S. Right now. That is one of the most important signals here. Give youerivatives intel is something that i dont really look at. I am not the right guy to answer that question. The buyer beware or do regulators need to get involved . Blackrock is saying, those bad etfs, you need to regulate those guys. You have regulators in washington looking at this. Eric it is funny you should ask. We are launching a system today called etf stoplight, giving everything they red, yellow, or green light based on a nasty surprise potential. That way, you can have innovation at the trading tool side, bitcoin, etf, things that attract futures, while protecting the innocent him and people who want only a long only exposure. Think the ultimate think is the sec will step in. Serious seems more about cracking down that they were six years ago. Alix i also want to get your take on flows. Comments on the bloomberg. This is looking at the volatility flows, and we have also seen a lot of volume coming into spy. Where is the shorter term risk . Eric i will divide flows into two categories. The buyandhold crowd keeps buying. Is taking money every day through the selloff. People are allocating, which is good. That means the Retail Investor is still ok. To 20 billion in january, which is a lot. Already given up 16 billion of that. The training crown cut a little too amped in january, and have sold them off in the past couple of days. The niceh that is baseline of flows coming in from the retail crowd. In hot money was selling january. But when the rates took a hit in the selloff, they have gone right back in. The sensitivity of rates is unbelievable. That field is so sensitive to rates. J k have been the story, but it looks like rates may not rise. Another story to watch. People one credit exposure rather than rate exposure. I know you dont do derivatives, but how do you have to hedge the markets right now the last couple of days if the last couple of days has taught us anything . Jay for the past year, rising rates has been bullish for stocks. Now, it looks like the speed of the rate hike, maybe there is a level where rising rates are not constructive for stocks. All the books such as myself who dont really do longshortstop, you basically hedge with fixed income, gold, and some cash. The question is how comfortable am i with that fixed income part of my hedge. I think you are moving we have moved from rate exposure to more credit exposure. Theso much hyg but more in investment grade. We think the dollar will weaken, and you get positive returns in offshore fixed income markets. Here in the u. S. , people have not paid attention to, with the weak dollar, all the foreign buyers lost money in the treasury market last year. A eurobased buyer of u. S. Treasuries lost 10 last year. Chinese, 6 . I think that is a big issue. David jay pelosky and eric balchunas, thank you both very much. A great discussion. Coming up, steve wynn is out at wynn resorts and is giving shares a boost. We will discuss that next. This is bloomberg. David casino mogul steve flynn has to down as ceo of wynn resorts after at cascade of Sexual Harassment results accusations against him. News has the shares popping in the premarket. Joining us is our senior gaming analyst. Does this take care of the problem . This islarge degree, likely to weigh on regulators, particularly in massachusetts casino opening was under threat because of disclosure problems related to steve wynn and these allegations. David what is his ongoing relationship with the company . He will not disappear, what is his relationship with the Company Going forward . I think some of the details are being worked out. The focus now is on mathematics who had previously been cfo. The alleviation of this concern about licensing suitability probably offsets some of the concern about his loss of brand premium. David he is recognized as a revisionary. He has read on all of las vegas, it is fair to say. Madduxey be hurt because does not have that . I think it was expected that he or someone like him would take over this role. The stock was in the 200 now. Tly, 160s if you figure every multiple point you lose takes 3 to 5 from the stock we are probably already seeing that. David you mentioned massachusetts, does that take care of macau . They are up for concession assurance 2022, no about what happened there, but this does alleviate some uncertainty about steve wynns role. David thank you. Up, mark critz nagel, a pioneer of tail hedging. He probably had a good couple of days. What he is looking at in the market and where he is positioned next. This is bloomberg. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Alix this is bloomberg daybreak americas. Im alix steel. In asia, buying in europe, and selling modestly in the jurors market. Dow jones up by 100 points. To a lower open but nowhere near the last few days. Buy the dip is all were hearing from the big banks. Wells fargo upgrading their for the s p. A broader stronger dollar story. Seeing some buying come into the treasury market. Watch the 10year, billions coming up in an auction at 10 00. What will the demand for yields to buy the longer Term Duration asset . Softer, 29, ale far cry from yesterday. Crude oil down. 4 , despite Goldman Sachs being bullish on the commodity. The eia saying they are looking in 2050. Brand at lets get a look headlines outside the business world. The house has passed a temporary spending bill that whatever the Government Shutdown tomorrow night. It wasnt the budget cuts to fund the military to september. A broader bill may be added before the senate votes. Leaders in both parties say they want to end the cycles of temporary budget measures. The head of the House Financial ServicesCommittee Says markets go up and down and is not up to congress to legislate volatility out of the system. Jeb hensarling spoke to bloomberg today. Clearly, Algorithmic Trading can exacerbate the highs and lows, but heres what i know. The underlying economy is strong. We have the lowest unemployment in 17 years, the greatest wage growth in almost a decade. Ultimately if you have good earnings, there may be a lot of volatility but sooner or later, the stock market will head in the right direction. Kailey he also took a shot at cryptocurrencies saying that they make las vegas look safe. In germany, the way has been included for Angela Merkels fourth term after reaching a deal with the social democrats. People familiar say social democrats will run the finance, foreign, and labor ministries. Worker look at the fence and the economy. Global news 24 hours a day powered by more than 2700 journalists and analysts in more than 120 countries. I am kailey leinz. This is bloomberg. David it was wall streets ticking time bomb and the time came yesterday as products betting against the volatility tumbled. Dakin campbell covered how these banks turn volatility into a hot commodity until it cooled off. You have a terrific piece in the bloomberg today. 8 billion more or less involved in these products . That is what we think, there is no great estimate out there. That is the best we have come up with. We looked at other numbers talking about trillions tied to the volatility complex around the world. The number we thought most confident about was the 8 billion tied to the cboe vix index. David one of the things that struck me yesterday was Credit Suisse, they had one of these things that they were heavily involved in. They came out and said it will not affect us. What is the involvement of the banks putting these things together with the underlying investment . Dakin the historic stock market highs led to a period of very low volatility for much longer than people expected, that history may suggest. Since 2009, when the first product was introduced, wall street has been selling these things to hedge funds, Institutional Investors, as well as momandpop investors. Credit suisse is one of the big issuers of these products. Barclays was the pioneer. David back to the Mortgage Backed securities fiasco, one of the problems, people thought the banks would create these and would sell them off but they did not have the same incentive. Why isnt there something similar here . Why is it good that Credit Suisse had no skin in the game . Dakin i think they did have skin in the game. Certainly, they have exposure that they then have to hedge a broad definition of skin in the game, they still have some. They have some risk they have to take care of. Involved. Till sort of, whats, obligations do the banks have when these things blow up, as they did yesterday . David and what about potential Reputational Risk . Nomar apologizing that people lost their shirt. They lost 96 of the value. A good question. I think some of these banks respond to their stock price. One reason Credit Suisse came out is because trading in europe was getting hit pretty hard because of their exposure to these products. That is one reason they came out, to make sure the stock price has a floor underneath it. We already heard about some people putting together a lawsuit against Credit Suisse yesterday, so thats an early stages. There is certainly reputational damage year. David thank you, a terrific piece you have out there. Alix joining us now is mark critz nagel, universal it investment resident. His fund specializes in tail risk hedging and mitigating black swan events like the one we saw yesterday. That is when you see a two or three standard deviation above the norm. He predicted the market rent of 2000 as well as the commodities boom. Perfect day to talk to you. Ask for joining us. How are you positioned in the last week, how much money did you make . [laughter] cannot talk about that. It has never been my job to take a crash, because top of the market. My job has always been Risk Mitigation. Picking crashes is impossible. Timing crashes is impossible. If you require a forecasting your investment thesis in order to do well, i think you are doing it wrong. Remember, markets do not crash like this. Market crash like this and then this and this. It is really meant to shake out the weekends, meant to get you short at the bottom. Really it is an impressive thing to behold with the market can do. At the end of the day, what i do is provide an insurancelike playoff pay off for my clients. Alix we have a full screen that shows the move in the vix. S p was onlyhe about 4. 1 , not the biggest drop we have seen. Saw 9 declines, you only saw a 13 change in the vix. What does that tell you about market distortions . We are living in a reality distortion. When it comes to what happened the last few days, what will happen ahead, all roads lead to Central Banks in the fed. People have these incredibly naive trades. That that makes us feel we are in a benign investing environment, we are not. We have been here before, m are the great moderation of the mid2000. We have seen this play out before. It will do the same thing again. Thinkso naive that people they can put trades on like the short volatility trade. I think people dont really believe it, but in this low rate environment, are forced to chase and do crazy things. Best,k dylan put it people dont do what they believe, they do what is convenient, and then they repent. I think what we saw his son repenting, and there is more to come. Alix where . Mark as far as the short volatility trade, it is easy to snicker about how naive it was, but it is a short gamma trade. There is sort of a feedback process, selling begets selling. There is no difference with people long in the market. People are long in the market because it goes up. When it goes down, people are not going to want to be long. Distortionsth the be, say, buying the s p, in etf products related to the s p . When i talk to some sources high up in the market, they tell me their biggest fear is the bubble of passive investing in etf. Problem, nos a big doubt, but think of the landscape of problems we have, think of the over valuations we have. Look at where rates are. There is no room for there to be more monetary easing. Tails to focus on the wagging the dog here, the derivatives market, i think we losing sight of the big picture. It is easy to not worry about that but everything is distorted today. This is what happens when we have this type of historic monetary interventionism that we have had. Alix if you had to read where we will see the most redemption, s p, rates market, how do you think about it . Thingthe s p is a risky to hold. Does not seem that way but it is. I expect in the coming years we will take back a decade. Alix wow. Ok, that is a call. How are you positioned for that . Mark i am basically in the insurance life payouts for my clients, so it is about Risk Mitigation. I think Risk Mitigation specifically is something that people get so wrong. Everybody has this dogma of diversification, they think it is the answer to the markets we are in today, to risk in general. The reality is, diversification has not been a good risk strategy, it has lowered your compound returns. Correlations tend to spike when you least want them to. Alix we have a chart that looks at the 12month correlation. You can see that in the bloomberg. Charthat happens wrong , but that is cool. We can talk about that. When you see a pickup in correlation, what is the most effective way to protect yourself . Mark this is after the fact. When correlations despite, people who think they are diversified the extreme case of that would be risk parity. They got it wrong. It is too late at that point. This is we cant getting flushed out here this is my point. We are going to see this feedback happen again. It will not be driven by the small area of the market. It will be driven by actual holders of stocks. Im just trying to get at, if im investor and i have to protect myself, i was in the wrong products, what do i do . I turn to you, mark, oh what can you do . Mark there is not much i can save for you. t rely on thursday risk diversification. If you can be honest about the fact that you are not diversified and there is one big bet out there, this monetary experiment working. You dont have something that will give you cushioned envelope. If you need to reset your risk, so be it. Alix in the shortterm, we have that chart that i brought up. Looking at the implied volatility of puts minus the implied volatility of calls. That hit a record yesterday despite the minor move in the markets. That is what we have been talking about. Reflectedbig move not in equities. In the shortterm, how do you look to make money . Mark that is often times driven by the calls. That is interesting to me from a trade standpoint. Does it show a little bit of fear in the marketplace . It does come in the same way that the vix did. There is some forced trading driving that, for sure. I dont think the markets are expressing a belief. I think so much of where the markets today is forced trading. When you hedge is not to diversify. Is there another magic hedge that would help you, if i did own the s p, for example . Mark perhaps owning less of it. That is all i can say. Having convex hedges is a good way to go but you are just going to get picked off if you do that. A bad idea for the public to be looking at derivatives in general. That was one of the problems with these vix products. There are people in these things that have no business being in them in the first place. Frankly, i would put some professionals in that category. I think people should stay away from getting too fancy about it. You are making progress by recognizing diversification is not the answer. Mark, a real pleasure. Mark spitznagel, a pleasure. David coming up, we get a read on the job market from Gary Burnison from korn ferry. You can tune into our colleagues Jonathan Ferro and tom keene on the radio. Pimm fox enjoins them at 10 00. Joins them at 10 00. Live from new york, this is bloomberg. Kailey this is bloomberg daybreak. Coming up later today on bloomberg markets, kevin hassett, chairman of the White House Council of economic advisers. Now to your Bloomberg Business flash. At t says it is exploring a possible ipo of its minority interest in directvs latin american unit. The company filed a Registration Statement but there is no assurance at t will tech take the state public. Is signaling that they will be increasing on investing in startups such as uber. Plans for ailed Telecom Operation in japan that would separate soft take into investing and telecommunication units. Carlyle group posted fourthquarter profits that beats estimates. The firms holdings gained. Well on ended the year its way toward a for him in your of raising 100 billion. That is your Bloomberg Business flash. David fridays jobs numbers show the strongest wage growth we have had since the recession with the january average Hourly Earnings raising 2. 9 from last year. Gary cohn told us it is still something the white house is keeping its eye on. We are excited to see it this month, we do hope it is sustainable, we dont want to say after one month in january, we have done it. We hope this is the start of something new and real and something good. We will need a couple months to reaffirm we are starting to see wage growth in the united states. David 40 inside look, we turn to Gary Burnison, ceo of korn ferry. The author of the new book lose the resume, land the job. Michael mckee is also with us. I happen to lose my resume a long time ago. Pick up on one gary cohn said, is that when you are seeing, that wage pressure really kicking in now . For sure, the advantage goes to the employees. The cycle has been 10 years now. Wage growth is about 3 . I would not be surprised if it is higher. It is a full employment market right now. David how is that distributed among different classes of employers . Perhaps, thes, nonsupervisor and production employees are catching up with the fat cats, as it were. It is a bit of a barbell, it is a skillsbased economy. The more skills you have the more money you will make. Education determines a workers earnings for life. ,learly, at the entrylevel there has certainly been a lot of activity in leisure and hospitality and the like that has helped wage growth. David what are we seeing when you go down every month from the labor department, in terms of jobs, growth, and wait pressure . Michael wage pressure is starting to rise but is not filtered through to everyone. You see it mostly in the better paying jobs where it is hard to find workers. It appears to also affect the lower skill levels because so many of those people have been absorbed into the labor markets. Anecdotally, you see signs signs saying helpwanted. Wages have not risen as fast with them. The interesting thing is when do people start to feel that there read wages are rising faster than inflation . Inflation has been going up for a while but people dont feel like they are getting ahead. Your survey suggests that real adjusted wage increases over the coming year are not going to be that great. Issue, look athe america over the last 30 years, income levels have risen productivity has not risen. That is a tremendous issue for this country. It is putting strains on everybody. You see the weight growth but real wages are actually not going up. Alix one industries are we seeing a pickup in productivity . Gary services, services, services. Inlth care, anything professional services, those are skillbased jobs, and you see wages rise. Those that dont require those kinds of skills, you are not seeing it. David what is going on with a mismatch of skills to jobs . Do you have jobs that are not filled because you dont have the workers . The that is absolutely case. 6 million openings right now in the united states. There are 5 Million People allegedly that would like fulltime work but dont have it. Why is that . Michael when do we start to see pushack of jobs start wages high enough that it draws people in who are not currently looking for work . That is one of the great theories of this administration, that there is this great unemployed workforce out there that would like work but you have to raise wages enough to entice them. Gary i think we have reached full employment. If you look back on the last 10 recessions, once you reach full employment, another three years before another recession kicks in. This cycle has been a 10year cycle, the longest arguably since world war ii. David gary, thank you for being with us today. Alix coming up, looking at this weeks treasury outcome for the 10year. What will we see in terms of demand as we see billions, on line . Selling the tribune. The transaction will allow them to repay outstanding debt, lower pension liabilities, and have a good cash position. Premarket. The more on what im watching next. This is bloomberg. Alix im a broken record but what im watching is treasury auctions. Today we get a 10year treasury auction, 24 billion auction. This is an increased him up from last week. In terms of the threeyear, we saw the highest yields since 2008. You had a strong dealer take down because indirect not show up as expected. The 10year will be particularly interesting. Take a look at the 10year bit to cover ratio. 2. 66. We are wondering what kind of yield you want of having demanded in the auction for that term premium as it continues to rise. David i will try to be a broken record, too. Demand, is supply and how much is reaction of whats happening in the markets . I want to buy treasuries because im not comfortable with equities. Alix i think it comes down to term premiums. It has been increasing trying to get toward zero. Basically how much extra protection investors are demanding to hold a treasury for longer term. How much will that filter through to todays auction will be an interesting set up for how we are positioned to deal with this inflation and wage debate, particularly when it comes to the fed. David interesting given what is happening in the marketplace. Alix coming up, keith parker, the head of ubs equity strategy. We will be looking at the market, looking a little softer this morning. This is bloomberg. From new york city, im jonathan. 30 minutes until the start of trading. This is the countdown to the pen. Global markets struggling so stabilize. The biggest s p 500 drop since 2011. Followed by the biggest jump since 2016. Equity volatility remains elevated. The market punishing investers who bet on an extended period of calm. And the callers from wall street remany patient. Goldman sachs says its time to buy. Heres the price action for you. Futures all over the place once again. Down 12 on the s p. Negative a half of 1 and the f. X. Market. We come down 1 3 at 1 . And treasuries do receive a bit. Down two basis points. 278 is your yield on a u. S. 10year. For the equity market for the s p 500, while jumping nearly 2 of the highs for the trading session yesterday, closing with a strongest gain since november, 2016, that on the heels of mondays equity meltdown that saw the worst day for u. S