about fbi impartiality dating back to the obama administration. it says text messages between former bureau officials in 2015 reference a directive from president obama to know everything we are doing in regards to the hillary clinton email investigation. texts indicated advanced knowledge secretary clinton even award prosecution before being interviewed by the fbi. salt lake city is the first between announced it would pursue the winter olympics. after spending four months ensuring utah could host the games again without using money. global news 24 hours a day andred by 2700 journalists analysts in 120 countries. i'm mark crumpton. this is bloomberg. julia: live in new york, i'm julia chesley. joe: i'm joe weisenthal. julia: another day of choppy trading. the dow up 200 points. 85%.ar yield around >> the question is, what did you miss? announce aers bipartisan deal to fund the government for two years. the senate still has to vote on the deal. investors are trying to make sense of the violent selloff. going back to the signs and wages to take stock of the economy. he joins us in the next hour. and the spectacular launch for the falcon have the. investors will be watching the cash burn. >> the bipartisan agreement facing bipartisan opposition in the house. mitch mcconnell and shop just chuck schumer announce a deal to avert a government shutdown. that bill is hitting an impasse in the house. they are voicing objections from all sides. now from capitol hill with the latest. it could take all afternoon if you explain what was involved. talk about the critical issues that had most contention from both sides. aspects in this particular budget deal are less contentious. there is a significant increase of well over a hundred billion dollars to military spending. that is a big victory for those who have been demanding this. there is an increase of $100 , to nih funding and opioid money to combat that problem. that is a victory for democrats. the issues are separate. the issues in the house in particular by the prospect of looking at this are gloomy at the moment, the fact they are demanding a guarantee that there will be votes on protecting dreamers as mitch mcconnell has guaranteed in the senate. brian has not made that promise. the house minority leader has been on the floor. . remarkable stretch speaking about dreamers and her desire to have some sort of deal. appear they are going to the democratic votes to get this out of the house? does that mean pelosi can get some leverage out of ryan opening the house to an immigration discussion? >> that is a key point you raised. house conservatives who don't like the fact that there are spending, theense freedom caucus demand several votes. needspected rhein would democratic votes to get it through the chamber. experience mark meadows is good with numbers. i would take that seriously. you are significant numbers of republicans that don't like that it increases nondefense spending. deficit hawks few left. from capitol hill on this developing story, thank you. we have breaking news from xl group, attracting interest from rivals. this is according to people with knowledge of the matter. you can see they are searching on the report from bloomberg. a market value of the most in billion dollars. this is still preliminary and may not lead tweet takeover. looking at a potential target for the casualty coverage business in the u.s.. we will continue to monitor. u.s. stocks are having a bumpy ride today. treasury yields surge. the cio at family management corporation joins us now on the latest but these market moves. this is preceded by weakness in treasuries. lots of different concerns. a weak dollar to boot. what is the narrative? it has changed certainly? >> there's a lot of things, as you mentioned. the market is catching up with fed expectations. the labor market is starting to take hold with wages and employment. the plan that the fed put in place is probably justified. i think they were behind the curve going into the year and now we are probably at a point that is right. jo: we have had a lot of false selloffs. theseears we get tantrums. is this different? >> it is a little different. i would say this is normalizing. i think yields are going where they should be. the fed will probably go to times, at most four. we were at near 100% probability of a hike in march. likely think marches area after that there is probably a few more to go. we start to see the curve selloff. the 10 year you'll -- real yields, expectations are at recent highs. >> what are the linkages between the selloff and the recent selloff in risk assets? markets long time the are predicated on low volatility, and the realization increase isket actually justified. risk assets are waking up. everything prices off of the risk-free rate. whether it's high yield can whether it is tied together. other risk assets are going to have to adjust. >> how long does this take? it can be painful and shock a lot of people. in general what do we know about how long this takes? is some moreere mullahs asian left. in some areas, a lot of defenses, they have gotten hit on the chin and you concert looking at those asset classes to start getting into them. i think they are getting attractive. these have been probably overdone a little bit. credit hasn't budged much at all. >> why? the economic backdrop is pretty good. earnings have come in. the backdrop is supportive. there is not much supplied coming in. lot.nk that that is a there is less cushion now. there are meager spreads over treasuries. the same goes for high yields. do you have any cushion to be buying these now? there is it really credit risk per se. here. has not moved julia: you have to be sure there is a problem here. ultimately we can continue to here.from you said we should realize our understanding of markets is less than we believe it to be. predict is an exercise in futility. the president tweeted this morning, he did make the point in a sense that we are in a situation where good news for the economy may mean bad news for the markets. we were talking about a fear of missing out problem. now we are talking about good news being bad news. can those things hold true? >> that is interesting. we would recognize there's a big difference between the economy and the stock market. early 2009, we did not bottom good news per se. bad news was still going on. we can have a healthy selloff withaybe even some more the economy it just doing fine. >> something you have talked selloff,en we get a there are different aspects. sometimes it is liquidity. right now it is alteration. if these things persist do they bleed into each other? >> i think they do. spreads have absorbed a lot of the rate increase. there gets to a certain point when people say i can get the risk-free rate at this. do i want to stretch myself and take the credit and liquidity risk to go in there? there's different inflection points. that is an underpinning it. the technicals of the bond market have supported that. i think there is a point at which, there is a spillover in people are not willing to take incremental risk for low marginal return. scarlet: he is sticking with us. this is bloomberg. ♪ scarlet: etf's help drive the rally and played a role in the latest stumble. inant to bloom in the spring eric. >> we look at the flows in the past week and it tells a different story than january. it is a completely different month. month, they do the same thing. spy is used by the trading crowd. andis used by advisers allocators. allocators are continuing to allocate. that money is coming in. it never saw outflows. spy got hit hard in a good way in january and then all that money has come out. traders seem to be spooked. the big story was about volatility. etf's, you canhe see the february returns are all over the map. these are fallout -- far out numbers. this is causing controversy. is confusion on how these things work for some people. have introduced a system we actually launched today called the stop light system. this is a way to give advanced information for the level of surprises that could be lurking in your etf. you can trade it. not to say it won't go down but there's nothing weird in it. and we give a yellow light because the holdings are not as liquid. red andg that gets a basically it checks every box in terms of infractions. that is something investors should view as cautious. this week and have people use the right products for the right reasons. a lot of people were running red lights for the last few years. let's bring in david shaw. it worked like a charm for years until it didn't. what we saw was the painful unwind. do you think there is more to come? >> i think it is representative of a broader secular trend we have seen in the market since the fed started on their quantitative easing program and took mortgages out of the market which suppressed volatility and now volatility is creeping in. not every instrument is going to blow up but it is an alarm clock to the investment universe that this volatility is not a one-way street. there are other instruments that may not be as extreme that we need to take into account. >> we had a guest yesterday saying that spike and volatility cleaned out the market. there are many ways to go short volatility. do you have experience products that suggests other ways are still being look at? >> the other week i looked at a corporate bond fund that was deemed enhanced. the more i looked into it, they were buying investment-grade corporate bonds and layering in shortfalls. givenou look at the test, what shortfalls have done, you add on rates following and clipping a coupon. i think that shows that not all market participants understand what that is and people were using it to enhance returns without understanding the risks. >> some of the funds, do you think they will just be relaunched? in theory they can just start over. or do you think they will be hesitant to let it out in the wild again? >> if the volume today is any indication people are going to continue to use them. it is like nothing happened. that. are back in there is a more sensitive version of x iv. that saw $5 million above its average. i'm guessing these will take volume away from it. the question is how much of the retail component will be scared away forever? i doubt no. will nothink the sec do much for now. julia: doesn't this suggest that the message here is people continue to be call him even after the spike that we saw? >> there is a little bit of avalanche patrol. the avalanche happened. i think it will scare investors out. the retail risk starts to creep back in. in prolonged times of low volatility this can get going. for a while investors will be hesitant to go deep. scarlet: we don't even really know how big this market is, do we? there is money that piled into exide the. then there are other ways people can express that trade but not necessarily through the etf's. >> the etf's, whether you are of ang spy, it is the tip bigger iceberg underneath. it trades its own exchange. underneath was a bigger trade of shorting volatility, one estimate had it $2 trillion. i also think it was front run a lot on that close. sometimes that happens with these products. you go back of four or five there are these crazy moments that happened with these crazy products. ,hey stopped issuing creations the futures long. it would to 100% premium and then they started issuing. it dropped and they got sued. these things are not completely new. you hate to see them. even back then that was part of a larger trade. you look underneath. institutions are using the derivatives themselves. scarlet: right. that is just a convenient way to keep tabs on it. thank you. julia: not reassured. scarlet: a lot of warnings there. scarlet: you can watch us on etf iq. coming up next with the countdown for tesla fourth-quarter results. what are investors looking out for? hint, it has to do with cash. this is bloomberg. ♪ julia: elon musk is a busy man. spacexay he watched his launch its first falcon heavy. are we back to earth? preview,s now for a diana. great to have you with us. let's talk production. i feel it a lot of focus once again is going to be whether or not we see further delays here. >> in early january tesla said it expects to hit a production -- investors want to see if they are going to stick to that. this is important for tesla's cash position. they are added interesting point in their estimates. one of the details about how a question was posed about whether tesla can achieve response was ais positive or 12 seconds. i don't think we are seeing that. we hitan't predict until 5000. are they going to hit 10,000 this year at all? just the lack of transparency around the run rate, and the overall issues. these -- they are excited about getting these at some point in the future. how crucial are they? is a number that has gone up a quarter over quarter on the balance sheets. interest free run. keeps their positive. had theourth quarter we semi truck and the new roadster. is that number going to arrive? scarlet: thank you for joining us. the market closes next. this is bloomberg. ♪ we use our phones and computers the same way these days. so why do we pay to have a phone connected when we're already paying for internet? shouldn't it all just be one thing? that's why xfinity mobile comes with your internet. you can get 5 lines of talk and text included at no extra cost. so all you pay for is data. choose by the gig or unlimited. and now, get a $200 prepaid card when you buy an iphone. it's a new kind of network designed to save you money. call, visit, or go to xfnitymobile.com. ♪ julia: stocks and the session after a shocking trading day. investors are asking are we friday yet? joe: re: friday? vonnie: almost. we begin with the market minute, and if you thought it was friday, you are forgiven because the markets have been all over the place, including the s&p 500, erasing all the gain from wednesday, the dow swings the 500 point rise, so we have been all over the place, and right now the early close numbers indicate a loss. these are modest compared to what we saw on monday. joe: another extraordinary session all the round -- all around. scarlet: the return of volatility continues. let's get to individual names, snap -- after they had their first -- 50%. this is a highly shorted stock as well. bermuda-basede insurer -- we side people with knowledge of the matter that it is good for a 12 and a half percent boost. resorts with a rally after tumbling in recent days. the chairman and ceo has to down asinoeside, ca regulators will continue their hislem about whether or not operations in massachusetts, colorado, and overseas might be in jeopardy. will continue to monitor. joe: now the u.s. government bond market. rates continuing to march higher on the shorter and long yield. at two point 84%, and if we look at the intraday, it was a very interesting session and we went out near the highs. we had a treasury selloff after the news of an agreement on the budget, perhaps spurring thinking of people talking deficits, so that caused some selling. a few weeks ago we were talking about flattening and there's going to be an inversion, but those seem like happy times compared to right now. if you look at the 210 spread, significant move in the recent days and weeks since those lows. i bet there is a lot of people who would like to go back to those days, but that is not the concern right now. julia: you mentioned the u.s. senate reaching a bipartisan deal, the u.s. dollar gaining on the news of that deal. led positives -- we have common currency hedging its lowest is january 23 despite the fact that german chancellor angela merkel are concluded that agreement with the democratic party on the rolling coalition -- will talk more detail later on the show, and we show you a relatively unchanged dollar-yen. and i am showing you the euro stock which was the biggest mover, the shift in the euro-dollar higher, 6/10 of 1%. finally on commodities, let's look at oil and gold. againwn 2.6%, and once the bear case is emerging for oil, over 10 million barrels a day, the highest level in 47 years, some incredible supply. gold selling off with the selling off of treasuries, and copper down 3%. seeing it a bit today with that decline in copper and oil. and those are today's market minutes. scarlet: and we have breaking , 20th century fox has reported and we have a beat on the bottom line and topline. the quarter, analysts were looking at $.38, the topline revenue, apron $4 billion, analysts were looking at under, cable network programming revenue $4.41 billion, a huge chunk of 20th century fox's is from cable networks can higher than anticipated. some commentary on the deal to sell assets to disney. fox sees the disney deal closing in 12 to 18 months from last december, so that should put us basically for a timetable of 2018 -- you can expect the deal to close. up 2% in after-hours trade. of the bumpy busy equity markets, and we have to now consider the prospect of what it means when we look at concerns about higher inflation and whether that economy feels that out. let's take a look at that with peter borish -- and you have seen for a long time a deflationary environment and out the narrative has changed to inflation, you are not convinced, are you? >> oh no. it is an honor to be here today where everybody is nervous about treasuries going up, what happened to copper, what happened to oil, gold, silver? while my god, wages have gone -- from 2..9 to 2.9. is being distributed differently and everybody is nervous, but there is no measured inflation yet, we can talk about so many different things, that it is a lot of fun, particularly to be a bit of a contrary and. ian. changed inything equities and volatility as far as you are concerned or is this the type of thing that we are going to settle down in a week and forget about today? rush --e in and in no market in terms of percentages and daily swings, but we are at the end of a cycle in terms of a long. of time in the bull market without a 10% correction -- a long time in terms of slow economic growth. everythinghink that is going to continue for a long time, i want to say it is all about risk management and i want to harp that escrow does not go hunting for acorns in april. shares inesla after-hours, fourth-quarter revenue slightly higher than what analysts were looking for. --rth quarter lost for share the non-gap automotive growth , onen for cars is 13.8% percentage point lower than what analysts were looking for. what is most important are deliveries, and where looking at model s and model x deliveries -- tesla has reaffirmed its forecast for the model three production rate. will get more details that are so many questions about how and whether tesla will deliver on its promise to create and make s's.e model pass joe: significantly exceeding 2017, so at minimum you want to see growth and on the revenue side they are going to be delivering it. is so the stock pop up briefly .8%nd obviously now down and investors trying to digest what is always a complicated report to work through. revenues, the beat on it is find that they reiterate their second quarter forecasts as far as model three production is concerned, but unfortunately we get promises and then we don't get followthrough. you have to wonder to what extent investors do at this stage. scarlet: you'll believe it when you see it at the stage with meantime withthe peter borish with us of quad group, and we are returning to a more normal regime. in theseintroduction markets a good thing overall? >> it is what it is in terms of an old phrase. volatility is normal, but we out there which everybody has always spoken about, and we have more policy uncertainty, which will lead to more economic uncertainty, which will lead to more market uncertainty, which will lead to more volatility. joe: is the policy uncertainty from the fiscal side or having to do with people still uncertain about how central banks are going to be withdrawing some of their extraordinary stimulus and anxiety around that? to be both which makes it more difficult and risk management more important. -- new fedde fed chairman. another risk management question what, that does it mean any nba teams aren't looking after me, so i have to be concerned that if chairman powell is in a crisis, we have an economic team and open slots in the trump administration, same thing, are they prepared to deal with a crisis. julia: some headlines on tesla, the cash burn, way less than what the street was anticipating. up 854r deposits are million dollars, this is also were tired on about the revenue line being bulked up by the deposits, and that is a huge deposit number. as far as demand is concerned, it continues to flow in. record sales in the fourth quarter, which is good news for the popularity of this brand. we can talk about the lack of positives in terms of production targets, that seeing these headlights coming through, the up.tion in stock is now elon musk knows what to say for biggest happy. issays the operating income coming at some point in 2018. from new york, this is bloomberg. ♪ mark: emaar come to an with first world news -- i am mark crumpton with first world news. nancy pelosi continues to advocate protection for dreamers, pelosi is criticized -- has criticized the bipartisan budget deal for its lack of commitment to address immigration. she wants house speaker paul ryan to open legislation in the house. the white house is praising the senate budget deal with sarah huckabee sanders saying the agreement will provide certainty for the next two years and achieve a much-needed increase in funding for national defense. >> the budget deal should be a budget deal and members of congress like nancy pelosi should not hold our military hostage over a separate issue. mark: sanders says the deal will move the white house away from crisis to crisis budgeting. the railroad industry is playing down expectations that it would require trained safety technology to be in operation in the u.s. by the end of the year. executives are saying positive train control or pdc will likely not be in place until 2020. agency says the production could have prevented a collision sunday and south carolina, and a derailment of an amtrak train near olympia, washington. high people were killed and dozens injured -- five people were killed and dozens injured in the two crashes. says that heesman renounced his citizenship years ago and never reclaimed that, and he claims to challenge the deportation, calling the presidency and a legitimate regime.- e legitimate , theections are over people of kenya have chosen their leaders and now expect you distractions, games, and sideshows, and focus our efforts of building our nation. mark: tensions remain high as they have ordered a crackdown on opposition leaders with a part in the swearing-in ceremony. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. let me bring you up to speed with tesla's fourth-quarter earnings. we are seeing stocks gain, but some of the critical issues investors care about are speaking to their model three reaction, but they are doing it and are on track for 2500 per week. cash burn also a critical issue for investors, way less than the street anticipated at $277 million, and estimated $900 million. let's dive a bit more to fourth-quarter earnings, and joining us from princeton is bloomberg intelligence analyst lineskevin, some positive from tesla versus expectations. >> you have to like that cash burn number, you probably have been tried in deeper and see what that number includes or does it include, but that is a positive. i also think on the other hand that in its growth phase where it is now, it is important to be investing, and the cash burn has to be there, it has to be happening if they continue to grow and get model two production work needs to be. it ang back and making better number is not necessarily a good thing in this case. julia: most analysts think they ise 2 to 3 billion this year. you think we'll see this? they should raise cash when they can before they needed, that would certainly be the case -- you model three ramps talked about the deposit number and they have to work through that act clock. backlog.et -- as you go through that process you need the capital to do it and why as will raise where you can and take care of that overhang. julia: speaking of that target on track for 2500 cars per week. kevin, 20 so much for joining us. you can see the shares are up. think you for being patient while we read the tesla numbers. ,et's get back to inflation nursing should be a positive thing cannot a negative thing, but we are seeing here is the return to inflation being quite read it appears to appear with vengeance. up? the fed mess it i guess that is what makes a market, i'm going to take the other side of the trade because i don't see how you can solve the debt crisis by issuing more debt. we know the government is going to run greater deficits. know aggregate demand is not particularly strong care or around the world. deutsche bank,h wells fargo, you might say they are runoffs, but the one question want to ask is if the today, like what took place in 2007, everybody poo pooed it, when you drop the it is then the water, small fish that show up. big so this gets us to the topic of discussion today and yesterday in the day before, the degree of which these little etf's are the tip of the spear to the much bigger trade of various products, and it sounds like what you're saying theoretically, there could be a lot more pain to come. >> absolutely. it is not inherently the etf's per se. little person, the retail that didn't understand it, just like the average worker, for some reason it is their fault that the are getting a wage increase. it is not their fault, it is a good thing, and getting an understanding of the dynamics of what these markets still, the complacency is bad because it makes you lose your risk management. i can't stress that enough. the goal of the manager is to be an actor, not a reactor. you look at, whether it is a certain asset class or securities? we have seen the bubbles come to the top, but what could be that indicator of the bigger problems? in thisk at currencies, -- it is a big market. and what if crude prices really died down, they have been weak, $60,f you go back through in a week. bottoms in late january or early february, and here we are doing the opposite. we watch markets. the market is right, i am wrong. if i see those numbers, i will tip my hat paul, and my goal is to be in the business to play another day. none of the commodities have rallied, look at silver. can't get out of its own weight. ie numbers are smarter than am. scarlet: thank you so much for joining us. >> always a pleasure. julia: you bring in the streets top technicians to look at index charts. abigail, take it away. what a week to join. the volatility that we have had this historic -- tons of volatility. what you think is next in the s&p 500? when you are expecting a consolidation, we weren't expecting it in the route we got it. intoow it is calming down -- and it has found a stabilizing area, and i think 2500 is a good area for that. that we lower support shared for clients, and you have several things coming in there, and the 200 day comes in -- there you are. 2500 right here, and the 200 day moving average comes in right in this area. would be nice to consolidate their even if it can do it about the trendline, and recognized still intrendline is play, so structurally we are ok. we are due for something we haven't seen in a while. what if it grows below 2500 and goes to the long-term uptrend? insince the reversal comes at around 2500, that might signify we might go below and defined has a consolidation of 20% and it would be a correction. and a bear market which we hope we don't get. abigail: it is interesting because back in november, it was said there could be these inverse vix products, and lo and behold, that is what happened. ratesw target, the rising showed a few months ago the two-year yield where you said at go up tothat it could 2%, and that is where we are at. >> the get this eight year base that we have on the two-year now. sameest rate cycles -- the -- this one has been 36 years, and the following rates are an inverted v, they are very fast, but the following rates to rising rates are very slow. simply because all of them have dealt with deflationary pressures, and it takes time to come out of that deflationary environment. and now i think we are out of it. shiftedns the cycle has and we are in a new rising rates cycle. abigail: does that mean we can get to 3% quickly? know if quickly, but that is what we are looking for. abigail: and finally, cisco systems. and here is consolidation coming into play, and there is something to buy when the market goes down, and this is an extraordinary 15 year base that cisco has emerged from. we had that incredible drop in 2000, and we can argue that it has had enough time to repair, and a new structural oh market is in play in the system. abigail: may be a pullback for the broader markets. you. you so much, back to julia: more to discuss from new york. this is bloomberg. ♪ the death toll from a magnitude 6.4 earthquake in taiwan has risen to seven. rescued sohave been far from buildings that have toppled, but dozens more remain unaccounted for. military personnel and volunteers are helping with the search. rescue operation was based on twitter, writing that will not rest until all are found. press secretary will resign after it was reported that he emotionally and physically abused his ex-wife's, and porter called allegations outrageous and simply false. defended porter, calling him a man of true integrity and honor. porter is considered president trump's more favorite aides. how olympic committee and u.s. gymnastics handled the investigation of larry nassar -- publicans and the mccracken lawmakers cite a legislation to establish a special committee to handle the pro. be. accusedn 260 girls nassar of abusing them. is wanting to preserve a cold war era with their arms accord, insisting that they have honored the 1987 intermediate range forces treaty, rejecting u.s. claims that russia has violated it. he said that we don't want an escalation of confrontation. global news, 24 hours a day, powered by more than 2,700 journalists and analysts in more than 120 countries. i am mark crumpton. this is bloomberg. we are back with peter borish. about you were talking the energy complex, and i want to get back to what got buried, and that was exxon mobil. just to give you a sense of the moves we have seen in the last couple of weeks, you pointed out to me that we are back -- what are your views of the energy sector? i am a simple economist, supply and demand. every policy we have, you can drill where you want, and given the regulatory framework, you are going to have more supply. technology helps, so you use it more efficiently. lowerupply, less demand, prices. we are seeing it across the board. you are ag if farmer. that is why we see deflation, and i don't see the fed raising rates since december of 2015 -- and we barely budged in the 10 year. at 285at 220 then, it is now, and is definitely reason to get a crash helmet and go somewhere. joe: you were talking earlier about taking the other side of the view from your old boss on inflation, but how do you let your macro picture inform your day to day trading? input andt become an what you do day today, which you stressed the importance of risk management and watching where the prices go? 4:00 whateverybody at is going to happen at 2:00, so helps my batting average. if you think we are in a framework where energy prices are going down or silver is going down, then you look to sell the rally. we are in the business of make it, take it. we are in there for a week or three months, so you have money and made a profit, then you wait for another entry opportunity. the go straight down or straight up. market smart -- stock lastly, said the smart balance is the biggest. math works, and fear is bigger than greed. will it make it more easy to make money or is it back to where we were, calling it volatile the volatility or you could make money? is a little of both because inflection points is always difficult. to got it is not going straight down and markets, because it is relatively tricky because you are used to bind the debt and then having it go back up. the worst thing you can have enabled market is risk management, but risk management, the one-time it doesn't work were out ofx, business -- xiv. scarlet: we talk about your framework, how does bitcoin and cryptocurrency fit into your framework? >> our framework is that you had an exponential rise in bitcoin and where they take off, so you can make an argument that the belowhas to go somewhere, 3000 to finish the move off of 20,000, so we caused here and it is trading nice from a technical perspective. are notiquid and we active participants in it, but watching it from afar is kind of enjoyable. julia: to be fair, this is something you called earlier. >> if you have enough opinions, what is going to be right. thank you for that. [laughter] joe: is their interest because we haven't heard people say it is going to be huge, but you see people interested? >> you are always interested in new markets particularly features -- you don't have exchange, but the by -- volume is not there yet. is therehow much cost with what happened in bitcoin and cryptocurrencies and what happens in traditional asset classes? today informed each other or do they happen separately? >> great question. corn was rallying asked research people if there is correlation with back and some of the bank stocks and nasdaq in general and whether it is a leading indicator, and unfortunately, no. the numbers weren't there. bitcoin hoping to be a alternative asset financially. >> there could be spreading they were covering it, but gold to me is just another trading vehicle. -- you can trade currencies, so unless something dramatic is going on, gold to me is a trading vehicle. scarlet: peter borish, thank you so much for joining us. >> i'm leaving. [laughter] up, chancellor angela merkel in germany has agreed to form a governing coalition, but what did it cost her? tweet, what do you want to hear on the show? let me know. this is bloomberg. ♪ scarlet: a possible and to a stalemate that has played germany's government since that septembers elections. agreed toberger has form a coalition with the rival party, but it should make too many concessions? we say concessions, we are referring to the finance ministry and the foreign ministry. what exactly did merkel give up your? she gave up the two highest profile ministries in finance which for aaffairs, party that won the election, is quite extraordinary. that ifways you can say -- particularly someone with aspirations to potentially throw your hat into the ring to replace marco, you have found -- merkel, you find yourself in not too many cabinets to choose from. julia: what about the finance ministry -- we know him very well over what has taken place over the euro area. what difference do we think his replacement will make as far as whether it is europe or domestic -- is and's concert concerned. >> i think it will be relatively small. wing, andom the right this takes us back to the first grand coalition that merkel had where she also covered with a social democratic minister. this is not going to be a massive giveaway, and in some ways you can argue it is convenient for merkel to have a social democrat be the finance minister because it will be a social democrat who has to say list will surely be a long of spending requests from the different ministries. we haveng further, talked about the european agenda in relation to france, spain, and european integration. but from a domestic agenda, what is this new government likely to pursue? the first thing to say here is that it is a continuation of the existing government. it is largely the same characters in power, so this is a government of continuity, even if they signal transition because both the leaders of the spd and merkel herself will not contest the next elections. but if you look at the content of the coalition agreement, there isn't anything radical. they are going to spend slightly more money on some issues suggest investment and high-speedure, internet -- some minor changes in my opinion and health care and other things. but on domestic affairs, it is more of the same. given where the german economy is, full employment and budget surpluses, quite frankly it is no surprise, even if it is slightly disappointing in the long run. julia: yes to go back to the base and explain why going into a coalition for a third time, despite the performance presented in the election and the fact that if you look at the polls, does it get much worse? >> this is essentially going to be a part of this case. spd thatay that the lost the election got a good deal. they got several juicy ministries and spending content included in the coalition agreement. and the alternative, if you look at the current polls, is because for the sdp, there will be blamed for new elections that nobody in germany wants, so it could be worse for the party. i predict this will pass but it will not be an overwhelming for martin schulz, and yes taken the consequence of that and is resigning as party chair and handing it over. he has fallen on the sword so to speak. the first things this new government has to deal with is an election in until the taking place on march 4. 30 to at the numbers and 40% of voters are still undecided. it is a significant part of the eurozone in particular, what is the outlook there, what are we expecting? sanguine, ik is believe it is likely that the right wing and center-right coalition led by silvio is likely to win, which will mean will have him back in the political limelight in italy. minister, but the main power broker, and at the same time this will mean that all the talk about italy leaving the euro and referendum will in my opinion disappear. isthat sense, the tail risk relatively small, but there will be a major clash over fiscal policy because some of the election proposals made are expensive and the rest of the euro area will oppose that. i don't view this election as caring particular risks for the rest of the eurozone. jacob, thank you for that. scarlet: it is amazing how silvio is able to frame himself to present himself as a reasonable alternative. julia: but not as prime minister. scarlet: but he is pulling the strings. that. can you imagine [laughter] bitcoin.acking the latest bout of volatility. from new york, this is bloomberg. ♪ scarlet: we want to give you an update, keeping in mind u.s. stocks weakened into the close in the final 15 minutes of trading. world indexat the futures, s&p, mastec futures are all opt in the moment. joe: and i have a chart my terminal that the vertical redline, you can see we continue to slip in after hours trading, something to keep an eye on. julia: bitcoin is marching to the second day of gains, meanwhile the us regulatory center spoke at the banking committee yesterday calling for an oversight of cryptocurrencies without proposing industry killing measures. peter -- thinkis history shows that new technology has fallen on the wrong side of regulation, from early because it was misunderstood. what is the risk of that in washington and among regulators? >> i work for a nonprofit whose sole mission is to regulate that risk, we have been educating regulators on bitcoin and other blockchain networks for about four years now. we have a long-standing relationship with members of the the chairman of those two agencies testify before congress today. i think they approved quite effectively that they are on top of this, the message was roundly, we got this under control, and they understand these technologies pretty darn well. there is a lot of interesting areas on the margins were in more -- where more interpretation, but the hearing was a success. reaction, itby sounds like everybody loves the cftc guys, the sec chief not so much, is that your impression of this good cop, bad cop thing going on? >> i would not put it that way, but crypto, the parts of twitter that look bitcoin, they have a love affair with the chairman of the cftc, and i see people trying to draft him to run for president of south korea, so we'll see if that works out. whole, and these agencies do different things and they have different expertise and both intersect with this new technology, open blockchain networks. the cftc is going to be the preeminent and derivatives like sec is goingd the to be the regulator of people who sell tokens on the promise of profits where we rely on those people to make the profits in other words securities that are masquerading as cryptocurrencies. scarlet: what was mentioned earlier calls for oversight on cryptocurrencies, but didn't propose any specific measures. what in your field should be introduced? what should regulators consider implementing? >> i don't think we need anything introduced. the good thing about securities losses that we have a common test about whether something is secure or not, and it goes back to the bank 50's about an orange grove in florida, which when i have time to get on -- but it is an open standard that allows a regulator to pick and choose when there is something out there in the world where someone is seeking the money of others on the promise of profits. is actually a line from that case, so the whole toolbox a needs in that case law can pick and figure out who in our community is not really building a new open network that is powered by a digital commodity or cryptocurrency or something like that. but is actually come in may be saying they are doing that but getting people an interest in the profits that will be derived from their efforts. in that second one it is a security, and the sec has all the authority it needs to make sure you follow the law, which is going to involve registering if you are doing a public offering, or fitting into a safe harbor, doing a private placement. your point that there be to be great oversight, but surely there is a way to calibrate regulation that will help foster innovation because if you particularly look can be pivotalat for emerging markets and their ability to transact, is there a way where regulators can benefit the technology? >> i think there is actually, maybe i spoke to soon saint there isn't anything needed, but the interesting thing about cryptocurrencies is the fact that the exchanges -- these are companies like coinbase or zap and they don't have an oversight of supervisor is for market transparency and that is because they only regulate markets and derivatives, and so we have a bit of a gap, and by virtue of historical accident really, that that has been filled at the state level. every state of money transmission has come to this question of whether a company is moving people's digital currency around is a money transmitter. so you have companies that have , 30, 40 in some 20 states, the ones that will give them the time of day, and that is the type of consumer protection and investor protection, but it looks different than what you normally -- and ithe cftc isn't all that great for the companies themselves because having to go door to door to different states and territory regulators and explain to them what bitcoin is and ask if they will give you a license is no piece of cake. it may be cheap to the payments currency -- the cryptocurrency. peter, thank you so much for joining us. what you need to know about mars trading day. this is bloomberg. ♪ scarlet: u.s. stocks losing steam, and features indicating the floor is open. and center back announces its rate decision tomorrow. joe: and the bank of england tomorrow. julia: and four quarter earnings tomorrow. bloomberg technology is next. joe: this is bloomberg. ♪ alisa: i'm in washington and you are watching bloomberg technology. the white house says that a senate budget agreement meets the administration priorities on defense spending and providing a two-year budget plan. the agreement on a two-year nearly $400 million deal would provide pentagon and domestic programs with huge spending increases. white house press secretary rob porter will design after a british tabloid reported he emotionally and physically abused his ex-wife. he called the allegations outrageous. john kelly defended porter, calling him a man of true integrity and honor. railroad executives are now f trainpositive trends o control not be in place by the end of the year. it was not be installed until 2020. the ntsb says it could have prevented sunday's and track collision in south carolina. another recent derailment in washington. in all, five people were killed and dozens injured in two

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