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Speaker 1: This is Bloomberg Surveillance. The volatility is a result of

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Speaker 1: a build up over many, many years, fed sponsored of

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Speaker 1: carry trades. We need our banking sector to be able

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Speaker 1: to make mistakes because they're all human, without bringing down

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Speaker 1: the whole economy or requiring a bailout. The pressures that

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Speaker 1: most companies feel are not translating into the kind of

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Speaker 1: investment that I think we need to drive economic growth

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Speaker 1: in America or anywhere else. Bloomberg Surveillance your link to

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Speaker 1: the world of economics, finance, and investment on Bloomberg Radio.

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Speaker 1: Good running everyone, Michael McKay and Tom King Bloomberg Surveillance.

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Speaker 1: We welcome all of you worldwide, Bloomberg Radio Plus across

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Speaker 1: this nation, Bloomberg twe Boston, Bloomberg elevens Rio in Springlike

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Speaker 1: New York, FM Washington, and of course out in the

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Speaker 1: Bay Area Waking Up. We welcome all of San Francisco

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Speaker 1: in the Bay Area, Bloomberg nine sixty, importantly nationwide and

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Speaker 1: across Canada's series SEXEMP Channel one nineteen. Good day, have

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Speaker 1: you with us? It has been an odd and I've

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Speaker 1: used the word clumsy or indeterminate week. We're just sort

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Speaker 1: of trying to get our bearings and perspective in the

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Speaker 1: weekend uh reading, I mean it has been all in

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Speaker 1: all a challenge to say the least will do that

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Speaker 1: with not endless dated checks, but we'll keep you abreast

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Speaker 1: to one. Equities, bonds, currencies and commodities are doing Bloomberg

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Speaker 1: surveillance much by cone Resnik Accounting tax advisory to sees

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Speaker 1: opportunities in commercial real estate. Your business needs market focused

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Speaker 1: guidance from the industry leading experts at Cohen Residec. Find

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Speaker 1: out how at cone Resideck dot com. Am I reading

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Speaker 1: This weekend starts with a new Foreign Affairs magazine. Congratulations

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Speaker 1: to Gineon and all Richard Hassan all over at Sea

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Speaker 1: IFI and Foreign Affairs for a must read thick edition.

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Speaker 1: Lord Summers leaves it off. I will read Tyler Cowen,

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Speaker 1: George Mason, I will read Robert decapolty Star have you started?

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Speaker 1: And I've read um Larry Summers headline just crossing here.

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Speaker 1: The Yahoo board has formed an indimend independent committee to

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Speaker 1: explore options for sales. Sign seems to have been hung

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Speaker 1: out on the door. Painful, Painful. One of the short

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Speaker 1: reads of the weekend Michael McKee signaled, Uh, it's good

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Speaker 1: to look at market notes that are short, sharp focused

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Speaker 1: eight pages, nine pages, and within them is important perspective

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Speaker 1: in this case. Michael, the vix Nicholas another great market note,

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Speaker 1: and he takes apart statistics like nobody. He's a chief

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Speaker 1: market strategy at converge x uh, and he's noting that

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Speaker 1: for all the volatility that we have had this year,

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Speaker 1: your favorite measure, Tom, the VIX has not gone anywhere

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Speaker 1: near the heights it reached back in August during the volatility. Then, Uh,

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Speaker 1: it reached forty uh in those days, and we're only

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Speaker 1: in the mid twenties obviously falling back this week to

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Speaker 1: the low twenties. Uh. So Uh. Nick's taken apart the

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Speaker 1: numbers and why this might be. We we hear so

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Speaker 1: much Nick about how terrified everybody is, and yet they're

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Speaker 1: not putting their money where their fear is. Yep, that

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Speaker 1: is absolutely right. It's really been puzzling that the VIX

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Speaker 1: just did not spike back to those levels that we

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Speaker 1: saw back in August. And I really wondered why, and

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Speaker 1: so I pulled apart the individual implied volatilities for all

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Speaker 1: the sectors of the SMP, and it turns out two

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Speaker 1: are doing their job and really getting volatile, and eight

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Speaker 1: are not. The two that are energy and financials. No

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Speaker 1: surprise there. Yeah, obviously people have been concerned about what's

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Speaker 1: going on, especially in Europe and financials and then oil.

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Speaker 1: Uh so that makes sense. But Uh, in August, technology

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Speaker 1: was was way up. Yes, exactly right. Technology is obviously

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Speaker 1: the the biggest sector in the SMP waiting right now.

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Speaker 1: It's an important sector to see get more volatile. If

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Speaker 1: you think volatility is going to increase. It did that

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Speaker 1: in August. It hasn't done that this year. I think

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Speaker 1: perhaps because uh, investors are looking at technology as being

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Speaker 1: somewhat insulated from the European financial situation, the situation with oil,

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Speaker 1: and even the situation in China. So it's temporarily formed

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Speaker 1: this little moat around itself and we'll see how long

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Speaker 1: that last. Well is that is this telling us that

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Speaker 1: what we're dealing with is sort of overseas concerns outside

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Speaker 1: of the oil patch in the US, because there's, as

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Speaker 1: we just mentioned, been a lot of concern about what

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Speaker 1: happens to Yahoo. Apple was everybody's favorite pinatta for a while,

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Speaker 1: and yet it doesn't seem to be reflected in these

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Speaker 1: fear gages. Yeah, that's exactly right. I went and actually

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Speaker 1: looked at the four biggest names in technology, the Microsoft,

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Speaker 1: the Apple, Googles and so forth, and it's really a

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Speaker 1: mixed ba. Some are strong volatotally like they did in August,

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Speaker 1: some are not. So your point's well taken. For the moment,

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Speaker 1: it seems to be technologies a story by story situation

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Speaker 1: versus a macro call like oil or financials. What is

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Speaker 1: your experience? And actually using the VIX, I find that

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Speaker 1: borders on, you know, medieval alchemy the way to me,

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Speaker 1: it's wildly asymmetric. It has value highly extended towards fear

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Speaker 1: and angst, and other than that, I have trouble using

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Speaker 1: VIX were you. I use just the basic numbers to

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Speaker 1: guide me. So, for example, the the average of the

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Speaker 1: VIX since its founding in twenty and a standard deviation

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Speaker 1: is eight. So within a very broad band literally down

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Speaker 1: to its head or up to thirty six, you're not

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Speaker 1: really getting a lot of signal. That's why I look

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Speaker 1: at forty on the VIX is where we start to

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Speaker 1: get interested, because then statistically it is too standard deviations

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Speaker 1: away from the mean and we can start to pay attention.

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Speaker 1: It got there in August, it didn't get there this here.

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Speaker 1: I I look, you know the elevations and obviously we're

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Speaker 1: damping down now. Is the VIX market now, nick so sophisticated,

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Speaker 1: it's derivative use of forward markets, that the VIX now

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Speaker 1: is not the same VIX we knew and loved ten

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Speaker 1: years ago. I think it's a very good point, you know,

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Speaker 1: for no other reason, and that we have all these

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Speaker 1: VIX related E t F products, which, by the way,

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Speaker 1: I've had about half a billion dollars of redemptions here

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Speaker 1: to date, so there's actually less need to hedge those products,

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Speaker 1: and there was in the fourth quarter of last year.

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Speaker 1: So there's a lot of counter currents. That's why you

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Speaker 1: got to stick to these big outlier numbers. And otherwise

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Speaker 1: it does tend to be a little noisier than history

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Speaker 1: would indicate. Um. Is that a good thing or bad

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Speaker 1: thing that we have all of these e t F products?

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Speaker 1: Is the VIX are reliable enough? Um? I guess it's

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Speaker 1: you know, the number is what it is. But is

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Speaker 1: it dangerous for people who in destiny ts which who

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Speaker 1: might be you know, significantly retail. Yeah, it's a great point.

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Speaker 1: You know, there's no such thing. There shouldn't be any

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Speaker 1: such thing as an investor in those volatility products. There

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Speaker 1: should be traders, there should be folks who hedge out

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Speaker 1: for a day or two, you know, But look at

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Speaker 1: the long term charts on any of those products and

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Speaker 1: you realize they're not for long term holds. They are

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Speaker 1: purely trading products, and you've got to use them as

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Speaker 1: that way and no other. How do you use them?

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Speaker 1: I have used them. Yes, we tend to have thirty

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Speaker 1: day whole periods of brokerage firms here in the States,

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Speaker 1: So it's hard to use them for any consistent period

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Speaker 1: of time because I don't want to hold them for

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Speaker 1: thirty days. What do you look at when you're when

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Speaker 1: you're looking at a VIX index to buy into, I

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Speaker 1: look for basically, I look at the long term price

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Speaker 1: chart to see how well it actually correlates to the VIX.

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Speaker 1: A lot of these products reset every day, and so

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Speaker 1: you have to be very careful on these any daily

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Speaker 1: reset product that you're buying it for the appropriate period

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Speaker 1: of time and that it does actually try what it

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Speaker 1: purports to track, because those daily resets can kill you

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Speaker 1: when volatility is high. What a hydrocarbons tell you right now?

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Speaker 1: We ask Kate more of this JP Morgan Private Bank

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Speaker 1: this morning, and she was remarkably cautious about the mystery

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Speaker 1: of what hydrocarbon shares do. What do you think they're

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Speaker 1: gonna do? Yeah, it's a great point, and that's well put.

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Speaker 1: The bottom line is that energy stocks act okay. Here,

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Speaker 1: I'm actually a fan. I understand where the commodity markets

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Speaker 1: taking us, but I think equities should be all right.

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Speaker 1: They've actually been in line with the SMP so far

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Speaker 1: a year to date, and a lot of the bigger

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Speaker 1: names aren't even better. So I think that we're pretty

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Speaker 1: washed out. We see that in the money flows on

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Speaker 1: the E t F side, and we see that in

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Speaker 1: the price action. So I like them for here. You

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Speaker 1: also like gold. I do like gold, and that's that's

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Speaker 1: a hard one to like because it's been unlovable for

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Speaker 1: the last four years since those two thousand eleven peaks.

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Speaker 1: But they trade extremely well, and I do think even

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Speaker 1: if you're not pre uh destined to like a gold philosophically,

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Speaker 1: it's a really important market. Tell are you a technical

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Speaker 1: or a fundamental and gold. James Steele has given us

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Speaker 1: such good perspective from HSBC, but he's completely fundamental on

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Speaker 1: good demand dynamics. I would say I'm fifty fifty. I

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Speaker 1: totally respect that many many folks would need to look

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Speaker 1: at technicals to trade gold because it doesn't have those

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Speaker 1: classic fundamental outputs like cash flow to analyze. But I'm

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Speaker 1: also bullish and demand picture, and I think it is

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Speaker 1: one of those rare risk hedges that people will flock

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Speaker 1: to if things get more bottle Nick final question, pictures

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Speaker 1: and catchers, they all return. What will you glean this

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Speaker 1: weekend from pictures and catchers? It's spring training. It's all

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Speaker 1: about chemistry between pictures and catchers. You know, it is

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Speaker 1: the most important relationship in baseball. They've got to get along. Yeah,

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Speaker 1: just like smart. That's the smartest thing we've heard this week.

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Speaker 1: Nicholas with converge X with a really smart note about

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Speaker 1: breaking up the VIX and looking at a subparts. And

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Speaker 1: UH sees a pretty good market away from energy and financials.

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Speaker 1: Futures at negative six down, futures negative forty six yields

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Speaker 1: were in and there's been a really nice reversal. I

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Speaker 1: don't want to make too much of it on a

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Speaker 1: churning Friday, but nevertheless, the tape ugly two hours ago,

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Speaker 1: and we've had a nice little lift up here. Dollar

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Speaker 1: weakness fractionally yen one was much stronger earlier. We pulled

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Speaker 1: away from that. Uh the German two year as my

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Speaker 1: full attention, we had a full negative point five four

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Speaker 1: print to three digits down negative point five three four

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Speaker 1: on the German two year yield, West Texas thirty dollars

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Speaker 1: cents the barrel. Let's take it with Michael bar and

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Speaker 1: get the latest world in national headlines. Michael, mike Ton,

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Speaker 1: thank you very much. Livia was the scene today and

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Speaker 1: the fight against the Islamic State group. American warplanes struck

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Speaker 1: multiple targets, including an apparent Islamic State training camp and

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Speaker 1: a senior extremist leader. The US official, who did not

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Speaker 1: want to be identified, did not go into details about

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Speaker 1: the leader or the area in Libya where the air

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Speaker 1: strikes were conducted. The casket of Supreme Court Justice Anton

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Speaker 1: and Scalia will be on public view today in the

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Speaker 1: Great Hall of the Supreme Court Building. The justice's former

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Speaker 1: law clerks will take turn standing vigil throughout the day

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Speaker 1: and night. It is NASA's version of a trash incinerator.

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Speaker 1: A bear of astronauts aboard the International Space Station released

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Speaker 1: a capsule loaded with one point five tons of trash.

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Speaker 1: The capsule should re enter the atmosphere and burn up

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Speaker 1: harmlessly over the Pacific. Tomorrow Global News twenty four hours

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Speaker 1: a day, powered by our journalists and more than one

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Speaker 1: fifty news bureaus from around the world. I am Michael Barr,

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Speaker 1: Mike Time. We brought Matt Damon back from Mars. We

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Speaker 1: can figure out what to do with trash over the Pacific.

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Speaker 1: Stay with US worldwide Bloomberg's Surveillance. The News update brought

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Speaker 1: to you by Benzel Bush Monorcar in Englewood, New Jersey,

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