The reason i wanted to look at that index ahead of the Fourth Quarter volatility last year, months in advance, the skew index had been elevated sharply while the vix was basically sleeping. A big tell on the volatility we sought to the downside. Then the Fourth Quarter happened, stocks fell, the vix spiked higher. This year we see volatility indexes basically stuck in a range as the s p 500 is at or near its alltime high. We have the skew index back on the rise. The reason i point this out, it was rising well in advance of the asked years volatility. Something to keep an ion, especially when we have basically been in a period of strong complacency. Sarah i have been watching the all telling yield curve. When you look at the spread we are seeing a flattening today for the 6th straight day. That is the longest streak of flattening since all the way back in august of 2018. Not even those most this most recent august. If you look at the spread right now, roughly 15. 5 basis points. Still healthy in positive territory, however we are starting to get towards the lower end of that range that we were in for a while before that intense flattening we saw at its most recent august. Where is this coming from . It is being driven by the long end of the curve. Look at the short end of the curve, that is more anchored due to fed expectations being on hold. At the 10 year right here, really under an immense amount of pressure. Bond buying over concerns of hong kong, uncertainty over age phase one trade deal. We have seen the 10 year treasury yields now fall 20 basis points alone. With record highs earlier this week even with some pullback to that you looking at valuations that are near those cycle highs. Aboutterminal it is all that forward ratio coming in at 17. 6. All the way back to february of 2018 to get a ratio this high again. Was notingly, r. B. I. All scary news going into the earnings season. On the price side of things, thirdquarter earnings have been very solid in the past few years. That is expected to move the numerator higher on the dominant or side of things. They were looking for earningspershare growth drop of 3. 8 . All of those factors means that forward p e ratio is still climbing a little higher. Scarlet fantastic roundup. Thank you so much. Still with us is doug ramsey, and Bloomberg News fx reporter katie greifeld. Katie, when you look at what is going on with the consumer, it looks like the retail numbers came in and it seems to suggest if you have the right strategy, consumers will continue to flock and spend. On the manufacturing side, there are still questions on where things are. We get pmi data on friday. It is not it is market numbers. How critical will this set of numbers be . Katherine when i talk to people i often hear a lot of, we already know we are in a manufacturing slump and it is global. I think there is a higher sensitivity to those retail numbers, but after that october ism report i believe it was, it sent such jitters through the bond market, people have been looking at the market pmis a little more. It is not the ism, but people are so focused on the ism that any hint that the market number can provide, they will be looking for. Again, i get a lot of, we already know we are in a manufacturing slump. Joe doug, talk to us about what parts of the market you like. You like small caps. They underperformed a bit today. Big picture, they have underperformed for a while over the longterm. What is this moment right now that makes them attractive . I emphasize it is a relative call. We are not optimistic on the market here over the next one to two years. What is intriguing i think about small caps here is, i mean, the relative peak in small caps most recently was 8. 5 years ago. They participated in this bull market but they have lagged for 8. 5 years. What the has accomplished here ave seenrly 2014 is we h relative pe multiples. We like to normalize earnings, ala robert shiller. On that basis we have seen our smallcap universe though from a in 2014, p e premium coincidentally when the taper started by the fed that year, all the way down to 10 to 15 i am sorry, they have gone from 840 pe premium to a 10 to 15 discount. That is a massive revaluation relative to the largecap universe. Premium blewhat pe up, if you will, in the first half of the decade when qe was in place. Although the fed will deny it it is buying assets again. I think for the chance that you see some of that pe premium on small caps restored. So i think there is less relative risk even if we are in for a difficult period the next couple years because of that valuation discount. Caroline it is all relative. Lets get a quick check on some earnings. Fourth quarter loss per share . 28. Fourth quarter revenue, 294 million. The estimate was 289 million. Making an acquisition of an airelated company, a voice chat. Up. 9 . This company has soared in terms of share prices year to date. Katie, your perspective in terms of rotation and what we are seeing. Of course you look at bonds and stocks. Are we seeing more of this appetite go outside the u. S. And where the u. S. Is going to be winner takes all . Where you look at where the dollar might be going in post fed minutes, how many people are saying it is time to get exposure outside of king dollar . Katherine you are hearing a little bit about that. But we are entering crunch time for the u. S. And china trade negotiations. You look at the dollar, u. S. Treasuries, they are still the ultimate safe havens. There is a little bit abutting optimism about europe, about maybe japan. Is the next round of tariffs scheduled for december 15, which is fast approaching. Still getting negative headlines. When i talk to investors, i still hear a lot of cautious, a lot of, lets keep our exposure to u. S. Treasuries. Scarlet going abroad depends on the trade situation being resolved. Doug ramsey joining us from minneapolis, and our very own fx reporter katie greifeld. Thank you. That does it for the closing bell. Next we will look at the most anticipated date of public impeachment hearings yet. This is bloomberg. Here is a snapshot of how we market is today. Joe the question is what did you miss. Caroline washington getting involved. Gress plans to day for a public impeachment hearings in the most anticipated witness takes the stand directly connecting President Trump to ukraines quid pro quo. And coming to crypto near you. Zero Commission Trading first swept through funds and now entering the cryptocurrency. Romaine value stocks have been frustrating for decades. Now is notest says the right time to bail on value. Rob arnott joins us now from newport beach, california. Also joining us is Sarah Ponczek. Rob, Value Investors had a good bit of a run over the last couple months. I guess the overarching question is is this sort of outperformance we are seeing in value, is this going to be a consistent theme Going Forward . Rob my short answer to that question is that there is absolutely no way of knowing nearterm whether the turn has already happened or whether this was a head fake, a bear market rally in value stocks. But what we can know his value is trading extraordinarily cheap relative to growth as compared with all historic norms. And that when value got as cheap as it is today, it subsequently beat growth by an average of 6 to 8 per year over the next five to 10 years. So, id like to think if you are crossing a stream, forget the eddies, the shortterm eddies, look where the current is, enda curran has been adverse for value, but value is so cheap now that the current in the coming five to 10 years is likely to be relentlessly beneficial. What exactly does your fundamental index strategies do differently . Yes, it has been a brutal year for value over the past 10 years, but you guys have been leaning further and further . Rob first, lets define fundamental index. Fundamental index simply says why should we weigh stocks according to their market value . To be more expensive the stock is, the more money you have invested in it. If a stock doubles in price, you have twice as much money in it as you did before he went up. That means with cap awaiting you are assisting assuming that after a stock doubled its future upside must be better than it was before. That makes no sense. Why not wait companies according to how big they are, their economic footprint, their scale on the macroeconomy. Look at the stocks share of all publicly traded company sales, all publicly traded company profits, all dividends, all collected book value or net worth. You can take a blend of these and you end up with a nice measure of the economic footprint of a business. It looks like a value index, but it has a rebalancing mechanism that is very different from most value indexes. As value gets further and further out of favor, we dive deeper and deeper into value. As value recovers, we take on a shallower and shallower value tilt. Joe in order for me to intellectually get comfortable with this idea that now may be the time for value, i would like to know what is your theory or explanation for why value has underperformed for so long . Because obviously in theory, cheaper is better when it comes to investing, except that has not worked for a long time. So i am curious what it is in your view explains underperformance for so long and what it is about these conditions that would say maybe now is a good time for it. Rob the underperformance of value goes back to 2007. There was the crash in early august of 2007 in which value stocks, momentum stocks, smallcap stocks all crashed at the same time. Three days of horrific performance. But what is interesting is you go back to 2007 and you find value was expensive. That is to say growth is always more expensive than value but sometimes the gap gets pretty tight. It was in 2007 setting the stage for it on to underperform. Thehe gap gets really wide, likelihood of it rebounding gets greater and greater. The flipside of that is the process of getting cheaper is a painful process when it inflicts pain and losses along the way. And so investors get scared. They want out when they should be wanting in. Sarah i have to ask you, because you have been warning about the risks for crowding for so long now. We are all starting to see some traction on wall street, across wall street for the value factor. Could you ever see a point in which you start warning about value somehow becoming crowded . Rob absolutely. And givenk on 2007, the work we have done in the last decade, the signals were manifest that value was expensive, was becoming crowded space. One of my early mentors in this business liked to say whatever is easiest to sell, do not buy it. What was easy to sell into thousand seven was value, leveraged value, leveraged smallcap, anything with small value orientation and momentum. Oh my goodness. Double down and triple down. That is a crowded trade. And that would have been a good time to go easy on value. If we get back to those kind of valuation levels, then yeah, i would express some serious caution about value. At the time i was expecting caution not serious caution. Yesterday we were talking about the frustration of talking across purposes about what value actually is and what growth actually is, but also that both can go down, even if value does outperform relatively. Next year we could see both selling off. Where do you think the outperformance will come . The positive were to the negative . Rob it could be to the negative. We have not had a bear market since 2008 on that. We have had six corrections in the intervening decade, but we have had no bear markets. So, we are past due for a bear market. Sometime in the next two or three years we will get a bear market, no question. When you get a bear market, it tends to take all segments of the market with it. Ath growth trading remarkable valuation levels, the likelihood is a bear market would be very savage for growth stocks, especially the fangtype stocks. Happens, we would outperform by going down less. The place where you find actual. S. ,ains is in nonu especially european and emergingmarket stocks, on the value side. Avoid the trendy tech stocks, even in international markets. But value in emerging markets is trading at barely 11 times earnings, and fundamental index in emerging markets is trading at barely nine times earnings. Wow. If you can get 11 of earnings for every 100 you invest in a zero yield environment, that is a fantastic opportunity. There by dent of emerging markets have suffered, underperformed significantly getting you to these cheap levels. There are no bargains in the absence of disappointment to set the stage for it. Romaine rob, always great to have you on. And of course our very own Sarah Ponczek in new york. We have breaking news right now crossing the wire. Paypal, the company is set to require Honey Science for 4 billion. Honey science is a company that does a lot of those coupons and rewards programs through your browser extension. The news is paypal acquiring the company for about 4 billion. Caroline i have seen them advertised all over the subway. Meanwhile, they live up to the disappointment in terms of an 86 fall and earningspershare for the third quarter. The estimate is in line. We are seeing sales of 2. 68 billion, down 3. 5 year on year. It really is victorias secret in terms of direct sales falling more than 5 . Bath and body works continues to outperform, up 30 . The stock sold off by more than 70 7 today. This is bloomberg. Is is bloomberg. Caroline General Motors has hit Fiat Chrysler. It has to do with a bribery scheme that has sent United Auto Workers and officials to jail. Gm says it cost 1 billion. Gm alleges the late Fiat Chrysler ceo used bribes to corrupt the bargaining process. They had denied that executives amazon preparing to open stores. Expansion could include Licensing Technology to other retailers. The new store format could launch as soon as october next year. Uber reportedly will allow audio recordings of rides in the u. S. It is part of a new safety push. The feature will be piloted in some latin American Cities next month. Users will be able to report an incident and submit recordings to uber. That is your business flash update. Joe u. S. Ambassador to the eu gordhan sondland testified today in front of the House Intelligence Committee on the hill, saying the president and really giuliani and Rudy Giulianis dealings with ukraine constipated quid pro quo. Mr. Giuliani demanded that ukraine make a Public Statement announcing the investigations of server, election, dnc and marie summa. Burisma. Mr. Giuliani was expressing the desires of the president of the United States and we knew these investigations were important to the president. Joe for more on what we learned from sondlands testimony we welcome josh, who joins us now from washington. The big headline was that line quid pro quo, which has been at the essence of all of this. Poke holes tried to in this claim but they never made a statement entered into the investigation or anything like that. Nonetheless, what did you find to be the most compelling and expect beyond that headline of ambassador sondlands testimony . Josh you are right. That clearly was the standout point here with sondland. But the other piece that is important here is that sondland pointed the finger basically at the highest ranking people in government. He connected these allegations to the president directly through conversations that he has had personally with him. He said he had a conversation about this with Vice President pence in warsaw in early september. Byjustified his own actions saying that secretary pompeo was aware of what he was doing all along. John bolton, National Security advisor at the time. The list goes on and on. Thecally giving him authority and suggesting that he was not part of some shadow back channel to ukraine, but that was official policy. Romaine one thing i found interesting about this whole affair, specifically the way that sondland laid it out, but so far he is pretty much the only one we have heard from who really was not a career diplomat or career politician in some way. He was basically just a businessman, a Hotel Developer who fell into this job. He does not appear to have too Many Political loyalties. What is your read on that, and do you think his testimony could be a Pivotal Moment in these proceedings . Josh first, i think his testimony is definitely a Pivotal Moment. He was in a unique position among the witnesses that we have directrom to have that line with the president and also with the president of ukraine, where he was carrying on firsthand dialogue. As you know, part of the republican strategy up to now is to consider everything secondhand information, hearsay, because they could not put it together. As for sondlands background, that is a really interesting point. It was fascinating today because you could tell, most of the times when people come in, even as they are career officials, one side, either the democrats or the republicans, one side is friendly to them and the other is hostile. That is generally how it goes with these witnesses. And you would expect that for someone like sondland, who is a republican appointee. But today he did not know who his friends were because he was getting it from all sides. Caroline bringing all sides to us as well. Josh, thank you. Coming up, a mega share sale. Alibaba raises 11 billion in hong kong. We discuss that next. This is bloomberg. This is bloomberg. Here, it all starts with a simple. Hello hi how can i help . A data plan for everyone. Everyone . Everyone. Lets send to everyone wifi up there . Uhh. Sure, why not . Howd he get out . a camera might figure it out. That was easy glad i could help. At xfinity, were here to make life simple. Easy. Awesome. So come ask, shop, discover at your local xfinity store today. Im Mark Crumpton with first word news. As we have been reporting throughout the day, Gordon Sondland told has impeachment investigators today that he worked with three giuliani on ukraine at the express direction of President Trump and push for a political quid pro quo with kiev because that was what the president wanted. Thatschiff told re