Transcripts For CNBC Squawk Box 20240622

Another 32 points. The nasdaq looks like it would be down by 123 points. Again, this is across the board some rough times. If you thought you were going to see a rebound this morning, its not happening, at least not yet. Part of the reason what happened in china. Joe mentioned the shanghai composite plunging to a fivemonth low. Its now giving up all of its gains for the year. That decline of 8. 5 that came today follows a 4 decline from friday. Again, it has been rough. It has been difficult. Weve been watching what chinas trying to do. There is a general sense of not only a slowdown in china but also the idea that the Chinese Government may be losing control. Many investors had been expecting beijing to unveil more policy support over the weekend following last weeks 11 drop for stocks, that didnt happen and the disappointment over the lack of a move is evident. It is one of the big reasons for todays more than 8 drop. The rest of asia also closing sharply in the red. Take a look at what happened. The nikkei down 4. 6 . The hang seng was up by 5 . The shanghai composite down 8. 5. Shanghai, it is early trading. Red arrows across the board. The dax looks like its down 2. 5 . Similar decline in france with the cac. Ftse off by 2. 4 . These are red arrows across the board. Late summer trades making you sea sick, there are good reasons for it. Check out the vix. Thats telling us that august is now on track to be the most volatile month for equity markets in 25 years if you can believe that. The dow officially in correction mode for the first time in 2011. As for individual names, take a look. Here are some of the biggest losers. These are the dow stocks. Chevron, caterpillar, exxon, walmart, ibm, Procter Gamble and apple. So many of those stocks with either exposure to energy or to china. Also the s p is not in a correction at this point but about 39 of the stocks in the index are in correction territory. 31 in a bear market. Here are just a few of the names posting big percentage drops off their highs. Chesapeake energy, keurig green mountain. Thank you. People want to sell stocks in this country, fine. Go put them somewhere else. Thats a good idea. Where else . This 300, this minus 300, i dont know. I dont know. Where else . Have you got a better idea . No, i think people are keeping it in cash right now. Right. I know. But when they finally come around to deciding, you know, 0 Interest Rates, no inflation, ten year back to 2, oil at 39, look at our unemployment. The question is can you find stocks that dont have the exposure over there. Thats why you looked at 2000 on friday closed not up but came back. Yesterday . Yes. I actually read something that last year. I read something. Number one, thats the lead. I read something. Thats the lead. Big time. No, but it made the point that the yuan has been tied to the dollar recently and the dollars been very strong so that the yuan hasnt been held down, its actually been propped up. Been propped up. This was a minor, minor devaluation that allowed them the they tried to devalue by 2 . The market took it down 4 . Then they had to get a jump on the other side of the trade. Wheres then . In terms of being tied to the dollar, its not probably surprising. Probably a good move long term. Maybe its another communist at the New York Times writing this. It made sense to me, andrew. It made sense they were allowing it but they did not allow it to do that when the yuan was so strong. This was something that made people start worrying that the slowdown in china is a little worse than we had been anticipating. If they cant control it, its a messy exit. I think youre right, great news over the long term if they continue to allow the yuan to trade. We still have a nice house in a pretty crappy neighborhood, in the u. S. Our house is tied to other houses. Were in a global neighborhood is the problem. What scares me, then i worry about maybe the fed, theres people that love the fed, think the fed has done a great job. Paul mccally, they need to take a victory lap. Theres others who say we have answered every debt problem by issuing more debt. Were in a global sort of debt bubble and that thats going to be a problem. Thats what scares me is that even our company our companies do mean the the reason why apple has come down, i know we have our other issues about apple, its exposure to china. The huge reason why perfection at 785 billion, right . It may have a five handle today. I agree. Actually, 603 with the declines reflecttive this morning. I told you exxon used to earn 12 a quarter they earn 3 a quarter. Price to earnings earnings are not guaranteed, andrew. Thats why pe every analyst and theyve all been wrong, theyre sheep being led to the slaughter. Theyre coming in today. Will powers coming in today still at 155. All of them are still there. Nice to see you back. Its good to be here. My noyes is leading my face at this point. Still burned . Yeah. Sun tan lotion. Georgias hot. Its hot when you wake up, its hot when you go to bed and its hot in the middle of the night. Just like you. Anyway. Lets i appreciate that. Hot in the morning, hot in the afternoon. And you, andrew. Not you. Check on the Broader Markets this morning. Oil, its going back to 70 soon. I dont know, 39. Down 1. 43. And that, remember for a period of weeks or even months our market, our equity market couldnt go up as long as oil is going down. We have zine kildof who was right on this. He was looking for a 2 handle. He lowered it from the mid 30s to the 20s. That is unbelievable. Someone wrote in to me today, you still want to buy cattle instead of gold . At 11. 50. Its down today anyway. Heres gold. Check it out. Were supposed to look at that at some point or whatever you want to bring up there. 11. 55, down. Maybe it is time to start thinking about it. Tim grant is going to be on to talk about gold maybe is the put through. Someone is saying china is trying to get away from the single currency globally, trying to hurt the dollar and have it have currency go to a place it has the most gold so it goes back to a gold standard. That im having trouble following. I know, i was, too. And then lets look at the ten year. Is it above 2 or below . Its been on both sides of that. 2 point its about as close as you can get without going below 2 . Why should that be a surprise . Where is the boon . Its not a cake, apparently. A bundt. Chief International Correspondent t. Michelle caruso. They havent fixed that, have they . No, they havent. Correspondent. Its too long for the teleprompter. Thats my name. And we have david kats here as well, and boris schlossberg. Michelle, you want to you can summarize or you can go because emerging market currencies are scaring the crap out of me. They are. Obviously everybodys petrified that they have denominated liabilities. They are exporting commodities and commodities are down in the dumps. Its really, really hard all the emerging market currencies. The big question im getting is how come the euro is going up when the equity market is going down. Its a really interesting answer. Its an alice in wonderland world were living in. Whenever the equity market would rally the euro would go up and the dollar would come down. Everybody would run to the dollar as a safe haven, right . Now youre seeing equities down, what, 300, 400 points and the euro went to 115. I didnt think it was going to do it in less than 24 hours. The reason why is because euros become the carry trade dujour. Everybody has the most liquid currency. They invest in the risky assets. When the risk trade unwinds, everybody is buying back the euros. That is why you have this unnaturally high movement. Euro came in on steroids. Left wing. Bernie sanders is the best im sure you have, but you just completely avoided, michelle emerging markets. Coming home to roost, the feds and global Central Banks not being able to its not enough, apparently. What do we do . This is the slowdown everyone said better not happen because weve got nothing to do with it. Damn good question at this point. We dont. Can we go back to emerging markets and bring up the screen to show how strong the dollar is. Dollar weaker compared to euro but when you look at what its done compared to the emerging markets over the last six months, been much stronger. Yeah. We all feel a lot of pain in the United States right now. Were all very focused on china. If youve invested in a lot of emerging markets, many people have, they had all moved up the asset quality curve, right . You could be down as much as 50 , 70 because the stocks have gotten hammered and the currency has gotten hammered as well. Remember this about emerging markets, they are far more evasive in the american markets. We havent had a lot of pain . In the u. S. , no. Losing 10 . Thats my point. Look at the futures, probably 11 . Weve officially had a correction. Now we can start to look beyond. Its 6 11. The s p could be up by the time the market opens if we do our job. We hope. It could be up. You dont know that. No. But that is not a lot of pain compared to the rest of the world. No, because the u. S. Economy is actually doing pretty well. The mini market meltdown is primarily driven by the overseas market. If you take a step back, u. S. Economy, corporate earnings, Interest Rates, there are a lot of good things out there in terms of the u. S. Market. We think were closer to being done with the sell than starting the sell. There were five selloffs. The market regains the highs 30 days after the sell. Last october, november the market was down 8 . 35 or 40 days later it was back. You think theres a different type of selloff because one of the things we dont know is what the fed is going to do in september . If they dont theres no way theyre raising rates. Lets admit it. Theyre not going to. Whatever happens between now were going to be talking about this in december . Right. Problems always seem a lot worse when theyre happening. If you go back to last september, october, you had ebola which was a real concern. You had the Chinese Markets slowing down. There was a fear we were going back into a significant slowdown. It didnt pan out. We think the same thing is going to play out this time. A little bit more fierce on the down side. Youre telling people to hand over fists, buy anything you can buy . If you have a six to 12 month time line, we think buying is going to look smart. Youll look dumb tomorrow and a week from now but if you have a long time time horizon, stocks will make money. A lot of people have been waiting for a correction to buy stocks. When the correction happens its very scary. Jim grant is on later but thats the key question. Andrew, the road we cant get off. September is off, next year is an Election Year. This is what people warned about. Youre never going to get ahead. You get stuck when you dont have fiscal measures and Growth Initiatives to help an economy just keep using, you know, monetary still h monetary stimulus doing it. Do you support going in september . Just get on the board. I dont imagine they will. We still make fun of john claude trichet. Does she want to be that person . It makes no sense to raise just so you have a chance to earn more later. It could be a half measure to establish credibility. 10. 5 basis points. 10 . 25. So many things have happened when it comes to china, when it comes to the market reaction. Deflationary environment were looking at. What im saying they could possibly do this and communicate theyre not going to do anything for a long time. I will bet you 10,000 that they dont raise rates in zblept wow. Whoa im on your side, too. Im not arguing. Im saying what theyre going to do. Guessing the fed is like being a criminologist. I think michelle is right. The idea of looking like no, you think youre right. Theyre going to play the risk factors. Less risky to do nothing in september. They can change in december. When you look at what theyre talking about in terms of price stability, its inflationary. You have the yuan looking like its going to lower input costs. Oil prices have come down below 40. They have two mandates. One of them is inflation. One is working in their favor not to raise rates. Larry summers laid out a third mandate. He has an op ed. He laid out not just price stability and full employment, he laid out the third which is Financial Market stability. Thats the unpoke spoken. To davids point, if equities recover, were on the same thesis. We think the dollar recovers. This is a short the dollar comes back . Dollar comes back in strength against the euro. Emerging market current sis are different. Against major currencies it will come back. Maybe this is a journal pitch. This is what were going to have from here on out, 2 growth, no inflation, nobody not japan necessarily, no one wants to have kids because theyre not going to have jobs. This is when you fix things with monetary stimulus instead of underlying issues. You cant expect it to grow more. Thats depressing. Its amazing how around economy no, we dont think thats ultimately going to happen. What gives you on tow mimpt about because theres an election next year . Speaking with hundreds of Corporate Executives and short over the last couple of weeks, business is pretty good. Europe is in a recovery mode. Last week. This is prior to last week. You cant mark to the minute. If the market starts to rally because a lot of these problems will disappear. They said china is slowing down but it will be okay. Its a two quarter if he no, maam than rather than multiyear. What is that, dow jones . Market watch. No longer. They went back and looked at the previous sector. 82. And they did that. How far a percentage stock price hit to company that. In previous lows it would indicate 5,000 on the dow if it went to those. Whatever we talked about, when were talking about euro parody, when everybody talks about that, you know right. Theyre dragging out the 1929 charts showing how this is similar. All the pictures in the papers. Exactly. The big phrase in 87, 11, 29, everybody came back on monday and they realized how much when they sold the market. Today theyll buy them. Does the dow finish positive . I would think so. Beckys vacation interruptus. Better be there. Thats what im hoping. I dont think im back the rest of the week anyways. Weve extended our special last night. We need to go 7 to 9. That indicates the bounce. I thought that would mean a bounce this morning. Thanks, david. Thank you. Coming up, were going to continue the conversation. Crude realities at this time. Prices dropping 3 today. Well talk to citi analyst whos been calling for 30 a barrel. Plus, big oil makers still paying big dividends. Will that change soon . We have that story ahead. First, here is a look back at this date in history. Welcome back to squawk b box. In youre just waking up, the sea of red. Heres whats happening. Dow looks like its going to open even worse than before. Now looking to open down about 380 points off. S p 500 would open off as well, 43 points down. The nasdaq would open off 155 points down. In the meantime, were going to talk now about oil which is pressuring all of well see if its pressuring all of us. Theres a good side and a bad side. Many Energy People are talking about it. Kate kelly has the story. Thanks. Are they going to keep paying costly dividends . Most companies have done everything they can to keep investors happy with capital costs and rig lay downs and preserving their dividends. Interesting numbers there. Some pretty Major Players including conniconoco phillips. Chevron and marathon at 5. 3 . At the current rate chevron spending 8 billion a year on dividends. Conoco phillips spending 3. 6 billion and chevron 7. 9 billion. If friday is any indication, that picture could get worse. Chesapeake industry has eliminated their dividends to see their pressured stock be hit with a 10 down turn on that news after a shellacking of 30 cumulatively in three months. Conoco phillips raised the dividend a penny. It took a nine figure writedown at the same time to cancel a deep water drilling project and reported a quarterly loss. In Going Forward those decisions may be tougher to justify in terms of spendsing so much money. Obviously shareholders want it but if the core business is in a lot of trouble it may not make sense. Do you know what some of these companies are thinking in terms of their forecasts for oils . Have they run the numbers . It falls to 30 or below . To be honest, i think, yes, they have. They havent really shared with us whats going to happen in the 30 environment. There are places where its super cheap to drill. I was talking with a guy from apollo natural resources. Hes in the north slope of alaska they can drill for 30 to 40 economically. So it really depends whether the infrastructure is in place and what the local an regional costs are. As long ago as in april i was at the sierra conference. The company was saying it was going to be lower for longer. I dont know if they were expecting 30 handle. They were looking to 6, 12, 18 months of a prolonged slump in prices. Theyve been preparing for it. The request he is can the medium or Smaller Companies survive it. Why do they see a longer handle . I think its a combination of all of the issues on the supply side especially. Opec, they drew a line in the sand last november. They said were going to keep up with the output. Were going to pressure the u. S. Shale drillers. Opec is close to 32 Million Barrels on a day on a 30 million quota. What do you think is going to ham to the shell b. P. Deal. I dont know if you saw the arb spread, its widening over 12 . Shell bg . Yes. I havent heard that its falling apart. Obviously shell is one of the bigger players. As a matter of fact, speaking of more expensive oil, theyre going whole hog into the arctic, they are saying they want the 10 to 20 year oil play. In terms of that acquisition, tough to say. Liquefied natural gas which is a story continues to be a relative bull story. Youve seen a decline in shares late and activism, but that stock has been pretty healthily valued based on l and g exports. I think that continues to make a bright spot. Ill be making calls. Iran said we will increase production. We dont care what happens to price. We need market share. If we dont, keep it down. Market share game. Well lose it forever. Thats the way it is with everyone. But what i would think is going to happen is were going to see if this continues, price regime, huge turmoil. Bankruptcies, venezuela, countries like that things will get worse. They were depending on flat prices north of 100 a barrel in order to balance their budget. Its going to get really tough in the pockets of production. Think long term if you were to say were going to have the entire Planet Energy costs, whatever it costs now, were going to cut it in half and its going to stay that way. Long term thats go the to be i read something that even over the course of the year for u. S. Consumers alone 180 billion extra. Instead of energy and butter thing. Whats interesting is in the first few months after crude got super cheap people were saving the money, right . They didnt expect to see cheap gas prices persist for so long. In fact, weve seen some selective refinery issues and things where in california and maybe the midwest gas isnt as cheap it is as in other parts of the country. Kate, thanks for coming in today. Thank you. There is one more analyst saying that theres a 90 chance that 30 a barrel oil could be a possibility. Joining us now with more on the call is chris ming. Is he Oil Strategist at citigroup. Chris, youre saying 90 chance that we get to 30. Why is that . What goes into that calculus . Well, it was 90 chance that we get into the 30s which weve now done but what i would say given trading with a 38 handle and the reality, if we step back right now were at 39. 90 30 were already there. 39 and change this morning. Yeah, that was the call last week. Now its a question of how low can we go . And the 30. We were trading in the 39 level in the section lafs week. Agreed. Now we can conceivably go to 30, 32 a barrel into the fourth quarter. The global prices remain. We continue to see crude oil going up. The u. S. Crude market, we lose 1 billion a day. Imports are expected to stay strong particularly from canada and the crude supplies continue to look pretty strong. So if we continue to put crude oil into tanks, take a look at where time spreads are. The sixmonth time spreads have traded eight months to tango. If we take another 5 off oil. We can get to 32, with china. Oil is given, one, fundamentals, and you have to look at money managing position as well. People at the highest net shore at wti even though were at extreme lows in the up side in the market. I should point out that even this morning this is changing so quickly. Wti is at 38 . What would it take to turn that sentiment around to 45 a bar barrel . Youre not going to do it on the demand side. You have to rachet up the supply side. One is a failure of the iran deal and that president ial veto gets overturned. The market facing half a Million Barrels for next year. That can definitely change things quickly. Also perhaps a restriction of capital for u. S. Shale guys. From an Economic Perspective things have looked okay. Shale has looked a lot more resilient than the most optimistic in the markets. If the yank the capital chain that can change things particularly given how short the market is at the moment. Things can change to the up side relatively quickly in terms of liquidation of their positions. Chris, thank you very much for joining us. Coming up, more on this mornings Global Market selloff across most markets. U. S. Equity futures and china having the worst session since the financial session. Mark grant, makes a new call on the ten year. Stay tuned. Squawk box will be right back. No students ever been the king of the campus on day one. 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Lets start with sri. Theyre calling it black monday. Its not me. This is coming from the official Chinese State media beijing isnt even putting a gloss on all of this. 8. 5 at the settle am. This is the biggest one day percentage loss since the Global Financial crisis, since february 27th, 2007 to be exact. What fueled the selloff was disappointment among investors that we did not see a policy response from beijing over the weekend. Remember, we saw some very digs appointing factory data last week. The market broadly was off by 11 . Hopes were running high that we would see some sort of response, some sort of policy response from beijing. We didnt see that. We could yet see it but a lot of people are telling me it has to be bold in order to make an impact. Thats the damage report over here in asia. Let me hand it over to seema modi in london. Sri, european stocks under a significant amount of pressure. The stocks sevenmonth index, a sea of red. There was an overwhelming majority of economic shock related to greece and the european economy. There is only so much they can do for china. Take a look at the european markets. The xetra dax is trading in correction territory. Down 2. 8 and breaking below 10,000, a level it has not traded at since earlier this year. Take a look at the stocks, the autos which of course rely on chinese demand selling off. You can look at daimlier, the owners of bmw. Miners weigh in heavily and the beijing billit down. Becky, the chinese worries being felt over here in europe. Seema, thank you so much. Thats seema modi in london. Lets get more on the Global Market selloff with mark grant. Hes the manager director at southwest cumulative. At this point youre thinking the 10 year heads to 1. 75 . Why do you think thats the case . I dont think the fed can do anything in these markets to raise rates. Youre getting a tremendous down draft. Deutsche bank says the Global Equities markets have lost 5 trillion. Youre 3 down for euro stocks, the dax. If you said an equivalent you had some perspective, if we were down 2. 75 , thats down 452 points on top of friday and thursdays losses. This is a falling knife. In terms of what happens beyond just 1. 75 , mark, we shouldnt say you were right all year, last year and this year, about lower Interest Rates coming back through. Thank you, becky. How does that play out . What does that mean for equity markets and in terms ever where people should be putting it. The safe agent means taxable munis and bonds centric to the United States. Oil is getting decimated. Its 38. 89 right now. It went through 40 like a sharp razor blade. And the situation in china is bad. If you think about it, becky, they were down 8. 5 . If america went down anything like that youre looking at 1400 points down on the dow, which i dont think is going to happen. But i do think its likely were going to be down significantly. Ive been telling the large institutions that ive been talking to and speaking with to cut back significantly on their position in equities, go to bonds, be in safe places, reserve capital. Put a fine point on it to the extent you can. Falling knife. How far is it falling for real . Well, if oil keeps going down, andrew, to the 35 level, technically the oil is just a cream, you could see a couple thousand points down from here in the dow down in the 14,000 area. And if the situation in china deteriorates and then if greece blows up, if the new party in greece and then they say they dont want to pay the bills to the e. U. , you could see a lot further down draft than that. The best Case Scenario . Well, you know, remember when i was on with you last becky i said flat maybe to down 20 . The flat was obviously torn out immediately. Best Case Scenario over the next three to four weeks. There is just a lot going on and to not recognize it is to be silly in my opinion. Thank, thank you for calling in today. It would qualify as a beer. From hd. Coming up, more on the china fears. Well talk with the director of research at the carlisle group. First, as you head to break, heres a warning saying investors have underestimated the slump in the economy there. Its worse than you think. Whatever you might think, its worse. I think i can pretty confidently say that. Weve been saying it for five years. I think the biggest lesson over the last three months for me anyway is that i think people are beginning to finally realize that the Chinese Government is not omni potent. Thats how they have the run up in their market, panicked responses, devaluation, nondevaluation. Various different mixed signals coming from the very different ministries. That has given them pause. Sometimes they dont have a include. Can a business have a mind . A subconscious. A knack for predicting the future. Reflexes faster than the speed of thought. Can a business have a spirit . Can a business have a soul . Can a business be. Alive . Welcome back, everybody. If you are just waking up this morning you might be wondering where things are. Guess what, that sea of red is continuing in the Global Markets this morning. Check out where things stand right here in the United States. After a decline of 1017 points for the week last week, the dow looks like it will open down 367 points this morning if things stay where they are. The s p futures are down 40 points and the nasdaq off by 150. Chinas main stock plunging 8 . Lets bring in jason thomas, the managing director and director of research at the carlisle group. Michelle carrera is back this morning. One of the questions we havent explored about china is the Systemic Risk, jason, to the Banking System and what really happens from here and whether there is really a Systemic Risk beyond just the broader questions about the economy. The Systemic Risk in china is a key concern and the reason they decided to intervene in the equity market. There was a five fold run up in Energy Credit that helped fuel the boon. There is a legitimate concern that too precipitous a drop could lead to losses on those loans, margin calls that could erupt into a more systemic crisis. The initial response had been to stem the declines so as to take that risk off the table. I think that the scale of over valuation was such that chinese authorities begrudgingly came to the conclusion that these resources could be better spent elsewhere creating systemic safeguards. When you think about the shadow Banking System, michelle, and people talk about the money market business. Sure. Whether were going to see it in some way that we havent thought about yet. I would say two things. I think there could be tremendous disruptions. I think there are tremendous disruptions going on in china. Walled capital. They do not let capital flow freely over the borders. That means two things. We always complain they should be open. Actually right now it seems to be a good thing for the rest of the world that they can wall off the place. Two, americans dont have direct exposure to china because you werent legally permitted to own stocks there. However, the emerging markets where many, many, many people are invested, thats where youre going to see the possibility of Systemic Risk because they dont have capital accounts. Theyre letting their currency fly freely. And the level of emerging markets is much higher now than we saw before. I think thats where people are likely to feel the pain and feel like they have some kind of china systemic exposure even if china itself walls itself off. Its probably a surprise for relatively new investors in overseas market, the idea may not have occurred. No. Brazil had achieved Investment Grade status. If you invested with dollars, the currencys gotten hammered, the stock has gotten hammered. Youve lost big time. Yeah, i think its going to be shocking to a lot of people. Jason, one of the things overnight that folks in china seem to be upset about is they were waiting for some kind of policy response from the government and it did not come. What should have or what were they waiting for and what should they be doing . The announced devaluation of the yuan is a reorientation of Monetary Policy as well as a way of domestic reflation. I suspect the peoples bank of china will in the near future cut required ratios, reduce policy lending rates, liberalize lending rates further. Ease domestic financial conditions and help to address the deflation in Producer Prices in china, help to put a floor under industrial input prices. I think that is the orientation of Monetary Policy Going Forward. Do you want to make a bold call here on what the what the stock market in china is going to do over the next even couple weeks here . Well, you know, when we were looking at the market totaling ebitda for all companies as of june 30th, it looked as though the market was 25 to 30 perts percent last week and today have cut into that significantly. Theres significant risk of over shooting to the down side. If fair value is another 10 to 15 away, perhaps theyll go through that, but, you know, you have the natural situation in markets where risk premium are rising. When risk premium rises they have to be shifted downward. There are longer term investors who see very attractive opportunities. When that occurs youre going to find a bottom. We will be looking and waiting for the bottom. Coming up, the nasdaq is now in correction territory. This story is not all about traditional technology. Were going to talk about which ones arent going down. We dont have a chair segment today. No. We cant talk about any we can talk about fun stuff. I saw the look on your face, when you go you are crushed by the market. We will talk about biotech a little bit next. We stop arthritis pain, so you dont have to stop. Because you believe in go. Onward. Todays the day. Carpe diem. Tylenol® 8hr arthritis pain has two layers of pain relief. The first is fast. The second lasts all day. We give you your day back. What you do with it is up to you. Tylenol®. Welcome back to squawk box. U. S. Equity features down 370 points. Lets turn to i guess an area that probably maybe we shouldnt be surprised, biotech. One of the hottest strongest, even janet yellen, she mentioned this way too early, obviously, but media stocks and apple and biotech, you knew the biggest winners are the ones that can pull back a little. Thats why people are worried about biotech, if you look at how its performed this year, its up 12 for the year still. Sometimes that 14 drop just within the last month for biotech. When you look across biotech, everything is feeling the pain. Folks tell me you have to separate it into the two buckets. The big biotechs, the growth fames the smaller speculative ones, gilead and cell celgene. Biogen had a tough quarter. You sure those are biotech stocks . You want to call them pharma . I do. Gilead switched over into that category. Folks are talking are those more far ma, biotech . If you look at the traditional biotechs a large molecule, we wont get too into that. When you look at the more speculative names people are concerned ability. They had such big runups, cars and smaller names, juno, kite, bellicum and cellectis. Maybe if they take a harder fall. Maybe they need to. They came up too much . It looks like it is down. 5 . I guess that was after the markets began. One other interesting theme here, there are a few deals in biotech and far ma, folks tell me a selloff and the difficulty making money this year maybe puts more pressure on the sellers the targets there. Because the folks in that stock, they want to cash outing make their money before the year ends. Its hard to decide whether what is more vulnerable. A stock not trait trading on metrics length. What does, how do you value that . You dont value it on any type of normal financial metric . So is that more vulnerable or less vulnerable than a big batch where you know exactly where the pe is, what Revenue Growth is, all that other stuff, which is more vulnerable . Folks tell me its the smaller ones. Those are the dreams. Have you no idea how big they might be. When the entire environment changes, people arent feeling optimistic. I talked to one longtime investor yesterday who told me he sold every single one of his biotechs in un. Christina . Not to end on a sad note. There are a lot of good stuff on biotech. People are nervous. You should never be really sad about money, guys will get beheaded and stuff. We need to watch. Thats true. I have a lot of things to be said before anyway. Thank you. When we come back, this mornings top stories, of course the Global Market selloff, china is suffering its biggest oneday percentage drop. We will talk about it. Now futures are pointed to a sharply lower open here at home. 361 points. We have it all covered. You are watching squawk box right here on cnbc first in Business Worldwide. When youre not confident you have complete visibility into your business, it can quickly become the only thing you think about. Thats where at t can help. At ts Innovative Solutions connect machines and people. To keep your internet of things insync, in realtime. Leaving you free to focus on what matters most. Every Auto Insurance policy has a number. But not every Insurance Company understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. Market in turmoil. Breaking overnight, stocks in china dropping eightandahalf percent. U. S. Equities futures lower. We will take you into the global selloff of to him lee. Crude off a cliff. Oil falling below 39 a barrel hitting its lowest level since 2009. The impact on Global Growth and the price of gas at the pump straight ahead. A fed rate hike now could tip the Financial System into crisis mode. Will the selloff change the Central Banks plans . We will have market watchers as the second hour of squawk box begins right now. Live from the beating heart of business, new york city. This is squawk box. Good morning again, well come back to squawk box, everybody, this is cnbc. First in Business World wide. Im becky quick. We do have breaking news why overnight. Chinas shanghai composite giving up all the games for the year him policy support was expected and anticipated in some camps. They were thinking that may come over the weekend. It never came. It fuelled todays drop. At the end of the day shanghai down 8. 5 and the nikkei in japan down by about 4. 6 . China regulators announced yesterday, Pension Funds would be allowed to invest in the stockmarket for the first time. Obviously, that was not enough to stop the bleeding. Meantime in europe the selloff there deeper through the course of the morning, too. You can see at this point it looks like the dak is down by 2. 75 . When you take a look at the United States, after a decline of 1,017 points, it is now indicated to drop another 60 points this morning. S p looking like it will close down by about 60 points on friday alone. The fax looks like it is down by 145 points this morning. The dow now officially in correction mode for the first time and take a look at the price of oil this morning. Its been getting sliced all morning long him we saw it close or fall below first 40 and now 38. 94. Hitting its lowest level since february of 2009. Its interesting. You can look at that a kunl ways. Lets get the pensioners involved now in this. Since we dont want to ice ourp money to try and support. They have been using their money. Lets bring in more bag holders. In this case, pensioners. Its a weird. There are 97 billion . I think it was 40 billion on the yuan alone. With the other markets. It was 97, somewhere around 100 billion. Wow, this is who else can we get to prop up the markets that doesnt instill confidence . No, it is not. Unless you think its keep. Right. When we were going to take all Social Security and let people put it in. Remember . Let people put their own money in, anyway. Mash it was, im not saying it was. For more on the market selloff and the stocks and the countries in bear market territory right now we are joined by domenic chu who probably did not get a lot of sleep. No, sir. Its the times when the going gets tough the tough get going, Something Like that. It is. I got to say im a little sleep deprived. There is a reason why. Its always fascinating. When you look to china, at one point it was up 66 yeartodate. It gave up all those gains, the shanghai deposits. Its bad here in china. Not as much. The u. S. Is very much a more developed markets than whats hang in china. Lets look at the broader s p 500. We have through fridays close, hit some big mile stoens, first of all, the S P Technology sector. The sector that matters the most. Its the biggest one out there. That sector alone has 40 of its stocks or 27 of 58 components in bear market territory. Thats again drops of 20 or worse in the tech sector. It matters a lot. That sector has a lot of fire power. If you tack the ones down 52 of the companies, a big swath of the most important sector out there. If you broaden it out to the s p 500, things get different, energy makes up a huge part of it. We know the worst performing stocks in the s p from its recent highs, chesapeake energies, its not just them, kurig. Green mountain, flash memory. Michael kors, united rent also. Whole foods, biogen. Trip adviser. Hp. The entire market overall has seen its fair share going down in that bear market territory 20 or worse. One nor thing i want to show you, interesting as well. You look at these things globally speaking, the overall markets in bear market territory i mean broad countries benchmark wise, china, greece, saudi arabia, board of trade, indonesia, nigeria, a lot are leveraged to the price of oil. We know as oil prices go down. These guys will go down with it. Heres the interesting part, joe, germany, becky mentioned how bad they are. France, all that stuff. Germany is now flirting with or right near bear market territory for that dax index, the main benchmark there. Its not the oil providing companies, its developed markets in europe as well feeling all this kind of pain. Back over to you. I know that you shouldnt get bad at the weatherman when he, you know, says the weather is horrible. But did you know what kind of report you just did . Were you looking at those numbers . Am i supposed to not associate you with this in some negative way . Thanks, for that report, dom. I hope you dont. This is the dont kill the messenger please. I would like to tell you that things are hunky dory the reality for all those people out there, theyre saying things have been due for a pullback for a while, remember the last time you said we havent seen this kind of a pull back since 2011ch it was april to october of 2011. But remember, when that happened back if 2011, we saw the s p drop by like 17, 18, 19 . So it could have more legs in the tamp down side if this holds. No kidding. You have to do that. Now we sit down 400 now. The markets Pay Attention as well, dom. This is your job. This is what you got to do. Really, i could ask you to find some bright spots, they are far and few between. This is up an eighth. I will tell you there are some spots in the Market Holding up better than others, throughout the course of the day, we will bring you some of those at least hieshlths remember one brought spot still there is health care and consumer discretionary. Those two sectors are the only ones still green on a yeartodate basis. We will look at the Industry Groups later on today there as well. Home builders, believe it or not, that housing sector is holding up relatively well in the u. S. , guys. The u. S. Probably still i mean if you going, if you got to own stocks, maybe you want cash, if you got to own stocks, maybe the u. S. Is probably the top place that you can, thanks, dom. But certainly no dom perignon. From here, tom lee. Founder, head of research. He is with us in spirit. The Capital Market strategist. You have been here a while and right is your faithal all shaken at this point or . Its been a tough week. They might look around say, well, you know, its not like Business Trends have absolutely collapsed. But we have seen things weak for a while. Whether its china and oil. I think the downturn really is disturbing. But has this changed the thieves . Does this signal the end of the bull market . I think its only possible if we have a global recession t. Odds are low. Is the u. S. Consumer going to wake up and suddenly decide to bunker down and that caused the global recession . When you think about the Systemic Risk that exists either in china or as michelle was talking about the last hour really in the emerging markets. I think what has to ultimately happen is a big deleveraging cycle. If this was enough to cause financial conditions to tighten and all of a sudden we see stresses develop either in the Banking System, i think thats what can trigger a global reception. Absent that. Is there a connection in the Banking System you see right now . I dont think were seeing enough, that type of stress develop in the Financial System. Jonathan has some similar ideas, i like the first thing in the notes, though, no invisible catalyst for a pullback jonathan. You need glasses. Seriously. What story is here. A debt bubble, relying on zurich eight years to get any growth at all. Only getting 2 . China absolute crapping its whatever. Huh . Joe, few look at where the volatility is in the market where the vix is. This t is the daim same as the day bear sterns collapsed. There was no specific news item. We have been talking about a slow environment with weakness out of china. I agree with tom, what would drive this down if something ends up hitting the global liquidity market that hit the Banking System, today we republished our recessionary sco scorecard there are certain things, preconditions you need to see. I need to see the yield curve invert. You tend to see lets say employment activity roll over. We are not seeing that. The ism 71 of the last 22 month has been over 50. It is clearly the market is stressing over growth. But thats not the same kind of things that should drive a market down substantially more than this. You and tom talk about the things to worry about that derails a longterm bull is a recession. And both you and tom dont see necessarily any signs of it. But thats the one worry when you are at zero that is the scariest thing. What if there were to be a slow down, we have no tools left. You know murphys law. You never know, its hard to use coincidence indicators to know whether a reception is coming isnt always the best way to do it. Thats the scariest thing. We got nothing. You can go back to qe. What if its a global recession . Tom raises one other thing i agree with, is there are a bunch of liquidity measures in the Banking System that you would see go bad in the near term. There are leading ways to see if a recession is coming, you are saying . Or if there is a pickup for this to become unravelled. It looks like equities are basically separated from the fundamentals on this, yeah. I think domenic said something interesting, leadership yeartodate is coming from groups, like the health care the consumer. We understand health care, consumer because of lower oil, but the fact that housing, which has been a rockstar yeartodate is a really big deal. You have to remember, housing has been dormant. Now we are seeing like a pentup demand, right, house information which has been absent seven years suddenly exploded the last three quarters. Housing does move the needle. You have to remember, housing leads expansions, every new home built creates 280,000 of Economic Activity and creates four full time jobs and start here, trending toward or ultimately getting to 1. 72. Thats a huge deal for the u. S. Economy. So, you know, i know people worry about china. In the next five years, i think the real thesis is its driving mobile growth. Thats what the markets have an unequal elittquillibrium. You are naive to think we can do it alone . If you think of the cohorts, obviously, its a huge story especially for commodities. This is 1. 995 . We spoke with market grant in the last hour. He thinks the ten year will head to 1. 75 . He thinks the u. S. Bonds are the safe place to be. Not just treasury, taxable munies. This shows you how much concern it is, thats the safe haven. Risk of version. The other part is if the markets starts to assume the fed is not only off for september but increasingly may be off for 2015, its going to push Interest Rates lower and that does put some floor under the system. You know, so there are definitely some bullets left in this. The first is taking awhatty view the feds will be tightening. Okay. So zero growth the rest of eternity. Either one of those things is that great, i dont think. No one wants to borrow money. Theyre fought doing anything with it. You really think lower yooeld yields can help at this point, jonathan . Do i think . You know, right now on the margins, if you said what are the bullets when the fed has thor is are on the shortened, the curve flattens out a little bit and probably, yes, incrementally thats going to put some support here. I think you are right. We are in a Slower Growth environment. Which is why the biotechs and health care and Growth Stocks are doing so well. Because the economic cyclical names have not been a winner for quite a while now for the reasons that you point out. I totally agree with that. Does the fed not raise during an Election Year only when its someone running for reelection . I think the feds are fought political. All bets are off. Normally in december, thats looking less likely, 2016 is it on the table . I think it depends on where inflation begins to develop in the employment. Its possible. Its not on the table . No, i think its possible its either way. Thats great. Nine years without a rate hike. Finally go a quarter point. This is weird. Its a disappointment, right . I think markets would rather see inflation and hay the feds saying, hey, look, the economy is Strong Enough to deal with this. Thanks,. Okay, everybody, when we come back the blood bath and media stocks also getting worse until last week. Analysts will join us to clang the media landscape 679 much more on the Global Market selloff. This morning jim granted will join us to talk about the impact on the fred and ubs is here to talk about growth fears when we return. Welcome back to the selloff, disney down 12 . Via com and netflix had been one of the biggest gainers down 21 in a week. We were talking before the show begins. Quarter bid, though, is the managing partner at media tech capital partners. We try and understand where this is all headed. Joe made an interesting point before the show began, which is all of these stocks, these Media Companies that are losing, shouldnt that all be going to netflix if you believe the simplistic view with a lot of analysts we had on is the old media losses will be netflixs gain. Not only should netflix have at least held up. If you added the market cap losses of viia com, time warner, disney. That should be 300 billion. It shouldnt have gone down. If its that simple, the netflix takes all the eye braul, netflix shouldnt be going down more than old media. It actually should. Ned flicks at some point has to start making money. Its making very little. Very little margin business. Lbo four times the profit of fet flicks. Yeah. Approximately the same number of us subdescribers t. Secret is it costs 8 a month. People dont bother to can sell, theyre waiting for the next house of cards or orange is the new black. They dont watch it that much. We keep hearing people with netflix are spending two and three hours a day watching. I dont buy that. Im waiting to give in and put advertising on netflix in one form or another. Hes got to much the profits up. Does that matter . Are people bothered if they put advertising as a stream . There are ways to do it. You dont have to stop the movie in the middle and give a break. This is brought to you the head and tail of the film. But theyre making no money and the off Balance Sheet liabilities for content that haftdings bought for the future. Doesnt have to pay for until it airs, there is not a sustainable model there for netflix. Put the whole land 12k345i7 context. Given the Broader Market selloff. Then you put media in there with this seismic clang in terms of thinking in the industry in the past couple weeks about cord cutting. Heres the real story in the Media Business right now. Its a buying opportunity. Watch for colbert and fallon. Colbert has half the youtube visitors for his Justin Bieber videos versus jimmy fallon who has almost 65 Million Viewers for his celebrities lip syncing. Thats where the promotion is. There is no money in the networks. Its promotion. Cbs has a lot riding on colbert. They cant get him out of the gate fast and bring in the advertisers, there goes cbs. There goes colbertert hes not grabbing attention. It doesnt bor me. He actually takes a shot at me. I dont know how many times i can go, and then from this angle. And then from this angle. That itself all he does, on the promos is wave like an idiot at me and then. Hes waving at you, you think . Sfwr well, he is. I think he was. But the promos are not, im not ready to say this is going to be. You have gone so far if colbert goes on network. No, late night is a very important component of the profit picture. So did. Was there something in the pace of cord cutting or what millennials are inclined to do . Did we see something in disney to explain the size of the pullback we have seen . Out of 80 million paid tv subscribers, we lost a quarter of a million in the last year. Speaking of tsunami. We talk about this all the time. Were similar, of similar generations. I dont like change. I cant see it happening. My daughter says she can live with netflix. I cant. Every time i see a moy, you know what it says, here are some movies similar to the ones i will allow you to watch. It was on demand three years ago for me to find movies to watch. If netflix wants to do something, let them go out and bid for live sports. That itself driver on paid tv. Thank you. You are coming back. We are together on that. Andrew. Well, tell me what you think of via com. Right now, somebody must be dying of death. He is only 92, yet his company has gone down, down, down, he has a value of 9 billion ret now. Its a terrific buy. Yeah. Thats two one you have been right about. Distribution. All the heads of these sustained glass new yorker. The turtle network. All these things. Its still more profitable than netflix. Wouldnt it have been a different situation if it never split . That was crazy. He thought he would get one and one would equal four and five and one and one barely equals two now. Briefly, time warner. Why dont they do what google did and spin out or make tracking stock out of hbo . Because hbo is a stronger competitor than net flicks is. It bakes money, its got great content. What does that do to the rest of the time . Hbo is a crown jewel. Time warner is a holding company. Take the ride on hbo. Did you watch fear the walking dead last night . No, i did not. Im not a vampire. Im not a zombie guy. Anyway, im reading all the comments. Some are saying after the first episode, im hoping for the zombies. If the characters are more than one shot. You got to give it more than one shot. Amc is typical though of the marginal networks that cant survive if they dont keep coming up with hot content. Thats not easy the only people to do that is hbo. Thats tough. I need to see hoy this started. See, thats already well into the i want to know how in l. A. Man where it already seems like its starting. Come back to netflix. How can you justify 330 times . Its acquired. We have people coming in saying, sell everything and put all the money into netflix. The socalled smart guys are saying, its a now shift from content distribution. Its not. Content will always be thank you, thank you for being here. Thank you. A pleasure. Appreciate it. I hope you were listening. Very much. Go for it. When we come back the morning, we got more on oil prices plummeted. Gas prices holding steady. We will tell you what to expect when you fill up your tank this week. You are looking at two airplane fuel gauges. Can you spot the difference . No . You cant see that . Alright, lets take a look. The one on the right just used 1 less fuel than the one on the left. Now, to an airline, a 1 difference could save enough fuel to power hundreds of flights around the world. Hey, look at that. Pyramids. So you see, two things that are exactly the same have never been more different. Ge software. Get connected. Get insights. Get optimized. Every Auto Insurance policy has a number. But not every Insurance Company understands the life behind it. Those who have served our nation. Have earned the very best service in return. Usaa. We know what it means to serve. Get an Auto Insurance quote and see why 92 of our members plan to stay for life. Welcome back to squawk box, everybody, on this monday morning, after a pretty horrific week for the markets last week. You can see how this is continuing to play out this week. Crude actually dropping below 39 a barrel earlier today, its just above that at this point. But still well below 40 at 39. 07 for wti, a decline of 3. 4 . The average price of gasoline by the gallon in the United States remains steady over the last three weeks, crude oil prices fell. The rising prices in several midwest cities offset prices to the west. This relation unit at bps refinery remained closed for repairs. It kept prices higher. It is expected to drop as much as 20 cents a gallon in the coming weeks if prices of oil remain at these levels. And a broad market selloff this morning. Check out some of the financial names that are a part of the selloff. Banc of america, j. P. Morgan, goldman sachs. Twitter, facebook, linkedin, yelp. The rest down 3 . Yell subpoena doing terribly off almost . Kind of hard to figure out exactly whats going on with those stocks relative to the world. Rapid reassessment, valuations. I will say if you look at technology broadly, including social media stocks, the private market valuations for so many tech companies. Thats a complete disconnect that will have to come undone. I think in the valley, that will be a whole other story. It doesnt happen until they raise more capital. It will be until we get into the down rounds the next rounds is a lower valuation than the last one. When i send you, i dont send you any emails. When i send you 04. 6 19, all he does, no subject line, 6 19. I have to know, obviously, apple. Apples market cap. It was 7 yiechl everybody said a trillion 785, everybody said a trillion was in the bag. If i send you today 590. Yeah. It took a wrong turn only a kirk on a way to a trillion. Did it not . Its going to be below 6 u. Everything in life is a straight line. When we looked at the dow components, apple down 20 over the same period you got Something Like an exxon mobile or conoco. How has the housing done sense they added apple to the do you . Not well. These are new lows we are looking for the u. S. Futures. At this point the dow futures are indicated down by about 445 points. S p futures indicated down by another 46 points. The nasdaq is down by 174. We have been in a negative territory all morning long. These are the lowest numbers with eare seen. Fundamental analyst dont have a clue, no idea. They use price earnings. It will go up another 50, 60, 70 . Really, 1. 4 trillion. They dont even consider the law of large numbers. Theyre useless except to look at maybe trends in the underlying fundamental also of the company. Coming up, market watcher jim grant is here on the Global Market selloff. Who will join us on the squawk set and well look at a closer look at china stocks and the fallout from chinas currency devaluation. One more look as we head to break on the u. S. Equities futures now, 450, 449. 50 less from another 500 point on friday. Well be back. We have deal news, Southern Company buying electric and Gas Resources for 66 a scare with enterprise value of 12 billion. A 36 premium. You dont often see big deals get announced in the middle of a complete and utter market selloff. Apparently these guys had some courage of tear convictions over the weekend. Lets get back to our Global Market selloff. As we were watching, heading to a break, we did see futures hitting the lowest levels we seen all morning long. You can see right now, the dow futures are down 467 points below fair value. S p down 50 points after a decline of more than 66 points on friday alone. Nasdaq looks like it is down, if you are waking up this morning expecting to see a rebound, you are not getting it in the early hours. Joining us to talk about it. Michelle carrera and steve leishman. We talked last week what the fed does next. I think there is at not a chance they raise the rates given yuan evaluation and oil prices. I think there is still some chance if this proceeds over, which looks increasingly look it wont. A couple things occurred to me while i think about this. First of all, whats going on even related to the hike . I dont know. I started to say, i started to think its more than just china. I think people, are theyve decided the punchbowl is being taken away. Okay. I was almost there. You were there. So lets play that through. Before you do that, though, if thats the case, id be socked if the market actually rallied if they didnt raise rates in september. I think it leaves that question of whats happening. Theyre not raising rates . The feds will think about it. The other thing is the relationship of stocks to growth. Its a very spotty record. You look at the last couple times weve had stock selloffs and Economic Growth. Look at the left of your screen. The go ahead is the stocks year over year on a monthly basis. Stock declines dont predict what will happen. There is obviously an effect. An effect through confidence factors. An effect, wealth effect. But on the left side of your screen, very good growth in early 2000. This is a muted gains in the stockmarket then you can see it does rise ahead of time. The feds will say, you know what, this is a market selloff. It doesnt necessarily determine economic outcomes. I feel you are answering an unasked question, maybe they should see the third thing. They do. They say they are a part of the other. Its been on this show. Over the time i have been an economic reporter covering the feds, it has to do with an awful lot of wealth tied up in stocks. And certainly spending of the wealthy. But its not a huge effect. The joke on the street is that the stock market has predicted nine of the last five perceptions. Speak of this. Down 500 points in the futures as well. I think we have seen the fed orchestrating stock prices. It depends on what you do. You got them up to where they are. You will take them this is my fault, too. Every time something goes wrong is a bad way to do policy. Thats why now theyre not going to move. Were stuck in the roach motel again, arent we . I think they would like to do it relative to whats going on with growth. What happens that they never can . Why would you take the wrong policy back . Michelle can talk about this. The impulses will come from coin, from the stronger dollar, although not relative to europe. The scintilla of truth part of the reason were not growing faster is because of the fed being at zero. There is a scintilla of truth there. Thats how it becomes circular. We cant move, it would hurt growth. But the reason growth is hurt is because we cant move. I have been available to understand the logic of why raising rates would increase growth. I would like to understand and believe. That i know there have been some establishes at it. They dont do anything but play around with finance. How would higher rates make them more likely to hire and invest . I dont see it. You see it, done you . I feel bad, i tried to talk with you several teams. Thats all right. I knew we were going to go down this rabbit hole. Its a great. I would just add that the whole issue of the emerging markets, the spregd of deflation, when we see all pain thats happening there right now. Thats because of low Interest Rates. You reach in malaysia you reach if brazil, all those places because you are getting zero. We pay have inflated a huge global death bubble. I bet tim grant will talk about that . Hes coming up, isnt he . He sure is. Im trying to win points with guys in the back. Vacation interruptus. Fishing. Coming up, the worlds faith in Central Banks is eroding. One possible beneficiary is gold. Jim will join us. Maybe hell update us on his puerto rican obsession, too. Global growth, shocking the market. Dow futures indicating a drop now of 536 points. It was worse than that if you can believe it. Joining us, jim grant founder and editor of grants Interest Rate observer joins us with more for this morning. I misspoke you thought the new jersey it was a state in which a president ial running. Now, but now, weve got obviously much bigger fish to fry im trylinging to figure it out, a bubble orchestrated by central bankers around the world and there is one, two kind of people, one believes that the fed keeping Interest Rates saved us. The other believes the fed keeping and setting prices is an active part of the problem. Are you if that latter cam. What i dont understand, what sort of throws something that makes that maybe not believable is that its not the United States that seems to have caught the cold right now. It looks look were importing our monetary problems from abroad. You were the leaders. The fed has been the central bank on steroids around the world. Yet we are being affected be apersistent slow growth everywhere else. The fed didnt orchestrate it. Its one world, one central monetary idea. That idea is that Central Banks can and should manipulate override the price mechanism. Have we exported that mistake . This idea is a world wide idea. I think the genesis, certainly ben bernanke was a proponent of it. The idea is you put the card asset values before the horse of enterprise, by ragz up assets you mobilize spending by people who have assets. You make it so much better. It was otherwise known as trickle down before the enlightenment. Thats usually the idea. What you have seen is an artificial structure of prices world wide. The prices, the cosmetic evidence of underlying difficulties. If you misprice something, its not just the price, its the thing, itself, that has been financed be i the price. So you have so many oil derricks, too many Semi Conductor fans, too much of something which is financed be i an excess of credit or debt. That to me is the essential back story to this difficulty, mispricing led by a central bank who think by inflating of lifting up stocks, bonds, real estate they will engender. They look for commodity inflation to prove the fed is too accommodative. You say it has been asset inflation. Yes. Every great financial prices i crisis is a function of debt. A function of the leverage in the system. You look at where we are today. You sa i to yourself, there is too much leverage in the United States . Lets take a look at the junk band market, what is usual about this phase is companies are leveraging when they might have leverage. There is a lot of debt in the junk market meaning bank loans to companies that have leverage. The debt is unusual in that the terms and conditions, the fine print that dictate how it will be paid is much more looser than in times past. Rates are very low. You would think it would give those companies a much more opportunity to pay it back. Therefore, you wouldnt worry about it in this same way. It gives Companies Much more lateralism. In capitalism. There is life, without that, what you find a bunch of dead ferns and what we have in america it seems to me is more and more evidence of fertilization of companies, radioshack was an example of a business that was improbably surviving on the sales of extension cords in the digital age and finance with very leniently priced jung debt. All this, what this does a slowed metabolism. So people say the fed, get the these geniuses that, i have succeeded in saving us from the events of 2008. Well, maybe. I doubt that. But they have given us is much slower. This is the piece that made me think over the weekend that normally you think you get a debt problem, its way too large. Now we will be paid back so you replate it. So you are able to pay it being. Thats bad. We seen where the debt causes problems in and of itself. Thats not the case this time. This time places like greerks they have a way of rolling it over where we never address it. So the debt stays out there. You never become insolvent. You never grow again. The fed wanted to stimulate socalleding a dpre gat demand. So it prints money. It suppresses Interest Rates. It wants to have a lot of financial activity. In so doing, it stimulated aggregate supply. So there is a lot more of everything, capex, the production on oil, and the a lot of everything weighs on price indices, were not meeting inflation targets. What shall we do . We shall suppress Interest Rates for another six or eight years. There is almost like people getting cars. We pull the demand forward. You never will have a drop. Mispricing of debt. It pushes 235i8 failure out . So the jurng bond default has been the lowest much of the Data Collected versus an average with four. So on its face, thats a good thing. Yet, without that, without the dine dy na mism. You are looking at europe. People declaring fik victory says anyone criticize the fed because there was going to be inflation, they were proven wrong. I was one of the people who said there was going to be inflation. I did say also that inflation takes different forms to manifest itself in different ways. It seems to me the per nishs cycle has been a systemattic comprehensive pricing. There is more than one way to cause a financial break. We have found one. Found a new way. We always do. Thank you. Well be right back. 80 of the poor in africa are rural farmers. 96 of them are doing rainfed agriculture. Theyre all competing with each other; theyre all making very low margins, making enough to survive, but not enough to get out of poverty. So kickstart designs low cost irrigation pumps enabling them to grow high value crops throughout the year so you can make a lot of money. Its all very well to have a whole lot of small innovations, but unless we can scale it up enough to where we are talking about millions of farmers, were not going to solve their biggest challenge. This is precisely where the kind of finance that citi is giving us, is enabling us to scale up on a much more rapid pace. When we talk to the farmers and ask them whats the most important thing. First of all they say we can feed our families. Secondly, we can send our children to school. Its really that first step that allows them to get out of poverty and most importantly have money left over to plan for the future they want. Coming up, much more still to come on the Global Markets selloff and the losses in europe are also getting worse the german dax off 4. 5 . Take a look at the tenyear yield. We put that chart around. You look at a yield of 1. 981. The dow could open off as much as 500 points if not more. We will talk strategy from black rock and Liz Ann Saunders and market master, mohammed elerrian. He says the sell isnt over. Well talk about it. Two streetlights. The only difference that little blue thingy. You see it . Thats a sensor. Using ge software, the light can react to its environment getting brighter only when its needed. In a night, it saves a little energy. But, in a year it saves a lot. And the other street . Its been Burning Energy all night. For frank. Franks a cat. Now, two things that are exactly the same, have never been more different. Ge software. Get connected. Get insights. Get optimized. There it is ugly. There is no way around it. Market selloff triggered by fears about coins economy plunging oil prices an questions about the fed. Just how rough will be the ride for investors. A big lineup of mark watchers set to tell you, would bes liz ann sanders, black rocks paul ebner meenld elerian. Its a turbulent time for airlines, a trip inside the numbers straight ahead. Shares of apple getting crushed t. Stock now down 20 in the last three months, shoulden advisors stay away or is now the time to jump in . We will talk about an analyst the final hour of squawk box begins right now. Live from the most powerful city in the world, new york. This is squawk box. Welcome back to squawk box. If you are just waking up, it is not a happy morning we are 90 minutes away from the futures opening on wall street. The dow is down. S p 500 off 65 points. Thats after a week where the dow was off a thousand points. The second time, rather, we should say if history since 2006 that the dow had opened or had fallen a thousand points. Lets check markets in europe as well. You are looking at the down arrows across the board as well. Virtually everything off close to 5 , from greece, its even worse, since august 10th, the germanys dax is down a whopping 16 . Coins shanghai composite got the role today after any hope for a rebound after last week, its going to be tough after that index plunged more than 8 overnight. That itself biggest oneday percentage loss since february of 2007. Sri joins us from singapore with more on the asian markets. Its hard to figure out tail versus big dog. We were down friday, china started us about a month ago and just adding to the problems with an 8 drop. They call it black monday. Its not just me saying this, joe, this comes from official Chinese State media. Beijing isnt pulling a gloss over this 8. 5 decline at the settlement. What i think really fuels this meltdown was the absence of any policy support announcements over the weekend. Remember, last week, we saw disappointing sluggish activity data, activity contracted and that contributes it to 11 slide in Mainland China and i thought. A lot thought we would see some policy support over the weekend. We didnt get that. That is one of the catalysts that led to this momentous decline today. We are not ruling it out this week. If we are going to see a policy response, a lot of strategists are telling me, it has to be bold, decisive, aggressive. A kind of a shock and awe draghi like moments to restore confidence in the stock market and restore confidence in the broader economy as well. Very much a case over to you peoples bank of carolina for the next step for the policy response. Thats where we stand out here in asia, back to you now. Sri, thank you very much. Things are moving rapidly this morning. Right now it looks like the dow futures are down 640 points below fair value. That means we end down 640 points from where we were last week. On friday the dow was down 540 points. To kick things off on wednesday with a loss of 162, s p down more than the day on friday. Right now it looks like they were down 72 points. The nasdaq looks look it will open down 202 points. Joining us, liz ann sanders, the chief strategist and paul ebner at plaque rock, liz an, this is something the average investor may not normally Pay Attention to things like this. This is something they will wake up and wonder what do i do . What do you tell them . Im not sure you do much of anything, we have been more cautious than we have been in years passed believing we would see a greater risk of correction. We have a record spike on a weekly basis of the vix last week. Fought sure we anticipated how ferocious this would be in a short period, panicking doesnt tend to serve investors long time well, this more cautious view is maintained here. I think the next support takes us back to the lows where we were in october of last year, we have the near 10 correction. Today is an important date beyond the obvious what futures are telling us now. Paul, why done we talk about the backstop could be or who the backstop could be, if this is something started by china and carried out here in the United States, what has to happen . Is this a situation where the u. S. Can stand firm or we need to see action from the chinese authorities . Well, the marks height uncertainty, the first has to do with china, how bad is the economy really there . What itself the spillover effect for the rest of the world and second it has to do with the fed and whether or not the fed is going to push ahead a rate raise in september despite Inflation Numbers look much worse than anyone expected . Let me stop you right there. What does the market want . Maybe you are taking away the punchbowl . Maybe they want to see faith in the economy or see the continued zero Interest Rate policy . Well, i think the first is in the long term, people want to see rate raises, that suggests the economy is improving. Right now for this point in september. Everything in the markets indicating its not time to raise rates, if you look at inflation expectations, where the ten year is right now. I think they mentioned it was 2 . Thats the market telling the fed right now is not time to do it. Liz anne, let me ask you, you said dont catch a falling knife here. You are surprised be i the ferociousnous, what would make you say this looks like a decent time, do you have to see stabilization, a bottom . Certainly the momentum factors would improve. One thing that led to this is the distribution t. Opposite of distribution is accumulation. So youd want to start to see some better action by the soldiers, even if the generals continue to weaken here. You are seeing put call blue out to 2 and friday. A lot of Weekly Sentiment measures. Were not picking up on friday and so far today. So i would look for a washout in terms of sent ipt. Im not quite sure we are will yet. Maybe if we see weak inside continue into the close, you start to see it today. Those would be the more technical things we would look for. You mentioned the other thing so important aside from the fed is how bad chinas economy really is. I wonder, is there a contagion point, a tipping point, where the numbers arent as significant as in the spread. We seen in the emerging markets, there is a point where you cant put the horse back in the barn . You know, china is very important to the world economy. Its about 15 of the world economy. Its as much as 25 to 50 of growth expectations. So, obviously, what happens is its very important. But lets separate the chinese stockmarket from the chinese economy. What we are seeing in the stockmarket right now, in many cases is a reversal of the gains we saw at the end of the last year. Those gains at the end of last year were divorced from economic reality. These losses in many cases are overstated in terms of how bad the economy really is. What we need are more data points coming out the pmi number on friday was bad. Lets remember, that was a survey, a soft indicator. It was a survey of purchasing managers expectations, not annual actual print of hard data. Paul, you sound relatively sanguine. How are you feeling about the markets right now, really . You know the volatility we have seen in the last several days is much larger than any 81 expected. Thats what happens when you see the vix have the biggest percentage gain in i think history. You know, what weve seen in the markets is in many cases a sharper correction, but when you look at how far the s p has fallen, we are now into close correction territory depending on where futures are right now. In many cases, thats a healthy thing. Certainly the speed at which this has happened is a bit unnerving. Taking a little air out of the marks is something that up until the last few years happened fairly regularly. Hey, palm, something that i was thinking, were always torn between overstating and understating whats happening. We said a couple times, never in history has the dow fallen a thousand points. It was 6 worse. We should always do 6 . Its like if the markets like telling us, look, if you will hype a thousand points in a week, then ill show you what a real setoff is. Bus that was even friday it was what three or four percent. Then again, when you do overstate it, the quicker people get scared, the quirk the bull market is over. If its a bull market correction. Im torn. 600 points. You were looking at the dow down by 330 points. 8 in china. Here is 1,400 points. 6 total for the week. If you look again today, add these numbers up, is it enough to get your attention . Believe me, usa today and main stream media and everybody else. 600 point. They dont do percentage. They do points. Liz anne, again, if you are somebody is looking at this, we know if we watch the tenyear yield this morning, its below 2 . 1. 9 and change we saw. We spoke with mark grant earlier this morning. He says, look, this is the safe haven. This is where he is telling people in terms of the bond market. If you are cautious on the stockmarket, where do you tell people . On the fixed income group, it has been a view towards safety on the fixed income side stating in treasuries, avoiding the highier risk areas. It is the spreads with the fed blown out, recently, it signaled underperformance of equities relative to treasuries. We are certainly seeing that right now. One other thing i wanted to mention, there was a lot of chatter on your show about the fed in Election Years. Now they may opt not to raise rates in september if turmoil continues. Whether thats a positive for the mark, who knows. I wanted to dispel theyve done nit ten Election Years since the history of the s p 500, including not the last two, 2000. All four Election Years in the 1980s so i wouldnt rest on that if you are a view of dovish fed policy is important for the market. That if they pause after september, that going into an Election Year, theyre not moving. Right. Liz anne, palm, thank you both for joining us today. We appreciate it. Well be calling you on it again very soon. Take a look quickly at a yeartodate of the dow. Joe is right, if you look at percentage changes, its a different story. If you look at the dow being down potentially another 600 points, yeartodate the dow would be down 11 for 2015. Thank you for adding it. 10 in a weeb. We wade for years for our, i did 9, 9. I said that was close enough. Its been four years sinces we had a bonified correction. Do it in a woke, that get your attentio attention. The thing to worry about is that horrible quick things that move it from weekends. Who knows. All right. We will continue to monitor this, this morning. Again, it looks like markets are on free fall this morning him when we come back, apple has gone to a dismal dow component. It is a Major Holding for individual investors. We will talk about the stocks recent moves and a possible apple comeback. Later, mohammed elerian will join us with his thoughts on a global selloff. Stick around, squawk box will be right back. 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Apple rolled the bull market wave, by a long shot and conventional wisdom assured us it was a sure thing that apple would be the First Trillion Dollar Company analysts across the bird had price targets and percentage gains to infinity and beyond, but once again, conventional wisdom at least at this point was wrong, apples lost close to a quarter of its value and all of its begins for the year, then some are gone. So down 7 a day at 98andahalf. That will put, i cant wait until it opens to see. Let me see if i can get a market cap. 785, 785 billion was the high an today were going to be talking about, well, i dont have it yet. It was at 6 02 at the close. It will be well into the 5 flints, joining us to discuss his will power, Senior Equity Research analyst at wr, robert w. Baird youre not going to change your price target, will . Not today . We still like the stock here. I guess there is an element, joe, the becker you are, the harder you fall in some respects. Here premarket as you know is trading ten times counter earnings. We are positive. China is a wild card for all of us. We think we will come through all of that. All you guys. You all got a variety of price targets. Some of them way up, some in the 200s and some of the things. You always talk about the ten times earnings. When you see Something Like this happen, does the futility of usings metrics in fundamental am analysis if trying to advise clients, does the futility of your methods ever come home and occur to you, maybe im not looking at the right things, maybe what i use will not tell me when i should advise clients to do Something Else . Well, look, i think ultimately in any business the goal is to generate cash flow. There is no entity that generates more than annual. I think we still get comfortable with the fact this Company Generates you know 50 billion a year in free cash flow. So this isnt a Country Trading on vapors and of course has been involved in a buyback dividends, you know, et cetera, returning to shareholders as well. You raise a good question. It has been difficult for a number of years from a valuation standpoint. Really the question is can it trade eight times earnings . Can i it go lower . Thats something i and others have continued to grapple with, figure out where is the floor of the stock . I talked to people about it. Youre 50 billion in cash flow. So they did that with the iphone 6, which was the state of the art. It was head and shoulders i guess people would say above competitors tech no logically. You dont know about 2016, 2017, throwing out earnings or cash flow projections based on what the company did if previous quarters, so whats it worth . How true is it . You accurate is it . When you are trying to tell people what to do with their hard earned money, it seems like the law of large numbers that occur. I didnt know anything at 785 billion. All i know is ive seen other Companies Get up to 6 or 7 billion. People are looking for the stock to double at that point with a straight face based on ten times earnings. Right, no question. Every time you hear the trillion dollar market cap. A couple beers. I guess we look at the ongoing trends and the reality is you have a survey out a week or so ago that suggested we think apple can continue to gain share in iphone even in the united stat states . Apple and iphone for years i think are still the under pinning that will drive stock and cash flow, we still feel good about the fundamental also. The law of large numbers is a challenge it will continue to face them. What we should do is maybe take a step back. Let things go under 100 today. Maybe its the open and caple is the preeminent company in the world. Where do you mortgage the house . What levels would that be for you . I need it right now. Would you do it today . I think anywhere here independent 100, you have an awful attractive price point. 10 cash flow yield. That stacks up relative to at t. You know they have been replaced in the dow or verizon that have 5 or 6 dividend yield have you the precash flow factor i think gives you support. So the answer is yes, we like it here. Its one of our top picks for certain. Then they put it into the dow. Which also, every fundamental am analysis analyst in the world should say, oh, im out of here on. That that should have been a clue, too. But, anyway, thank you. We have been talking about that. Thanks, for putting up with the will. I know nothing, but this is apparent. But, wow, its been ugly and horrific. I feel bad for people. We also go ahead. Its a humbling business. We are all humbled every day. We make better decisions. The appleonnians, its my fault they were going out, its like the iomeg . Ans. They get so caught up in love and thats also a reflection over the top. When we come back. We will talk about the markets with the chief economic adviser Mohamed Elerian, he says this downturn isnt over yet. Find out what he says needs to be done, look at the ten year at this hour. Zplmpblts. Coming up, when we return, chief economic adviser Mohamed Elerian will join us, merging markets and more as the dow opens off more than 600 points, Global Markets Turbulent Times for american, southwest, delta and jet blue, a check on the sector just ahead, as we head to a break. A month if a month for the dow. Squawk box returns in just a moment. No students ever been the king of the campus on day one. But youre armed with a roomy new jansport backpack, a powerful new dell 2in1 laptop, and durable new stellar notebooks, so youre walking the halls with varsity level swagger. Thats what we call that new gear feeling. You left this on the bus. Get it at the place with the experts to get you the right gear. Office depot officemax. Gear up for school. Gear up for great. Two trains leave st. Louis for albuquerque at the same time. Same cargo, same size, same power. Which one arrives first . Hint its not the one on the left. The speedy guy on the right is part of an intelligent system that creates the optimal trip profile for all trains on the line. And the one on the left . Uh, looks like itll be counting cows for awhile. So maybe the same things arent quite t same. Ge software. Get connected. Get insights. Get optimized. All right, folks, listen up. There is stuff you need to be watching. Right now it looks like the dow futures are indicated to open down another 580 points, believe it or fought, this is off the worst levels of the morning. Things are jumping around rather raptdly. You are looking at 100 point moves happening quickly. Its a decline another 3. 3 . Remember for the dow. This comes after a decline of 3 on friday. 1 on wednesday, small moves that added towing look pretty startling and stunning. S p 500 is off t. Nasdaq off 3 . All of this is off if early trading. The dax is down 3. 8 . The kak in france is down t. Ftse four and a quarter percent. Things kicked off last night. Shanghai that markets closed down 8. 5 . It was down as much as 9 pfrs in the sex. The nikkei and hang seng down over 5 . This is playing out in virtually every market this morning. Take a look at the energy complex. Wti down below 39 a barrel right now. 38. 74. Thats a decline of another 4. 25 . The tenyear note below 21st for the First Time Since april. 1. 988 . Is this is happening before the dollar is down across the board. The yen at 120. 04. Its a different story when you look at the emerging market currencies. Gold this morning looks relatively flat. Gold has been bit up. Has there ever been a plaque tuesday or everybody is calling this black monday. What about a plaque thursday . Was there ever . Its a ruby tuesday. Right. Its always a monday. People come back for the weekend. They think about it. One name we talk about a lot. You hear us talk about Stan Drunkenmiller the legendary investor and hedge fund operator. Used to be making a lot of money on big calls, he was at delivering alpha, steve, a couple yeemplths you talked to him. Was it a year ago july and talking about how the feds should have started raising a while ago because of the dislocation we talked about with jim grant. That it causes things to do things that they wouldnt normally do when you artificially set prices that then, have screwed up. Anyway, normally i dont quote them. These are stocks today. Now all the consequences of the Financial Engineering will be exposed and now the fed wont be going until at least 2017. Nor should they. The market is now going to shut down the behavior that the feds sho you would have shut down, itself, a year ago, an additional 5 trillion in m na. 700 billion with record prices. So people didnt know, how many holes do you drill . How many factories when you have artificial you know price, this is the idea that jim frame talked about too. The fed and what its done has built the metabolism for capitalism. The losers dont get shut down and the demand gets pulled forward in all this. When stan was there at delivering alpha. I think he first warned if 2005 about some of the dislocations and subprime and the housing bubble and it took how long twoandahalf, four years. People said he was wrong. It was a year ago, i am worried he will be right. The implication that he is calling for effectively a bear market thats longer term, this is not just a week long or twoweek long. You will not upend the m na market t. Buybacks, all of the things he is talking about if we have a snap back. What does it mean if the consequence of the Financial Engineering is exposed. What does that imply . It means everybody that has been a supporter argued there is consequences of it. Its not a free lunch. You dont want a 2008 consequence of it. You dont want something worse. Ultimately the conclusion has been among most Monetary Policy experts that the benefits outweighed the cause. You have to ask yourself the question. Given the Economic Performance weve had, where would the free market set Interest Rates . I dont think they would have set it a whole lot different from where the fed, in fact, there is a good argue, a smart guy from minneapolis would argue the feds should have done a lot more the fiscal stimulus was too low. Its fiscal. But the lack of fiscal was a big part of what the fed was leaning against. Look at europe. They delayed much worse outcomes in the United States. Which moved much quirk and much more and much more aggressively. Let me show you the fed funds. They are dialing out folks, that september rate hike as we speak, now at 26andahalf basis points for the december fed fund features. I dont want to give you probablys. Thats a complicated calculation that most people on the street cant even do because of the idea of a range, were working on a formula, heres what he said over the weekend the latest turbulence likely to be a signing factor. I bring that up in our new ecommentary graphic. You see the bubble there, you like that, thats nice. J. P. Morgan are coming out last night on our special dial back her call from september to maybe december, maybe later. The hawks like laquer and we will continue to argue domestic data have already made the case for a rate hike. Thats the old drunkenmiller argument for the record. This is the most interesting one of all. Oxford economics, if this is hike related, a decision to delay would essentially be akin to a kid taking a tookie from the jar, then decideing to put it back if, just eat it. This is what were going through. If this is what were going through because people are afraid we will like. I dont think its the fed. They are looking at the Global Economy change. I agree, not to put words in everybodys mouth, if you blame the feds, these are the consequence, then if its a 10 correction, i dont know. If you look like trachet. I heard that comment. They do not like that. It would be an operative modus operandi. They look at risk. Somebody last week said theyre insurance adjustors and figure out whats out there. At this point its riskier than to wait for the next meeting. That is probably true. But if you get this. If this thing works itself through. This is still possibly just that 10 correction we are waiting for t. Economic data, joe, you were on vacation, has been good, it will get a big upgrade from the Second Quarter to the Third Quarter on thursday. We will do twoandahalf in the Third Quarter. Sar are is here. We will talk currencies in a moment. More Mohamed Elerian, the chief economic adviser. Thank you for joining us, mohammed, on this morning. I listened to you last evening as we were trying to figure out. You have been right thus far. You said the selloff would continue. The question is how long will this selloff continue . It will continue until you get one of two things, a policy Circuit Breaker and this zrn come out of the fed or ecb. It has to come out of china. China is low enough. They have been inflated well beyond fundamental also by central bank policies, so in order for you to bring people back in. You got to overshoot the fundamental also on the downside. Its two things. Shortterm, its about the lack of a Circuit Breaker. Longer term, its about the lack of Economic Growth around with the emerging world slowing and the currency complex imploding there, that is transmitting contagion overshoots to the rest of the Global Markets. Its difficult to predict what policymakers will do. Talk to us, where are you right now. I think we are still well above what will be warranted by fundamental also, this enormous faith in Central Banks. That space has meant we have borrowed returns and growth from the future, hoping that central bank will be able to hand off to higher growth. That has not happened. Now. Stan drunkenmiller, the question im trying to get at, from a valuation perspective, if you are right, we have overshot even where we are today by what, five, ten, 15, 20. What are we talking about here . So it depends where. Value has already been created in some parts of the marketplace and that speaks to entities, countries with very strong Balance Sheets and good economic management. Thats value there right. There is value on the currency side, particularly in the over emargeing currencies. But if you are a beta investor as a whole. I have been saying for weeks, barbell, take a lot of overinflated markets by Central Banks, but a lot of cash to give you optionality. Some higher risk liquid opportunities particularly in the startup space. Its not the time to jump in. But it will be. Homeland, what year was it when you said the instead put a wedge between nick fundamental also and stockmarket valuations that was unjustified . Because if we go back to where you thought that the fed had put the wedge in, we got about another 5,000 points to go on the dow. So it started doing that in august, 2010 with the announcement, with the announcement. This is important because you know its stunning that this is jackson hole week and we havent talked about jackson hole, normally we would be talking jacksonhole 2010 bernanke put forward qe 2 to pursue economic objectives. That was the start of the wedge. And then it kept on growing with qe twoandahalf and qe 3 and then with other Central Banks jumping in. That is when it started. Some improvement. So its not, the economy is not where it was when you said that back then. So the economy has come up. I just wonder how big the wedge, were trying to get at how far this needs to go before you think the wedge actually is at this point. Yeah, its hard. As you say, there has been a tremendous amount of healing that has gone on. Particularly in the private sector. Its really hard. Remember, technicals are in control. This is pure leverageing. We got to figure out there isnt as much liquidity in the marketplace as we thought there was. You know, this liquidity delusion is not going to bite us. Having set that, joe, there will be opportunities. This is a good time for investors. This is an easier time i onically than it has been for the last two months. Value is being created. Homeland, we got to run. Real quick, from a policy perspective, what do you expect out of china and out of the federally quick . So i agree with becky. It will be very hard for the fed to move in september. It had a window. That window is closing. They cant take the risks of move income september if this market turmoil continues. In terms of chinas, its real hard. They dont have the effective Circuit Breakers that the federal ecb will v. They will inject more liquidity. They will reduce rates. It will not have the impact that the federal ecb has. Mohamed elerian. Thank you. I really present it this morning. Thank you. We return to closer looks like sectors Like Airlines and autos are dealing with the drop. As we head to break, heres a look at where gasoline prices are this morning. Thats one of the nice charts we are looking at today. Squawk box will be right back. Welcome back, everybody, take a look. Here we go again. If things open up. We are 45 minutes away from the open. The dow will be down another 561 points t. S p futures look like theyre down 60 points and the nasdaq is down 200. With that in mind, why dont we play sectornomics . Phil lebeau will look at the auto sectors and the airlines this morning. Phil. Reporter and becky with the drop in crude oil prices we ultimately will see good news in terms of prices at the pump. In terms of the auto stocks, look at gm and ford. We expect that to continue what we saw last week. Gm well likely to trade well under 28 per share. The low 28. 82. Morgan sent a price target of 27 per share. The key thing to take away from this new coverage, earnings and cash flow are highly dependent on china. Thats why theyre setting the target at 27. What about tesla . It held up relatively well, this morning, its indicating it could be down as low as 213 a share. As for the airlines, jet fuel prices should be moderate, which should go good news for the airlines, that sector as well has been under pressure almost all of the Airline Stocks when you look at the Airline Index were down anywhere between 5 and 8 last week. We should point out, when you look at the s p 500 sectors the airlines are one of four that are in this month still positive. Well see if that changes a little later on this morning. Becky, back to you. All right. Phil, thank you very much. Again you saw what happened with tesla. That stock looks down another this morning. The media stocks are getting especially hard hit, anywhere you see speculation, including the biotech names as well. Those are the areas getting particularly hard hit this morning. Its not just stocks, though, its also the euro, hitting a sixandahalf month high the yen hitting a one month high this morning. This is a little more of the chaos we have seen. Sarah ice isnt here with more on currencies and what is happening with the emerging markets. You just heard Mohamed Elerian say it was an overshoot and implosion. Money is pouring out of emerging markets in the past 24 hours. Really, its exacerbated what has been a blood bath. Its not just in the currency market. Stocks taking a dive to a sixyear low. Its this triple whammy, commodity is falling. The current says are changing. We are seeing moves we have not seen in ages in the currency market, we are talking 20 to 40 declines, from in indonesia, to south korea, to brazil to even mexico. Investors dont appear to be discriminating between the countries, because a countries like mexico is actually growing better than expected. Yet its getting lumped into the mass t. Peso is at a record low. Countries, we dont talk about it every day, theyre flashing warnings signals, theyre trading at levels we havent seen since going back to the dark days of the Asian Financial crisis. 1997, 1998. When asian currencies like these got punished as a group, eventually hitting their economies and their Financial Systems. There are some disturbing similarities. That itself where the Research Focused over the weekend. For instance, pegs are being broken, currency pecks for the dollar, hot money inflows are reversing. They do guys have better armor this time around in the form of reserves to fight back, theoretically, that i have safer financial stchls okay. These parallels will be increasingly in focus with the big moves getting people nervous in the market. We talked a lot about this. Where the backstop comes from, Mohamed Elerian is in china. It has to be there. I guess thats the question people will be watching. China, the other fact is the local Central Banks and politicians will be under increase scrutiny. Thats like places like the turkey and the lyra are getting beatennous out. Their collisions are under turmoil and nervousness and the response has to come locally. Yes, china is at the center of this. One other key difference between then and now is these economies are much more closely tied to china. That has been the Growth Engine for these economies. There has been a black tuesday. In australia and new zealand they called 1987 black tuesday it was a different day. Back if 1929, it was a black thursday. It was followed by a black friday and a plaque monday. One thing to remember, 508 points in 1987, 23 . 23 . Versus about 3. 5 . It was different shades. Black monday is trending on twitter, though, right now. Yeah. In china that was certainly the case. Cumulatively when you look at the last four trading sessions things are getting ugly. When we return, we will go down to the New York Stock Exchange, our friend jim cramer, mind out what he thinks will happen and the week ahead. Here are the futures one more time before we go to that break. You look at the dow off 5 point. We are back in just a moment. Its so shiny. I know, mommy, but its time to let the new kitchen get some sleep. If you want beautiful results, you know where to go. Angies list. Everyone can shop for services from highly rated companies, even without a membership. But as a member, you can save more. And you get exclusive access to ratings and reviews. Angies list is there. For all your projects big and small. Pretty come see what the new angies list can do for you. Lets get down to the New York Stock Exchange with jim cramer. Jim, when china. Theres john paulson walking along outside. I should run out there right now. Take a shot. There he is. There he is, right there. Just wave at him. See if hell come in. Hit him. Hit him, that guy next to you. Not you. Sorry j jim. Jim, china, obviously, throws us for a loop. Because of what could happen with emerging markets. Is that what this is or is it just the idea that Global Growth is really hard to come by and may not get that much better any time soon . I think the fear of a world recession and 1998, obviously, we could have a situation down as much as 17 to 18 . I think some of that is factors in this morning. The Chinese Market started its rise literally this week last year. It went up 3,000 points. It was a nasdaq 2000 experience. If you erase that, a 33 decline. The fact that weve linked with them is odd because we werent linked on the way up. We have Circuit Breakers in place. I think it was good to catch some of the points and if you wanted to, you could sell everything today and still do pretty good. Although, im not advising that. He was bullish and points out he was bullish in october in an email, and its all historical. Whatever was, was. I prefer to think about dividends. I prefer to think about where yield can be without the oil companies. His point was that maybe now the markets shout down the credit markets rather than the fed shutting down the credit markets. In the meantime, trillions was put on. A lot of stock buybacks that wouldnt have been done similar to the sub prime situation back in 06. I look at our im not sanguine like buller at 113 on friday which was cataclysmic as far as im concerned. I think you want to be a buyer at the end of the day, not a seller. Would you buy apple today, jim . Yes. Okay. Thank you. Were going to have more on the markets when we return as we count down to the opening bell. Well be back in a moment. What if there were only one kind of dog . Then it would be easy to know everything about that one breed. But in fact, there are over three hundred breeds of dogs. Because no one can be an expert in every one. An app powered by ibm watson will help vets tap Specialized Knowledge in the cloud for every breed. And whatever else walks, flies or slithers through the door. Ibm watson is working to make medicine smarter every day. The market this morning as you probably know by now is indicated down between 500 and 600 points. 624 points as were watching. Its moving quickly today. Im glad i dont have to make a bet on whether we close above, below, or where we are right now by the end of the session. Its a real mix. Its been happening not only here but playing out in the tenyear note. Thats been the one place that people have been fleeing for safety as a result. The yield on the turnyear has plummeted below 10 . Apple, dow component right now. And oil, which is also what does that say . Its selling everywhere but if thats an indicator of Global Growth, thats not pretty either. Well, back to 39 or so. Bull market corrections are character rised by scary events like this. But the question is it continues, is is this a longterm issue or are we going to snap out of it . Usually the sharper and scarier they are, usually its better. If the dow is down 600 points today after the losses last week, that would be a decline of 11 of the year to date. What is chinas next move . Is that what were waiting for. Are we waiting for that in new york. Thats crazy. The world is crazy. Join us tomorrow. Well talk more about it squawk on the street is coming up next. Stocks up for an risk sell off at the open. The biggest gap down in seven years. Good monday morning. Im Carl Quintanilla with jim cramer and david faber. This would be one for the record books pushing the s p into correction territory. Europe is down 3 to 5 . China falls 8 overnight. And the tenyear yield down and oil is down almost 4 . After a week