Transcripts For CNBC Squawk On The Street 20240622

Lost more than 1 trillion in market value. And an 8. 5 drop in shanghai last night. Wiping out chinese gains for the year. Jim, what is the story today . I think it is china. What id like to do because its a terrible market. It reads something that is in keeping with that. I sent tim cook an email trying to understand covering apple because that is a crucial part of it. And tim sent me this this morning right before the show. Ill read it. As you know, we dont give mid quarter updates, and he rarely comment on losing apple stock but i know your question is on the minds of many investors. I get updates on china today including thing and we have continued to experience strong growth for our business in china through july and august. Growth in iphone has dproen and weve had the best performance in the app store over the last few weeks. I cant predict the future but our prediction is reassuring. China presents an opportunity over the long term and the growth of the middle class over the next several years will be huge. Signed tim. I think its a great jumping off point for where we have to start. I think people fear the largest stock in history doing poorly because the Largest Company is affected by the chinese market. So i thought it might be a good place to jump offer. I think its great. And that is news that we get from mr. Cook in terms of what they saw for july and august so far. Of course, that is a concern. The overall chinese economy is a huge concern. The impact of the stock market now actually not even up for the year and the losses that have been taken flowing through to the ability to the Chinese Consumer to spend things on money like iphone activation has been a key question. But, we have to bow down to the declines in the stocks. Obviously apple is not the only this stock is just the largest. We have Circuit Breakers in place. Theres no benefit to being old other than the fact that ive been trading for 36 years. This is my eighth crash. Is it a crash . Well, im going to call it that because people like that. A chinese crash. China, yes. People seem to act as though this is a crash here when it really snisnt. Were talking about a correction for the first time in a long time. When people look at the underlying mehealth of the u. S. Economy, some things could be positive, whether its the drop in oil or the broad commodity complex, and the tenyear yield below constructive case. Im not saying were going to bounce today. The dollar is weaker, the euro is breaking out to the new up side. This is a new ratio thats higher. Commodities were a country that is a taker, not a producer of commodities with the exception of north dakota, texas, alaska and oklahoma, perhaps louisiana. Those are our oilbased state. I dont mean to be sanguine. I do think that we have to go to a 1997 scenario. 19 decline in 98. Thats another one that was imported. I think its realistic to talk about what happens in situation like 2011. We were imported from india, greece and spain. All those are on the table because theyre important. Crash in china, correction here. Youve been compariing shanghai to the nasdaq for a long time. But when it came to tim cooks email, does that help you handicap the chinese economy or help you understand the data from them. No one believes the numbers. I believe tim cooks numbers. I think china is in a contraction. Contraction . When you have a 46 factory order goodbye sevens. My belief is that they are experiencing a literal stoppage of their economy. I dont know about that. I dont know about listen, you and i can argue all we want, and the fact is neither one of us will ever fully know, and that is part of the problem. Let me finish. We dont know, and i think were going to think iphone activations . I believe coming in until i read tim cooks statement which made me think that perhaps not that were overduing it but maybe its 3 . Its not a consumerled economy. Its a mirror of ours. Lets look at china as nasdaq. We started this week last year was the beginning of the run. We were 2200. We then go to plus 5,000 in the june time frame. Only 30 from where we would be if we wiped out the whole move. I think that you were to say that there is some correlation with the stock market in china. You understand from the from what most people are saying. Im saying most people believe there must be something really horrible in china, some are going to say after today theres a contraction. Im going to take it off the table. Again, i get updated on reading tim cooks performance. I get upkates every day. That means including this morning. We have this weekends apple numbers. Its better than the Chinese Communist party numbs. Chinese communist party numbers, versus tim cook, cook says hes experiencing strong growth. He said its accelerated in the last two weeks. Accelerated. Right. So, i mean, we may think that china is terrible, but these numbers say that one aspect of china which is perhaps the most important when we get to whats happening in our country because were not a big seller of iron oar is that this Consumer Company is experiencing acceleration in its business in china. We have to compute that in along with the trading halt in the s p level 3. Lets say its not our country. Its their country, but weve had spill overs. Were going to here stories about firms that are poorly positioned. Sure we will. And theres selling going on simply because theres selling going on, and im sure there are risk managers saying your value at risk is too high. Take stuff off the table. That is happening. Im sure there are funds and various things. Moving the euro versus the dollar last week was odd but maybe its connected to overall trades taking place. I happened to speak to any number of Market Participants this morning, those who run Big Hedge Funds. August has been a bad month. Theres no doubt about it. That said, i did not here anybody really questioning the underlying undermefundamentals economy at this point. Simply saying the multiple is down a number of points here. Weve got the tenyear below 10 which would argue you could have a higher multiple than you previously did, and theyre still talking about the s p trading at 15. 6 times expected eps. Dow would be at 14,000. 2. 75 dividend yield with a twopoint tenyear. I know this is going to sound insane. Youre going to do what im going to do at the end of the way, which is put some of my retirement money to work. I did that on friday too. I dont know where the bottom is. In the end, i have retirement money, and am i going to say im waiting for the big one . Im not putting it all to work, but i have no choice. Sometimes when youre all cash, you can say im going to stay all cash because my principle is that the fed has to raise but i cant go there. Speaking of the fed, heres summers today in the Washington Post saying what hes been saying far while. No time for a rate hike saying there may have been a period six to nine months ago where it made sense but its now moot. People are saying this would be the time where you would say they know nothing only they have nothing this time. I think there are always things that they have. Its interesting. The chinese are able to sell every single bond they want if they wanted to come in. I think that mr. Buller used the term sanguine about china. I find that to be counter intuitive. I believe they have to decline if only because i lived through 97 and 98 and i made a strong point in 98 that we should not be impacted by this. But theres no way they can raise in september. Well, you know what . Dont you think it would be great to hear them say that they agree with the imf . The treasury secretary came out to talk about monitoring things. I would put it in the reassuring category. If they say were not concerned and were going 25 basis points, that would do what . Destroy it. Theres no question. Theres deflation. How can you raise rates in the face of that and whats going on because they know nothing. At 17 rate increases going into great recession. That was the second worst downturn in our country, and it was obviously bad to do it. And mr. Bernanke was a good fed chair. Yellen, it would be helpful if she came out this is not that. No. But i am saying it would be. How about these use october 5th of 1998 when greenspan felt cut us 50 basis points that day. You can say i know all the gray beards are saying they cant do that because theyve cut to 0. Well start to hear quantitative easing. It wont be long. And, again, no reason to be sanguine because were down a lot. If you earn the largest stock in the kworld, apple, and i read you this statement from tim cook and you still want to sell it aggressively at 98, i say be my guest. Ten times, nine times without cash. Right . The last i looked, thats what you would get from a classic heavy clickly cal. You said last week you wake you up when ge started to yield 4. I assume youre looking at those today . Im not napping but i think you would wake me from my nap. Ge is one of the situations where you actually have chinese exposure. 27 out of 30 dow stocks have overseas exposure but largely europe. Most of the companies that reported this quarter were using 110 on the fse and were now below that in terms of the euro being stronger. I could tell you, i know this is odd. You would raise numbers for most of the s p right now. You think about all the things done at ge. Theyve been focussed on trying to get the stock price up. Huge move to basically divest ge capital and hes got a 23 stock price. That has to be an enduring frustration. Obviously, this is a broad selloff. Ge is caught up in it because of parts of the business but wow, given what they did this year and his focus because hes got a few more years and thats it. Its got to be frustrating. Neither china or oil that leaves one fifth of the company to be china and oil. Thats too much. You say we dont know where the bottom is. We had emails this morning, and aair yan talking about the wedge between confidence in Central Banks and fundamentals and how the wedge is being removed. Why would you not wait to see something more dramatic than what were seeing this morning. Im not talked about committing all your cash. I think if youre in margin, youll be taken care of by a 2 00 margin clerk whos not going to assess your relative worth and just decide youre out. But i think that you kind of fall back on the idea that this is still a collateral, not Systemic Risk. Systemic risk meaning that those of us who work for a company at the time are concerned about a paycheck or worried about atms. Everybody wants to relive the last time that we had this kind of a move, but its so different from 08, 07. So different. The credit markets were the real story. And cash levels were nowhere near where they are or household Balance Sheets. And there was a seizing up in this country. Theres nothing comparable going on right now other than the sizable correction. I think thats right. Although you always have to wonder and be concerned that they there may be something were unaware of, but i have seen no sign of it. Certainly high yield has been hit on energy, spreads have opened up there. We know that. Weve been watching that for some time. These s p futures down almost 100. Jim mentioned the Circuit Breakers. Well watch at the hope. The First Circuit breaker is 7 . Thats 138 points on the s p. That triggers a 15minute halt. Level one. Level two is 13 which would take you to 17. 14. Level three, 20 would be 15. 75. So thats where, and the nyc invoking rule 48. That allows the designated Market Makers not to have to disimnate markers before the bell. I think these are all important. Ill echo what david said. Theoretically if you were to just land from mars, i know because stan drugger her used that example. You would be thrilled is going to hit a low. You would be happy if youre pepsico where you have most of your raw ingredients coming down. Youd be happy the jeuro is lower. Downturn is broken but emotions are taking hold. Obviously people are thinking panic is a terrific strategy. Here were talking about the futures. Were talking about hedge funds and others who play in the premarket. Fundamental buyers dont typically show up in the s p minis. Not the first day. They come up in the second day. Im trying to get a gauge into how much that decline in the s p 500 premarket can become selfreflective. Clearly it already has given whats gone on this morning as we worsen as we get toward the opening bell. I think we have to wrestle with the idea that not all stocks should be down equally. If youre sitting there and running kroger in cincinnati, youre not sitting there as you would in 2007. Im concerned about our consumer. Im not saying kroeger theyre smart people. They sell on a supermarket and thats similar today as it was thursday. If i own hmos, why do i care . You care because your stock is a financial decline. Only because of the impact of selling as opposed to any fundamental hit to the business. Housing starts decline given the fact that theres a demographic change. People arent going to stop having children. They did in 2007. Of course not. Again, were all cognizant of what we see on the screen. If we just take counsel from our screen, wheres the value added . I think you have to think about i know this is extremely shortterm in itself. Wednesday, thursday, friday. Lets say we call warren buffett. Were not. But do you think he would say my core businesses are all down this month . Do you think we would have sent 30 billion a few weeks ago if he thought things werent going well at all . No. In the deal with precision cast parts. We questioned it at the time. Maybe not so much now. Boeing is, precision cast parts a major player. They are levered to china. Now, obviously and also maybe the fuel efficient planes. Very true. But, remember, i come back to here. Lets look at a home depot. Home depot started the if you go back year over year which i think is important to recognize. Youre talking about a year ago at 86. Should we repeal all of home depots points . If we went to the 52 week lows of every stock, we would be at 14,750 on the dow. There are a couple of stocks to worry about in terms of the dividend. Caterpill caterpill caterpillar . Chevron . Probably. Chevron is committed to the dividend. Exxon . No. They were set up for this. Now youre getting to some of the bright spots that some of the desks have tried to put out. Jpmorgan calling it a reality check. They say a number of important variables are not confirming the new variables. The latest earnings dynamic are not the reason for the market fall. Commodity prices are not far from 08. China short is a crowded trade. Is that what youre getting to . Yeah. I think theyre all secondday things. Emotions are riding high. You know, i wish my emotions were riding higher. Then it would be more in keeping. Well, lets fast forward a bit into the trading day today. Is there a point at which theres something you see that you say i want to start picking some things up . I think thats a great point. If im going to own them for a while, and what kind of names are you looking for . Is it purely defensive . Theyve been shooting the generals. Thats apple, facebook, i mean, you name it last week and what we may see today. Its easy to do that. Why dont we extrapolate. Look at the numbers now. If verizon opened at a 5. 3 yield, that seems attractive. Procter, i dont like the quarter. Intel, i dont know, it seems solid enough. Mcdonalds was in the 80s before but that will yield 4 . Thats intriguing. Cocacola will yield 4 . Especially with the tenyear below 2 . No one is going to look at these now. We trade as an equity class. People feel its damaged. When the smoke clears, were still stuck with the idea of what do we do with our cash . What do i do with my cash in my 401 k . Do i wait until its really down . Do i wait until i see a 2009 scenario . I cant do that and i dont think im hay loan. I think a lot of people are waiting. We had a huge amount of money pulled out of this market this year. We do not make that much money in bonds. Again, if the country thats the epicenter of this decline is china, i would have thought that they would have seen a dramatic deacceleration in apple iphones. Thats a good enough indicator to refresh. Tim cook saying its accelerated. Although the bounce we got out of the email lasted about eight minutes. Thats typical. I say you sell the dream and buy the truth. To me the truth is apple is doing better. Do i like ten times earning stock in some will say thats as of this morning. How about tomorrow . Is tim cook going to issue no. What would you look for as a sign of a bottom from this correction that is now, what are we down about 9 , maybe, a little over . How about dont you think we can extrapolate to the worst of the situations which would be 2011 when we thought italy at 7 was going to go bust in stl there there was a 17 decline. And that was every day coming in and then, of course, draugma draug gi. We traded during 2011. China is i know its hard to say that the second largest economy is a contained economy, but they are exportered of things we tend not to be buyers. Theres a lot of companies that sell a lot to china. One of them being apple, but im struggling with this up to date information, i guess is what im saying. Any number of things we discuss here, that always get impacted. Activism, carl icahn is getting on a board that he filed on not that long ago. On june 24th th, he said i think the market is extremely overheated. Hes been in energy which is the most beaten up and his portfolio has suffered. Its a highclass problem when you have over 20 billion. Activism strategy doesnt matter right now. Bill ackman moving in on on the leez. Mondelez sales are probably flat but the raw costs are lower if the commodity decline continues. Merge if you continue to havs like this for any number of more di days, you dont know when it is, things will calm. The pipeline, its true. Its been poised for a great deal of activity even before labor day. People were saying are you in . Make sure youre in. Is this preseason and after labor day the actual playing starts . I mean, a lot of people are off, obviously theyre coming back to work today. You dont think thats a major part . No. I think youre scrambling to find senior people at marthas vineyard. I look at what david is saying about the decline in mergers. To me the decline is the 140 plus companies that were valued at a billion dollars in this market, this waiting in the cue to the ipo market. Those i think are going to be revalued as much as the people who are involved in venture capital. They tend to try to be oh blif vous. They put up a good face. You have to go off Public Market values. This will be interesting to watch. If youre just joining us this morning. Youre looking at what will be an historic sell off in about five minutes. S p is poised for the biggest drop at the open since september of 200 8. It will push us into correction territory. Its coming after the dow lost almost 6 last week. Its only done that 17 times since 1979. Weeks like last week where you lose 1,000 points in a week does not happen a lot. No. Remember, the week before the crash in 1987 was one of the worst weeks in history. I remember coming in and it being on that friday ahead of the crash and saying weve already declined a huge amount. It was one of the worst weeks ever. It didnt matter. Nothing matters today, because panic mode is in. Now, i hate to fall back to a traditional what ive used for the last 20 years which is bristol meyers. Do you think its impacted . It could go down more. Were taking out the october lows convincingly. Do we wipe ourselves back to 2011. I find that hard. Our employment wasnt that good. There was weakness in the consumer that we dont have right now. The consumer is strong. Should get stronger given the strong dollar and weak oil and low Interest Rates. Toll brothers, will they have a worse quarter because of this . They serve properties over and maybe there are people on wall street who fear their jobs. Youve said housing punching above its weight is not enough. 10 of the economy is not enough. We need more. I still believe it would be helpful for yellen to come out. Maybe the fed is irrelevant at this point. People like to talk about it because its easy to talk about. Im trying to compute where the dow is and i do not come up with these numbers, dow down 800. Its very hard for me to think that a verizon is going to trade to a 6 yield. I just find that hard. Caterpillar maybe because its linked to china. It doesnt make sense to you. It does make sense to people who believe that this entire period of growth has been an illusion through the prim of kqe, and tht prism is being taken away. They should tell everything they bought, but they didnt buy anything. The problem is that 403 out of 500 s p stocks on friday were still above where they were. Youd say that these people who sat it out, well, they missed the rally in 403 of the s p stocks. Hindsight is 20 20. And everyone who has been disciplined has to call into question what discipline meant which means i think points were gettable. I stopped liking the setup a little bit. Do i like a setup when the market goes down . Mark laihains, at one point he d maybe this is overdone. Theres a level where its over done. Easy to see in hindsight. I dont know if thats 97 and the s p. We dont need the old, the fed chief to come on 60 minutes and say were done with the bank failures. We spent a tremendous amount of time and money rebuilding the Balance Sheets. Its far better than it was five or six years ago. I did the unfortunate thing this weekend of looking at the chinese, at whats in the chinese index. Who knows . You know, the one thats l r their nasdaq. It would go down another 8 in china. The fact is by doing the things they have and not engendering confidence, theyve actually killed more confidence. Yeah. And they clearly are not in control of a market they wanted to be in control of. There you go. The chinese are revealed as a government who cant stop a decline. Im using a 2200 price target for those shanghai index. Thats 1,000 points from here. You could get that tonight. If you get that, what are we looking for tomorrow when we come in . Wow. China is giving up the whole game. Now theyre going down . I dont know. If you have all cash, why wouldnt you put something to work unless youre really fea fearful of Systemic Risk in our country. Im not. At tend of the day, apple is down 10 knowing theyre doing well in china, i dont know what to say. Am i waiting for apple to yield 4 . I dont know. Im not waiting. Youre not waiting . I guess i dont know. I mean, tim cooks information as of last night. Maybe its changed. Its 9 29. Do they buy a lot of phones at midnight . Theres the opening bell. And the s p at the bottom of your screen. Well watch the Circuit Breakers again. Look for the s p. If it falls 138 points, youll get that 15minute halt. There have been 19 s p corrections since world war ii. The average decline is 14 , and the average time it took to bottom, five months via s p capital iq. That is what some are fearful of is its not about today or this week or about going into labor day but even if we get a bounce in the next few days or weeks that september and october will be tough. In 1987 we werent able to recover for many months because we felt there had to be have been something hidden. It turns out it wasnt. How bad is credit right now . You have always taught me to look at credit. I dont think its that bad. Spreads have widened in energy names as they have the funds that were set up to buy a lot of energy debt earlier this year. You know theyve had their faces ripped up, so to speak, but beyond that, nothing ive heard indicates the credit is that bad. What is bad are some of the high multiple high fliers. Im looking at celgene down 21 . Netflix, down 17. 5 . Celgene has a lot of cash. I dont think the forecast they put out is based on melanoma is unreasonable given the fact that unfortunately disease does not is not cured by decline. I dont mean to make light of that. Im saying its hard for me to say that you dont buy it down that much. What are you waiting for tomorrow . Does it drop as much tomorrow . Youve got facebook down 14 . Apple down over 11 . The generals and the highest multiple. Well, apple isnt a high multiple name, but some of the high fliers are really, celgene and biotech, are getting absolutely annihilated. I have to tell you. Remember, theres dreams, and then theres reality. Do i think that the numbers that the ceo of celgene put out are wrong do we decide the whole p e is lower . Yes. Do i want to buy at Interest Rates where they are and a dividend yield of 3 . I cant say no to that. If youre wondering what the biggest point loss for the dow ever was, a point basis, september 29th of 2008, down 777. This is, obviously, well below that. More a minute we were down almost 1,000 points. I think thats an interesting figure. What was going on in the country that that was the center whole 1933, 1934 conceivable situation. Its very interesting. Tomorrow well come in and well look at these prices, and there are some people who are negative who are going to go positive, and there are some people who will have to be changed. Nothing will change. I dont understand some of these moves. Why is verizon down 13 . Because its a machine. Its a machine. Its an algorithmic machine. Hey, it is. And verizon, i mean, we go back. Lets look at verizons low. Youre at it. The dow is down 1,000 points. And the losses on some of these names, unh, verizon, ge down 13 . I dont this is, i have to make some phone calls. These are you have to find out these are enormous moves, and when you see these kinds of moves, people it becomes selffulfilling and then everybody is like all right. Even though i see real value, im not going to take a shot. How about verizon has backed off a bit. Its down only 9. 8 but some of the moves are dramatic and enormous. Jim, comparisons to 1987, today and then. In 87, we were very unprepared. We did not have Circuit Breakers. We had a fed that wasnt that focussed in terms of the day today. We have that now. And in 87 we were up to 29 times earnings going into the week before the crash. 29 times earning was expensive. Were not that expensive now. What im bringing up is clinical and nonemotional. I think clinical comes into play a day or two from now. People say i got a chance, ive waited and waited, and i feel like i have a chance to be able to buy. My father passed away in november, and he left some money for my kids, and ive been waiting for the big one. Is this the big one . I dont know. Its certainly noticeable. What am i going to do . Im going to wait for the super big one . Thats hard for me. Black monday, october 1987, the dow closed down 2 2 . It was only 500 points at the time, but it was 22 . This is 6. 5 . Youre nowhere near that. From a color standpoint, you might ask whats the mood like on the floor . Theres more traffic in terms of Market Makers making their way from post to post but the open was kind of like the open we see every day. Lets go back to 1987. That was not the monday that monday. The bottom was tuesday when there was a plunge protection that came in. Then we stayed at that level for a long time because we had to believe something was lurking. Turned out nothing was lurking. I think there are per ma bears emailing me saying im too sanguine, this is something we could go down 25 . I should point out. Those moves in the first minute were so dramatic and were well off the lows now. Verizon, which had been done, i saw it down over 12 . Its now down 4 . Celgene was down 21 . Its now down 10 . The volatility is extraordinary. Like i said, that was that preseason versus keeping the regulars in. Some of those moves, i havent seen moves like that since real crashes. But were coming back fast. Not to say that we arent down dramatically still with an almost 5 decline in the s p. Apple down 6 . It was done 11 at the open. Tim cook sent me an email this morning. I regard it as reassuring. Look, when you have these situations, you have a lot of younger people who didnt trade through the crash. You have other people who think the only time you get the declines is when you have genuine Systemic Risk. Im not asking you if i should put my money in jpmorgan or treasuries. I did put some money in treasuries in 2008. I remember you getting on the phone with us one morning and you were a fan of going to the atm. Yeah. On nightly news saying, i dont know if my atm is going to work, and that was after the tarp was rejected. That was poorly received. I could imagine. But there are some questions being asked then. We can all remember those conversations. Am i better off . Whats the value of paper . What should i bury in my backyard . Nobody is talking about that or questioning if were having a down gdp. Cvs down 20 . Will they do whats necessary will their numbers do down because people are healthier and stop brushing their teeth . A lot of these are strongly performing names through the year. Theres one name on there that you could argue, all right, it all lines up for that to be sold. Youre going to giver me free port. I am. Sold to you. Again, not making light of it. It is so easy if i were younger and had not traded through 87 and some of these other crashes, i would say i have no idea whats going on. I am telling you the machines can do these kinds of things. Jpmorgan, lets use that. It traded at 54 within the last year. Is it right that it is trading to the 52 week low. I could make the case selling it down to 54. But its stronger than it was a year ago, and i do not think they are levered to chinese banks. Im going to make a couple of phone calls. I think i should do that. I think you should. You are clearly not in the camp that says a recession in emerging markets makes its way here . Thats the one thing the bulls cannot answer yet. I think if a recession hits. Its funny. Theres a company that reports this week. I think its emblemmatic. Ulta was at 120 today. Its at 150. I would have liked to have gotten those 30 points for a company that is a beauty parlor where i predict that people will still get their hair done. They report this week. A bear would say jim, that 120 to 150 move, you shouldnt have taken it. But if you put an order in at the opening, you would have gotten that. How much of your mind is funds starting to fail and orders in big liquid names not going through. Thats possible which is why i said tomorrow might be better than today. The chinese government, they have to sell 1 trillion in treasuries, and they have to stop doing whatever theyre doing. And start facing reality. If they do that, their equivalent of the s p goes down and well come in and say why didnt you tell people to sell apple at 95. What were you saying . I say if i bought it at the opening, im up nicely, but i recognize that if you are margined, you got a bounce and youd better use it. The brief conversation i was able to have, a lot of stocks were not open at 9 31, and so when we were at celgene down sharply or verizon or apple, they were not open. They were not really that was still the indication, so to speak, but a lot of things have not been opened. Or are just getting really started. Okay. Lets use celgene as an example. Throughout. Those were not representative of real trades. But lets say celgene is selling at 10 times the 2020 number. Its not that bad. That is not im looking for dividend yield. It was down 21 . But down 15 . Thats a great opportunity to sell. I think thats an opportunity to sell. Ges yield 405. Cat, 402. The move in corporate yields verizon doesnt do a lot of china in china, i dont believe. When you were in china, i called you with verizon. You do have to bring your own special phone to china, because you bring your actual phone, theyll take everything from you. There are a couple of companies who will do anything in china. But i look at some of the dow stocks down, and i think could they be down tomorrow . Absolutely. Would you like to buy Something Like i want to put 401 k money to work . I dont know. I mean, if im waiting for the big one, did we revisit what we had at the opening . I think a lot of the stocks were not open. They were not really lining up, the actual level of buyers and sellers to indicate trades taking place, but looking at it was frightening and now looking at a market that is still down almost 4 , a dramatic decline, nonetheless, feels a lot better than it did only moments ago when you had Certain Companies that appeared to have their stocks down as much as 20 . I was out with ere inburn et and said i thought it was ridiculous. That was a break down of machines. They break down all the time. They could do it later today. Its a long day. Its a long day, and its early. What do you make of the idea that mutual funds have historically low levels of cash on hand and as redemptions come can in today, theyre going to have to close positions . Thats why tomorrow is probably a more thoughtful today to put money to work or maybe at the end of the day, i think they use futures to recognize that theyre going to have redemptions. But the dow down 3 does not fit my theory of total downside. It should be down more than that. Because thats equivalent to the 1997, 1998, 2001. We should be down more. I think 15,900 is a little too high. I havent seen this much activity in a long time. Id love to see whats getting open and whats not. Bob is out there. Buybacks come in. They will start to come in. Down 3. This is not that bad. 550 after 500 is not that bad. If you have margin, this is a nice opportunity to take some gains. Youre up a huge amount on tesla. Tesla is not bristol meyers. Shocker. Now, how about an snl those guys who got the price, the ones who sold at 92, how are they feeling . They feel like geniuses . And now, by the way, you can say im back to 100. I can ignore what tim cook says and blow it out. What does tim cook know is the information is only last night. Today could be a weak apple signup today. Today may be a day where activations arent as strong as friday. Do you want to play that game . Dow is down 534. For a minute, we were down almost 1100 points close to the open. Would you be willing to work with me tonight at 7 00 p. M. I have a feeling that might happen, yeah. Lets get to bob and see whats moving on the floor. Its been an interesting morning. We moved 500 points on the dow from the lows to where we are right now. They did invoke rule 48. Rule 48 allows the designated Market Makers to essentially wave price indications, and that basically makes it easier to open stocks. A lot of designated Market Makers are opening their stocks manually. Its a little unusual, and some of them still have an open. The gray ones have an opening, the yellow ones and green ones have open. Not everything is open. Quite a move at the open. This is a good time to review the Circuit Breakers that we put in place back in 2012 after the flash crash. Let me point out what is going on here. So youll have individual stock Circuit Breaker halts when the s p drops 7 and 13 before 3 25 p. M. , so between 9 30 to 9 35 a. M. , youll see the same thing thats been happening here. So a 7 drop would be 1832. Were a long way from that. And a 13 drop would be 1714. After that if the s p drops 20 , Trading Halted for the day. By the way, after 3 25, no halt in trading in a 7 and 13 drop. Between 9 45 and 3 45, there are individual stock Circuit Breakers. No you get a halt for five minutes when theres a price decline of 5 or more over the fiveminute period. This has been a successful way to deal with market gyrations in individual stocks. There have been some dramatic moves this morning. My understanding, and im not at the ford post. Ford was halted on the up side. The stock rallied suddenly off of the bottom. Were getting some circuit br k breakbrea breaker kicking in. These work on the up and the downside. Elsewhere, theres ford. You can see that move there. Now just still down 5. 6 , but it was halted and coming back on the up side. Not just on the downside. Right now all the big market leaders are on the downside. Its really sort of pointless to put them all up, but netflix, amazon, go pro, down. These were much weaker about ten minutes ago. The banks have been a subject of interest. They have been weaker for a while now. They are down as well. We were down notably more than that. I think question for today is if were going to get more follow through. There was anticipated attempt to buy on the dip because the feeling was there were a lot of panic sellers coming in from europe right at the open. Obviously some people saw this and bought very heavily. So far that has been a good bet. Everybody has anticipated a midday rally. The question is how we do at the close. If we close around these levels. I think a lot of traders will consider that a victory and some of them will be making money. Were starting to see stocks open. Theres a lot of the market open now. Now down 621 points in the Dow Jones Industrial average. Thank you, bob. Do you agree with bobs point that a close around here is considered a success . I think thats a call good. I always caution people that there are margin calls that are one and two, and theres always people who got the wrong side. There was a lot of margin get. Maybe if you want to put some money to work here, today is the day that you want to you should wait until 3 40 when the buybacks arent there. Its about the time laockhar speaks. He could probably call for tightening. How timely were the comments at 3 00 . Am i making fun of those people . You bet i am. They are of no help of the situation whatsoever. For were some of those things that were making my eyes pop out of my head when i was watching some of the quotes here at 9 30. None of which i think are going to end up even being real trades. Celgene was never down 2 1 . Verizon down 12 . That was scary, to say the least, but all of the stocks are dramatically higher now that they seem to have found sellers and buyers. Netflix, and others down dramatically. Its down over 10 . I dont want to make too much of this. The s p is down over 4 . Certainly a significant correction taking place. But when we looked and saw ge down 11 , verizon down 12 , apple down 11 , celgene down 21 , that does not appear to have really been the case. And netflix is back to where they were before they reported the spectacular quarter. No one is going to care about it tonight. I would sell any oil stock today. We had a statement from iran that said were going to pump at all cost. We have a president thats pro getting iran back on the grid. I would sell those. If i were heavy in stocks, i would probably sell, try to lock in some gains. I dont think thats wrong. Meanwhile, were keeping our eye on the bond market. Its been hanging onto a onehandle all morning long. Lets get to Rick Santelli in chicago. Reporter good morning. How do you spell disproportion gnat . Thats whats going on. Consider. Maybe it has a capitulation feel at the low. Down here, heres how you define that. At noon eastern, they look at a range like today, and lets say the dow has a 1,000 point range. If its less than ten away, they look at that as a capitulation trade. Okay, the dow is down 709. What are tenyear note yields down . About nine basis points in tens. Five bay si points in 30s . I think the best way is reconcile it is three weeks. Its about three weeks from this week that the fed is going to make its move. And, obviously, theres a good helping of adjustment in recalibration going on, add in china, add in foreign exchange. The dollar value is changing quick. Lets start at the clues. If you take a chart tenyear minus bundle back to february, notice how many times weve talked. If you start to read 60, meaning tenyear rates drop. Thats important. Its linked at the hip in the 150s for months. Second clue, when we talked about settlement of 30s at 275, we said when we close under 275 is when this thing gets momentum. That happened on the thursday. The dow was at 15,550. How would you like to sell those prices . Lets look at charts along the yield curve. April for fives and tens as you see on the following chart, foreign exchange, the great leveller, even though its managed as well, all those countries in emerging markets that have all the liquidity splashing on their shores and games being played by the communists, wouldnt you love to be a fly on the wall trying to decide what levers they pulled that they shouldnt have, or a fly on the wall in januaret yel. Thats some of the most serious conversations of the day. But back to the euro versus the dollar. Havent been there since january. What do you think on the dollar index . When was the last time it was down here . January. There is no alternative. Theres also no alternative to how emotion treats equities. Back to you. Well talk to you in a few minutes in. Well keep our eye on oil now close to 38. Jackie is here. Were down 2 . 18 on wti. Trading at 38. 33. The session low this morning was 37. 75. This is one of the slides that comes as a result of the die maam maamics that we dyna were seeing. Traders are concerned about Global Growth and demand. Theyve also been telling me expect to see choppy movements. We bounced off the session low. Some people will come in to make a short trade. Directionally speaking, we think on the floor, the sentiment is that prices are going lower. If we close below the dollar level, its the first time weve seen a close at the 3 handle. It is significant. At this point traders are starting to talk about a two handle. Something that was in the cards but nobody was really looking at realistically. When the slides happen, they tend to come quickly, at least in the oil trade. A lot of this will depend on what happens in stocks today as well. Jackie, thank you very much. Jim, your thoughts. Do not use market orders, people at home. The market is not youre not getting reports. When youre not getting them, that means youre picked off. Do not be picked off. Everything must be limit ordered. Do not issue a market order. Second, obviously i would devote my entire to show. Im going to talk about the idea. Im going to pick a stock and do dream versus truth, hope versus truth. I want to point out that once again if you look at stocks and try to figure out which ones are domestic and have the least exposure to china and are down big, those are opportunity. If its oil, no, no opportunity. We dont know where oil is going to symptom. N stop. You do want to take your queue from some situations. I want to default the apple only because we have some current information there. If i could buy apple at 95, 100, betting that tomorrow will be a down day, id buy a little more. You would . Yeah. And you wouldnt consider it granular, that email from tim zmo cook . Nine times earnings is not granular. I remember in 1997 i was interviewed by charlie gibson, and i had to stop him in order to be able to put in an order for my 401 k. Killed it. I cleaned up. We could still go double. In Collateral Damage we were down 12 from the high. In 199 8, that was bad, reflected a Big Hedge Fund blowing up. We were down 17 in october of 2011. All those in r in play because theyre all Collateral Damage. Not Systemic Risk. Use limited orders. Youre going to end up buying some stock basically flat because you got picked off. Sure. Do not get picked off, people at home. Whats on mad tonight . Okay. Were going to look at, i was going back over with my head writer, were ripping everything up. Its going to be 1010 100 devoted on what to do. Its a long day and there will be people who need to sell between 12 and 1. There are mechanics broken down. The mechanics of our market now is so different than five years ago. Whether its driven by the algorithms or the etfs. Its hard to quantify. Its a stock market gone mad but not an economy gone mad. In 1987, i remember thinking, okay, what is happening in the u. S. Economy that we could be down 50 points on a monday 508 points. It was nothing. Well see you tonight if not before. Mad money. Lets get to bob who can recap the last 20 minutes. Reporter its been an interesting morning. A lot of people running around. A lot of traders standing here. A numb of stocks that still havent opened. They invoked rule 48 prior of the open. That allows the designated Market Makers to open the stocks without desim nating price indications. They normally do that. This enables them to open the stocks a lot quicker. Some of these traders are opening these manually. They dont normally do so because theyve seen some strange and interesting price dislocations. Some soof the stocks are still t open. Id say the majority have. Weve had a 500point swing from the highs to the lows in the Dow Jones Industrial average. I want to point out weve talked about these circumoit breakers this morning. There were buying opportunities. I dont know if you can put up ford intraday. Ford dropped at the open, and then there was massive amounts of buying as ford hit lows, and, actually, triggered a Circuit Breaker on the up side. There are individual stock Circuit Breakers that will hold trading on the up or downside. You can see it on ford. It plunged after the hope. People rushed to buy it and it halted on the up side because there was so much buying activity that occurred, and it looks like thats probably now open again. The indication of how crazy things are. What we saw at the open was a lot of panic selling, some people watched this very carefully and stepped in to buy. A lot of them have recovered modestly. If you put up citi group, a number of the banks dropped and have recovered. This is not true of everyone. You see citi group coming back. That was a dramatic decline five minutes after the open. Some of them came down, then rallied back, and then kind of came down again. I think maybe google, it might be a good indication of that. Were getting a lot of rather dramatic moves. You can see google down, then up, then down rather dramatically. The oil stocks also all over. Eog, for example, plunged at the open and also in an attempt to come back there. Were getting a lot of unusual price dislocations. You seat it up and down and down again. You want to watch the high yield market. Jnk, plunge dramatically and came back. I can show you these kinds of charts all day. I think you get the idea. Big declines and a rally back. Still down. The question is how do we come out of this in the long run. I hope these charts indicate there are people who are buying aggressively with numbers down this much. Thats the good news here. The question is whether theres enough buyside interest to maintain the, i call it modest but it is a modest rally, off of the lows weve seen later in the day. Its going to be a long day and there are traders trying to get stocks that are open. Ill be down here all morning watching things. Back to you. All right. Bob. Thank you very much. We do want to welcome sara eisen, simon hobbs to post nine of the New York Stock Exchange and welcome you to the markets on what is an historic sell off. Dow at session lows. Dow down almost 1,500 points. Off the levels and hanging off the levels of last october. Youre looking at yields on corporate names like ge close to 4 . Tenyear with a 1. 94. Can i mention the euro is spiking dramatically. This may be part of the story as we work our way through the day. The euro is a major funding currency. If youre borrowing cheaply in euro and trading around the world, its a sign of distress in the markets. Its rising itself in a funding currency, it may pomt the closing of other positions that are closing in the euro. The euro is up 7 or 8 so far this month. Thats a major currency move and may lie at the heart partly of whats going on. Above 1. 15. That takes you back to february. Bob was mentioning this and we talked about it while it was happening. Some of the severe price dislocations. I have a feeling bob is going to be looking closely into that. While we are down 3. 5 on the s p, at the very open, some stocks showed, at least, huge declines the likes of 12 or 13 for verizon or ge, even apple. It does not appear they were real trades taking place as those levels and those stocks had been fully opened. I have a feeling weevll be looking more closely at what was going on. It set some panic, if i can use that word. When you look at celgene down 21 or appearing so. Or many of those names have come back dramatically from what dont appear to have been real trades, not to say that we arent seeing significant dislocation with the s p. Down perhaps more than some people believed it would be but 3 looks better than it did at 9 30 when we were down 1100 on the dow. Lets bring in tom mclennan, the editor of the mclennan market report. If people arent familiar with youre work, theyre becoming familiar quickly. You do tech analysis that has essentially called for a serious correction now. For months and even though i think youre looking for a shortterm bounce, you said theres more pain to come in september. Am i correct . Thats what were showing, and, yes, i think theres going to be a big bounce when you see the vix index go way above all the futures contracts. That always produces a bounce, maybe not to the second. Were getting a little bit of overthrow today on monday. Everybody has had a whole weekend to start worrying about it. Thats a great tell that a bounce is due. Now, a bounce is different from a bull market. And we do still see a general down trend lasting until about april of next year. Walk us through what led you to the call for this selloff, and whats leading you to think that the fall is going to be even worse. Well, we have a great leading indicator that i discovered five years ago. It looks at data that the cftc publishes. It looks at the euro dollar contract. Thats not currencies with the euro and the dollar. Its euro dollars which is an Interest Rate contract. When you look at the commercial traders net position in euro dollar futures, that tells you about a year ahead of time what the movements of the stock market are going to look like, not perfectly just like a road map doesnt perfectly electric li look like the road. But it lets you know what youre going to see. I think a lot of the reaction last week was people trying to front run that big selloff that weve been looking for for almost a year now. I wonder if we should have paid closer attention to the dow transports, the hardest hit group. Theyve been showing pain for a while. That group, that includes airlines and railroads, is now down 19 from the high. It is almost in bear market territory which would be down 20 . What does that tell you . The transports are leading us lower. What does it tell you about where we go. The transports topped out last year. The dow transports topped in late 1999 and they were in a down trend by the time the rest of the markets started to figure out there was a problem. I want to correct something you said. You guys, all of cnbc need to get a correction in your vocabulary. Youve come to this belief that 10 have a correction and 20 is a bear market. A correction is any movement thats contrary to the direction of the prevailing trend. So you can be in an up trending market and have a correction that goes down. You can be in a down trending market and have a correction that goes up. A bull or bear market is when the trend is down or up. Forget about Percentage Points as your guide post of whether its a correction or a bull market. That doesnt help you know what to do next. You need other tools for that. I want to encourage everyone at cnbc to let that go. You should have a fine jar that everybody puts money in when somebody says officially in bear market territory. Its not a helpful comment. If theres a fine jar, theres a lot of things we could say to fill it up. September, how bad do you think its going to be and why . Well, september is an accelerated phase of whats going to be a longterm down trend that will last between now and april. It wont be a straightline down trend. Itll have a lot of texture. This sell off in august is over duing the pace of what its supposed to be doing. We need to bounce back up. We should have a hard day right after the fomc meeting. Really, its all about what i call the real fundamentals of what matters. Theres only two of them when it comes to the oil stock market. And those two fundamentals is how much money are there and how much does the money want to be invested in this past week we saw a big change in number two when money didnt want to be invested but the overall fundamental factor thats going to lead us into the down trend is about the how much money is there part. Generally with the euro dollar commitment did is saying theres a global liquidity crunch thats going to take prices down. The risk factor in that analysis, though, is if the fed does what they did in 2013 and starts at another qe program that pumps money in. That could ruin my expectations. Very quickly, tom, do you have a level youre watching on the tenyear treasury note yield as we broke down as far as the bottom . We like to watch bond yields at the 30year level and we like to compare it to crude oil. Crude oil leads the bond market. At the point you see a bottom in crude oil, three weeks later youll have the bottom in yields. I dont know the level, but i know you cant really get a bottom in yields until after youve got a bottom in crude oil prices. I dont know if people like your analysis or the way you schooled us on live television. Well see you again. Tom mcclenen joining us. And the words are always a little bit debatable. China is at the heart of the sell off. 8. 5 plunge in china leading us lower. Joining us j stephen roach, and now with yale university. Its great to have you on here with shades of 1987 and 1997 and 1998. The world is looking toward beijing for a policy response. Do they have the tools . Well, sara, they have plenty of tools. Theyve been ineffective in arresting the market decline which is just overwhelming their capacity to understand the markets, let alone, put in the downside. Their tools are better, i think aimed at focusing on the economy. Theyve made much better progress than most people think in rebalancing the economy away from a manufacturing toward more of a services economy, and beginning to get some payback in the longawaited emergence of the Chinese Consumer. The market that ran up 145 and is now unwound 40 or 39 from its peak since june 8th is clearly, has the head lealines. Its erased all of its gains, the chinese equity market. Why unlike the Federal Reserve or the European Central bank cant the pobc come in and shore it up and stop is bleeding . Its still up 40 year on year, only about 12 of the urban population owns stocks in china, and this is a fairly compressed bubble that did not really allow the broader Share Holding public consumers to adjust their lifestyle expectations commensurate with the inflated equity values. Were making a lot out of it because the spillover affects on us but in terms of the agenda of chinese authority, this is not the most important thing on their plate. Is the chinese situation, stephen, the biggest thing on our plate . You know, only 2 of s p revenues are made in china. These moves on the markets worldwide seem very big if it really is about china here. Is it . I dont know, simon. Thats a great question. I mean, you know, the markets have been elevated a lot by Central Banks around the world. Theres something of a house of cards thats been in place since the crisis. We all know that. I mean, you know, weve had the weakest recoveries post any recession all over the world, whether its the u. S. , europe, of course, and japan, and the developing world is heavilily dependent on our weak recoveries. These markets have been inflated by quantitative theyre taking the medicine away, and the markets are imploding, and maybe china is the excuse. For many people watching, this is agonizing. Which the experience that you have, what do you tell people to do here . How long does this last, do you feel . Hard to say. I mean, i say focus on fundamentals. Ultimately markets will find their level as dictated by the fundamentals of the underlying economies theyre trying to approximate. China is not as bad as the screen indicates today. The u. S. Was probably not as good as it appears in the sixyear run up after the crisis. Theres truth in fundamentals. It just takes a long time to show up. On the fundamentals, stephen, obviously the u. S. Is many way the best house in a bad neighborhood. An important thing to remember as we watch our stock market plummet today. The question is when do the stock declines impact the real economy . Is there a fear that the magnitude of these declines could spill over to the real economy and actually drag down what has been a very fragile recovery . In the u. S. , youre talking about . In the u. S. Yes. Its a fair point. Keep in mind, the consumer growth rate, growth rate consumer demand has been pathetic. Weve been growing about a 1. 4 average annual rate for 7. 5 years. 1. 4. Its a fragile consumer recovery. The Balance Sheet repair we needed after the crisis, weve made progress but we have more to go in terms of paying down debt and rebuilding savings. Consumers are, obviously, vulnerable to a negative well shock if this continues to intensify, and thats been a weak link in this recovery. Well see what happens much. Thank you, stephen roach, the former chairman of morgan stayly ash. Up next, the stocks that investors are buying today. Markets clearly in negative territory, though off the lows. We opened down over 1,000 points on the dow industrials average less than an hour ago. If you cant stand the heat, get off the test track. Get the mercedesbenz youve been burning for at the summer event, going on now at your authorized mercedesbenz dealer. But hurry, offers end august 31st. Share your summer moments in your mercedesbenz with us. One of the worst dow opens in the history of the index. We were down 1100 points at the open. Now down 362. One question is what are Retail Investors buying today . Good morning. So our colleagues at cnbc. Com look a survey, an unscientific one, but, still, wanted to take a look at what readers and viewers thought of the current market and the conditions. We took the survey over the course of this past weekend given the market turmoil. Heres how these thousands of requests have been boiled down. 16 are not buying anything today. Theyre just going to hold and wait and see what happens. Were down about 375 points. Down about 1,000 earlier. 37 said theyre selling nothing on monday. And then 4 of them said sell everything. The other 40 of people said theyre going to do a combination of buying and selling. Heres whats on the shopping list. First up on the buy side, what are people looking at . The buy list favorites, apple, number one on the list far buy to dip type of situation. Facebook, disney, and netflix. Those are the tops. The sell list favorites . Apple, number one again on the sell list, interestingly. Oil related products are second. And then bonds and netflix. Netflix and apple both made appearances in the buy list and sell list favorites. It goes to show you these two stocks have become one of many lightning rods in the overall markets were where the bulls and bears are fighting things out. The good gauge of retail there. Thanks very much. When we come back, art cashin joins us to help make sense of this selloff. The dow is now down less than 400 points. 388 points. That is still over 2 . The s p 500 down almost 3 and the nasdaq getting hit the hardest. Pain across europe as well. We want to show you whats happening across the atlantic where theyre down more than 4 plus declines across the region. A new season brings a new look. A chance to try something different. This summer, challenge your preconceptions and experience a cadillac for yourself. The 2015 cadillac srx. Lease this from around 339 per month, or purchase with 0 apr financing. No sixth graders ever sat with but your jansport backpack is permission to park it wherever you please. Hey. Thats that new gear feeling. This week, these folders just one cent. Office depot officemax. Gear up for school. Gear up for great. We are retracing a lot of the losses. Thankfully down just 300 points on the dow. Lets bring in art cashin. I think the opening print on the dow is a lot of over 1,000 points. This has been an extraordinary hour. It has been. There was close to 4 billion to sell on balance within that, and thats a rather marketmoving thing. Although 1,000 points and 4 billion dont sound like they fit together. There were a couple of things going on here. In other markets, europe, in particular, where prices were down and couldnt raise cash. Came here to raise cash. Another factor, that on this program, a week and a half go q we talked about mutual funds having the smallest amount of cash in the history of mutual funds. I said the risk was if you began a bit of a selling spell and then people would start redechlgss, and they start redemptio redemptions. If you dont have cash to pay for it, you have to sell more stock, so then its a selffeeding process. I think thats what we saw. To pick up the idea of International Markets forcing selling here. The top 50 blue chips in europe were down over 7 . They are extraordinarily losses. Not so much in london or germany but in the other markets. Not just the your is spiking but the yen is spiking. Both of which are major funding currencies and an indication if theyre higher, of market distressed. And people being forced sellers. Exactly. Theres a lot of what we call the carry trade going on there. Funding in tokyo and funding with the ecb is actually cheaper than here even though were at a 0 rate. Isnt whats going on here, theyre pricing out the odds of a september rate hike. You dont expect it this year, and it looks like the currency market is catching up with you. I think thats about 30 of the currency move. The other is the relationship of the euro and the yen. When you were defiant and said there will be no hike in 2015, did china occur to you . Not so much china alone, but i thought the International Markets were destabilized, and what i think were seeing again and again is the emerging markets and their currency are borderline freightening. We look like we did in 97 in several cases. I go back to my old argument. The imf and the world bank told them no. If they went ahead and Something Like this resulted, they would lose credibility. People would say you were warned. Why did you do it anyway . Its a scary move for them. I guess what do they do if it starts to inflict pain on the u. S. Economy further when they dont have the tools . You heard me before. Qe 4. When does that really become something we have to contemplate . If the economy begins to destabilize. Isnt the underlying debate about the power of Central Banks and if they can do anymore . I mean, its not a monetary phenomenon. Money is cheap around the world and were heading in the low direction. How much do you want to force feed when it doesnt have the affect you expect it to have. Youre being logical. If youre the fed and you have a v no other tools, you repeat it one other time. We see the dow only down 1. 8 . The s p has come back. When i was looking at 30 seconds after the open, did somebody sell verizon at 38. 50. Ge at 20 and a little more. We know the power of the quantitative funds. The algorithm says sell enanne you do, but people will say the dow was down over 1,000 points. Was it real . My old saying is when you cant sell what you want to sell, you sell whatever you can, including your grandmas necklace . It looks like grandmas necklace ended up in a hock shop today. Good to see you. Thank you. You know its a different kind of day when the dow is down almost 3 00 and that sales good. We were down almost 1100. Well talk about where were headed later after a quick break. It took Serena Williams years to master the two handed backhand. But only one shot to master the chase mobile app. Technology designed for you. So you can easily master the way you bank. No sixth graders ever sat with but your jansport backpack is permission to park it wherever you please. Hey. Thats that new gear feeling. This week, these folders just one cent. Office depot officemax. Gear up for school. Gear up for great. Market is beginning to head into negative territory again. Take a look at earlier this morning the dow was down more than 1,000 points at the open. We had cut the losses to less than 3 00 but were beginning to accelerate in the other direction. A chief investment strategist with raymond jam and a senior economist with wells fargo are both joining us. We were at cnbc in the beginning of july saying our models suggested that the equity markets were going into a period of contractions. They targeted a plus or minus threeday session margin for error. The d the New York Stock Exchange is more oversold than after at the march 09 low. Its at the same thing we saw at the march 09 low. Were making a low. The question is if you get a vtype bottom or a sharp throw back rally and a retest. But this is a bottom . Were wnitnessing it now. Today or tomorrow, and then a throwback rally. The only question is if it goes straight up or comes back down and retests the low today or tomorrow. You blinded us with a lot of statistics coming into that. Whats your judgment on the nature of the trade after that bottom . I think were still in a secular bull market. Ive been in this business almost 45 years. Ive seen this act before. This should not have surprised people. Anybody that listens to the message of the market knew we were vulnerable. What is surprising is were only 10 off the highs, not 20 off the highs. What is your take as an economist here . Obviously everybody is very mindful not just of china but that the fed is apparently willing to move possibly in september and we have fischer going to talk to that over the weekend in jackson hall. From your aspect, are what are you selling clients . You hit it. The markets seem to be starved for Economic Data or some fed communication as to how they will look at Financial Market volatility, and what Global Developments will look like. Of course, we do get that speech from fischer on saturday on inflation and monetary policy. But, of course, its important to keep in mind that the underlying Economic Data in the u. S. Is still improving on a cumulative basis, and we continue to see that overall inflation an Inflation Expectations are still very available. Its important to see how the fed will look at that, and we expect that the fed will give some indication if we continue to see markets sell off. Were back down over 500 points on the dow. Down 3 , heading south again. You hear the talk that we need to see a healthy correction and pullback. Thats normal in a bull market. It doesnt feel healthy when you have 500 to 1,000 point moves lower on the dow. How should investors feel about the fact that its so sharp and violent in. Its sharp in terms of points. When you look at it in terms of percentages, you can go back to the 1930s and find similar type moves. I would point out that every 3 or higher gap down since 2001 like we saw this morning as led to higher prices, one month later. I think this is part of a bottoming process. You tend to get these wild swings at market lows. I think thats whats happening. How do you break it down further than that. Coming in you had onethird of the s p 500 in bear market territory down 20 . You had another third in correction territory down 10 . Its a different market depending on how you slice it. Whats the play book for the second half of the year now given that . I think you have to take out a rifle approach, and i think you look at special situations. You can look at companies that have the highest sustainable Free Cash Flows like i put in the letter this morning. We queried our analysts looking for such companies. Theres a list of eight companies with high sustainable Free Cash Flows. We think thats the way to look at things Going Forward. We do not think this is a crash. We think this is a normal 12 correction here. And youre drawing peoples attention to the Free Cash Flow as a dividend opportunity or because youre worried about stress and the ability to survive through that . Companies that have strong Free Cash Flow and, therefore, high Free Cash Flow yields ten to do well in secular bull markets. Thats what were in. This is what you see at the tail end of a decline, not at the start of a whole new fresh decline unless were in a crash, and i dont think were in a crash. Lets zoom out to the rest of the world and talk about what this means for Global Growth. When you see 30 and 40 moves in a matter of months, stocks and bonds selling out, how do you recalibrate what happens with World Economic growth . Well, looking at the trade thats occurring right now, this is a flight to quality with the intention of preserving capital, and so when you put it to Global Growth, it really begs the question of what capital inflows will look like. If the trade is a flight to quality, we should see more capital inflows into the u. S. Okay. Well leave it there. Thank you both for your time. You bet. Up next, former fed governor, robert helder. Much more on todays action and where we go from here when squawk on the street comes right back. vo me . I dont just wait for a moment. I watch for the perfect moment. The one nobody else sees. And when i find it i go for it. announcer at scottrade, we share your passion for trading. Thats why we give you the edge, with innovative charting and trading features, plus, powerful mobile apps so youre always connected, wherever you are. Because at scottrade, our passion is to power yours. After a bruising week for stocks, where are experts finding value in this wild market . Find out at trading nation. More squawk on the street coming up next. The mercedesbenz summer event is here. Now get the unmistakable thrill and the incredible rush of the mercedesbenz youve always wanted. But you better get here fast. Yay, daddys here here you go, honey. Thank you. Because a good thing like this phew wont last forever. See your authorized dealer for an incredible offer on the exhilarating c300 sport sedan. But hurry, offers end august 31st. Share your summer moments in your mercedesbenz with us. Lets show you the equity markets after one of the most historically brutal opens. Were look at the dow now down 363 points. A lot calmer than earlier when it was down almost 1100 points. Its a move lower by 2. 25 after the worst day on several years on friday. The s p is down 2. 5 . Selling the u. S. Dollar with dollar yen above 118. Crazy moves across assets. Lets go to chicago with Rick Santelli. Good morning, rick. Reporter good morning, sara. I have a special guest because whether anybody acknowledges it or not, we all know what this morning felt like. Kind of 87ish. I was in this pit right here when it was the 30 of year bond pit, and Robert Heller said i could call him bob. Thank you for taking the time today, and is there anything about todays action that reminds you of that fateful october day in 87 when you were a fed governor . Well, its certainly that breathless feeling when the markets started to open down 1,000 points, i think that takes your breath away. Just like it did in 87 when it was down 500 points. In percentage terms, that was higher than today. Absolutely. Im going to hit you with something thats been a common refrain in the circle of my discussions. All we needed to do over the last several years was contemplate japan. Very low pricing pressures but look at their economy. Is there a lesson to be learned here that was missed by europe and the united states, bob . Well, i think japan is a special case. Japan has a very old population. Japan, you know, it was not in the economy ready to move quickly. The u. S. Has a lot more innovation. A lot more energy, and, therefore, the u. S. Economy, i think is basically a lot stronger. Japan had its great day at the end of the last century when they were catching up to modern technology. China did it in the early part of this century, catching up to modern technology and eventually both of them will slow down. Japan slowed down first. China is slowing down now. Bob, when i look at the comments i hear from many guests and traders today, its about trickle down. There wasnt a whole lot of growth at trickle down when stocks were propped up to many different policies. Certainly not the fundamentals at 100 continuity on fundments and now many are worried the crash in stocks will have an impact. Why should it be different on the way down than it was on the way up . Well, first of all, there wasnt much trickle down on the way up. The basic problem with the u. S. Economy is really theres overregulation. New rules every day. Banks are not hiring loan officers. Banks are hiring compliance officers. Let me stop you right there. I love this line of thought. Let me interrupt you a second. Okay. So when we listen to janet yellen and company, they always talk about things. Theyll talk about biotech stock. She weighs in on whether the stock market was rich or cheap. She says they had to do something because congress didnt. After your comment, i think it is a naughty thing that the Federal Reserve didnt focus completely on congress and say, listen, you shouldnt be doing this, because we cant stop it through our indirect tools. Your thoughts . I agree with you, rick. You said it very well. I cant say it any better. Congress and the administration, the regulations that we are experiencing, thats the problem lies with the u. S. Economy. We cant get to growth by just stopping what were doing. And that is the cleanest shirt in the dirty hamper truth story. Start telling it like it is, fed. Bob heller, youre the man. Thanks for being on the show. Down 391 on the dow. Want to zero in on the Consumer Discretionary sector. Kourtney reagan has more on that. Consumer discretion sector is one worth focusing on. Especially in times of uncertain Economic Growth coupled with the biggest part of the year still to come with the holiday season. When it comes to the entire discretionary consumer sector, the s p is down about 10. 5 from the high. If we drill down to the three retail dow components, walmart, nike, and home depot. Rl ma walmart has seen the shares drop 30 . Nike down 13 from the its 52week high but still largely liked. Even home depot, a retailer which turned in Strong Quarter after quarter, the last several, at least, almost in correction territory as well. A number of retail shares are off sharply from 52 week highs but it didnt all happen over the last several days. The stronger dollar is playing a part too. Retailers that sell internationally seem to be hit the worst. Even those skews toward the high end. In the case of michael kors, the shares have been declining shedding more than 54 from the most recent high but down 5 in the last two sessions. Fossil shares also down 2. 5 in the last two sessions but 50 since the most recent report. Coach down 33 from 5 2week high. Not everyone is in correction territory. Among the better performers if we can call it that, dollar general, tjx and game stop. As weve been talking about for some time, retail has been and continues to be a stock pickers mark market. Not every stock is down as its neighbor but there are some commonalities you can find when you dig into the details. Enand it looks like Consumer Discretionary barely positive. Well have much more on that market selloff with the dow down 377 points. Is s p down 2. 5 . The nasdaq down 2b. 4 . 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. We are in the middle of a Global Market selloff. The dow is down 354 points. At one point early this morning right after the open, we were down almost 1,100 points. Lets bring in dan greenhaus. Dan, you sit on the trading floor. What was the open like and how are we recovering down 343 points . Were seeing 100point moves here by the minute. Yeah, i think when you see a market open up down 100 points as the s p did or 1,000 points as the dow did its inevitably going to bring in some bottom feeders, so to speak, some bottom pickers. Moves like that are really rare even in bear markets let alone bull markets, and so looking at the screen we have up now, its no surprise the losses have been cut, the fact theyve been cut by more than in half is a legitimate conversation. The fact were not off nearly as much as we were at the lows is not surprising at all. Are we looking at a good buying industry with all the major Industry Groups in the red and a broad market selloff . Ill say this. The open was a really good buying opportunity. I think to the extent that you think earnings and Economic Projections havent meaningfully changed in the wake of insert anything thats happened the last couple of weeks then, yes, it becomes a buying opportunity. I think the question now becomes how does the fed respond to this because as important as the micro has been, the focus right now is certainly on the macro and whether they go ahead and hike and, if they do, what is the language around that hike . I think to the extent this has reduced the odds of hikes not just in september but Going Forward then, yes, this becomes a buying opportunity. Don, do you accept this is mainly about china . Is this really the root cause of whats going on here . Its hard to deny that china certainly didnt spark this latest round of weakness but i would remind everybody of something that we all know and thats broadly speaking the s p 500 hasnt gone anywhere in several quarters now. And so clearly chinas devaluation, ones interpretation of the move, has been the reason why this last move lower has occurred. Its come in the context of an overvalued market and one thats facing the prospect of higher fed Interest Rates. You can certainly blame it on china, so to speak, but it didnt happen in a vacuum and thats the important point. Dan, i dont know if youve had a chance to talk to your trading desk today, but you have a decent line into a lot of funds out there. Im just curious as to what you may be hearing, a market like this selling can beget selling although, again, were well off the lows, and i dont even count the open given how crazy that was. Whats the chatter out there . Well, ill say this. First, let me say at the risk of propping up our own firm, we have better than a decent contact, but besides that really . You had to do that, dan . I would not be allowed back in the room. Shameless. Listen, its still early. Everybody was very busy on the open. Ive had a decent number of conversations this morning. Theres a lot of interest in the perspective, what were the macro conditions, what were credit spreads and financial conditions doing around those periods of time . People want to get a handle, and i would say, what ive been telling clients is really very simple. In the last 50 years or so outside of bear markets, the type of decline that youd see culminating in this mornings open, so to speak, has only been seen three other times in the last 50 years, that was 1987. That was the 2011 debt ceiling crisis and one other one im blanking on at this point. It was more rapid than 2008 which, of course, doesnt count because of the bear market. I think the inevitable question were going to head towards is given those very sharp moves and given what has happened with the japanese yen and the euro and whether thats at the heart of many of the foreselling whether or not inevitably someones got into trouble here. Someone very well may be in trouble. I have no insight into that and even if i did, i wouldnt announce it on tv. But, listen again, this is still a relatively modest decline, so to speak. The last letdown has been quite rapid and quite deep and certainly broad, but the fact of the matter is that these broad indices, whether the dow or the s p, are still roughly, for lack of a better word, only 10 off their highs. I dont want to go into sort of the historical points about how often these things occur, but were sort of of the belief nothing really has changed yet in terms of the economic or earnings projections and someone might run into trouble here, someone might have been too over levered. But for the average person watching your show and listening to me right now, all you really need to ask are self is where do i think the stock market will be in six months time not six minutes or six hours. Dan, ill push back against you. Whats fundamentally changed, chinas economy has slowed severely and they dont have a grip on it from a policy perspective. Theres a crisis of confidence thats spilling over to the emerging markets which is showing 10 to 20 moves in currencies without any coordinated policy response coming from there. Given how much of a threat it is to this market, how can we see a bottom . Well, listen, i dont know whether this morning is a bottom or this afternoon. I agree with you there, sarah, what this has done is reinforced the view in our view at least that chinas policy response to what was going on in the stock market was haphazard. Its no surprise to see their response to whats going on economically is haphazard. In terms of the economy, though, several weeks ago we put out our quarterly Conference Call report. We listened to a lot of Conference Calls from Industrial Companies, finance, restaurants and the like and for the most part companies that were operating in china said weeks ago there was something going on there that wasnt right. It wasnt it was worse than you had seen in the last couple of quarters. I dont think the devaluation, so to speak, tells us anything that we didnt already know if you had paid attention to what a number of those Industrial Companies had told us a few weeks ago. As for whether this is a bottom or not, thats a much larger conversation we dont have time for. Dan, thanks for weighing in, of course, on the selloff. Valuable perspective. With the dow down now 362 points, lets send it over to jon ford with a look at whats coming up. Morning, were going to continue to talk about these markets. All the major indices down just over 2 now but, boy, where weve come from not just friday down 500 points on the dow but earlier today that open was crazy. How much does china play into this and what does one bigtime tech ceo have to say about china . More on that and these markets at large when we start squawk alley. On wall street although were still seeing big losses we are clearly off of the session lows this morning that had the dow down almost 1,100 points. Right now the dow is down 349 points. S p is off about 45. Some of the big dow laggards, dupont, cisco, jpmorgan, travelers, exxon actually got down to 66 today. Over at the nasdaq names down over 3 , netflix, yahoo amazon, facebook, tesla. For a moment netflix was down 16 . And your biggest loser is baidu down close to 6 . The next thing well watch is the youeuropean close in about minutes from now. Could we be in for round