Transcripts For CNBC Squawk On The Street 20240714

And their currency is under siege. Our problem is a Federal Reserve too proud to admit their mistake of acting too fast and tightening too much and that i was right. They must cut rates bigger and faster and stop the ridiculous quantitative tightening now. Which gets us to the markets this morning, jim. We have been talking about negative rates, they only continued to worsen. It is a strange phenomenon to be sure but it is also a worrisome cycle people believe because you have negative rates that auger for weaker Economic Growth or a lack of growth you have what are it becomes selfreinforcing you have the global coordinated monetary easing going on right now. And you have the first time people talk you about the possibility of rates here falling dramatically from where they are now have you ever seen a ten year whipsawed as much in yield in the half hour period as we did this morning almost as if someone wants to get ahead of even lower yields there is a big short position in bonds. There are natural currency flows. Why would you be in negative yield environments they arent going away instead there is more and more so we really hard to get out of. Yes, they are. Thats what i wonder. You have to buy dollars if youre the fed, you certainly dont want to get there, right what do you do to avoid it one would think you probably follow the president s advice, got to cut, got to create more demand. I dont think thats so wrong. Look, were stuck in a quarter point situation, now it looks like it is 50. Is this a race to the bottom there is no race first, we have to dial it back it is very easy to take our cue from something that may be a false cue. If you look at the s p 500 as an aggregate and macro, i think youre being faked out if you look at the components of who can do better, who can do worse, i think that 3 yield just got far more attractive than it was. Ive been concentrated on accidental yields that were 4 and 5 we have to figure out, lets lose at t. We both look at at t so what is at t enormous debt load, they could start to refinance at lower rates. Yes not conceivably. Their mix of business is not necessarily hurt by whats going on around the world. So they can refinance. They can do what cvs is doing. Look at cvs, too much debt down. They are at a good quarter and buying back debt i think that were being shortsighted i think you have to look at our economy as a dr horton economy, as a lenore economy. Mortgages, housing punching above its weight doing far better now they cant hide it, the Mortgage Rates have to go up were seeing banks under pressure, theyre all going to be dealing with bad if you look at the mosaic of loans, there isnt anybody in any situation that will default that wasnt so, funds can single the wrong thing when it comes to our country. Maybe not germany. Germany is really completely caught up in how slow the chinese economy is look at those numbers. The chinese economy going down. Give your money to the German Government, you get 94 cents back people do that when they have too much money, nowhere to put it, got to have somewhere, they dont want to invest necessarily because they thats how it becomes selfreinforcing why wouldnt merkel do it to get her economy moving why . They fear the deutsch our president continues to be on his mantra of cut, cut, cut look, i think our rates are too high there is not that much inflation. If youre looking at inflation, our rates are too high if youre looking at the economy, larry kudlow was very accurate, very accurate depiction. I was on the phone to the large retailers. 20 years ago china was in a better position than it is now. In 1949, china was going back i think we have to look at the reality of the companies that are reporting. Remember, look, i am in the end a dollar sign represented by a man. I look at stocks i dont look at macro. Why dont i look at macro . I talk to the largest retailers in the country business is quite good there will be a bit of a lift after the september 1 tariffs. Will it hurt so far the major retailers have been able to suppress nobody else is. China ruined korea too. Ruined a lot of our Business Confidence is particularly good if youre a Multinational Corporation right now. If youre ratcheting up tensions, this is where this all began with the ratcheting up of tensions between our country and china. Some news service telling china not toed me unt ed mmeddle in h. Nothing is Getting Better on that front not disagreeing i look at i am stuck within the four walls, the canvas of the s p 500 and not no longer emerson, which was hurt. It is no longer 3m, which had many other issues, besides that. I no longer ge, United Technologies a good china number, it is not even just all around bad and, david, the linchpin is a company that cant sell because of a particular engineering issue. Huawei. Yeah. Huawei. Boeing is us huawei is them think about it if you ask what the huawei, unless we fade and fold on huawei, and boeing because it is the biggest generator of gdp out there. Right so want to hear what kudlow had to say yesterday why not positive on the also about how china is hurt more than we are in terms of the back and forth. Take a listen. I think china is getting hurt significantly, much more than we are, as i said before. Okay, if they want to wait, maybe so but the chinese economy is crumbling. It is just not the powerhouse it was 20 years ago Everybody Knows that as i said before, you know, supply chains are moving out the demand for their goods is moving to other places later in the day, former treasury secretary Larry Summers had a strong rebuttal to kudlows beliefs. What larry kudlow just said when he asserted that china was not nearly the economic power that it was 20 years ago maybe the most ludicrous economic statement ive heard a public official make. Chinas economy is approximately seven times as large as it was 20 years ago all right we made the same point it may have been that larry somehow misspoke on that i think hes aware of that all great, all china concern, you, dollar sign, stock market man. Im stuck me, trying still to understand negative Interest Rates. Right it is like the universe expanding. I still cant get my head around why you want to do it. Im james quincy. The ceo of a Great American company. Cocacola 220 million. Youre not actually a u. S. Citizen, thats okay from the uk. I had a great quarter will people drink less cocacola because of this . No. Does it yield 3 . Yes. Does it have a fabulous Balance Sheet . Yes. Buy. Okay. Is that up to the president is that merkel is that xi it gets flowed away with Everything Else, concern about this move appreciable move down in yields here. What that means for Global Growth. We can be scared. We can be scared or not scared. What should we do if youre Jerome Powell, your buddy jerome what do you do right now you have the president tweeting at you you have negative rates, 15 billion trillion worth of negative yielding country securities out there. Adopted that. The not the value i disagree with that i dont agree with the values. More like henry ford, never complain, never explain. He should be as quiet as possible. Talking too much. There is no there is nothing to be gained you tweet back at the president . No, youre not going to tweet back at the president. Look, it is just i think the president is need to cut more. Do you need to cut more in order to get make sure youre not in that selfreinforcing cycle that europe and japan seemed to be. We have deflation that could have cut more. But if you want to force the feds hand, i say, look, youre just playing the panic game. Im trying to dial things back here i know that the treasuries are making it so youre supposed to sell citi. The xlf is something the algos say sell when you have radical moves in treasuries. Like at citi and say Michael Corbat will buy back every single share he can, because it is additive to earnings, he can buy back 10 i will be selling citi because of a move even though it has tremendous recurring revenue, ill be selling citi, Goldman Sachs, switch there, who does the best in trading when you have wild moves . Meanwhile, 60 of the revenue could be recurring yes. If this economy were apple, i would be worried. Capturing enormous profit credit card yes. You take apple, april is at 197, 198 before this happened, and now it is going to be at 194. I demand to know what happened to apple, the company. I know what is happened to apple, the stock it has the downward pull of the s p. I love to be also has 13 of his revenues tied to Mainland China apple is the true battleground thats the one that im saying, of faang, thats the one that has the most earnings risk but, david, if you told me, lets forget about the precipitous the velocity in the move if you are stewart miller, if youre lenore, if youre at kb homes, youre sitting there saying, you know what, people are going to come off the sidelines an buy starter homes and retailers which are very much aligned with housing, do well our own diana olick, housing expert, just emailed us, mortgage purchase applications tanking as rates drop. Tanking. Why . Because people are concerned about the economy. Consumer confidence but, david, unless we see a dramatic decline in employment, you will not have a decline in purchasing power this is about purchasing power the president , if you can be a little more granular and much more about path, what, about housing being i dont think hes got this down, like he knows where hes taking it with the trade war with the trade war and the impact i think he should recognize that the economy is strong and therefore jay powell is a little hamstrung. We have unbelievable unemployment, if you remember 69 was against that, we have Larry Summers calling something that larry says to be the greatest blunder of an odd choice of words by mr. Kudlow yesterday by the way ratchet it back ratchet the temperature back we should not be there will be selling of Procter Gamble because of the s p, right . What is procter theyre selling because of the craziness go on in the markets around the world. But are people going to use less purell . Gillette will do okay in this environment. Procter gamble. Im stuck within the i am i have to look at the companies that im trying to figure out what to buy. I can see decent dividend yields that wont be impacted by the concerns of global trade. Since 3 30 a. M. , ive been working on trying to come up with a list of stocks that have good yields tomorrow, a nice new acronym, something new. Im work on an acronym too. Unlike watch im sorry, im trying to help people make money, not lose money. Ratchet it back. You got the dow down 307 points. You tell me at t, david, at t, lets go over at t lets use paradigms. 6 yield does better in low rate environment. Quarter wasnt that horrible what am i supposed to do you interviewed the ceo of verizon. How are they hit by trade flows . Theyre not ill take 4. 6 all day thats what people have to do. We have people who buy stocks and sell stocks. We cans which to be a macro fed network. I dont know binary lets go home. Ill take my mic off and go home i got things to do at home my wife is busy all day. At that restaurant. Back to china for a moment, we did hear from ray dalio earlier, bridgewater, one of the largest hedge funds, heres what he had to say about i believe the china is a competitor of the United States or chinese businesses will be competitors of american businesses and other businesses around the world and that youre going to therefore you want to be, if youre diversified, having bets on both horses in the race not quite sure what that means. But okay well bet on both horses in the race that brings me to alibaba. Bet on them, they have have an enormous issue in hong kong, issuance, not an issue, issuance of stocks. Can you still do that in the current environment if youre alibaba . I dont know the answer. I havent heard from them. Demand economy. Remember those terms command economy. Got to do what they want how are the nine Stateowned Enterprises doing . How about ious, the New York Times, pretty good quarter, the failing New York Times you look at that, why isnt that in the conversation . Why is that abstract ray dalio will stick with that view until the facts change and the facts change, yes, he will change too therefore basing thinking some billionaire says something makes me suspect, think yourself think of yourself. Now, david, heres something that happens even with interests like this. We have to tease a commercial. Yes, we do. Even under these frightening circumstances, we have to do commerce. Theyre not particularly frightening at this point, about the they are fascinating. Should i go home . Negative rates and myself, i have to spend a lot of quiet time thinking about that when were back, well be all over the moves in the market futures, of course, were about 15 minutes before we get started with trading here at the nyse. Were going to have a down open this morning, but we have a lot more program for you coming up after this driverless cars. All ground personnel. Or trips to mars. 4. 95. Delivery drones or the latest phones. 4. 95. No matter what you trade, at fidelity its just 4. 95 per online u. S. Equity trade. Were keeping a close eye on the broader markets. Over to bob pisani on the fwloor wi floor with more on that. Sometimes it is difficult to point out a clear causal connection in the stock market between the stock market and other events there was pretty clear one this morning. And it was Interest Rates. Around 8 00 a. M. We saw a sudden whoosh downward in bond yields take a look here, went from 165 to 163 or so in a matter of minutes. Thats a big drop. We were watching it physically that seemed to be a breaking point for the stock market i saw this is the s p 500 futures moved to the yun side. So very clear causal connections. We had normal things happening when this happens where the yields drop. Bank stocks, for example, which trade minimally preopen, bank of america, pretty good shares trading, this is all preopen numbers were seeing for bank stocks right now i should point out that while this say notable decline, the bank stocks have been having a problem for years and years. The kbe, we say the s p has gone whe nowhere for 18 months. We have gone essentially nowhere for almost three years now this is not a new problem. Banks have been dealing with this for a long time the other issue, somewhat flattish loan growth around 2 thats a separate issue. The other thing i want to point out is the commodities and what they have been saying. For the last several days, you look at oil, for example, or take a look at iron ore, here is some of the names that are in the red here, marathon oil, devin energy, apache, preopen numbers, we have been noting how moeflt moe most of the names are sitting at multiyear lows want to point out commodities in august and see whats going on here iron ore down 18 . Crude oil down 5 . This is just in the last couple of days that we have seen to the downside and we have also seen some other issues with energy overall. So if you had to point out what is going on here, i would say the fed easing started another global easing cycle. Thats an issue for the markets. And trade tensions are clearly exacerbating Global Growth problems and earnings projections as well. Next half hour well talk more about how analysts are having a tough time now with second half and 2020 earnings projections, those numbers are starting to change ill show you some projections on that in the next few minutes. Back to you. Bob, thanks you nailed it there. Those negative rates dont you think that possibility that there could be a hiccup in the economy as rates go down is do you think thats fatuous, it always has been the case . Right. Always. What you need is someone like ill use a name. Jamie dimon, hes a man of great authority, whether it be yes, yes. We have great recurring revenue streams, good lending in the system, good employment. Am i being a polly anna . No, im stuck with the data. I could easily go macro and say this is i havent seen this since 1929 i havent seen since 1937. I havent seen this since 1949 is that helpful . I dont regard any of those analogs as helpful you have to come out and say, what happens with lower rates in our country . What happens with the other countries, frankly, germany, needs to go buy cars they cant sell them in china. China slowing the economy chinas economy is slowing and the defeatists negative rate territory overall . How do you get out of it you solve the uk. Thats potentially going to be more of an issue rather than less. When im over in italy where i have a house, speak to industrials, thats what i do, theyre all so fearful of brexit that it is kind of like theyre in another world and capital goods for their capital goods for italy and germany, germany does a lot of exports are going to slow because of what is happening in china. Thats not acknowledged. Chinas narrative is our economy is slowing, it doesnt matter. We are pain takers thats their narrative, not our economy is growing you sell the i need to know what stock in the dow deserves to be down that percentage other than the one youre going to talk about. Disney. Yes lets talk about disney the shares are under pressure this morning this after the company missed the top and bottom line estimates of the analysts who follow it, blaming costs related to crease of the new streaming service, though not unexpected but you did also have the integration of foxs entertainment assets, of course, that was a 71 billion purchase, it took quite some time to close. Company also announced it will bundle its new Disney Plus Streaming Service with the ad supported hulu service and sn pl espn plus, the price 12. 99 a month, 30 discount. Bob iger addressed cord cutting with julia boorstin. Are we concerned about cord cutting . Yes, thats an important business for us. But it is the reason why were going into this other space, why were pivoting strategically to give us an opportunity now and contend with the transformation that is going on in the traditional space, but to thrive and basically completely different marketplace, under different marketplace conditions. Julia will join us in the next hour with more from that interview. Of course, going into the quarter, i had heard from other investors, the concern was, well, maybe things on the cord cutting front, espn in terms of subs worsen. That was not the problem the problem was things like the fox studio, which in the conference call, mr. Iger said suffered from the long period of 2017, who was there lack of decisionmaking so the fox studio. Also not as well attended as they had thought for the star wars attraction it was kind of like yogi berra. So crowded that nobody goes there. Exactly people stayed away because they were worried it would be too crowded. They also did raise price. They only had one attraction open theyre going to open the second one fairly soon. Also hotel prices have gone up in anticipation. Noted a lot of things. It didnt come in where they anticipated. The revenue number, though, jim, was a substantial miss from what analysts had i was actually frankly, i was surprised. I know that at the beginning of the call iger mentioned it would be very difficult to explain was it his finest hour in terms of explanation there were many moving parts that were in the the numbers i wanted versus what we thought, david, which is we thought this is a hit machine. That was going to be the story line 38 weekends out of 52. It is a hit machine. He didnt stress hit machine. He did a 4 billion franchise. I say it wasnt his finest hour, he did very little talking i think this was we need our hands held for this quarter. I suppose it doesnt derail the overall story of this is an involving direct to consumer company, this is by far the most important single thing theyre doing and theyre investing a great deal for it, not unexpected in terms of the numbers. We had hedge funds during and after the big meeting in april when they rolled out their direct to consumer strategy. It could replace the likes of netflix or a google for them it doesnt derail the overall story. Were rolling out what is going to be an enormously potentially Popular Service at 699 1299 for the bundle of services. And were going to crush it when we hit that. What it all costs is the key question and how the other businesses perform thats being rolled out also. This was a bridge quarter now wasnt the bridge over the river kawhi for heavens stake i was thinking about the 12. 99. How many people they had 300 different pieces of entertainment versus netflix four this is not a consequential quarter. Im leaving, taking face value it was not in the shape it should have been. The granularity of when he was saying in terms of the theme parks and what was up and what was down, that was hard for me to understand. In part because i had to do it on the fly it had not been telegraphed. We did not think that was the case so that is important to me it was not a great quarter but you if you think disney plus will do well you wade in the stock two days from now. No one is going to downgrade it. Until you start to see or until there is really questioning of the ability of that service to garner as many subs as people anticipate, youre not going to see the stock abandoned and by all of its support. I i had gotten a buy i would have said stress the disney and then the new disney try to put the not great attendance number into a better context, which is that how about saying it was softer say it was softer. Why wouldnt you use that characterization if we were talking about semiconductors, i know hes going to say, listen, it is people, confidence, gasoline, all these things but it was it was okay to have said it was softer than we would like i think that would have been a terrific nonmea culpa and we would say it would get better. Quick pivot. Does he get the bett ebenefif the doubt . He does. Ill give him the benefit of the doubt. 30 seconds, we get an opening bell what is the key this morning what should we be watching most closely . I think it is the crazy negative yields all over the world. You hate macro, though you dont like macro. Im stuck with macro. I did well with macro and micro at college if that matters. Here is the opening bell for this morning look at the real Time Exchange back at our headquarters open lower this morning. Big board eagle point income company, celebrating its listing. At the nasdaq, radius health, biopharma, focusing on osteoporosis and oncology. Fabulous work with Womens Health i like them. I dont like the stock, but i like their portfolio we havent talked novartis. No. I saw that there are people telling me, this is just a what is basically data inaccuracies. And i personally think this im not saying much to do about nothing, but i do think that vas narisen is a terrific executive. Those who think this will sink his regime is wrong. If it goes down today, buy it. Novartis, right saying they did not get they got inaccurate data. It doesnt affect the actual drug they approved. Thats why this stock is high price point for this very rare disease, but the stock is down 7 from its high but the best quarter of the pharma group i still like it. How could apple not be down more if the world is i dont know. Maybe the president knows because hes talking hes been talking about china do we have the tape now or all right. Ill tell you a couple of things he had to say. He said somebody had to do this to china, china was like an anchor said the market will go higher again. He believes they manipulated their currency reiterated this idea that companies are moving out i dont know that that means when he says that, by the way. A lot of this is the bottleneck of vietnam and something about south korea and i made a deal where they agreed to pay more well get the sound here for you. Let you listen to it sometimes it is hard to take it in full context. Im stuck again look, match. Com and i take two is not necessarily the economy. But they are what am looking at tyson foods not necessarily the economy. But thats the latest score card disney did not deliver we should not let that completely color our thinking. Is it frightening . There are people in my twitter followers saying, you better get more scared. Well, in 1998, on october 8th, i was scared between 9 00 and 12 00 until karen cramer said lets buy a billion dollars worth of stock. Was that before the fed cut at 2 00 yeah and she made me go get french fries and a diet coke and pretzel and after i came back, she put every penny to work and doubled it everybody was fearful except for her. There are people fareful ear you get a cut from the fed, to get ahead of the skcycle of negative rates that many are dealing with, germany and japan key among them, that what do you do there you say the economy is weaker than people think because it is not actually weak. You dont have inflation okay. Jay powell has a tough a tough thing to figure out. Such a nice guy i dont mean that in the usual flip negative nonsense this was not the passive aggressive way that everybody hates is part of my life this is what the president should do. You call merkel, say, look, america has n merkel has not been his partner. You say, isnt it time, macron, i dont know, uk, whoever, and say, guys, you know that chinas manipulator stand together with us and china has to stand its ways thats never going to happen. Never going to happen. It is on the it is on the verge of happening, david. It is on the verge it is on the verge happening. What it what i just said. No. It is. Were going to have coordinated action we have been talking about bmws. It is going to happen yeah might be a something in the works with tariffs in europe and it may shock us, but it is that would be something positive for it to happen. Administration would like to do an encirclement, get the germans wasnt that the call to the Transpacific Partnership . There were many, lets just say, people who were reluctant to stand up to the chinese because they felt that if they were selling volkswagen, suddenly fiat would move in. The chinese are tough. Theyre tough negotiators. But, david, i know the dow is down 400 let me get scared about something. Let me think, besides help me get scared jpmorgan the banks are down. Goldman best Balance Sheet they had in years and doing the credit card ill be frightened. Banks down 3 with rates collapsing. The transports are collapsing transports are collapsing. Oil. Oil down as well. Oil is oil, ill explain why oil is coming down. That is reflecting, of course, fears of the global slowdown and people think this is supply. Above 60 couple of weeks ago. The supply camp, there is too much supply. And then there is demand camp. The demand camp is winning now saying there is not enough demand the issue is in the last few months, we have had an amazing amount of marcellus natural gas come to the market were now finishing pipe to have natural gas come to permian. What happens when you can siphon off natural gas . You can drill much more. You cant now because youll be flaring and we do have Oil Companies that are in the allno to flare were going to drill like mad. Well add 5 Million Barrels, 5 Million Barrels, 17 Million Barrels in the next three years. The numbers you throw out are crazy. 17 Million Barrels a day there was a time when 10 million was we were at 6, scott sheffield, i would say, the greatest oil person of our time, pioneer, pxd, said we are going to double. I said when . Within ten years okay we doubled but before ten years he came on not that how do you like that . Everybody thought there was no way. He said double i said i needed him to repeat it now he says were going to have another 5 im quoting him, not me. 5181, and about 3. 3 . Okay. You cant own any oil. Millennial Money Managers believe the fossil fuels are the next coal. And there are younger people who manage money. Thats a very interesting point. One we probably should spend more time on a different day but the power of psg, how important thats going to be are we going to see a Major Global Oil company adopt more of an esg Carbon Capture kind of approach to enhance the brand with millennials. My 25yearold said why dont you talk about the b corporations like almost nothing, it is public i said ill focus on bp, which has a 6. 6 yield covered by cash flow, drilling a lot, the great Growth International oil and, david, you cannot give this away 6. 6 yield and safe. Whats the matter . What are you doing im looking at twitter. Just trying to looking at the dog list. Im listening to you. Always listen to you. I appreciate that. I got something in it too i got something for that. Well see stocks test the bottom, thats what theyre doing. Well look at Companies Whose stocks are starting to rally and then were going to say, wait a second, are we going to have lower yields tomorrow perhaps, yes but were not seeing the were not seeing the Michael Corbats of the world not buying back their stock no. The point we made earlier, there is a potential positive here Companies Significant debt loads if the Capital Markets are open to them, will be able to refinance at lower rates paying high Interest Rates has not been a problem for any company because thats not been the case for a very, very long time it does we had 11 years now of being near zerp. Yes 11 years. Thats bad. Ten, a decade came back for the war of savers, people who were saving money and have if the been rewarded for having done so getting what, 2 if theyre lucky. What you should do the deal around for a few weeks. People at vanguard had a 3. 1. So lets deal with reality what happens to growth, super hypergrowth companies . Theyre able to transcend slower economies. So ill pick one, doesnt have a lot of volume now. Probably dont know. A company that is like a lot of the others i follow. Hub spot remarkable quarter. Hub spot . Yes cloudbased market. Okay, thank you reported last night, unbelievably great quarter that stock is up 10. Cbs is one of the Top Ten Companies in sales in this country. Look at that, it is up 2. 5. They beat the same store sales numbers. And they actually managed to get close to the 7 number that merlot has been talking about. Merlot, the ceo the deal was not well rewarded and perhaps not well understood by the Investor Base to some extent you used to refer to him as a fine merlot. Did he become less fine and is he on his way back to ageing i switched to the sulfate free Cabernet Sauvignon from sonoma, not as good but millennial cab 3. 5 yield debt being whittled down can probably refinance eight times earnings i guess because of china, i should sell that and even short it, right . I got people on my twitter one of the few Large Companies that is having a good day. It is early would you give me that it is early. Not showing them to you now it is 9 40. It is 9 40 it is early. Not etched in stone. Can we come back to the ten year yield i want to take a quick look at it negative Interest Rates again. I know you dont want me to go macro on you it is fine. 40 people go macro i still come back to the move that we saw earlier today. Steve liesman talked a great deal about it, bob pisani referenced it, 1. 625, jim. Youre Satya Nadella. Can i deal with look, again, dial it back youre Satya Nadella, the ceo of a trillion dollar company, trillion dollar company. He can borrow money to buy back stock, buy back stock, sit there and print money, azure is doing great, no azure exposure to china. Why do i tell me the bear case on microsoft here give me the bear case. The ten year it is global softening, it is a Multinational Company that relies on a lot of markets will not have Business Investment to the extent you did and things will slow quarter is important two weeks ago. Azure is knocking it out of the park Satya Nadella is a hero. How about google . Alphabet somebody found some black hole and i read and the stock is down 8 again, david, if you watch stocks, you watch the ticker, micron, probably not that great a quarter. Apple probably good quarter. Dish, thats your world. I dont care for dish, but you can probably craft a positive scenario i dont have one i can go over the tape and i am stuck, stuck, stuck. And i can say, listen, gold is up, i should be frightened gold has been a false tell how many times in last decade. It has been lets get to Rick Santelli, of course, who has a lot of history in terms of following that bond market rick, that move we saw this morning, lets call it 8 00 to 9 00 8 00 to 8 30 in yields, see anything quite like that my opinion is if you watch the market yesterday, before our time zone hit, the yield was around 167 we really never saw that today around the same time, actually, the yield was below that, after a spat of unexpected global issues, whether it was some of the weak data in germany, new zealand lowering 50 basis points listen, anybody ever go watch a Little League game you know how many wild pitches there are . You need that back stop. I dont mean to blame the fed, but im going in part to blame the fed. They took away the back stop, and we all should not be shocked that all the balls are now going behind what used to be a stopper. By just a quarter point, for no real reason, maybe nervous about the globe, they made the globe more nervous they created a selfspiral on the credit side because if u. S. Blinked, if u. S. Is buying into this, they all needed to new zealand goes bigger. Now everybodys trying to raise from central bank standpoint think about this, i remember standing in the pits in 87. It was stocks that caused bonds to rally this time, the treasurys rallying causing stocks to fall. Think about it completely different dynamic and, granted, there could be an explosion or smoldering institution out there that were not aware of yet there could be a huge margin call, which is highly likely in addition to Everything Else. But, lets look at some charts im going to start with the 30year bond you realize right now were five basis points away from the all time low yield in the 30 year bond, which was around 210 in july of 2016 you see it on that chart now, lets look at a tenyear, ten years, double bottom, just above 135. July 12th, july 16th, were getting closer i said the company wide email, the minute you closed under 195, lights out technical look to it, and you see how 30 basis points evaporated is it unique to us no this is the heart of the issue look at 20 year bunds. Almost minus 16, never a lower yield. Look at a 20 year french never a lower yield. Look at a 20 year gilt, never a lower yield. The problem is the credit markets and the Printing Presses and Central Banks trying to jump ahead of each other has created this dynamic of risk off and right now everyone is piling in to treasuries, granted there is some recent shorts that are panicking, but for the most part of, this is central banking issue with fieeedback loops into the equities it is exaggerating yield curves. Jay powell should have came out and said, im not playing this game, i dont care how much the work the back stop and were going to stay pat. David, jim, back to you. What breaks the cycle then . Good question. Most likely well hit historic low yields things will regroup a bit, but the problem is that every episode like this creates more negative rates for you options traders out there, you know, if it wasnt for the u. S. And several other economies, what do you plug into your black to calculate the options. Risk free Interest Rate. Try to put a minus number in there. Try to put a negative number on your clearing cash government securities try to do all of these things. And youll see how absurd this is all getting but in the end, the catalyst obviously was the president , listen, i love some of his policies, but, larry kudlow, steve, art laugher, put them in the room, tell them to quit talking about markets. It is obviously, way above his pay grade. All right, rick well be coming back to you a lot here the ten year, 1. 611. Although, i dont think youre going to be able to get the numbers you want when you go and refinance. The mortgage bond market hasnt backed up quite as much. It hasnt yet it is interesting to see all the bank stocks. Yeah. We did get some comments from the president , we got tweets earlier, right around the 9 00 lets call it 8 50 a. M. Mark on the fed. More on china as well. To eamon javers in d. C. The president just left the white house on his way to dayton, ohio i had the chance on the south lawn to ask him if hes monitoring the stock Market Reaction to this china news were seeing today heres what he said. No, dont think my rhetoric has at all it brings people together our country is doing incredibly well china is not doing well, if you look at the trade situation. China just admitted yesterday that they have thats obviously not the right sound bite i asked the president about whether hes monitoring the stock Market Reaction here he said the Market Reaction was anticipate, that he expected this kind of fallout, but president also said that chinese are eager to get a deal with him. He thinks the United States is in great position economically and the president s comments today on the south lawn sort of bear out what people around him have been telling me for months now, this is a president who is willing to absorb some significant stock market pain in order to achieve his objectives of reshaping the u. S. China Business relationship. Thats his fundamental goal here so shortterm movements on the dow are not necessarily going to rattle this white house as much as they would on other issues because this one, the president sees as absolutely core to his promise to his constituents and his legacy as president of the United States. Thank you eamon javers from the white house. While he was speaking, we hit 1. 60 on the tenyear yield jim, we were 2. 07 right prior to the fed cut, which was a week ago. Yeah. We were 150 basis points higher two days ago . Look, there is flight flight but, david, you talk to me endlessly and you got to talk to people about this, there really is only not one game in town, there is one game in world, u. S. Treasuries, liquid, yielding better, safer. You say, listen, we are taking down too much debt, there are issues involving lets say global. Whats fascinating is that for a long time, back when this when Interest Rates fell dramatically, you had a chorus of people saying, more debt is no way to solve a debt problem and that eventually we would reach some sort of keynesian end point where rates went skyrocketing and instead, we have done the exact opposite thats confusing people. We have this global glut of capital somehow that is creating these negative rates where you have people in germany are happy to give the government money for ten years and get 94 cents back on every dollar they lent them i think thats irrational you can be more creative there are when i ran a bunch of trusts, there are many times youre forgiven, not allowed, forbidden to be able to buy in your cash, put cash in other countries. Cant go buying u. S. Treasuries, running a german pension fund. If youre a corporation right now and you can actually get access to the Capital Markets the way you Capital Markets the you want and get investors to line up for your paper, why wouldnt you issue as much fixed debt as you can . And then buy back all your stock, your cost of capital. Yes apple should be out. Why not retire the shares where you are paying a 3 dividend shouldnt you be borrowing . Japanese yen yield is pretty good. Yes. Look, again i need to see concrete evidence that employment is coming down. I need to hear from the d. R. Hortons there there has been a sudden decline, from the Oil Companies that their Balance Sheets wont support actually the opposite the vix level i need to see off. People say im not going to panic if the tenyear yield is one and a half there are not enough people like that nobody has ice in their veins. I tell you that much nobody. No. A lot of interesting moves in the market. People are so frightened. I thought i had seen everything. Im saying that higher Interest Rates are better than lower rates. I dont want to get too counterintuitive here. I mean, the president should be tweeting lower rates are good. Given the Unemployment Rate of 3. 7 , 2 or more gdp growth, some wage inflation, 1. 6 on the tenyear is probably not something you think that goes along with all that. No. But the capital fund flow of funds, the ease which you can buy u. S. Treasuries. Rick was talking about a potential blowups a lot of huj funds have been short treasuries im sure we will see i want to squeeze in a faber report if i can. Something you always ask me about. Down 2 , thats what we need. Our friends at cbs and viacom an update on a deal we have been waiting for for years, for months, for weeks that still hasnt come, but worth updating people it appears that we are getting very close for the first time at least a long, long negotiation where cbss board in particular has taken so much time in terms of going through every single particular of a potential deal, they are talking Exchange Ratio with viacom. I dont have the details specific on where they are in fact, they havent nailed down an Exchange Ratio i think it was. 63 last title. They are so close that people tell me they would be surprised if they didnt reach a deal within the next few days. You said august no, that was somebody else. I will be on vacation next week, so inevitably it will happen while i am away. We have been talking for months the fact that backis, viacoms ceo, would run the combined country. The ceo of cbs would have a significant role as well the Exchange Ratio has been the key. Given the history between these companies, you can never say with absolute certainty they will get it done but given where the negotiations are right now and Everything Else that has come prior to it, you think they will be able to nail it down soon. By cbs and cbs. 50,000 cbs. You pointed out one of the great bright spots today if you are along cbs and have bought it recently is the company, of course, we know it as a huge drugstore chain, also one of the largest insurers in the country. Yes. Cvs shares up almost 6 . A great job larry really delivered david, this is kind of a fear is fear itself fdr moment can we remember that the Banking System collapsed and we were in a deflation spiral that meant we had 27 , you know, unemployment Industrial Production declined rapidly. What i look at here, i dont see the fear is fear itself is much more about this is what happens when you get zblo globalization. It allows for the ease of capital transfer. Yes but globalization has brought many benefits as well. I am just saying 508 walmart gets a lot you ever go to walmart, by a really nice shirt for three bucks whats wrong with that . Nothing globalization globalization. Walmarts online is fabulous i dont know other than disney, i dont have a lot of things that i think should be down 2 today. Disney is down almost 6 . That is pressuring the dow i like to focus on the s p bob beyond burger, the s p up now 13 . We are down across the board. Particularly banks on the weak side here. Off of the lows, but just barely look at the sectors here there are the banks. Energy oil is down 7 this month, just in the last four or five trading sessions industrials, semis, these are the cyclical names golds sickyear high. Gold has not been affected against anything long term it was a hedge against inflation. How did that work out . Now a hedge against uncertainty. I agree with jims comments on gold the banks there, the usual suspects i want to point out some of these numbers arent going anywhere for years bank of america is down here jpmorgan is 106. It was there in 2017 it was 106 look at the kb, the bank etfs. This is going back to 20162017 here look here. We are essentially where we were in late 2017 in the kbe for all of these bank stocks why have things gotten so weird in august . Two things number one, the Federal Reserve happened number two, more tariffs so its very simple here we had the fed initiating a global easing cycle. We saw that today within india and new zealand lowering rates we have trade tensions hitting Global Growth. This is what im concerned with because im the stocks guy, earnings projections we had a very, very difficult time with all of this going on how do you determine a future stream of earnings, which is what the stock market is we call them top down strategists, people who look at the broad pictures here. Citigroup, lowered their 19 and 2020 earnings estimates last week Goldman Sachs did essentially the same thing, lowered the 2019 and 2020. So these are big top down guys telling you we are having trouble figuring out whats going on then the bottoms up guys, these are individual strategists they look at the individual stocks john over at Gordon Haskett commenting on industrials, trade tensions worsening, the prospects for Industrial Company earnings and share prices at trough appear to be getting further pushed out its harder to figure out where we are with the industrials that he deals with. Also issues that are psychological in nature. They have to do with things like we are not sure what we are doing, so we will spend less Capital Expenditures we were in the double digits in 2018 it was a great year. You see every quarter now Capital Expenditures are going lower. This is a sign again of psychology for the individual companies saying we are not quite sure whats going on we could automatically adjust buybacks. We can adjust dividends quickly, just move them around. If were putting a new plant in, thats a longterm prospect. With that uncertainty, we are not there. Thats why the tariff thing is difficult. Its a different game. Its not that easy on the numbers. There are psychological knockons that we are getting. Finally, a little bit of good gna news here. We are at 23 on the vix. Remember in january, we were heading towards 40 in february of last year, we were north of 50 at one point. So, yes, this is elevated compared to where it has been in the last several months, but a true, true panic level not yet so there is a little bit of good news right now we are well off the lows guys, back to you. Bob, thank you. Bob pisani. I dont know if you knew this, jim. We are a podcast thats right you can listen to us and who wouldnt want do that . The opening bell hour of squawk on the street at cnbc. Com podcast apple podcast, spotify, google, or whatever you want to listen to us. People love podcasts. I was with arod yesterday. Were you . Yes. Podcast is one of the greatest sellers really quite good. I had the fortune to be interviewed by him the man is kind of a double threat man. He is he is impressive all right. Can we watch walmart . Lets let that be the tell. I was going to ask you . Walmart was at 107, broke through 106. Thats walmart they do lower rates but it may have to raise price as lynn. Little bit. And what are you focused on on mad tonight . A company that fell off the cliff is bausch. How about medical marijuana . Medical is the able to dose it, gw pharma. I think its terrific. David, people do not understand the power of trying to solve diabetes in any way, shape, or form tandem is doing a great job. None of these companies is connected to the fed i should gig ofigure out a way 4 00 how does beyond meat and the fed ill come up with something. I studied macroeconomics for a long time. I should be a macro economist if i care about macro. You may end up being fed chair. Can i keep the other jobs dom chu is at our headquarters. This is very much a macro morning. It has been for quite some time ever since the second hour of squawk box. As we take a look at whats going on here, we are well off the lows not well off down 550 we are back to the 500 level off on the dow the places we are seeing some of the most heat in terms of the market, they are macro oriented. The tenyear note yield, we dipped below the 1. 6 level for a bit. We are now still talking about threeyear lows in terms of u. S. Tenyear treasury note yields. Thats a big focus on that Interest Rate theme, we have been talking about this idea and the president tweeted about it this morning that the yield curve is maybe wide. One thing to look at is in the longer term is scheme of things. Tenyear treasury notes and twoyear treasury notes has been trending down quite some time. We are at the lowest levels going bab to the middle of 2007. 12year in terms of twoyear and tenyear te tenyear treasury note yields. Its not just about whats happening here in the United States but also globally as well of course, those Macro Markets playing out. Gold prices up 2. 5 . Silver, by the way, outpacing gold today, up by almost 4 as well we put up bitcoin prices not because they are anything like gold or silver, but over the course of the past few weeks they have become a place where some traders have looked to store their value to get some performance here in terms of the overall risk appetite. Those bitcoin prices up about 6 so far today and then, of course, as we see these ripple effects coming from the Commodity Markets overall, its about whether or not we are seeing some of these moves play out in crude oil that commodity again down about 4 today a massive move lower for crude oil prices as a result, oil stocks are taking a huge hit on that. That will become a big focus as well one other thing, sara, as we talk about this. We will be watching there was stocks, semiconductors, and small caps to see if they have any kind of a validation for the overall macro move lower and risk sentiment getting ratcheted back back to you at the New York Stock Exchange all right dom, thank ou. And good morning, welcome back to squawk on the street. Im sara eisen here with david faber. Live as always from post 9 at the New York Stock Exchange. Carl quintanilla with the market off. Another big selloff here on wall street global bond yields really leading the charge lower stocks are following suit. Dows down 511 points, down 600 at the low s p down 1. 6 . The nasdaq down 1. 3 and just some of these stunningly large and low bond yields, david, 30year treasury yield at an alltime low tenyear yield below 1. 7. Almost 1. 6. I mean, the move today, sara, in the yield was extremely sharp over an incredibly short period of time. 150 basis points a few days ago. 2. 07 a week ago. This has been remarkable i have continue to try to wrap my head around negative rates, which only get more and more negative you are now paying the German Government 6 cents on every dollar you lend them. Crazy, right . The question is why. Clearly trade tensions are escalating the u wan weyuan went the other. And then there is the fact that other Central Banks are joining in on the action whether its a currency war or an easing war to fight the trade war. I saw when new zealand came out last night, i dont know, after 9 00 p. M. Cutting rates 50 basis points big surprise india surprise thailand surprise. Whats it mean . Is it a reflection of continued and or concern about growing global weakness as a result of the trade war . China is the second biggest economy in the world it continues to slow down. It is the appetite for countries like new zealand in buying their resources and products so you have got the slowdown factor and the currency war at play nobody can be stuck with a strong currency. It will hurt their exports whether central bankers admit that or not, they have to keep up with each other guess what its working for the Central Banks that cut rates thats why the president is frustrated. I know we love to show the statistically insignificant dow, i like to refer to it as the tenyear yield over the last six months, does it add up to you with a country with a 3. 7 Unemployment Rate, decent year over year wage growth, gdp above two. Does that make sense to you its a reflection of the fact that Central Banks all over the globe are buying bonds that there is so much liquidity in there the u. S. Is a safe haven the u. S. Is a relatively high yie yielder compared to germany. The money keeps rushing in and in and in. What do you do if you are Jerome Powell . You can surprise enormous pressure from the president , continue to cut rates. Surprise with bigger rate cuts do you want to get ahead of the idea of negative are rights . Probably. Trying to generate more gloet to get away from it. Probably. You want to steepen the yield curve. You want to prevent the economy from going into something deeper someone else who has an answer to that question Steve Liesman. Steve, what does the fed do . Talk about overbilling. Having an answer, i dont know but there is a powerful and global downdrafted bond yields this morning as you were saying, the tenyear note down to its lowest yield in roughly three years. German bund lowest level ever, now more deeply negative and increased speculation u. S. Yields could go subzero. Look at the three big bond markets we are following there its now 161 on the tenyear yield . I just looked, its 165. The bund minus 60 basis points for the yield. Japanese tenyear is holding in there. Its unclear what sparked this reallily as sar was talking about, it started with unexpectedly deep rate cuts overseas add to that a really good german Industrial Production report, both raising new fears for the outlook of the Global Economy. Several Central Banks cutting more than expected, new zealand, thailand and india dropping more than expected pressuring the u. S. Federal reserve to act as fed u. S. Er officials see u. S. Rates out of line with the rest of the world thats what the president was tweeting about this morning. The probabilities. Relatively modest so far there is some bid in the 50 basis point. The 59 probability of a quarter point in september, 73 chance of another cut in december and a third cut being sort of toyed with for january the drop in yields is getting scary. The already epic global bond bubble continues to inflate further. Pimco sweeting, tweet, its no longer absurd to think that the nominal yield on u. S. Treasury securities could go neg ticht. They dont see this as a Central Bank Issue they think its about the aging Global Demographic and technological demographic pushing yields lower whatever the reason, either because of longterm issues or nearterm worries about growth and tariffs, 15 trillion, sara, of debt worldwide has a negative yield. Thats up by a full trillion dollars in the last few days. We talk about it. Everybody is sort of stunned by it and bewildered by it. What are the actual ramifications and implications of that . Is it helpful to growth have that its hard to say. There are people like peter fisher, who was formerly at blackrock and now and the u. S. Treasury who thinks we need a positive yield curve and th its very hard to say, sara. The prospect that some portion or all of 22 trillion of u. S. Debt could go negative its just very hard to fathom. The u. S. Debt has been an anchor in the world in a world of increasingly negative Interest Rates. Thats something that has been a beacon for assets around the world to come in and soak up this excess global savings thats out there i mean, the idea that creditors pay debtors to borrow money, it was looked at right . If david faber, formerly the brain cant get his brain baroud it, i cant either. Formerly . Thats unfortunate to hear. I believe you still to be the brain. You know what i mean. I do. And, steve, you bring it up. I do, too. It is very difficult i get this all the time for people to understand where is that money coming from that is willing to actually lend it for ten years knowingly getting back now in germany 94 cents for every dollar you lend . Hit has to be money it will be less if you dont pat it there. Clearly why is that . They are afraid of deflation. Plus, there are mandates that come with the money. There is money all around. I want to point out one thing. But it does before you say that, it means theyd rather put it there than into some other more productive use . Does it mean there is simply a surplus . Theis is the global savings that they talked about, bernanke talked about older People Living well, thank god, who are still needing a place to put their savings for if you are going to live longer, you need greater savings. There is also the lack of consumption in places like china. And they have a lot of savings they need to put someplace and u. S. Yields, by the way, are the most positive of any major nation out there but i did want to get to something sara was talking about, what global central bankers would do this sets up in jackson hole in three weeks, i think, which is where global central bankers are going to meet. The treasury secretaries and the finance ministers pushing them to get together towards accord you imagine there will be interesting talks on the sidelines about how Central Banks should navigate these difficult and Interesting Times. Steve, looking forward to that as always, jackson hole in a few weeks. Steve liesman, former u. S. Treasury secretary joined squawk on the street yesterday. Take a listen to what he said. I think if things continue on the current path with major volatility injected every several weeks by some american action, youre certainly getting close to a 50 50 risk of recession over the next year or year and a half. Joining us now, brian nick and managing director and Portfolio Manager burns mckenney welcome to both of you brian, how do we interpret these global bond yield move race to the bottom i think the reason that the attention that we are paying is more to the bond market than equity market at this point is because the central bankers have gotten out in front. The u. S. Is still i think pretty far from recession we think its a one and three chance the next year you need to see the trade war escalate for that to be a big risk central bankers are cutting rates. The fed last week, why are they cutting rates . A preempttive measure . Now it looks like they should have done 50. Yes if the fed delivers on what the market is expecting, it wont have an impact its not going to be helpful so do they come out with a surprise do they go 50 in september these have to be on the table if they want this to have an impact the tweets from the president make their job a bit harder. It looks like any extraordinary measure they do is because of political pressure. Or targeting the dollar, which they dont like to do. Why else would they go 50 and surprise the market . Just to basically assuage investors that we are not here letting you invest without a net here, we are not going to let the economy fall into a recession. Not just the sort of mathematical damage from the tax increases themselves, but the uncertainty we are creating for the lack of investment and potentially in the Third Quarter now lack of consumer spending. Burns, what are you guys doing within your portfolios on a day like this where we see such a dramatic move lower in global bond yields well, there is obviously no place to hide within equities on a day like this. And this is a continuation of what we have seen for quite some time of binary markets where you basically have Monetary Policy or trade policy or what are tearing the marke steering the markets right and lef. You have stocks moving so much together it makes it harder and harder to find Companies Trading on their own fundamentals. The defensive sectors have been bid up to the point where you go to defensives, you are paying so much for the insurance it lose as lot of defensive nature one of the first places we are suggesting investors look and we are going to ar dividend payers and Companies Growing dividend dividend paying names tend to be a little bit less volatile than the market and they do offer stability in this type of situation. You know, look for companyspecific stories you know, places like, for example, the Defense Sector is one place that investors might look where you, you know, you have that stability, but they havent been bid up to the same degree that Consumer Staples or utilities have. Are you surprised small caps and or companies that rely on the domestic economy here, burns, have not fared better in this todownturn you know, typically, and we saw this a couple of years ago, that when we saw a lot of the the slowdown was brought from outside. It was coming from a slowdown in the Global Economy, whereas the u. S. Economy is doing very well you have low unemployment, you do have High Consumer confidence, and in that environment you would expect smaller caps to be doing better. You also have a tightening of Global Financial conditions despite the efforts of central bankers and oftentimes small caps are most vulnerable in those instances. Brian, what are you telling investors what to do similar to burns, looking at more defensive names, looking to get income we dont think at this point that the market is look by to move higher. We wont wake up and have the trade war solved any time soon also probably coming out with interesting opportunities in the credit markets as well when things settle down. Where in the credit markets derisking with high yield that was the right call coming into the period. Coming out of this assuming the volatility comes down its been a good time in the past instances of trade relateddyruptions in the markets and when you hear people like Larry Summers talking about odds of recession going up, thats the first place you look, right, the credit market the high yield spreads came out aggressively in a short period of time they were a little bit more well dehafd yesterday they will be correlated to what equity markets do. I expect them to widen out today. We are looking for the bottom in terms. High yield market. Thank you both. Thank you. Thank you. Lets get to eamon javers in washington for more on the president commenting on some of these issues we are talking about. Thats right. The president is watching this market fallout to the china trade news you guys have been talking about. He left the white house. When he was on the south lawn about to board mar even one i asked if he was monitoring the stock market fallout heres what he said. The Market Action is to be expected i might have expected more at some point we have to take on china. China is losing so many they are losing thousands and thousands of companies are leaving china now because of the tariffs. And were in a very good position as to whether or not a deal will be made, i will tell you that. China auwould like to make a de very padly. The president saying he expected this Market Reaction that we are seeing here and he might have expected a little bit more of a reaction than what we have seen so far this week so that indicates the president politically might be willing to absorb a little bit more stock market pain as he tries to achieve that goal. He says we had to take on china here somebody had to do it. He has in the past blamed previous president s for not addressing the china trade imbalance and ultimately he says he is confident that thichina wt to make a deal he feels he still has the upper hand despite a lot of this Market Reaction we are seeing through the week today, guys. Eamon, we should point out the s p is well off the lows, down 0. 9 right now. That has been always the question how much main is the president willing to take . I guess it has been generally believed he wants, given his previous enormity of sweets on the market itself, to see it go higher i think thats wrong. I dont think they are paying close enough attention to this president. The president said to me the Market Reaction was expected he expected to see what were seeing now and in fact he thinks it could have been even more. That to me indicates that he was prepared to absorb even more market pain than what we are seeing in order to get this goal done this is a fundamentally important goal to this president. He is willing to see a lot of action on wall street before he is willing to back off on. This it doesnt seem like he is in a position politically or economically to paback away from what he is trying to do. Do you know whatyearold curve is at two wild a margin . I dont. I would love to know what larry kudlow briefed him on before that tweet u might have a sense of what the sort of economic thinking inside the white house is thank you. You bet. We watch the tenyear yield creep up a bit from the lows sara, by the way, there is a reason Steve Liesman referred to the fact that im formerly known as the brain i cant do math. I was referring to 94 cents. Its negative. I wanted to clarify that. Its not 600 basis points. I still think of you as a brain. 0. 6 basis points. Its still the larger question of why you would lend money when you knew you were going to get back less. But not quite as much less. I think its just a rush into safety no other place to go follow the Central Banks sort of increasingly bearish outlook on the Global Economy. Conceivably a worldwide savings clut that steve yeah. Lets focus on disney. Those shares are sliding this morning. That is having an effect on the dow. It missed on earnings. That is the company blaming weaker numbers on the ongoing integration from the entertainment asset of fox which it bought and the high highway cost of building the streaming business as well theme park issues perhaps lets get to julia, she is the down with disneys ceo bob iger. There is julia to fill us in. Thanks so much. Well, disneys ceo telling me that the company is incresting to succeed in the streaming wars he announced disney will sell a bundle of disney plus espn and hulu with ads for 12. 99 thats a 5 discount than if you bought all three separately. Our goal all along was to achieve scale particularly with disney plus as soon as possible to basically sign up as many subscribers as possible and get them into the service, giving them a chance to enjoy the great intellectual property and the product that will be a part of that service we thought this would be a great step in the direction of achieving that goal. Now, its not just about subscription revenue for those services iger telling me that giving a broader audience for hulu will help grow the ad revenue which he says he is a valuable revenue stream disneys bundle will cost the same as netflixs most popular streaming subscription so i asked iger if he is looking to steal some of their market share. Weve always believed that there is plenty of room for us both to thrive in this marketplace, for us both to exist, although i know there is a lot that has been speculated about us going after them or competing with them. Were not. We are looking to occupy space that clearly is a Growth Opportunity for the company and growth in terms of consumption with product that is very, very differentiated now, as for that differentiated product i asked iger if he needs to make more content acquisitions the answer was very quickly no find more on cnbc. Com. We will have more in the next hour on squawk alley. Back to you. 71 billion for fox. Of course, closing on controlling all of hulu stay with us we also want to bring in ben, Morgan Stanleys head of mooe research he has an overweight rating of disney target price 160 anything you heard on the call that changes your opinion here no. I mean, look, you have to put the move today in perspective. This stock added 50 billion in Market Company since february before their investor day. Exceptions had gone up i think with the First Quarter of the foxconn sol dags some noise around a large deal. Some of the investments on the fox side to build hulu and i think digestion of all of that stuff into the stock today is not surprising. There seem to be few still who have doubts that disney plus is going to be a success whether on its owned or linked with espn plus and hulu and that 12. 99 offering what are the risks that would be a surprise to those who think 6. 99 and given the potential audience, this is going to run away with the market well, i think there is this difficult to answer question about quality and quantity you know, one of the things that netflix has done over the years is build just a massive amount of content we can debate how good it is or not. Thats sort of a personal preference decision. But they have a ton. There is years of content on netflix. Thats not what disney is doing. Thats not their strategy. The question is, if its not all things to all people, even if it is an incredibly attractive array of brands around disney and pixar and star wars, et cetera, you know, how big is that marketplace we dont know the answer to that question today we think its big. But you wonder where expectations are versus where they can ultimately execute. For all the noise around earnings last night and the disappointing numbers, the incremental information on the disney plus front i think was clearly bullish. Julia, going into the print, there are at least some investors i have spoken to are wondering if we are going to talk about weakness at espn given the cord cutting that was not where the weakness was. Did iger discuss his expectations given espn is a very important component certainly when it comes to cash flow of this company certainly there was some strength at espn in terms of advertising rates increasing what you have with the Media Network is the fact that you have, you know, declining viewership because of the cord cutting issue. Its not just a disney issue thats across the board in the Media Industry espn may be charging more per ad, but they have the fact that their audience is shrinking. Those espn numbers were not terrible i think it sort of fits into this larger question of how disney is positioning the audience over where disneys margins may be better. And i think iger spoke pretty significantly how they are laying the groundwork for this to abstrong business now, but perhaps move over more into that direct consumer business depending what happens with the paid tv business as a whole. And i thifeel like the bullsr on the price the bears are talking about fox and other misses, especially espn and cable so does it just change the timeframe for disney which argument wins out there . Well, look, i think the streaming debate is going to take years to be answered. Thats good news or bad news depending on your investment horizon. I think on the core business, including the fox assets, clearly there is an earnings reset that has to happen if you bought this stock in the last three to four months, i dont think you are surprised by issues around cord cutting, licensing revenues coming in lighter, and you are focused on what is this Company Building in 2024 many ways, the accelerating cord cutting at the industry level reinforces the importance of their streaming strategy in general. Thats why i think most of the people who bought the stock of later bullish. The earnings are going to be volatile there is a lot of moving pieces. We added a big acquisition in the mix. And so this volatility shouldnt be a shock i think most people will take this as a buying opportunity. Finally, ben mentions 2024 of course bob iger is going to be long gone by that date. Is there any talk about succession in terms of when his departure takes place a little less than two years from now yeah, about two years from now. He has extendsed his tenure many times. I hear from some people that he is going to extend it again. He has also said adamantly this is the last time he is extending his end date as ceo. But i think that the question is what happens with the streaming business there is some speculation that kevin mayer, who is running the International Streaming relatively new division there could be set up to succeed iger if he if that division ends up going well. I think its too soon to say as this goes through the transformation, we will see who emerges as the leader of the most skef successful divisions within disney. It will be interesting to watch. At some point we will talk about that a lot more. Julia, ben, thanks to you both. Thank you. The collapse in treasury rates continuing to support gold prices, and will continue to thats according to citis latest commodities reports in which they up their price target on the precious metal. With us now senior strategist at citis Global Commodities team first of all, just given your history, you know you can comment on this as well, whats your take on sort of where global rates are in that fairly dramatic move we have seen of late in terms of yields . Well, the move lower in rates, both in the u. S. , but what were seeing broadly across the oecd and emerging markets is a bullish factor for gold. Its not just nominal yields that matter. If you look at in the u. S. , real yields at the belly of the curve, if you look at the five year and tenyear sector, we are approaching zero and in that context, very want been there since 2016 and i think thats a favorable environment for gold, which, you know, i would model as a Long Duration zero coupon asset gold is really benefiting from the central bank easing. One more point on the central bank side globally, its not just that the Central Banks are cutting rates in this environment, but also the fact that the Central Banks are buying record amounts of gold. If you look in 2018, you saw over 650 tons of net purchases from Central Banks thats a record. In the first half of this year, 374 tons we are already on pace to eclipse my 700ton central Bank Forecast for net gold buying in 2019 this is a con struck tifr rate channel. And you would have made more money buying gold so far this year year to date up 18. 25 thats more than the s p 500 make the case to investors who are looking at the yield move and thinking why wouldnt i just buy a Procter Gamble or a company with a high dividend yield versus gold, which doesnt pay my yield sure. So thats certainly a discussion among macro investors, you know, when the s p 500 is playing a higher dividend yield, then a tenyear treasury bond, where do you allocate i think the concern is that a lot of what is driving inflows is not just lower rates. Whats driving lower rates is also concerns about Global Growth risks, trade tensions and emanating from that standpoint so you also are seeing a safe haven bid for gold and kind of a protection of your investment by having Gold Holdings in your portfolio. Basically, gold is benefiting from risk off flows amid these lower global rates both in nominal and real terms. I havent heard you mention currencies, which is actually why i think that the gold has been doing so well its the ultimate alternative currency when every central bank is pressuring their currency, three surprises overnight, china, you name it, gold gets the benefit of the doubt what is the gold price telling you about where Monetary Policy is headed and where currencies are headed sure. In this discussion we have been talking about gold and denominated in u. S. Dollar terms. If you look across other g 10 currencies, currently such as pound sterling or aussie dollar, gold is at record nom nay levels in those currencies. In the dollar terms, we havent seen a sharp selloff in the dollar you have seen a little bit of weakness in the big dollar index since the what hawkish july fomc in that context, gold is continuing to outperform i think if the dollar is going to weaken over the next six to 12 months, i think through denomination effects, thats just a kicker for gold, although i think in this environment its the rates channel, lower yields, official sector purchases and safe haitiven inflows drawing ai for the yellow metal i have highlighted consensus for the last few months that i dont think gold positioning is belolg yet. From a normalized basis looking at open interest i think the market can accelerate another 50 to 100,000 contract equivalent appreciate your taking time thank you. Thanks, david lets send it over to sue herera for a cnbc update at this hour. Good morning. Heres whats happening at this hour north korean state media says leader kim jong un supervised a livefire demonstration of newly developed shortrange Ballistic Missiles the move designed to send a warning to the u. S. And south korea as they conduct their joint military exercises the four rounds of weapons firing in two weeks comes during a stalemate in Nuclear Negotiations a taliban suicide bomber targeted a Police Station in kabul killing 14 and wounding 145. Most of them civilians it is one of the worst attacks in the Afghan Capital this year and it comes a day after a u. S. Enjoy and the taliban reported progress in their talks on negotiating an end to the 18yearold war in Afghanistan British airways canceled 100 flights to and from london airports after its check in systems were hit by computer problems 15,000 passengers were stranded. And a Spacex Falcon 9 rocket launched from Cape Canaveral last night the company says the rocket successfully deployed a Communications Satellite about 31 minutes into that launch. Its a busy day on the markets and in the news. Thats the news update this hour guys, ill send it back downtown to you david. The market is well off the session lows, we should point out. The s p now down just 0. 83 we had been double that. 1. 67 when i looked, near our lows of the morning. Still very interesting morning given whats happened with bond yields art is back with us at post 9. It appeared the market, art, was moving on the bond market move as opposed to sometimes we see it the other way around. Yeah. I think what happened is that we had Central Banks begin to cut a bit more aggressively than people thought, particularly the new zealand bank they began talking about rates possibly going ultimately negative and that would have strong implications for australia and maybe even canada, and that brings us much closer to home. And what happened then was rates around the world began to accelerate to the downside and that basically spooked the equity markets there was this, wait a minute, whats out there you know, whats happening is it something bigger than what i see . And thats what took us down the dow took out mondays low. It went lower than mondays low, which was 25,523. The dow is getting pressured by disney earnings, which are a fundamental story having little to do with anything macro. Right i think it was swept up in the move the s p luckily did not break below. That was 2822. So thats why i think you are getting a little bit of a bounce here but again viewers would be well served to keep an eye on those yields and where they go. Do ywhat do you make yields by the way, the nasdaq down only a third of a percent what do you make of this move, not just the negative, which weve talked a great deal about, in terms of 15 trillion of sovereign securities that are yielding negatively, but also the move here . Yeah, only the first time in 6,000 years of trading that weve had negative rates, so it shouldnt be a shock, i guess. But the yields do two things one, which sara alluded to, and that is it impacts the currency. If it a bank, for example, new zealand this morning was more aggressive than people thought, and that took the new zealand currency significantly lower now you got people out there and they say, okay, we all panicked on monday because we thought the chinese were going to bring currencies into the trade war. Then you see new zealand cuts more aggressively, and their currency goes down they say, well, wait a minute. Maybe you dont have to be overt about it new you can just say, hey, im only innocently cutting my rates, but, oh yeah, looks like my currency fell, too. So you are getting some of that. And that also helped spook the market it was a gin combination of is something i dont see, and the other currency preciossures are going to continue to be around as we saw monday, thats something markets dont want to see. Art, you have been through a lot of down drafts and scary moments and unusual moments in your time here how bearish in general right now are you feeling about the equity market well, again somewhat skittish if we rolled over here and violated the morning lows, then it would really begin to be a problem. For now everybody is kind of crossing their fingers and whistling past the graveyard saying, okay, we tested mondays lows the dow fell, but didnt collapse the s p held so i guess we can be in good shape. I think thats why you see a little of this bounceback. Unfortunately, when you get a turn like that, when people are convinced, it should look like a stampede people should be rushing in to buy them we dont see that happening. This again looks like a simple rebound or reflex rally. That raises caution. We are 5. 5 off record lows for u. S. Stocks. So i wonder how much the setup into this has to do with the sort of extreme or more you know, bigger moves that we are seeing, the price action we are seeing. You know, you are going to see that, particularly after the last year and a half, two years. Youve seen some dramatic swings both in short time and short direction. So we keep moving. So, yeah, i think volatility is going to be here to stay id be worried if the vix got up above 30 but i think we are going to hav jumping markets for a couple of weeks. Negative rates to stay as well boy, as i said the first time in over you can go back to the ancient sumerians trading commodities. It doesnt make any sense. Of course can i beg you to lend you money . Well see you. We live in Interesting Times you know, id like to point out that this is the first time you can actually say this time its different. It really is. It really is. Art, thank you. My pleasure. 30year yield approaching a record low of 2. 8. Hitting a low today about 212. President trump watching the recent market volatility on cnbc here is what he told reporters in the last hour. I think the Market Reaction is anticipated i would have anticipated it. I would have maybe anticipated mean more. Ultimately, its going to go much higher than it ever would have gone because china was like an anchor on us. China was killing us with unfair trade deals. The people that allowed that to happen are a disgrace. China, what they were doing to us for years and years, taking hundreds of millions of dollars out, stealing intellectual property, targeting our farmers, all of that is ending and they understand that. Joining us now by phone, Goldman Sachs strategist abbey joseph cohn. What do you make of this global bond market rally taking on a more intense turn today . It certainly has been very intense. Sara, its very interesting to see which countries stepped up over the last 12 to 24 hours to lower their rates. New zealand, thailand, and india are all nations that are deeply affected by whats happening in this trade dispute i was going to skacall it a skih its now bigger than that, between the United States and china. We also need to look at some of the other countries that are significantly impacted by whats going on these include korea and taiwan also singapore, australia, and lets not forget japan so were looking at these Interest Rates moving lower. Art was very important in his historical observation with the sumerians. We really dont know what happens with negative Interest Rates. There is the one way to look at it, which is the benefit we see in terms of equity valuation there is also a signal and the signal from the very low Interest Rates is not just that inflation is low, but there is concern about the pace of Global Economic activity. A good deal of this is, of course, related to trade disputes we always talk about the bilateral situation between the United States and china. Lets not forget about germany as well, the worlds Third Largest economy where there has been a sharp deceleration in the Economic Activity since the end of 2017, and most of that is concentrated in the industrial, the manufacturing sectors in germany, which really depend upon exports so we are seeing a Global Impact on Economic Growth so its not surprising to see global Interest Rates moving lower as well. Yeah. German Industrial Production much worse today, down 1. 5 month over month what does this add up to in terms of the case for u. S. Stocks i think that david coston has done a fine job of laying out the base case, which is that what we are basing our analysis on right now is where we are on tariffs. Plus, the assumption that september 1 there is another 10 increase on tariffs from goods from china and the forecast that comes from david costons group basically say that the u. S. Economy continues to grow, albeit at a slower pace than the president often speaks about, and Earnings Growth will continue i think its important to note, as david has pointed out, that while Earnings Growth for 2019 roughly 3 , we expect some acceleration in that but the consensus expectations is much higher than ours currently the consensus thinks earnings can grow next year at 11 . We think thats too high here is my point for investors, and that is we have now most of the results from this quarters earnings reports, and not bad. You know, more than 80 of the market cap has reported, and there have been some positive surprises for the quarter. However, in most cases the guidance for the remainder of the year and for 2020 is not all that favorable and i think that investors are beginning to look at that. So when we talk about the volatility in the market, a good deal of it is related to the fundamentals beginning to show some signs of slowness, and in some countries that slowness has been around for a while. And so there is one basket of concerns some of those are the fundamentals the other basket of concern obviously, relates to policy decisions being made not just in the United States, but now in other countries. So finally, abby, lets say jay powell calls you up, wants a read on the market and says what do you i do with all of this the global context, the rate move, the pressure from the president , what would you advise him . I think jay powell and his colleagues on the fomc are in a hard spot. We will likely see another couple of rate reductions. September looks pretty concern he puts the probability at about 80 and another reduction later in the autumn. The concern, of course, is that Interest Rate reductions can only go so far in terms of their impact on the economy. If we were seeing a deceleration in Economic Growth in the United States because the cost of capital was too high, then, of course, the Interest Rate reductions would have a bigger impact but what were basically hearing from companies who have dramatically reduced their investment, capex, and so on, its not a function of cost of capital. Its a function of concern about uncertainty, about which way the Global Economy is going, where they should be putting their supply chains, and so on and i know that jay powell and others in the fomc are always looking at the intermediate to long term. That is, how do we bolster gdp growth long term how do we bolster productivity long term . And there hasnt really been an opportunity to have much discussion in the markets about that we are not seeing the sort of longterm capex, longterm r d, and also the investment in people that we would need with regard to bolstering productivity abby joseph cohen, thanks for calling in when we come back, we will have much more on todays big selloff. Dow down 329 it is well off of the session lows still a pretty ugly down 1. 3 interestingly, its not the trade chinarelated stocks that are getting hit the hardest. Its those exposed to lower yields financials are the worst energy, industrials. But you have traderelated names like nike higher, semiconductors higher today so sort of an interesting dynamic playing out as the rerket sells off mo squawk on the street when mo squawk on the street when we come back right sfx record scratch music plays throughout [ watch me walk by Spencer Ludwig ] yo dj, can i put in a request . 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Dows down 267, so were continuing to come back here lets go to the eye of the storm right now, cme group in chicago, Rick Santelli with the Santelli Exchange on a major day. Major, world bonds. Thank you, sara, id like to welcome my guest john sylvia thanks for joining me. Lets get right into it, india, new zealand, thailand and others central bank last day of july, arguably a needed rate cut, but these are not normal times the backstop, the Federal Reserve representative was taken down symbolically, and it seems as though theyve unleashed a race to liquefy adding to negative Interest Rates and a feedback loop. Look at the treasury vix, the ty vix, highest level since april of 17, very close to the highest levels since the end of 16. Your thoughts, john . You got it, rick. Your comment earlier this morning was very well taken. Yes, youve unleashed a system you had an unstable equilibrium and economic system, you made some changes you added tariffs in china at the same time now you had the fed cutting rates. Now you got other countries cutting rates. The system, the Financial System is desperately looking for an equilibri equilibrium, but we know from philosopher marcus brody, you are dealing with powers you cant possibly understand. We can start off with rudy donbush and overshoot it thats whats happening. The markets are looking for a new equilibrium and continually get shocked by other changes in the system i also like your point earlier today, if i may, when you said we should get the people together and really Start Talking about some economics yes, we need to do some serious economics here drop the foreign policy, drop the politics, and actually get some serious people to talk about economics, and when you get that, maybe youll get some stability. But until then, all we get is more rhetoric and more changes and just continued instability giving you the vix that youre talking about. Yeah, and you know, david faber asked a great question this morning he said, well, what makes this stop and there is no easy answer here i like your word equilibrium, because i think were going to be looking for one, and the very issue i would focus on next beside the ty vix would be 30year bond yields. Right now theyre 5 1 2 basis points away from all time lows that will once again kick start a psychology that will start another wave of sovereign drops on the long end. Your thought oh, absolutely. You can say that the 30year, the 10year all overshooting theyre really beyond the point of a stable longterm equilibrium, and that shock has to put some players into motion. For example, we know that a lot of korean debt is actually denominated in dollars, so youre changing Interest Rates to influence the currency. Youre creating these debt burdens in countries like korea, which has to rebalance those Balance Sheets perceived as pursuing the dollar and lower Interest Rates, so again, that shock hz as to settle out and w really have gone from a point of we thought was stable equilibrium to a search for a new equilibrium given again that vix. Once again, were in a search. I dont think this ends anytime soon i think we have to have some political stability. Were out of time, but i think another easy barometer for when this settles down answering david fabers question, watch the dollar index when the dollar index really starts to move down, several sections in a row, that may signal an all clear. I agree, i at one point said Central Banks are dollar dependent. When you owe money and you keep easing to keep your currency from appreciating, many times theres some type of investment or structure beneath it that has an increased demand in dollars john sylvia, thank you for your time today. Thank you. Sara, back to you all right, rick, the discussion, i would just note that we are really climbing back here were still in selloff mode, but the dows down only 240 points nasdaqs almost climbing back to the flat line. If you go within the s p 500 to see whats turning green, stapl staples, real estate, technology, materials and utilities now all trading higher yes, youve got those groups that benefit from the low bond yield, they pay dividends, their search for safety. Financials continuing to get whacked. Apple, facebook, google up at this point as well. The semis are doing well right now. Well continue to monitor this volatile session mike santoli joining us on set for more mike, a little bit of a recovery definitely a recovery obviously, you know, we have these kind of highly stressed markets where you have the sharp selloff. Its always a series of minute to minute testing, figuring out if theres more kind of indiscriminate selling behind the initial burst of weakness. You didnt get that this morning. Even at the worst this morning, the s p 500 held at least about a half a percent above even yesterdays lows, so it wasnt as if you were breaking new ground to the downside, and i think that probably meant that you did see some of those groups that you talk about that just have this direct relationship with where yields trade that do have a little bit of buying interest, and also big growth stocks, they act like bonds in this environment, right . Youre buying a source of very long dated cash flows. Thats what these big faang companies are, so at least the instinct is to buy i dont think it means youre out of the woods, but i think as long as the bond yields dont make dramatic new low it seems like a buying panic in longdated government bonds right now. If you look at the price charts of all the longterm government bonds, they look like vertical momentum chase stocks. Thats the action youre seeing right now. Youre seeing the shortterm sentiment measures on bonds really hit very, very elevated levels so it should, if all else is if nothing in the system is kind of blowing loose right now, if youre not having some kind of real systemic stress or forced selling or forced hedging of mortgage portfolios, all the stuff you talk about when yields get to these levels, then it would actually act as a stabilizer for stocks because it probably cant get more extreme, at least in the very shortterm. Once again, i also was pointing to the overnight lows in the futures on monday night, remember that when you did get before the chinese currency was fixed at a little stronger level than we thought, and the u. S. Declared china a currency manipulat manipulator, its about 2780 on the s p 500 or thereabouts we know how sensitive headlines are in this market right now. There is a South China Morning Post headline quoting a former official saying that china is still likely to attend september trade talks, maybe a glimmer of good news there just to get the confirmation on the chinese. Yesterday during our interview saying they expect to have those talks in september as well. But we never heard from the chinese and we still officially have not because we know that they plan a bit more offensively, wouldnt you say, suspending agricultural purchases, sentitting the ewan weaker tensions have not calmed. This isnt the market bidding for a deal its the market saying please stop going further apart and bringing more economic pressure on a world that seems like it has a big growth problem right now. Everything is off its lows, including disney, which of course has been pressuring the dow. At least for a reason we know. Dow is still down 1 . We have the s p down zbl netflix is also down. On the bundling is that why, the espn plus, hulu, disney plus . Im not sure why netflix would be down, sara, i got to ask you now before we go whats coming up opt last hour of trading today . Major show today. Full Team Coverage of the selloff in the final hour of trading. Plus two big guests. Were going to speak on cnbc with former treasury secretary jack lew it will be the first time hes speaking about this president s decision to label china a manipulator. Some people thought it was more appropriate during his tenure, and cvs health in todays session on the back of earnings, weve got an interview with larry merlo. Thats today at 3 00 p. M. Eastern, also the announcement of walgreens closing stores, see how that rivals cvs. Lets get back to dom chu at headquarters far sector check on the selloff. As you guys have been pointing out we are well off the lows of the session so far the dow is cut in half its losses, and the s p 500 you can see only off by about a half a percent right now still putting into play that downward move well see if it modesttests som those lows in terms of sectors moving to the upside and downside, the out performers so far today, you can see materials on the heels of gold prices, new motte a very large gold miner utilities on that yield play and Consumer Staples, the dividend payers certainly ones to watch energy and financials no surprise, the sector laggards with Interest Rates a key focus, and if youre looking for where some of the Shopping List items are for folks out there looking to buy dips, check out these names, alphabet has now peaked alt tat the green, up about 1 3 of 1 . And apple it says red right here, but its taken a few peaks at green positive terr