Transcripts For CNBC Squawk On The Street 20240713

Others warnings of continued outbreak headwinds plus mobile merger revision, why softbank is cutting its stake in the Overall Company that will be created between sprint and tmobile, and why its so much more likely to happen and shares of deere are up, reporting abunexpected rise in profits, shows an early sign of stabilization for the farm sector coronavirus worries putting stocks on track for a negative week theres a spike in new cases both in and outside of china you got cocacola joining the list of Companies Impacted by the outbreak, saying it expects it will cut quarter earnings by one to two cents a share they coupled that with a 2. 5 div hike and we heard from lulu, daimler and others as the list is getting longer and will get longer from here one of the things people took the cue was from proctor said it was going to hurt us, the stock was up and climbed form the rest of the sector. Why dont we tell the truth . A little too premature, they all presume it will be solved within a foreseeable time frame the medical professionals are not saying that. Youve got companies that are, make carbonated water and shampoo, and theyre making the judgments. I dont buy it do we know whether you say the med ral professiical profese not certain. They dont know or believe it will spread. They believe it will spread and it wont just die in may and go away . What is it like sell in may its a disease its not a stock market. Yeah, but the warm weather is expected fauci is no longer, dr. Fauci is not saying it will stop in april, and i think that what these guys are like betting on april to stop and i think theyre also not counting on like what happened in korea yesterday. The kospi is, has tumbled this week as the number of caseloads there obviously a low number right up sixfold in three days yes, so people are starting to say you cant control it. We have a hard stop from people from china we do not have a hard stop from people coming from korea and japan has a few more people as well now they do its being contained it would seem but when you start to hear concerns about the olympics. London saying were ready to host really . Just as a yes what theyve done in tokyo is incredible gdp down 6 in q4. Pmis, 47. 6, ten straight months of contraction when they canceled the cell phone conference in spain, people understand, thats where business gets done i mean, cutting numbers, cell phones we are i think were whistling past some of a very difficult graveyard, which is dollar up really huge, hurt earnings, okay lots of places where you cant gather for trade it just comes out to be that theres just, you cant buy everything through zoom technologies, so i just think were a little too bullish im not saying that because were a little too backish what about the notion that if theres really global turmoil, all the money comes here okay. Where . Does it come in bonds . Bonds are below 1. 5. The money seems to always try to find the thing that doesnt make any money for them i remember when i wrote my first check, pay me this i was like darn, im not making any money on my checking account. I can buy a cd it does come here. It does come here but its got to be with companies that have yields that are not hurt ive been working on the drug side because they seem to be right. I find out that 80 of our pills or at least the ingredients originate in china there are 48 plants in the province thats got cordoned off. Are they going to be able to deliver us what we want . Now youre getting into the inflationary aspect of all of this yes reuters with the story about suppliers to deere and cat having to turn to domestic supply for 40 more and theyre going to pass that on. Well see if deere addresses that in the call deere like the quarter was, i know the stock is up and i know the bar was good but if you go through the deck, almost everything is bad. The Gross Margins were good. Thats not necessarily how we want the company to make its quarter. Also theres a line about farmers get money. Its an election year. Bloomberg have money hell give anybody money. Hell give anybody money . You sound a little chagrinned today. I do . Why . Its a tv show. Im listening i only interject when theres something worth saying what are you, at the club youre at the club i am your rich uncle at the club what kind of youre my auntie have a couple of, what do you drink at the club . I dont know. I dont drink. What do you drink at the club mets cup. Its hard to take david seriously. Ill going to address you. Guys, keep doing this every friday, go ahead the ceo of dominos talked about it with jim last night on mad money. The theme on the ground in an effort to look out for the safety of our team members and our customers have put protocols in place for us to safely deliver pizzas to the customers in china, without a lot of direct contact with one another, and as you said, jim, really first and foremost, at this point in time, its not sales. Its not store openings that were concerned about. about the safety of our customers and our team members that stock was up 75 yesterday. A lot of people were short it. There are some people at various publications who said it will blow the quarter rich did a great job i think that what were getting is what dr. Mark bristow predicted, doing a great job where the ebola was raging where he was mining for gold in africa and he just said first of all, jim, dont be a sissy. Always aggravated me he called me a sissy bus that he okay because im jimmy chill. He said you just dont shake hands. You never shake hands. Thats apt try doing that during the course of your day and frankly, we have people who know, they want to come up to you, they say hello to you try to just say no, i cant shake your hand. We had one guest i will not name him said listen i dont want to shake your hand. I said okay. We could change the way that we go about doing it ive said that, this, this taiwan will get it. Even the bowing a bowing . A bow to you. Have you stopped shaking hands . Yes but you know me. I was first in wiping down this desk every morning now we all do it ive taken my cue from you. Thats true and im anxious not to shake peoples hands i have a mask here could literally save lives not shaking hands. Wasnt it done to show you didnt have a weapon we dont have weapons. Its weird to do the elbow thing. Not armed i got guests and all the guests want to shake my hand at the end of the interview because it looks like that i like them im not, with the exception of, you know, theres one company i wouldnt shake hands with even before the virus, you know what that is, but Everybody Knows which company youre talking about i am struggling, i want everyone at home to know i dont want to shake anybodys hand the three stooges used to do, lets do that. Boom do not miss our special report on the outbreak tonight 7 00 p. M. Eastern, not a laughing matter, trying to wrap up the headlines of the day on cnbc david . Lets talk about sprint and tmobile the two companies are on the verge of getting this deal con, a deal announced almost two years ago in late april it was of 2018. They are now targeting april 1st perhaps as the day which theyll be able to close the transaction. Remember of course we got the allimportant judgment from judge marrero earlier last week that allowed the deal to continue to move forward saying to the state ags, you dont have a case the companies i believe will be procompetitive getting together and yesterday we can tell you as well of course its been reported that they agreed to a new deal remember ive been saying for months to expect once and if they got the approval from judge marrero or he ruled in their favor that tmobile and its parent Deutsche Telecom would be pushing for a reduction in the price. That happened. It wasnt a particularly onerous, and it is borne entirely by Softbank Softbank owns, what, 83 or so, somewhere in there of sprint shares, the remainder is of course public. The public shareholders will continue to get the same ratio, 9. 75, sprint shares for each share of tmobile, but the effective ratio for softbank will be about 11. 31. So it will bring the overall number to 11, but theyre taking all the hit in terms of at least the reduction. It amounts to about 48. 8 million shares that will be surrendered by softbank essentially. They do have a provision in this that says if tmobile shares maintain a certain price after the deal, and this will be measured sometime after they actually will have a make good and get those shares back in the combined company sheesh. What it does in effect is allow the deal to happen were waiting for the california publicutility commission to rule i am told theyre going to wait. Theyre going to try to wait, not going to close it in the face of a waiting of the ruling from the puc in california thats about it, all that stands in the way at this point the renegotiation is done. April 1 is the target date and guys, then well really be talking about a significant change in the wireless market in this country, what the competitive effects will be. Dish will be off to the races, of course, in its efforts to become a real player nationally in wireless. So many Different Things this was the key, final key hurdle perhaps, california puc notwithstanding. Let me ask you a question i spoke at length with dan hessy, former ceo of sprint. Why is he not getting credit for saving this company . Why did we not hear . He saved sprint. Dan hessy yes, he did okay. But theres not a plaque. Was it really saved yes, it was at 2 he came on mad money i said this company is going bankrupt you are going this is you talking. Two bucks, youre going to file for bankruptcy and he said absolutely not this company is a buy. The shares are a buy why does he not get any credit well youre giving him credit right now. Thats all i wanted to do because look at what was kind of a fivebagger if you listened to dan hessy. At that point how many years ago, thats a long time . It was done the same weekend the hostile. For tmobile. For tmobile. Thats 2011, isnt it nine years ago in dog years. Thats a long time. I just think its important to give credit to people who saved that company dan hessy saved it remember, of course, it was the Sprint Nextel deal which almost doomed it not that good right up there of the worst deals of alltime, aol, time warner, Sprint Nextel, Monsanto Bayer i thought it was important to pint out someone kind of a hero of mine, kansas city, family guy, a lot of kids go to notre dame, just a good man, all right . Okay. I thought it was worth it its not like, i know hes going to hit impact hp and say things that are somewhat negative negative on who come on, youre going to be negative you hate poison pills. I am known for hating poison pills . You are interfere in the governance of corporations in an effective way . Well talk about that, a lot of m a tactics that are interesting going on at hp xerox i want to get your full take on it, jim. You got it. Ive been working on it. Well get to other movers today including slack, call on chewy and a bunch more cramers mad dash and the opening bell in about 16 minutes. Dont go away. Yes im stuck in the middle with you, no one likes to feel stuck, boxed in, or held back. Especially by Something Like your cloud. Its a problem. But the ibm cloud is different. Its the most open and secure public cloud for business. It can manage all your apps and data from anywhere. So it can help take on anything, from rebooking flights, on the fly to restocking shelves on demand. Without getting in your way. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From using feedback to innovate. To introducing products faster. To managing website inventory. And network bandwidth. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Which of your devices are protected by daily security updates . Daily security updates. Daily . 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Its very satisfying for dog owners and you know what theyre talking about the private Fastest Growing vertical is pharmacy anybody who also knows when you have dogs, and we have a dog with a cough right now, nvidia has a cough. We have to flood nvidia with at buy antibiotics. You get everything from chewy . Some. They send us lice pictures of our dogs they tell you the dogs birthday amazon . No. You do dog food chewy. Furniture you go to amazon judging from that wayfair layoff wayfair they have a production issue, right . I dont know, david but i can tell you that this one is headed higher chewy is headed higher. Chewy is a real subscription business got it. You have a dog. Whats its name . Scoop oh, like you, you scoop oh oh its cool, man how about purse sources. Is that your second . One dog, scoop the one and only a lot to get to. Well talk about hp and xerox and look at viacom day two after that hellacious beating. 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Find the best instructors in the world, and tie it all together with a worldclass software experience. We ended up creating, as you all know, so much more. Peloton is truly a category of one and were just getting started. Now, lets do this. Together, we are going further than we ever thought possible. The opening bell is brought to you by nuveen, a leader on income, alternatives and responsible investing. Youre watching cnbcs squawk on the street live from the Financial Capital of the world. The opening bell in about five minutes as we close out whats been another although short, crazy week of coronavirus headlines. Jim, some of the metrics coming out of china, the Passenger Car association. First two weeks of february cars down 92 , in the first week down 6 . A lot of companies are really theres a lot of people who feel this will end very soon and i think the revisions down, illinois toolworks hit an alltime high they have a lot of auto. People dont care. Investors dont care. They talked about the chinese economy especially having been closed for a couple of weeks and barely reopened for sometime therefore. Dont care people dont care when do they care i dont know dont ask me its unlike, its uncharacteristic that people dont care about numbers coming down uncharacteristic they think this will be contained. Yes and theyll have sold their own tool demand will return. They look at history and thats what it has shown. I talk to the robin hood types and they say jim, what have you taught us they always come back. I have never said no, you always said they come back they dont necessarily come back i know younger people who own galactic of battle virgin and they are like im up 100 . What do you know about stocks . Only time i heard was 1999 for a long time i looked like i was foolish. Its funny you mention that, bloomberg has a piece out this morning about ill read the headline, mom and pop are on an epic stock buying spree fueled by free trades yes on the heels of the e trade Morgan Stanley people do not understand. Were in that period. We keep hearing all people do is index fund. That is wrong. Thats brain wash. People are also buying look, i had a very smart guy come to me and say how could i lose money on gme on gamestop, how could i lose money . You could lose all your money. Well, no, how could i lose money . If were back to this jds uni phase era. Just dont sell us, jdsu. The difference is going to be what, profitability . I dont know. Its index funds and if people dont use margin it may not go down that much because they might just say you know what its going to come back. Its also easier to say its going to come back when the tenyear is 1. 5 or less. Not 7 or 6. You go to cash only to realize you feel like such a chump in cash let answer not forget the bull market in bonds has been a what 30year plus market if you invested in bonds youve done very well what is our job to say you know what . Slack is up because they got an uber deal, you should sell slack . That is the story out this morning. Business siinsider says uber moving all 38,000 employees to slack which faced increasing competition from microsoft so its up i know. Were in an era of rewarding large contracts. Yes we are. When i got in the business, used to be this, there was a machine where you could get the quotes at grand central, right there, Merrill Lynch machine and every time even a military contract, raytheon will win something. Buy raytheon the numbers would come out on friday, rigs are up. Go buy halliburton it worked like that and we got algo and post algo like post expressionism. I like post expressionism do you . Campbells soup cans yes wish i bought them in 1963 i wish i did. How about a mare lon shot red . I wouldnt be working. I like slack. How about tesla coming back tesla is up 40 points the last hour of trading . This is the sign that they know more than we do. When i meet younger people, they instinctively know more than i do they say you know, youre too old. You dont understand stocks go higher i see so we definitely need a sarcasm. I know. Jimmy chill just says all right, go on galactic battleship virgin, go ahead [ applause ] cash is trash cash is trash. I kind of like some cash. I like some gold [ bell ringing ] i like some gold, david. Put a lot of ties in my trarn. Opening bell at the s p 500 and the big board is dny Technology Group celebrating the first day of trading at the nasdaq, duos Technology Group, a provider of intelligent Analytical Technology solutions. The market is all red did millenials come in and say go to james gorman and say what should i buy gorman now runs e trade. Not yet it hasnt clicked. No, but mr. Gorman, you mind if i buy some stock . Mr. Gorman, what do you think . Do you think its going to be like that . No, i dont no e trade will be a unit of Morgan Stanley but it is an interesting culture. It was a sentimental deal and we cant let it just stop. Lets talk about that deal e trade is an upstart culture from the days when it starts it has always been a rebel Morgan Stanley a Rebel Without a cause, by the way. Morgan stanley is as i remember when i went into Morgan Stanley the first time i shined my shoes i heard it was white shoe. I didnt have white shoe but i had portaadvanvance. I knew i was out of my element Morgan Stanley thats a long time ago. I know. Dean whiter it was unfortunate, sears didnt work necessarily Morgan Stanley is well goldman is doing, i dont know, spinning disks over there. I thought that Morgan Stanley and e trade is an odd couple well, theres some good pieces out this morning sort of framing the deal yields are structurally depressed around the world right programmatic trading has altered the brokerage business zero commissions, altered the trading business and so everyones going to chase the consumer everyone where else would you go . Hes created james told me created a gorilla, the technology is good across both platforms. I believe in the deal. But i think its, everything is robin hood the darned robin hood. When they passed 10 million, thats almost twice e trade. 10 million accounts 10 million accounts they buy single digit, because they buy ford, they buy a lot of ford they dont like to buy, you know, amazon they like to buy tesla, thats 910 a share. We dont care to them enough. I tried to on mad money but they trade like ten different stocks your whole show at night is based around educating Retail Investors around single stocks yes, i dont want them to lose money if i had my show in 1999, i think i could have stopped what happened in 2000 no, you couldnt. Yes, i could have no, you couldnt. I could do anything you do, wow, better. No you cant. Yes i can no, you cant when the broadway stuff comes up its my favorite. There is a look at breadth which is negative, on the dow two stocks up, mcdonalds and travelers. Exxon and microsoft will lead you lower. People are thinking that the strength in dropbox shows that microsoft is vulnerable. Dropbox had good margins, dropbox going against microsoft. Betting against satya in a tell nadella is not a good idea people say dropbox theyre vulnerable theyre not vulnerable thats wrong people feel crowdstrike is vulnerable because of the z scaler apple shares are barely down. In fact they were green for a moment there, down 15 cents on a 320 stock price its still up 9 for the year. Okay. Thats all you have to say . Thats all you have to say . Kind of giving it to you guys to bat around a bit, give me your thoughts. Tim cook immunized it, the first to say i dont know what the downside is going to be. Thats how we started this week yes, and people didnt go out and blow it out because people are convinced that this is going to be like ebola, like sars, like mers. It will be solved. When i speak to Drug Companies and i speak to the ceos of Drug Companies, no one has anything really confident people are saying we dont have it, its hard keeps morphing chinas adjusted the number of cases three times this month alone, so thats thrown their legitimacy of data into question and chinese said it will be eradicated in a months time, we will win a complete victory was the quote. Complete victory, okay. Look, i want you know i search every night, it drives my wife crazy i go to every one of the sites, i go to the lancet, the cdc and the whamma jamma and go to my interests and great guys who are involved the fauci types i keep hoping to hear something good no one will give me anything good im d im begging for it david, its on a podcast you have to do something other than nodding your head. Oh, nodding my head are you antagonizing me im going to the stock if you go there im leaving down another 1. 7 youre going there . Yes, of course i am we need to discuss what happened to viacom yesterday. Wall of shame did you read the sales reports even more negative mafia nathan your friend bob backish welcomed a number of investors redstone give us time, patience, you guys are overreacting. Im not sure how that was taken. I am paraphrasing based on people who were there telling me saying this wasnt a real quarter once they get together sort of trying to sonic the hedgehog. It was an overreaction on the part of the selling. Receipts down again. Listen im listening these are some of the questions. The direct to consumer, isnt it somewhat murky, some say whats the Value Proposition there when youre selling some of your shows, like spongebob to other streaming outlets, whats the Value Proposition in terms of what youre offering there in the socalled house of brands. House of brands questioning the efficiency of the Business Model the key thing as well was at fill yapt the affiliates they included reverse comp. And eps. When you broke it out it was down 8 . We know that this because the available universe homes for cable is down 8 that was troublesome to some and always the Case Questioned some of the deals that had been done in terms of reupping with the big cable companies, what really were the economics of the deals. Writeoff, david. We talked about the nfl but you get questions 2 billion in adjusted Free Cash Flow for this year going up. When the deal was getting done, they were talking about 3 billion. So now theyre talking about 2 billion and then its on a 30 billion revenue base, and so on an earnings base, yes, it is cheap which is why you had so many Value Investors move into this stock but on an adjusted Free Cash Flow basis, obviously growing dramatically 18 billion in debt. A good amount of debt, owe 5 million in dividends every year to national amusements, something approaching that by contrast for example discovery has 11 billion in revenues and 3 plus billion in Free Cash Flow its interesting they talked about doing opportunisti opportunistic. They did buy stock back but i read that david this is when negativity crests and everybody has terrible things to say and we move on thats your hope. Your hope is it cant be worse but theres greenfield on the Conference Call says listen, not going to be able to get carriage because disney plus is doing so well against your programming, nickelodeon. You have people obviously saying they cant get the nfl deal even though they have great relations with the nfl writeoff was miserable. The economics, what it will do to Free Cash Flow pluto pluto, dopey, right are you going to, you didnt bring back the wall of shame last night i said if this win doesnt come back up the wall of shame will be activated. It was not pleasant. I lost my temper last night. I know that. My executive producer regina was quite surprised that i was as upset. I hurt my travel trust, i hurt my people, sometimes you just get had. I was wrong. Thats it, youre done with that dont want to mortify me ill do a faber report, a poison pill came late yesterday. Hp put a pill in not perhaps unexpected by some, because this is a Company Without a staggered board. Of course just remember 24 bucks is the bid from xerox, challenging all the directors on the board who are up for election, that is the entire board of directors of course on monday, hp will report earnings after the bell. Yes well be focused on those, see whether the Company Gives anything more there in terms of a plan that goes beyond a year or two, unclear exactly what will be offered but there is an expectation perhaps its going to be more than just a simple earnings on monday but those will be important of course in and of themselves as this battle continues to rage. Okay, they put the poison pill in 20 you cant go beyond that why . These guys put the tender in remember now the idea that they were going to get more than 50. 1 and be able to close a tender seemed unlikely this does appear still more on the road toward going toward an actual vote, again well see if in fact the companies do choose to engage. There is a belief, however, on the xerox side they dont necessarily at this point have to engage with management, or the board having to engage with the top ten shareholders who could deliver the votes to change the competition to the board and tell them work a deal with them, they find acceptable to get their votes in a coming vote that wont take place until lets call it late april or may. We have a statement from xerox as well on this plan that was put into place by hp in terms of the poison pill. The hp board clearly adopted a poison pill because our offer is receiving overwhelming support from their shareholders regardless of the what the company and the advisers announced monday, along with earnings, we believe hp shareholders appreciate the value we create combining xerox and hp outweighs and incremental to anything hp it create on its own. We will press ahead with our previously announced tender offer and electing our slate of highly qualified director candidates. I should note of course its not unusual to put a pill in at all in these situations, happens any number of times. What is somewhat different we used to have staggard boards how this is viewed from a governance perspective when votes come in and those and i and others weigh in on the votes will be interesting. Poison pill is not typically well viewed from a governance side of things you got icahn in favor of john byzantine running this combined company, 8 plus holder of hp shares, plays an Important Role and darwin at xerox who would roll into any deal, i had a statement from him, deason telling me im not a seller of xerox, im a buyer i dont know taking over management and driving to these amazing synergies, talking over 2 billion in over 50 years of doing deals ive never seen one more obvious han that. I dont know is the right person to do it its clear as day to us down here in texas. Says Darwin Deason jim, where are the longs on this i have not spoken to the big guys clearly telling me not on or off the record they are going to be in fave. Theyve got to win them. If they do, this whole thing could change dramatically. Hp does not have the ability to reverse the deal in terms of saying were going to try and take you over, even if you dont want to, because they missed the nominating deadline to nominate directors from xerox and so its a very interesting combination chairman of levis . Certainly hes quoted in the release in favor of putting the pill in. He says the boards focused on creating longterm value and essential. Hp shareholders have sufficient time and full information when considering any tender offer weight bearing. Giving time just in case the tender were to come in and they were able to close around it, get more than 50 . Lets see the quarter businesses having the impact you might have expected. Hp is going up on the higher likelihood if this were to get to the finish line xerox would be the buyer in the past so often everybody is expected if they ever sit down theyll reverse it. Hp will buy them this is the market saying maybe not as likely as we thought. Ive got to tell you the debt will be valued at what what kind of debt . The companies with a lot of debt do not get great multiples in the stock market. Maybe thats something individuals would take down, take a lot of risk for yield, reaching for yield i dont like that deal guys, were down 200. 30year year at aballtime low, close to 191 and exxon below 60 for the First Time Since 2010. Ooh the new tobacco. No one believes me seema modi. The major averages pulling back once again from record highs. A lot of the cues taken from the bond market. The tenyear yield sinking to its lowest levels of the year. Lowest level since september now propping up some of the rate sensitive sectors, utilities right now in the green big question is how much has the coronavirus fears impacted earnings estimates going into this years profits expected to grow over 6 in the First Quarter. Today wall street cut that estimate by half to around 3 , weighed down by major cuts in the deep cyclicals like autos and energy the sector arguably hit the most is the cruise lines by the coronavirus fears. Norwegian yesterday on its Earnings Call despite not having exposure to china said that it is canceling all cruises in asia til september of this year. You can see all the cruise lines are down on the week take a look at shares of deere up about 8 , biggest earnings beat in nearly three years and it follows positive comments from deeres ceo john may, seeing early signs of stabilization in the u. S. Farm sector and says Farm Confidence though subdued has improved. Deere optimism following similar commentary from peers in the Agricultural Equipment space now the big question is how is Coronavirus Impacting its Global Business Conference Call starts at 10 00 a. M. And i will be on it carl, back to you. All right thank you, seema sorry, just looking at these u. S. Market pmi numbers. Weve been talking about them all morning long not bad in europe, above expectations in some cases but Services Come in, jim, at 49, sorry, give me a second here but i think it does explain the drop we just saw, 49. 4 on services. Its chilling because it really does say the economy is going to be full i think the virus is totally underrated lululemon came out today and said the virus is going to hurt them at what point do we say you know what many, Many Companies are hurt by the virus, were paying too much for stocks i dont like monday, i dont like what it will be like monday Charitable Trust selling i dont like it. Well bet berkshire and buffett. Could be a day for it. Rick santelli, youre not a huge fan of the market numbers but what have we got today yes, no, listen, im a fan of markets. Im a fan of fair price discovery. Well go into that some other time but this is an historic day on so many levels. The biggest youve been talking about it, here is the 20year charted 30year bonds, longest chart we could show you. Will you not find a lower closing yield than 1. 95 except for right now were trading at 1. 89 you get the picture. If we close down here new alltime forever low close for 30year bonds. Tenyear note notes 2 basis points we have inversions on some of the more bill related comps to the long end as you well know, the recessionary indicators, although theyre probably not recessionary indicators. Capital flight from japan and all points around the globe are pummeling into the u. S look at a 24hour of tens. We had basically a 1. 46ish test. Lets go yeartodate and see how much damage is being done. Yeartodate were obviously taken out the end of january 1. 50 plus close. Zoom back a little farther to september, weve already taken out those double bonds in the low 1. 50s and zoom back to august and here is the key, 1. 45 and change is the cycle of yield close. Now theoretically we could make a Double Bottom there and all could be well, except for if you go back to 2012, at 1. 45 and change we have the big Double Bottom from 2012 and 2016 at 1. 36 and thats what makes traders nervous. 30 years have already gone through. Its like almost impossible traders say not to see a test in the huge Double Bottom finally i wish i could go through all the currencies but japan is at the epicenter, their economy may be floundering, maybe theyre already in a recession. A variety of reasons, including coronavirus capital leaving flight to safety currency designation, seems to be gone. Right now theyre at a tenmonth low against the dollar, very close to a 14month low going back to december of last year. Carl, jim and david, wish i had more time. Back to you well talk to you again soon, rick guess who well talk to at the top of the hour, larry kudlow from the white house about the markets and the economy, as rick said, tenyear 1. 45 and change has not year, 1 change, has not closed here since mid 2016 the dow is down 289. People know aflac. Aflac . But not what they do. So were answering their questions. Aflac is auto insurance, right . No. Uh uh. Is it Homeowners Insurance . No. Uhuhuhuh is it duck insurance . Nope. Ahhh do they pay me money directly when i get sick or injured . Yeah. Aflac you got it. You know aflac boom get help with Expenses Health insurance doesnt cover. Get to know us at. Aflac dot com. Dealing with our finances really haunted me. Ttle cranky. 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Some providers you have to manually download updates to each device. Comcast business securityedge updates every 10 minutes to help keep your connected devices protected against new ransomware, malware and phishing threats. Every 10 minutes feels pretty good. Get secure, reliable internet and voice for an amazing price. Call today. Comcast business. Beyond fast. Lets get to jim and stock trading. We have z scaler today, offers the best service, cloud, Cyber Security, just pure cloud Cyber Security and its bad one of the reasons why it is bad is the price for perfection, a lot of people thought it couldnt miss. Then also Palo Alto Network is going against them i want to be a little more circumspect about Cyber Security though we know we are being hacked all over the place. That is very, very tough a very good ceo of zscaler to see that takes your breath away jim, youre going to stick around yeah. I have to. Were going to talk to larry kudlow about the data rolling in this morning and the Market Reaction you ever get the urge to go a little crazy . You know what im talking about, right karen . Huh . You wanna let yourself woah, but you cant do it here. Or here. It hurts more when you fight it. But totally cool here. Woah and here. Woaaaahh oh yeah. Woah, kid. She gets it. [ roars ] woah get it all out. So when youre ready to let yourself woah, theres only one place to go. Universal, baby through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From finding out whats selling best. To managing your fleet. To collaborating remotely with your teams. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. As of 12pm today, i am debt free welcome back to squawk on the street. Home sales dipped 1. 3 in january to seasonally adjusted 5. 46 Million Units that is still better than the street was forecasting but the National Association of retailers calling this just a minor retreat. Sales were up solidly over the year, 9. 6 compared to january, 2019 inventory continues to shrink. At the end of january there were 1. 42 million homes for sale a decline over the year and the equivalent of a 3. 1month supply so tighter than the market was a year ago the lack of inventory is continuing to push up prices, the median home price in january was 266,300 up 6. 8 year over year that means that home prices are rising at twice the rate of wages. Now, Mortgage Rates of course are at the lowest level in years but chief Economist Says he expects they should be even lower given where the ten year treasury has been. Thinks they should be closer to 3. 2 and says the market could be pricing in potential changes to fannie and freddie but overall a minor retreat for existing home sales down 1. 3 in january to a seasonally adjusted 5. 46 Million Units back to you. Thank you for that. Good friday morning everybody. Welcome back to squawk on the street. Im Carl Quintanilla with david faber and jim cramer sticking around for the top of the show sara eisen is on assignment. Dow down 267 we got a tumble as the u. S. Market pmi shows contraction for the First Time Since october of 2013 thats when we really saw this selloff begin yeah. Im uncomfortable with the 30year below 2 and thats just because when i see that, the saying is people just really think there is a hard stop to growth and that is related to a ripple of the coronavirus. I dont think its obviously a statement of our country our country is doing pretty well were having money coming in remember the chinese when they were supposed to sell our bonds, supposed to wreck our market, theyve been cellar. So what . The economy, two tracks. You talk with people and they say i dont know where this is going to end i dont want to be in the room i dont want to get with customers. Then the economists who say listen, this is going to cost two cents per share. I think the first economy is more like the one we have. I dont want to scare people but i have way too many people in my day to day who are very concerned for their employees. Yesterday i had dominos on what is he talking about china. Two quarters ago the greatest opportunity. Now the hopeful, against illness, i dont want to say mortality but the lethality is not horrible for younger people but you talk with someone about greatest growth area and then now they speak about can they live its chilling it is obviously were dealing with the continued effects of the slowdown in the chinese economy and what the impact is going to be both there and around the world as a result of disrupted supply chains. So many other things, jim. That said, it will come to an end. Yes, it will. Maybe thats the optimistic note we should now go to our guest larry kudlow for more on todays market drop, the Coronavirus Impact for stocks, and the outlook for the u. S. And Global Economy and where were going were joined now by white house top economic adviser larry kudlow welcome back to theshow. Thank you, jim. Appreciate it. So how dolls tes the u. S. Ec stop itself from being entwined with the worlds second largest economy that is truly paralyzed right now . Well, look. I dont think were not going to decouple. Everybody knows that the tragedy here, i see it in human tolls. You know, people catching this virus, many people dying i guess new numbers out today were not good. You know, thats most regrettable. Incidentally, weve done what we can to help them and i announced this two or three weeks ago but finally, as you probably know, china has allowed u. S. Cdc experts to go in with the World Health Organization experts thats a good thing. And i hope it works. Now, coming back to our story here, i just want to raise this point. If you look at the atlanta fed gdp now, theyre predicting a 2. 6 increase in the First Quarter. And thats a pretty big number because of what weve seen in china. 2. 6 now, whether that number holds, remains to be seen i understand it fluctuates but i think that is very promising second point, jimmy, yesterday as you know, we had very positive reports from the philly fed manufacturing and the new york empire state manufacturing. And heres the key point in both of those mid month surveys they did not find any major supply chain problems. Now, again, i know this could change the First Quarter has, you know, month plus to go but, nonetheless, as early indicators, the gdp now and these ism reports and of course at home were in a housing boom as you well know so i just think we should be very calm about the u. S. Side of the story which is looking pretty good. On the other hand the chinese side of the story is very difficult. Its a human tragedy it will come to pass at some point but im not smart enough to know when that is what is the 30year alltime low yield say about this economy and the perception well, look. I have to think, david, that is a run to safety. I have to think that with respect to the outbreak of the virus in china, perhaps the worst thing with the virus, im not an expert on that. Asia is obviously on red alert regarding the virus. We dont see too much in europe. But i just think in generally would be very careful to put too much emphasis on what bond rates are doing or Interest Rates are doing or even in the short, short run, the stock market. I think youve got a lot of mood swings here and i dont think it reflects the fundamentals. All right larry, just something that im very concerned about can you go to the president and tell him that its possible to have as much as 80 of the pill, of the pharma business, ingredients and actual pills, that are made in china, 48 plants in the wuhan area, can you tell him, we do not have enough medicine, we do not have enough supply in this country . This is going to be a problem in three weeks and weve got to do something about it it may come down to the president doing something about it jimmy, when you say were not going to have enough supply in this country do you mean the u. S. A. Or china . U. S. A because, unfortunately, we somehow let the chinese become so important in the actual manufacturing of our medicine, larry. I know you and i are not happy about this we cant that they became so important. We used to have it made in canada, made here. But weve let the chinese be so powerful in the actual supply chain of our pharmaceuticals that a lot of the doctors i talk to, larry, are concerned we just want to be sure that we do not have shortages in medicine which you know would then cause inflation and peoples lives yeah, inflation or perhaps even worse human suffering of course im not too worried about the inflation. Look, President Trump from day one, let me go back a second, from day one in a meeting in the oval office instructed us to engage with china in every way possible to help china, to send our exports to china it took a while to get that done but its getting done. As a humanitarian gesture. Now, that doesnt answer your question precisely but im just saying thats been his attitude. Just help china engage we have good relations with them now. With respect to pharmaceutical products here at home, jimmy, im sure the president i have not spoken to him since he got back last night from his west coast swing. Im sure he will want to do whatever it takes with respect to secretary azar at hhs and the fda and so forth to make sure we have sufficient supplies to take care of business, illnesses here at home. Im sure he will do what he can to expedite that whether that means special deregulatory efforts, whether that means executive orders, remains to be seen i dont want to get ahead of the story, out in front of my skis but we will do whatever it takes. Now, as you well know, the virus story is not an american story i mean, weve been very, very, very well contained. And so i think and ive talked to dr. Fauci about this, who is a genius. And were, you know, fingers crossed, god willing, were in pretty good shape here at home and the other point ill make, and this is not a cynical point, just a factual point, in a typical flu season in which we find ourselves, these, you know, deaths in the u. S. A. Can run upwards of 20, 40, 60,000. And thats an ongoing issue. Im pretty certain we have enough supplies, vaccinations, and what not, to deal with that. But without speaking to the president yet and i will within the hour or so, he will do whatever it takes, jimmy, to make sure we have the right medicines available. Believe me he will. Thank you it is very important for peoples lives larry, its carl. You talk about bond yields not reflecting fundamentals. I mean, it was ten days ago the president pulled out a list of four companies did fundamentals, were heavily reliant on four big names. Well, carl, i cant im not going to dig in here look weve had a fabulous stock market i mean, just in the last 12 or 13 months its up over 30 including todays correction i, by the way, view that good market as a sign of business and Consumer Confidence and a sign that Business Conditions in 2020 will get better not worse. Going all the way back to the president s election i believe the s p 500 is up close to 58 or 60 . So its been a terrific, terrific market. And i think the fundamentals of this economy are very solid. All right . Very solid even with headwinds weve had very tough fed tightening. Wish they hadnt but they had. Now theyre beginning to unwind that, add to the Balance Sheet thats good. But that hurt us a lot the boeing shutdown hurt us a lot, carl, as you know well see about the virus. Somehow at this point it doesnt seem like a problem. Heres where im going to. In the three years under policies of lower tax rates, deregulation, independent energy, and better trade deals to open up an export boom, we have managed a 2. 5 growth rate on average for three years that is significantly better than the prior administration. It is also significantly better than what the cbo has forecasted im going to add to that in the area of fundamentals america is working and there is a blue collar boom weve created 7 million jobs cbo said wed only get 2 million. Weve created 7 million jobs and the wonderful part of the blue collar boom is that the bottom half, the bottom quarter, and the worst 10 , the plant workers if you will, the Assembly Line workers and related white collar, are out performing their managers by substantial amounts. I mean, one little factoid, i know there are a million numbers here, average Weekly Earnings for production workers up about 5 okay over all i believe the number is 3 and that is not only true for the blue collar boom but i want to add to this there is a womens boom. Women participation rate, women now the majority in the labor force. I think 3 4 of the new jobs last year came from women Something Like that. Theres a womens boom and finally, i know i dont have any millennials here on the panel, but the snowflakes thanks, larry well, im just guessing the snowflakes and the millennials are working. Okay their participation rates are going sky high and their wages are rising at close to 5 . So this is a fundamentally very sound economy. Lets get back to the economy though and the virus, itself you just said it doesnt seem like a problem and, certainly, from a Health Perspective at least in the u. S. Thankfully it doesnt. But you also said at the very beginning we are not decoupled from china right their economy is essentially shut down, you know, for a month or so now. There are a lot of supply chains, despite the trade war that raged for two years, that is still interconnected into that economy what are your expectations when it comes to supply chains, when it comes to a virtual halt in the worlds second largest economy on the impact here i mean, theres got to be a significant impact, doesnt there . Well, its a good question, a good point now, the word significant, david. I dont know our views here at the nec and the cea are very close to the private sector views we were looking to clip 0. 2 or 0. 3 of gdp off of the First Quarter because of the issues that you raise supply chains and other things okay so that is just guess work if you want to know the truth we dont really know i dont know how accurate the information is out of china. Now, look. To try to focus in on specifics which is what youre asking me, its not easy. But ill repeat what i mentioned to jimmy earlier some of the indications were in mid february right now february 19th to february 20th, whatever day is today. So far, it does not look like whether it be supply chain or other problems that the u. S. Economy is getting hurt in any significant way. In a small way, yes. In a significant way, no again, i go back to these two points the atlanta fed gdp now number through february 19th is 2. 6 for the quarter. Thats a good number because you know we lost half a point on boeing. So it could have been over 3 thats one point i know that can move i get that but im just giving you the only info i know. Second point, on the manufacturing indexes yesterday, from the philly fed and the new york fed, both were much stronger than anyone thought and neither of them saw a supply chain problem. Now, thats the middle of february okay so this could change it could change for the better or the worse all right . All im saying is what we now know does not seem to be a major blow to the American Economy thats what we know. The other point i want to make is, because of strong job creation, i mean, our job story objectively has been fantastic with low unemployment across the board and the lower income wages doing better than the high income wages the Housing Market is very strong now you have low Mortgage Rates. Thats a good thing. You have more people working and their incomes are rising and i think theres a housing boom out there thats going to really boost the economy by the way, you know, ive seen some of this back and forth politically. Lets not forget, we did a calculation on this up and down from the Census Bureau and the bureau of labor statistics in three years, and im proud of this, in three trump years, with low taxes and regulations and energy and better trade, average family incomes after tax, after inflation, are up 5,000 nothing like this has been seen. This is just in three years. In the last 20 years under republicans and democrats. And on top of that, the savings from low energy prices, from the fracking revolution, we calculate 2500 per family, and on the deregulation, which is probably the most underrated thing, deregulation is so important, particularly for small businesses,we calculate 3100 savings for the average family now, those are numbers we havent seen in over 20 years. It shows the health of the economy. It shows the health of the worker and the consumer and the family and it shows that some very good things are happening inside the economy. So i just will leave it at that. I am not saying we decouple from china. Look, even phase one lets go to that for a second. Give me a moment on this i know youre always tight oh, boy china has cut tariffs three times if im not mistaken. At least twice they just did a third time last night. That was not specifically part of phase one the 200 billion increase in u. S. Exports to china was predicated on exclusions and waivers. They are cutting tariffs, which is a permanent,efficient way t do it. Thats an awfully good thing president xi assured President Trump a couple weeks ago that china, even if there are some delays, intends to meet their obligations. Now, what does this mean it means we are looking at a potential export boom the likes of which we have not seen in i dont know how long. And export boom, whether its farming, manufacturing, autos, technology, pharmaceuticals, you know what . Export booms thats the highest wage people im sorry we have to run, larry thank you again for going right to the president and telling him about the pharmaceutical shortage that we do not want to be hostages to the chinese a very good case for why unemployment is so strong. I will carry your message, jimmy. It as good message by the way jimmy cramer youve been very constructive in this and i thank you very much. Thank you very much to my old partner larry kudlow from kudlow and cramer always good to see you and i love the upbeat news. Have a great weekend, sir. Thank you all right, jim. So we seem to have stablized here at these levels just south of 29k and as we mentioned with everything all right no. Im just saying. I was look aing at david doing a tweet. Im not tweeting. Im texting. Larry talked about employment i am upset about this chinese thing. Okay i am when i have to Start Talking about whether to fist bump, shake hands, we are in a different regime i do think i want larrys view of things to be the only narrative. The chinese narrative is not something we can get rid of. How about that we didnt really dig into cooperation between us and china nor the fed response whatever it should be. No. Its hard when larrys answers run into the minutes rather than seconds. My friend larry, uhe has a great optimistic view. I tell you, it is in short supply particularly with this coronavirus, which i dont want to make too much of. My wife says every night why are you making so much of it and i just think that its my job. What are you going to do on mad tonight okay. Well go into a Cyber Security company. Proofpoint and a couple surprises of stocks i think you should buy ive been working on Counter Cyclical and counter pharma. Counter coronavirus ideas. All right, jim. I really hope the weekend goes well and we get good news out of china its going to be full of news the nevada caucuses saturday and the berkshire letter on saturday as well. And positive with beck oin monday i cant wait yes when we come back a lot more on todays selloff which is easing off just a touch nn lk atlanta fed president deisochardt is with us dont go anywhere. Wenot the exception. Sh food being the global norm, at emerson, when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. St. Louis fed president James Bullard joined squawk box earlier this morning. Here is what he had to say about the coronavirus and the impact on the economy take a listen. If you think that this virus is going to dissipate and then were going to have a temporary shock and everything is going to go back to normal, yeah. I think the fed is in great shape and we dont have to lower rates in that scenario for more on the virus of course and the impact on the u. S. And World Economy lets bring in former atlanta fed president. I dont know if you had a chance to listen to larry kudlow from the nec. Still, suggesting Economic Growth here in the u. S. Will be fairly strong. What is your view in terms of the overall impact knowing of course how uncertain everything is right now in terms of the virus and its impact in china and on supply chains and economies around the world i agree with both jim bullard this morning and larry kudlow that first its a little early to tell. And its a wild card factor but i think we should not panic at this stage that it is going to have a major impact on the year i think the federal open Market Committee members are likely to look through this unless the evolution of this is very, very severe so im in general agreement with bullard and kudlow, both and again, in asking mr. Kudlow about the move in yields on the 30 year in particular to all time lows, he suggested safe haven. Are yields telling us anything at both the 30 and 10year level how low they are i dont think they are signals about the Economic Future in the country. I really do believe these are the result of capital flows into the dollar the dollar being extremely strong now and you can imagine that investors around the world are trying to seek a safe haven, to use that term, so i, again, agree with Larry Kudlows view on that. What are you watching closely to try to determine, perhaps, if there is going to be more of an impact or a way we can actually foresee what the impact will be on the u. S. And World Economy from the growth of this virus . Well, i see three channels if i can take a moment. The first one would be that the disease actually comes to the United States and is virulent enough that it affects our work force and we get a mirror image of whats been going on in china. That would obviously be a very serious development. But the indications of that at this stage are very, very small. And so i am not too concerned that were going to see a true epidemic here in the United States so then you move to the supply chain effect and the export channel effect supply chain, mixed indicators theres a lot of anecdotal feedback that supply chains are being affected and of course you have the apple news last week or earlier this week. But again, i think its a little early to tell that the supply chains are going to be disrupted enough to have a sustained effect on the u. S. Economy and then the export channel, likely some effect on exports to china. But i would say, fortunately, the motor of the u. S. Economy is domestic consumption and that is a very benign picture at the moment so i cant get overly aroused about exports taking a hit dennis, as were talking, this happens a lot the president tweets in all caps, says if our formerly targeted farmers need additional aid until such time as the trade deals kick in that aid will be provided by the federal government, paid for out of the massive tariff money coming into the u. S. A. Again with the caveat that we are in early days how much of this is unwinding the presumed effect of phase one . You know, i dont have good information on that. You know, i would assume that just as phase one was coming into play the chinese were hit by this and its going to affect their imports from the United States and, therefore, a lot that was promised will not be delivered at least in the short term that would be my working assumption at this stage but well see how long this virus affects chinese demand but, you know, the principles involved in phase one will probably be met if we just give it some time also while were talking brainerd is on the tape talking about potential tools if rates go to the lower bound. In this case she mentions yield caps specifically. Do you think the fed is going to need to reach deeper into the tool box given what yields are saying about potential growth . Well, i think they have been looking at the, lets say, the odds of hitting the lower bound again in general and somewhat theoretical terms. That is not a forecast of where the economy is headed. The fomc naturally is doing planning for various contingencies. When and if that happens, i would think they would resort first to quantitative easing and then conceivably some form of Forward Guidance rate caps are one tool they need a robust set of tools because the conventional wisdom today is that the tools they have are simply not that potent when youre starting at a low Interest Rate environment. So im pleased to hear that theres a lot of discussion going on about what could be done if we ended up at the lower bound again. Mr. Lockhart, we appreciate you taking time with us. Thank you. Thank you Dennis Lockhart dont miss our special report on the coronavirus outbreak it is tonight at 7 00 p. M. Right here on cnbc all right. Dow is down 247. Lets get a news update this morning with Courtney Reagan at hq the countdown to the signing of a Peace Agreement between the taliban and the u. S. Will begin tonight when the seven day reduction of violence promised by the taliban will go in effect the deal will be signed february 29th paving the way for withdrawal of u. S. Troops and intraafghan negotiations. Iranian leaders and candidates joining millions in voting for a new parliament there is the possibility of lower than usual turnout the u. S. Extradition hearing for wikileaks founder julian assauge is scheduled to begin in london on monday. The u. S. Has charged him with leaking thousands of classified documents and wants him to face trial. He could face up to 175 years in jail if found guilty a government sponsored mass wedding in the philippines saw 220 couples exchanging vows amid a coronavirus threat some of the couples were provided with surgical masks how romantic the annual masked wedding is a post valentines day tradition in the country that is the cnbc news update for this hour. Back over to you thank you a quick programming note as we go to break as we mentioned earlier, warren buffet live on squawk on monday. Hell sit down with becky quick to answer her questions and yours as well. You could send them to social media using the askwarren of course the berkshire letter will come out tomorrow more squawk on the street after the break. we see hat emerson,kthroughs when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. Try to win by attacking, now, we know the trump strategy distorting, dividing. Mr. President it. Wont. Work. Newspapers report bloomberg is the democrat trump fears most. As president , universal healthcare that lets people keep their coverage if they like it. A record on job creation. A doable plan to combat climate change. I led a complex, diverse city through 911 and i have common sense plans to move america away from chaos to progress im Mike Bloomberg and i approve this message. The founder and chairman and long term ceo les wexner stepping down yesterday. The Company Announced a sale of the majority stake victorias secret to private equity firm sycamore partners. Joining us at post 9 is the New York Times prize winning columnist jim stewart. Jim, it is good to have you. Great to be here. Big news yesterday not the least of which is the implied valuation of what we thought was a pretty storied brand in vs well, right i think this shift is coming out a moment too soon. A couple i looked at the numbers from last quarter on victorias secret performance and there is a down ward spiral even worse than i think i realized, the deterioration there. Youve got a big Consumer Brand like that. Theyve got to stop that quickly. Beyond that as we wrote in the piece in the times the culture here needs a complete revamping. Considering it is a company that is the customers are overwhelmingly female women the way women executives and workers were treated over the years is pretty appalling. By the way, we heard from Board Members who put out a statement for the article and i believe them i think they really are committed to trying to do something dramatic there they one step which we saw this week is theyve gotten rid of the wexner cronies on the board. In terms of operating models, i mean legacy models, do you think it is mostly about the mall and physical distribution or was it about athleisure, some sort of fashion cycle that brought about the decline . I think a lot is more the latter that does i think suggest an opportunity for a private equity owner here because i think the whole image, the whole branding, the whole marketing was looking back on it now was basically a male fantasy of what women should look like too bad we dont have sara here today. To keep us honest we dont need an all male panel here some of my women colleagues said led me through alternatives it is astonishing the different marketing approach, the diversity of the models, embrace of different body types, different agaethnicities, the recognition that beauty comes in many different varieties not this sort of rigid image, which is basically very difficult even for very young women to achieve. But, you know, when i looked at the site for the first time a while ago it was the women may have been different races but they were indistinguishable. They all looked about 16 or something and unbelievably slender. So it was a very certain type. You know, the world just isnt that way i think they have to dramatically address that issue. And abandon this kind of, frankly, decades old image of what women should look like. So if you address culture and you address product and you address marketing, what else is on the checklist then youve got to deal with the broad issues of facing facing retail. But at least from talking to women i think thats something where victorias secret may have an advantage there are a lot of women who feel the need to actually try these things on to go into the stores im also told the technology of making these things is quite complicated and that there is room maybe for additional innovation there so i think theres a lot of upside there they are still going to face the broad issue of the retail environment. Which by the way, what is left, you know, the publicly traded l brands, you know, the bath and body product, that is i think more vulnerable to the broader problems facing retail theyve got solid numbers there, which are, you know, impressive, but theyre not off the charts the growth story there it is a relatively mature business im not wildly excited about that ill be very curious to see what kind of multiple the market puts on the remaining part of l brands plenty of news to get to this week as well not much time to do it you already discussed the milliken pardon given your knowledge of that. The definitive book on that era in many ways lets fast forward to the debate earlier this week and bloombergs poor performance what is your sense in terms of what that means and how it will be viewed in the market place and beyond i think that was the headline coming out of there, there were a lot of people sort of in the moderate camp who were looking to bloomberg as their savior but hadnt really seen him in recent years, hadnt seen him on a debate performance i think the sense of deflation has been tremendous. Not that i would by any means count him out but there has to be a dramatic turnaround there. And i have to say, if i was trump i would just ignore all this stuff about the russians. Because why, you know, who cares about the russians the democrats are a russian dream at the moment the way theyre pounding on each other it is quite startling to me as Bernie Sanders seems to be ever moving more firmly into the front position that, you know, why are klobuchar and buttigieg beating up on each other when bernie is sort of running away with the whole race . I hope people ask him some tough questions about who is going to pay for all of these giveaways history is filled with examples of all kinds of leaders who promised, promised to give away practically everything without saying how were going to pay for it and there are some famous disasters. Look no further than venezuela im not saying he is a venezuela but its the oldest trick in the book is to promise things. To be fair were running enormous deficits over the last couple years you could have said the same thing about the tax cuts not in any way saying sanders plans are not are very much unclear in terms of being paid for but that is the world we live in giveaways, what did we do with the banks ten years ago weve been doing giveaways for a generation thats true we have done any number of giveaways. Im not saying theyll ever go away but if there was a finite number on that package, a big number, but i still have people sharpening their pencils trying to figure out what the deficit numbers are going to be under sanders but the numbers ive seen are massive theyre like way beyond anything weve seen it is currently sort of fashionable particular in the pop list wings of both parties to say deficits dont matter but i couldnt buy that. There is a point where, yes. Deficits are going to matter you know, do we really want to test that boundary you would think given the deficits already at a trillion bucks a year in a growing economy it would already be alarm bells ringing but its not. No. I think economists are going to have to do a lot of research to try to figure out how were in such an incredibly low Interest Rate environment where we are having massive deficit spending. I dont think it is an issue that is going to go away and it is surprising that the other Democratic Candidates have not focused more on sanders, who is at this point the clear frontrunner even though he is still only mustering 25 of the democratic vote. Right see what happens in nevada this weekend. Jim, thanks. Sure. As we go to break, take a look at the markets here session lows down 307. And the s p is back to 3335. More squawk on the street en ce ckwh tto examine investmentgo opportunities firsthand, like innovations in agricultural research. Because your investments deserve the full story. T. Rowe price invest with confidence. We see eat emerson,mulating when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. Theres room for more than just the business you came for. Whether thats taking in every moment. Or capturing a moment worth bringing back. Thats room for possibility. How far we can go, oh oh these could be the best stock picks to ride the growth wave find out which on trading nation. Cnbc. Com. More squawk on the street coming up. But were also a company that controls hiv, fights cancer, repairs shattered bones, relieves depression, restores heart rhythms, helps you back from strokes, and keeps you healthy your whole life. From the day youre born we never stop taking care of you. If youre just catching up this morning dow down 312. The stumble began when the u. S. Pmi came in showing contraction for the First Time Since 2013. And you got the 30year bond at an all time low yield below one nine earlier this morning. The Morgan Stanley Ceo James Gorman making the case for his companys 13 billion deal to buy etrade i never worry about strategy, never trying to copy what somebody else is doing we have to do whats right for Morgan Stanley when you get that done you have to be very opportunistic and move and move quickly. So we put in obviously a very full, i think, appropriately, bid for a great, Great Company with an iconic brand if wed messed around with that and tried to do this on the cheap that would have created all sorts of turmoil so when you make your mind up be aggressive to get the job done the stock extending losses from yesterday when the deal of course was announced it is an all stock deal so it has the effect of depressing the over all value our next guest says investors should agree with the overall logic behind the deal. He is noted m a attorney and senior chairman, joining us right now. The man has done probably more deals in the Banking Industry than anybody i know you wont say that but its true. Why do you like this deal if you do because there is an inherent industrial logic to the transaction. There is a need for scale. There is a need for consolidation. Nowhere is that need greater than in Wealth Management. I think there is also a recognition, quite correctly, by Morgan Stanley that diversification is valuable and that being able to add revenues in what i would call an asset light way is very helpful. We have seen obviously Morgan Stanley leading in terms of strategy with the acquisition from solomon smith barney years ago, following it up here. What about the idea of a culture clash, etrade, Morgan Stanley, very different organizations perhaps dont fit well together . That is a question ultimately of integration management. If you go back long enough, you can see a culture clash at Morgan Stanley of course with the dean witter deal and it can happen but it can also be managed. And i suspect that james gorman, who really knows this area, and is a very excellent people person will figure that one out. It was interesting. They used stock in part because they cant use cash because of the oversight from the Federal Reserve that wont allow them to use as much if they want to continue to buy back stock which then goes to the larger banks, rodg, which really cant do big deals theyre cut off from doing a large banking merge the likes of the consolidation of which you advised on so often during the 90s quite correct the very largest banks, the big three are all limited by a National Deposit cap and they are all over it. B of a, jpmorgan, and wells. But they can do other types of transactions which dont involve deposits such as Asset Management is the pattern were seeing right now in m a a recognition that structurally low yields, programatic trading, and deflationary Commission Structures are not going i think thats right and that puts the pressure on to engaging consolidation transactions because by increasing your scale, reducing your cost, you can buffer all these external factors which are really a potential very strong head wind in this area do you give Morgan Stanley credit for seeing it earlier than their rivals . I give them credit for having a vision this is where they want to be. Its right for Morgan Stanley. It may not be right for anyone else, but it is right for them what do you think about Goldman Sachs and their efforts particularly the focus on the consumer its a nascent effort but one thats not unimportant in terms of that institution and the significant change that seems to be undergoing. Again, i think they have made a decision, and i am sure with a lot of care and research, this is an area they can serve and serve well they clearly have a centurypluslong track record of figuring this out and i suspect they will do just as well with the consumer as they have done with the institution etrade is a name we talked about 20 years ago in a much different expecter of the markets. Now with zero commissions theres data coming out that Retail Investors are trading with more frequency because its free, essentially. Sure. I wonder what kind of implications that has for m a . If were truly in an era where mom and pops are getting back in the market well, i think that is a positive to your earlier question, the vision to see that at an early stage and capitalize on it rather than retreating from the area, maybe its the time to move forward finally, rog, do you expect to continue to see more consolidation in this Asset Management Wealth Management sector i do for all the reasons that have motivated Morgan Stanley. I think more generally were going to see consolidation in financial services, and the critical element here which i think has been largely overlooked is why scale is so important today. Its always been thought of as a backoffice issue, technology and control. Now its front office. How do you Market Services and products how do you deliver services and products and thats where scale is so critical roger, always appreciate your stopping by. Great to see you. Take a look at the markets here dow is down 276. Squawk quack is back in a moment and when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk welcome back to squawk on the street. Im dominic chu. Stocks poised to close lower for the week were just off the worst levels of the session, the s p down by about 32 points. We are in negative territory and many of these sectors are including technology, you can see on track to be the worst perform they are week, even after recording a recordhigh for that sector two days ago we see some of the biggest declines in names that have pretty much led the rally so far including the semiconductors, the chipmakers amd and nvidia holding on to doubledigit percentage gains for 2020 but todays loss is slowing that momentum down keep an eye on all of those chip stocks as well as the hot software ones. Back down to you guys at the New York Stock Exchange. Dom, thank you very much. Watching the markets, dow is down 255 we have breadth improving on the margin coke has crept into the green, but the tenyear is still below 1. 46 and the 30year below 1. 9 back in a moment [ applause ] thank you. Its an honor to tell you that Liberty Mutual customizes your Car Insurance so you only pay for what you need. I love you only pay for what you need. Liberty. Liberty. Liberty. Liberty. The unparalleled landscape of park city, or the famed peaks of whistler, youve faced the hassle of lugging your gear through the airport. With ship skis, youre just a few clicks away from having your skis, snowboard and luggage shipped from your doorstep to your destination. With unrivaled pricing, real time tracking ship skis delivers, hassle free. Ship ahead and go catch those first tracks on fresh snow. Ship skis. Your skis. Delivered. We sunleashing the promisegas of clean energy. At emerson, when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. Good morning its 8 00 a. M. At dropbox headquarters, 11 00 a. M. On sweet wall stre sweet sweet and skie is live want the funk we need the funk we got to have that funk good friday morning im Carl Quintanilla with Morgan Brennan and jon fortt at post 9 of the New York Stock Exchange obviously a selloff is in place, althougwe