Transcripts For CNBC Fast Money Halftime Report 20240713

Jon najarian, what do you tell people dont appreciate the number of cases there are going to be. Me what do you do with the up fear is also contagious. People are going to stop going 1,000, down 1,000, 92 bips on out. We are a Service Economy the ten year people have to go out. What are you supposed to do . I dont see any reason for if you are me or somebody optimism, the stock market has very, very shortterm you buy on completely underreacted. The disand sell on the rallies from a wellknown hedge fund if you are a regular investor at manager, versus bellski and home that probably doesnt have as much access to information and the markets as frequently as dwyer who say we are going to be higher at year end i do, then i think you kind of sit it out, scott. Make sense of that for people . You hold onto what you have got. It is impossible to make sense of it, because we are if you have got the sort of stocks that you know are not as talking about an outcome that no one knows the answer to. Reactive to this i dont think with any degree of certainty you can say that you want to go in and be aggressive we have seen a number of to in the market. Josh browns credit, teledoc and i think this is a process as we have talked about yesterday i think you look at conditions work, which is slack, both of that are going to provide for you answers as to when you are those working very well. Going see a little bit more because they are Remote Access tranquillity in the marketplace. Points that people can go to, let me ask you this, what scott, to use, versus things sounds more plausible to you like the airlines or the then the bellski dwyer view of cruiselines that you talked about at the top of the show lets say a minimum of 34000 on as far as right now what i am doing i am glad thatter with the s p, or stocks having seeing twosided paper again another big woosh down because started last friday. This gets worse and people are you and i discussed. Still the someplacent because we have seen it throughout this week they are looking at numbers that twosided paper. Are going to dramatic echange first four days of last week it chkt thats a great question the answer to that is exactly was not two sided. It was straight one way, just why we are seeing the significant volatility and sold, sold, sold, sold on even any lift, they sold it significant expansion in daily trading ranges that we are having the answer to that is either side of that, you have no even harder. Thats not happening to the same conviction or confidence that the conditions are going to extent this weekend. Present themselves to suggest there is a lot more buying that if we were going to go 40 lower the balance returning is a positive thing. The buying seems species, from here and the equities market was extrapolating a high though, meghan, not trustworthy. Degree of complacency, okay, i the experts have told us, this is how it happens. You dont put a bottom in would argue that you would see multiassets, not just equities, immediately when you rally 1300y de tieriorating in a very aggressive capacity. I dont think you are seeing then you reverse it with almost that just yet. You are still seeing some pockets of taxable fixed income 1200 and nower with back down that are trading well i think you right now are look at about eight, seven or eight. What are you advising people to specifically, first and foremost when you come into the morning, do what is your firms strategy where is the u. S. Tenyear right now . We have gotten more treasury that is your leading indicator conservative 92 basis points. We went to an underweight on what that is messaging to the equities after we saw a lint of market is what is the behavior a leg down and felt like there right now of the market . Was more to go potentially it is not like we are painting they still desire safety for a an overly pessimistic picture it reason. Is it messaging that . Or is it messaging it is going is just that they are heightened to be a heck of a lot worse than uncertainty. People are thinking . Whats the message here. We dont know how this is going the play out the biggest component is how i think it is somewhere in long this could take one of the biggest factors is between. Because we are still in whether this virus is deterred by warmer weather. Unchartered territory where would dont know that. Rates are. That is the difference between historically low, i dont know this beingt the year with if anybody knows how to react to the rates. Lets talk about bell kyi and dwyer. They have not adjusted their s p analysts expecting 10 earnings earnings you cant come up with a growth, it was ratcheted down to valuation on the market i know brian does a ddm as well, seven. Now it s. Dividend discount model. You still cant pick a target without knowing what the valuation. I think i agree with them, the market will be higher a year from now than it is now. You could have said the same thing in april of 08. It doesnt mean we are not going to go down a lot further in terms of the hem fund manager, i dont think the bonds are telling you the market should be 40 lower. 40 you could say 10 . Is the bond market screaming to you that stocks still need to go lower . Let me ask it that way yes heres why we talked about how the economy was driven by the consumer 70 consumer driven economy as opposed to others. That was the motto over the last year or so the consumer in my view is going to be shocked by the numbers that come out. While china and we dont know to believe those numbers or not, have said their cases peaked and are coming down. Korea is still putting up 10 per day on a higher base those numbers, when you start having the testing coming out which still isnt out and you see 1,000, 2,000 case as day, which i dont think is unrealistic and the consumer starts to retrench and doesnt go out and spend is that in the market not at all. Thats the most important thin it is either in the market or it is not when the reality sets in by virtue of real numbers is that going to change not only consumer but investor behavior Consumer Behavior is beginning to change. Consumer behavior actually has to change if we are going to contain this in the United States investor behavior certainly has changed within the last couple of weeks i would say more, though, trader behavior has certainly changed in the last couple of weeks and thats whats been driving the market i lock at treasury yields not so much as a predict of where the equities market might be going in terms of lower. But i lock at it and i say to myself, i cant get the v recovery or bounce in equities that everyone is talking about unless which market, jim sorry. Which market has been smarter to this point the bond market or the stock market a stock market that saw stocks go up in some cases by parabolic moves based on less fundamentals and more multiple expansion, and a lack of earnings or a bond market where rates have been down and screeming to you that maybe the stock market shouldnt be where it is for all the reasons that i just mentioned . In the shortterm, in the moment that we are in right now, unquestionly the bond market has been smarter, scott. Toernd, sorry to do this, if you look at the last 12 years, the stock market has been smarter and every dip in yields has whether you agree with it or not it factually allowed multiples to expand. Yes, we have not seen the Earnings Growth for the last two years. But the multiple expansion has factually kept the market higher the question for me is not where bond yields go from here the question is where do earnings go from here . Lower, lower. The question is what does the shape of the bottom look like, is it going to be u shaped, where q 1 and q 1 stink and you get a upward trend in the second half we dont know because we dont know the trajectory of the coronavirus. But q 1 and q 2 will be below where they are right now this is the opportunity for companies to kitchen thing anything they should have been writing off in the first half this year. It is possible it sets up for a second half but there is questions we dont know the answer to. Will this virus go dormant in warm months . We dont know. Cramer says his short range oscillator is informing his call to buy some stocks. Quote, i expect a mild recession based on weakness in frafl and entertainment but right now the oscillator is saying you should buy stocks, both short and long term that oscillator is not going to mean anything when you see 1,000 cases in new york, in l. A. Disagree completely. You are going to reset the oscillator. It is about the numerator, again. It is the number of cases we know there is going to be tens of thousands, hundreds of thousands of cases the issue is the mortality rate. We know there is going to be hundreds of thousands you think people are ready we know there is going to be tens of thousands. Thats in the market . Why is the market down today, jon. Why is the market down today . Because we are just experiencing that up and down. It was up yesterday. People are selling rallies as they have been doing all last wee and dips are being bought though since the first time like i cited last friday you. Dont think it anything to do with comparing ceilings, the state of washington to china with case popping up in new york, new jersey, and so many states i do. You dont think thats the fear factor . I do, but thats a very, very shortterm thing, scott, thats shorttermer term than i am in terms of trading because you are going the get these cases popping up the cruise ship in san francisco. Headlines all day today. These are your words not mine. Okay, okay. We know there are going to be tens of thousands. Tens of thousands, we know that for a fact. Cdc says that. You are dealing me thats in the market yes, sir. And thats why we keep coming down but we are not piercing those lower lows right now, scott. Because it is about do we experience the same thing that the epicenter had, in japan . I know thats not it was wuhan, china, but japan and south korea their numbers came down dramatically as far as mortality rate thats what people will be focused on in a longer than 24hour clock. What the do you are adding aggressively are you agreeing with jon . What i am doing is looking at my portfolio and saying what do i have in my portfolio and does it still belong there . I had teps in my portfolio since december the exact thing we are experiencing now is the reason they were in the portfolio i look at the tips and say to myself with the Federal Reserve coming in and pacifically discouraging the risk aversion safety buying type of behavior that we have experienced the last couple of weeks, i dont need tips anymore. What do i do with the money . I go exactly to what i believe in this market right now is your equity safety trade. Thats the fangs that is amazon that is apple. That is netflix. Okay microsoft those are the names in this environment that are going to provide equity safety. I am going the say to you what somebody who is a hell of a lot smarter than me when i said Something Like that to them. What about apple, what about amazon these are the stocks that are going to do well in this yes, scott, but they are stocks, if the stock market goes down, i dont give a damn about those thames because they are going to go downtown . The stocks will go down but the businesses will remain strong and resilient to the rest of the other potential businesses that i am able to buy in the equities market if i am going to be liquidating something that i believe is no longer going to work for me like tips i want to reallocate those funds. You are talking about the fangs, which continue the trade at a premium valuation. You are talking about there has to the been any rotation from growth to value. There absolutely should have been. You said the fangs continue to trade at a premium valuation. To the overall s p itself. Right isnt that offsides in this environment . No, thats reflecting doesnt the valuation have a long that tells me they have a long way to go before they get in line. That valuation tells me you are talking about companies with cashrich Balance Sheets, talking about companies that are going to be able to in a time of contagion go out and bye an instagram or a linked in and Companies Like that thats going to work for them the mega cap technologies with flush Balance Sheets are the safety of the market if you need to put money to worked right now. It is the first place that would work i am not infearing that i think a bottom is in for the market. I am telling you, i am out of these tips, this is the place i want to go. Do you agree or disagree . I think you are both right, actually what receive seen is in aggressive selloffs, the high growth names have gone down, but they have gone down last they have outperformed the market i think there is some safety there, and valuations are elevated but in general you are paying for the higher growth if you look of the other signals in the bond market we talked about the ten year but not the shape of the yield curve after the feds emergency rate cut we saw an aggressive steepening between the ten year and the two year as well as the ten year and the three month typically you look at that and you could interpret that as a bullish signal but historically if thats steepening it is because the shortened is dropping aggressively because of emergency rate cuts from the fed. And that back end, that ten year is not moving higher that has been a not good signal for the market historically thats preceded recession. I think we are getting negative signals from the bond market that definitely bear watching. We will ask guchbd lack about that coming up in 15 minutes or so rick reader telling us especially on the long end you have room to go down. Scott minerd, too the 25 basis points you put out there. To who is right, it is the story of whether we are in a correction or the first or second leg of whats going to be a bear market. I believe this is a correction and in order the take the next big leg down through fridays lows you have to have something further unexpected it cant just be that the number of cases goes up that is expected it has to be a derivative effect which is somebody has a hard time financing airlines are in the epicenter of this schedules are cut all over the place. There is no indication they are having fpszing their operations. They are just cutting schedules. You are too early. You are correct credit is available banks are lending. Businesses are getting money they are not seeing an issue i get it. Thats my point. We are anticipating, though, what may happen. Thats what the stock market is doing. And what i am suggesting to you is where this precipitous drop in yields is forecasting it in a better more logical way than the stock market can i follow on of course we are trying the anticipate as you anticipate we have to look at the sea of liquidity that the Federal Reserve, the ecb, peoples bank of china, everybody is putting out there it is possible that financing dries up it is unlikely in those conditions, really unlikely. I dont see it. Rates are so low there is so much capital out there looking for a home. Thats my point if he have to pay yeah i dont see that happening if you dont see that happening yeert and you agree with jon then you should be plowing money into the market right now. It is just a question of the bottom. You are sitting on 12 cash i dont hear you saying i own boeing, it is at 268 and thats absurd so i am buying it intel and all the other stocks are getting hammer, thats absurd, too, scott and i am buying that. Yeah. Why arent you doing it i am days away. You know i am a long Term Investor let me Say Something we are going into friday in a terrible news cycle. A bad news cycle you go into a friday like people want to buy tomorrow may be my day. Want to disagree with joe on one thing. I dont think value i agree with you on your long side but i dont think value should be trading higher value is more of the economically sensitive stocks. You want to own the growth which is why you are attracted to it. I did not say value should be it is not that i believe it should be what i am doing is observing the margaret and saying in this country i dont want to own the fangs if we are going to get a rotation from growth into value. You never got i. I could look at it and i removed that head wind from the conversation. I also think going back i think this is so incredibly important to talk about yields yields telegraphed in january exactly what the equity market is doing right now they didnt the inverted yield curve. It was the fallback in the u. S. Ten year. That had financials trading lower, and that really telegraphed what you see right now. Let me make a point on something. You go back to 2012 when the u. S. Ten year went down to 135, and took equities down with it you go back to 2016, when it went down to 135, it took equities with it and to a smaller agree, if you go back to august when it went to 144 and took equities with it, in each of those instances equities didnt fine the bottom until yields continued to move lower and equities stopped credibling with yields falling thats what has to happen here thats the correlation that you are looking for. Yields, they need to go lower, scott. Maybe they need to go to 75 basis boipts but you will get the all clear signal when yields do that and equities stop going down. Let me ask you this yeah. In terms of things that are falling that you deem ridiculous, have they fallen too much, you have exposure in the airline space, which is one of the epicenters of this issue. Right. I mentioned boeing, dropping like a stone i dont know if you own it anymore. I do. I havent sold any matter of fact i added to it the other day. What about united and other names getting obliterated. Down a small part of united i took the opportunity yesterday when it went positive briefly to sell most of what i have left. I hasnt happen about the cut yesterday. I was expecting it because they cut the schedule as i do the math, they were 10 to 12 this year. Asia, 16 . They are down that then they will cut more, i think they will cut through april. But the business customer, if you talk to all of them, they are not traveling. Conferences have been canceled thats where their moirns are. So margins are. They are a high fixed cost business you need the leverage of increasing revenues to make the companies. They may report a loss i will buy back in the 40s. What if this persists into the Summer Travel season. I will buy in the 40s and come back to it. I kept a place holder. I hope you have something to buy. I dont agree. Do you see what some of the you know, credit in the airline space, you know, it is not a pretty picture. Right on the other side of it, it is not a great offset but you have lower fuel prices despite opecs move. Thats their biggest cost. They are not hedged. Cds is what i was trying to think of i cooperate think of it. Credit default swaps. The trading mechanism. The problem is if it extents. I dont know if the airlines are pricing in a recession or pricing this going into the third and potentially Fourth Quarter. Heres nobody is mentioning what we saw is this major democratization of investing where you can go into etfs for and you can buy anything you want. We saw this massive move into passives we talked a couple years ago as long as you dont try to do it on robinhood. Exactly right we talked a couple years ago about what happens if they get nervous. So they have been taught to buy dips everything has been a v shaped recovery in the market never had economic issues. What if it is u shaped does the individual investor and the institutions, do they get nervous, antic, start selling . The pipe is not big enough to accommodate all of that. It is a black swan even. I am not saying it is going to happen but it has to be in the dialogue is it is it irresponsible to make a v shaped call yes. Right now i would agree with that yeah. You are just you are not going to have it is already sort of factual. We are getting to the end of q 1. Aller seeing is preannounce its. We are in march, there is no way the preannouncements stop any time send 678 qorvo, united, disney is going to have to do it with theme park closures are people flying down orlando in the heart of spring break . Some them are, but it is curtailed. It is going into q 2 the question s is it u shaped or l shaped do we go into the second half. I dont know we need to wait and see if the virus closes down in the warm months we dont know. What is interesting, so many of the firms that we looked at lowered their First Quarter numbers maybe took a little bit out the Second Quarter but kept their year the same. I dont think you see the major hockey stick recovery in the second half. I talked to companies who said we believe lose revenue out of all of this. Most are saying they are not. The ten year is 105 the record low is 90 we may be heading for a retest of that. You are right, the correlation receipt now, shortterm, the market keeps ticking down as bonds keep ticking. Which is why we have asked the question and suggested, and jim cramer has been talking a lot about this, you cant feel better about anything until you stop the drop in yields. The ten year is do you know need another sign of where sentiment. The correlation between equities and lower yields has to break. I think we are seeing some measures of fear, but not quite to the point of capitulation put versus call ratios are elevated. Highest since december 24th, 2018. They are. They were, not now. Then you look at other measurements of survey data and it is not as extreme up until we saw the spread of the disease outside of china it was reasonable to expect the v shaped recovery. But once we saw the kind of very aggressive spread outside of n china it became irresponsible to expect this to be a shorter term yeechbt. Dont miss an interview. Doublelines ceo jeffrey gunned lack joins us. You can always watch or listen to us live on the go using the cnbc app we are back in two minutes i love the new myww program, because its tailored to you . Take the personal assessment and get matched with a proven weight loss plan. Find out which customized plan can make losing weight easier for you myww join today with the ww triple play welcome back, everyone, im contessa brewer. Heres your cnbc news update right now, federal medicare and medicaid officials started an inquiry into the seattlearea nursing home at the center of the coronavirus outbreak that killed ten people in washington state. Inspectors are trying to determine whether the life care facility followed guidelines for preventing infections. The grand princess cruise ship has been denied docking in california at the order of the governor officials are aweighed waiting test results for 21 passengers and crew members on board that ship three members of a previous crews of grand princess tested positive for the coronavirus. The three day ultramusic festival set to begin march 20th has been canceled. City Officials Say it will be postponed likely until next year. Then there is a 7eleven store in tokyo displays a box of 60 face masks for 160 they were buying masks at high prices on line and selling them for about the same price at any rate, officials issued an apology. Thats your news update. Thank you. Now to washington, where we have breaking news. Big Tech Companies are signing ontoday to a new initiative aimed at combatting Child Exploitation amid growing pressure from washington we know that representatives from facebook and google were at the white house this morning to discuss the problem. Already companies kpd involve include microsoft twitter, snap, and row blocks companies will prevent these materials from appearing on their platforms. They are going to target problems in Live Streaming and share information with each other and with Law Enforcement Child Exploitation has become the latest front in the battle over big tech. The attorney general will be holding a press conference on this issue any moment and accused companies of blinding themselves to this kind of behavior in their quest for profits and has questioned whether they still deserve the liability shield that has been fundamental to their operations. The Coalition Said we stand behind the principles and will be working to clearly, big tech to trying to get in front of this issue. Lets welcome in jeff regundlach, the founder and ceo of doubleline capital. With us from los angeles nice to have you here. Thanks for the time. Good to be with you again, judge. It has been about four months. It has. I take you to the bond market. The ten year as i look at it right now 92 basis points. Whats your reaction to what we have seen in the bond market the bond market is rallying because the fed has reacted to the seizure in the Corporate Bond market which was not getting enough attention i mean the junk bond market widened out about the same as it did in the Fourth Quarter of 2018 it widening out massively again today. Jay powell has a background not as a theoretical economist but as a private equity person and his actions on short rates have been pretty much in reaction ever since he started the easing cycle, pretty much in reaction to problems in the Corporate Bond market really worth paying attention to. Because obvious low the stock market has benefitted a lot from buybacks and as the Corporate Bond market is weakening, now that it is over a 1010 trillion milestone, as Corporate Bond yields are going up just as rapidly as treasury rates are falling it is problematic for the buyback aspect of the market the fed cut rates the 50 basis point intrameeting panic rate term cut if you look at history once the fed does a panic intermeeting rate cut, particularly when it is 50 bassis points, usually what it is when they have to panic they typically cut again at the next meeting. I am in the camp that the fed is going to cut rates again, perhaps even in two weeks and that well see short rates headed towards zero i agree with jim beenko who has been talking about that. I am not sure they are going to cut to zero immediately but i think we have another rate trea are not a place to make money anymore. They were a place to not lose money. Thats what is happening at 90 basis points on the ten year you are not looking of the a 10 rate of return over a one year time period. You use the word panic when describing what the fed did. Why use that word . Why wasnt it justified what they did because they are worried about maybe a consumer panic. Maybe they are also worried about what could be a very real freeze up of business this this country, especially on the mechanism that makes this economy work, thats the service side yeah, well i dont disagree with that. When i say panic it doesnt mean it is not justified. Sometimes panic is justified if someone is breaking into your house through the window i think you are supposed to panic. Business activity is pretty likely to contract i mean, the anecdotal evidence is getting powerful. I received multiple emails today of clients that were planning visits to doubleline saying we are cancelling them. I am sure i am not alone in that obviously the airlines are in free fall for good reason and small bus activity is going to contract i think it is fool hardy to think anything other than this is going to take a major hi to economic growth. Maybe Grocery Store sales will go up on a shortterm spike but all other social activity is grinding to a standstill. Do you think the fed made the right move i think cutting rates was justified, for sure. I mean i dont like the way sort of in which it was done. It feels like, you know, they were between a rock and a hard place. I mean, the fed when i say panic, the fed in their most recent press conference, took a victory lap, talking about how they had finally reached a stable place in policy and that they could be on hold for the foreseeable future, maybe even the entire world that we are in a good place, policy rates were appropriate. I dont know i thought it was a little bit of hubris at this time but the data point has changed between where the fed was between a rock and a hard place if they dont cut ratsds, the stock market is tanking, was tanking last week. Now it is a roller coaster ride. The bond market activity with high yield spreads blowing out and treasury rates falling just as fast as high yields are blowing up you cant blame the fed for cutting the rates 506789 they probably have to do it again because this situation doesnt seem to be doing anything but continuing you have seen the press conference with the president and the physicians on top of this coronavirus situation, and they are saying that they might have a vaccine in like a year, year and a half. So nobody knows what is happening here so caution is appropriate. So scott minerd told me the other day the ten year could go to 25 basis points i mentioned right now we are at 91 we could test 90, which is the record yeah. How low do they go in your mind. I think we are near the low right now. Maybe we get to 80 basis points on the ten year. I dont believe in the 25 basis point ten year i think thats just extrapolating the move that already happened i think that the short rates are definitely going lower there is no upward pressure on short rates. But we are starting to see a steepening yield curve in a way thats noticeable. Not today exactly. Although it is moving around but now we have a 100 basis point spread between the two year and the 30 year and 90 basis point red is wean the five year and the 30 year these are levels that we havent seen in quite a while. So i think we are getting to the point where fiscal stimulus is going to be more talked about. In fact, i think we are going to be hearing that as a narrative thats common in the days ahead. And it is difficult to see why you would have a demand for a 160 long bond or a 150 long bond or 80 basis point ten year if all this supply coming but i dont think calling the direction of Interest Rates is all that meaningful right now. You dont make any money regardless i think you are better off staying in cash, really, than in owning a ten year treasury because the profit potential, even if you are absolutely right and you do get lower ten year rates you dont make any money it is a place where you just have returnfree risk. You can understand why some people are looking at the ten year for example, and saying, and we have discussed it on this program multiple times as long as the ten year note yield keeps falling, it is hard to be confident about a stock market bottoming i agree with that i think the thing you are supposed to own i have talked about this for almost two years now is gold i turned bullish on gold this the summer of 2018 on my total return web cast when it was at 1190 to me, i talked about my just markets web cast, which is up on doubleline. Com on a replay that the dollar is going to get weaker the dollar getting weaker seems to be a policy and the fed cutting rates, slashing rates s clearly going to be dollar negative and that means that gold is going to go higher gold is doing super well even with the dollar unchanged over the past really 14 months or so. And gold is at a record high in terms of euro and many other currencies and i feel like it is almost a certainty that gold is going to go to an alltime high versus the dollar as well and the gold is really performing well. Gold miners have not done well at all they are probably up today but they havent done much year to date i think you have to look at alternative assets to Financial Assets in this present environment and gold is an antidollar play that i think aboutl continue to be profitable i am not shig about buying the ten year the make money. You are making more money in other things. Whats is one thing that you are looking at in the market across all Asset Classes or even in the stock market that is guiding you in the direction you think thingsmay go we see the transports are in a bear market. As we are speaking now, they have dipped there. Yeah. What is the one thing that someone says, what should i be watching more than anything else well, i think we have to watch it is not a market thing. It is an Economic Data thing thats initial claims for unemployment which are very low, and are the one thing that makes the economy seem like it has been holding up but if this situation with travel and leisure and nonsocial activity continues, you wonder if you can keep initial claims down near 200,000 per week the five year moving average of initial claims is around 243,000. One of the most predictive aspects of Economic Statistics for recession is when you get unemployment claims on the weekly basis i use the four week moving average because they are so volatile. But if they go above their five year moving average you are done put a fork in the economy. It is almost definitional. I think you have to watch the unemployment situation f. This slowdown if this slowdown of Small Business and frafl and leisure and the like sustains, it probably will lead higher unemployment and thats just a really big problem for the economy. Also Consumer Confidence, which is tied in to unemployment Consumer Confidence in the present has been very resilient and at historically high levels. However, for the past 18 months or more the consumer view of 1 months into the future has been dismal that setup usually puts you on notice that you have got to watch the view of the Current Situation for Consumer Confidence because they have been dismal about the future for some time. Historically, it is when the view of the future joins the you sorry, the view of the present joins the view of the future in waenging that is also sort of definitional of a recession. These are things we have to watch out for. Similar, the movement in the bond market is very similar and the movement by the fed is very similar to past massive slowdown i want to say one more thing about employment that is the jolts figures that dont get enough attention have been very weak basically as weak as they were going into the Global Finance crisis, which maybe is foreshadowing an upparticular in unemployment claims which would really kind of be the engame of this economics expansion thats what i am watching out for in terms of Economic Statistics in terms of market, i just think that the two sectors that are just falling knives are financials and transports. And i dont see anything thats going the reverse that until we get through the other side this valley of this sort of travel shutdown and financials of course, are getting trashed thanks to the low Interest Rates i sent you some charts last night. I dont know if you have them. One of the charts i think is very interesting is a chart of Financial Market performance comparing japan, europe, and the United States going back to 1995 and if you look at it, the japanese Financial Sector of the stock market is down like 80 since 1995 it didnt rally at all going into after the Global Financial crisis or going into the Global Financial crisis. It stayed very, very depressed why was that thats because japan had zero Interest Rates when you have zero Interest Rates, banks cant make any money. After the Global Financial sorry, going into the Global Financial crisis and after, europe and United States stocks there it is on the screen now, they rallied similarly. You see the orange line and the blue line rallying exactly the same out the recession of the dot combust. Then they both collapsed in the Global Financial crisis. After that the europe Financial Sector hasnt recovered. The u. S. Financial sector went to match its highs of 2007 incredibly now the Financial Sector is underperforming because we are heading towards again zero Interest Rates from the fed. When you have zero Interest Rates from the fed and low ten year rates banks cant make any money. Receipt now you stay away from those sectors. We are looking at the charts and the markets de tieriorating further. The dow at the lows of the day, down about 920 points. We are keeping our eye everywhere you now have a ten year yield at 90 basis points. 904 into right. Lets talk about credit there is a suggestion there are going to be some sorts of, quote, unquote, credit events, right . As fundamentals de tieriorate in certain areas, we have talked about them already, travel and leisure and things like that but credit is available. You know, banks are lending and businesses have access to credit there is thou freeze up to make people nervous to the levels that they started to get in 08, right . We can agree with that are you at all concerned about what may take place from a credit stand point that we need to keep our eyes on . Yes absolutely i have been talking about this for at least a year and a half and that is what when the next recession comes, and we certainly are looking at a risk of recession, at least a negative quarter coming up on gdp that in the next recession you are going to have the downside of this long period of credit expansion, fed stimulus, the longest expansions in the post car period, although not the strongest expansion. And the credit market has just been lulled to sleep out of complacency with the size it has grown to and the leverage ratio and the corporate economy being so high. Then the next recession you are going to see the epicenter of trouble in the markets will be the Corporate Bond market. You are starting to see that now. The stock market as you say is down 1,000 or so today it was up 1,000 yesterday. It is moving 1,000 points every day. It is just a different sign, plus or minus sign every day but high yield bond market is now back out to the wides. It has been reasonably orderly thats interesting because usually when you start having these types of mega moves in the stock market, you start to see a real seizure in the Corporate Bond market. And that really has not happened which is one thing that is Holding Things together. But the Corporate Bond market in the next recession will not hold together. Maybe the fed cut helped that it certainly helped the Investment Grade Corporate Bond market was not able to issue a new bond for seven days ching led to part of the motivation for the fed to cut rates. As i said earlier, jay powell cares a lot about corporate credit, knows a lot about corporate credit, being from a private equity background n 2018 there was two months in a row that you couldnt issue a Corporate Bond that led to the pivot that powered the market in 2019 we had seven days in the Investment Grade Corporate Bond market here where you couldnt issue a bond that led to the fed cutting rates. Clearly it helped the market clearly it helped the liquidity in the Corporate Bond market now it is almost like today with the stock market dropping and the high yield going back to its wide it is like the Corporate Market pounding on the door again that the fed acted in the history of the last 20 years when after they do an emergency intrameeting cut they make another cut at the next meeting. I think that makes the most sense. What about from the fiscal side you are not the only one who suggests that thats needed. A conversation i had with a ceo of a very large firm suggested the other night is that the reason the market didnt like what the fed did is because thats all that it got we need something from the fiscal side. Well in terms of the market not getting much out of a 50 basis point cut thats only because the bond market are already priced in that cut the bond market was looking for three rate cuts when the fed did two. No wonder there wasnt a big bump out of risk assets because the market already priced it in. From a fiscal perspective, what makes sense . Well, frankly, fiscal stimulus doesnt make any sense at all in the long term because we are already running National Debt growed at 6 gdp thats a question of do you want to deal with the shortterm or long term . If you want to deal with the shortterm fiscal makes sense. You might even do a george w. Bush situation where they have wired money to people we have actually done free money to the middle class before they did it before in response to the Global Financial crisis it wasnt a lot of money i think it was Something Like 500 but thats one of these things that could happen again that would be a fiscal stimulus. That clearly goes directly int spending or perhaps paying down debt, depending how scared people are. But fiscal stimulus would be most effective at the middle class telephone. Let me ask you this, since were talking about that, you mentioned, sort of takes us into the political spectrum super tuesday is done. Biden had a huge win youve spoken about the risks to the market with Bernie Sanders bidens gotten this big lift now, Elizabeth Warren is out as we speak yeah. Yesterday, was that all a biden bounce, if will, from super tuesday . And now, how do you size up the Political Landscape . Well, its really fascinating, isnt it, after the midterm elections, the two leading candidates in the polls were joe biden and Bernie Sanders for the democrats. All of a sudden, we had about 30 more show up and we went through all of this trouble, all of this money and all of this energy to end up right back where we were after the midterms with joe biden and Bernie Sanders and its pretty remarkable how the democratic establishment issued super tuesday Bernie Sanders was looking pretty good, they really changed things by encouraging buttigieg and klobuchar to drop out and throw their support behind biden. And they even tried with beto orourke to do it. It was pretty darn effective it even kept Elizabeth Warren in the race to further sap from Bernie Sanders and its tremendously effective. It looks like theyve engineered a joe biden nomination unfortunately, joe biden is the same as jeb bush the republicans could have done this maybe back in 2017 with jeb bush if they would have done that, you would have gotten Hillary Clinton as president instead, they let the free for all continue, and you ended up with President Trump now, theyve anointed joe biden and i think joe biden is completely unelectable one of the reasons that Bernie Sanders didnt do well on super tuesday is was that he unfortunately appeals to voters that dont vote. He appeals to a low turnout segment of the population. The young people and the younger people just didnt show up on super tuesday. Ive got a feeling that if the younger people that suppoBernie Sanders didnt show up for Bernie Sanders that theyre extremely unlikely to show up for joe biden. But i think one thing thats going to happen, its not going to be so much that the market is scared of Bernie Sanders because it looks to me like hes pretty much done. But i think the market has to be scared of joe biden starting to move to the left because he needs to consolidate support as he can to try to woo back or woo in the bernie supporters who are probably pretty upset by the move by the dnc to take it away from bernie. If nothing else, youll get a zeroing in on bidens policies more closely than you have in the past, if truly he is the presumptive nominee. And what his policies would mean for the stock market ive got steve weiss wants to ask you a question jeffrey, with the understanding that nobody really knows, whats your baseline case for how long the situation goes on with the coronavirus . I assume thats underpinning your projections on the economy. And then, unlike prior recessions, the fed doesnt have that much room with the rates to do anything. So do we have an administration to get things done two questions. Well, what was the first question again whats your baseline case in terms of timing. On the virus. Put your genealogy hat on, which you dont have to do if you dont want to, but you can take a stab. I have no expertise in that area, but im just looking at the situation and i just believe that this is going to be a bigger problem than people thought for sure i was meeting with a client of mine, a couple weeks ago, one ever my biggest clients they came in. And it was the day that they announced that they had recalculated the virus count and it exploded higher that day. I dont remember the numbers but it was a huge upgrade. They didnt tested right and they hadnt qualified correctly. Suddenly, there was a much bigger number, my client asked me are you riskmanaging around this virus at all. I said, you know, its just today that i started to think that there was something here. And it just keeps getting worse and worse. And ive been reading notes from people that do have expertise in these areas. And they definitely are highly cautious about things. I think that you have to be riskmanaging around this virus situation for sure and obviously, the market is taking that into account and i just i believe that whatever the consensus is about the situation, i think its worse. Thats kind of where i am on it. What was point two of that question second question is, with rates so low, the fed doesnt have their typical stotoolbox wr according to a paper i read from the prior fed its typically a 5 spread stole lower rates we dont have that. So does trump have the wherewithal, because its his scorecard, what will the fed do with 500 bucks from the administration, if they can do that without asking . In other words, is it lengthening the recession . Well, youre right that the fed has very little to do on the Monetary Policy side, obviously. I mean, theyre already down i mean, theyre down so low and theyre going to go lower. What they said they would do, and i take them at their word because i dont think they had any options, jay powell has said in plain language, repeatedly, that he doesnt like large Interest Rates, hed rather do largescale which is quantity tiff easing. Over the last six months in response stoto the repo crisis that has not slowed down its amazing how highly coordinated the feds Balance Sheet is to the s p 500. Its almost a constant now with the fed Balance Sheet, we see that the stock market is basically unchanged inned past 15 months. There is no progress being made on the stock market in the past two years. So the fed will do largescale asset purchases which means it will hem with the fiscal stimulus, in my opinion. It will be trotted out in the economic weakness were confronting. I forget what number that brings us to in qe its qe 3, weve done 5, qe, 1, 2 and 3 we have operation twist in there and the repo facility that jay powell swears up and down is not qe i guess qe means buying long bonds. But it would be qe4, i think it would be pretty big because it would need to finance not only the fiscal stimulus, but also the emerging weakness in the Corporate Bond market which may need some addressing, too. Because the Corporate Bond market weakening would be absolutely problematic for the entire United States economy. No question about that. In the two minutes i have left, i have a couple of things i want to put a fine point on, if i may. You said the fed is going to cut again, march 17th and 18th, thats the next meeting. They cut there yes or no and by how much . I think they cut 50 in the next meeting in just two weeks i think thats going to happen do you think we go to negative rates . No, i dont think we go negative rates i think jay powell understands that negative rates are fatal to the system if we go negative rates it will be capital destruction en masse. We can understand negative rates in japan and in europe because you got the United States where you dont have negative rates we talked about earlier how the Banking System in japan has been decimated since 1995 with the Interest Rates we see how the Banking System in europe has been decimated thanks to negative Interest Rates jay powell, i applaud him loudly, seems to understand that a negative system for the United States would be a disaster and hes not going to go there, i dont think. Although ben bernanke and janet yellen has been trying to change his mind in the news wires i applaud jay powell and believe he wont go to negative Interest Rates. Jeffrey, i appreciate the time i know the viewers do. These are amazing time well talk again soon. What a difference two weeks makes, right thats right. Certainly agree with that. We will talk soon. Thanks so much all right, judge. Be careful out there you as well everybody else, thats jeffr gundlach joining us there. Theres a sea of liquidity out there, thats okabvious, bu the leverage is not accepting the liquidity, and those clamoring to buy treasuries, unless that correlation breaks, equities dont go higher a good farmer ready to buy, sorry were not doing it today, were days away, scott. I know you hold my feet to the fire well talk more. Okay. Yeah, we say elevated measures of cash we cant rule it out abd, air products thanks. Im short to semi smh, i hope i lose money on it stocks are down 950 the exchange starts now. Thank you, scott welcome to the exchange, everybody, im kelly evans and we have major wall street as coronavirus spreads. The dow is down 952 points thats a 3. 5 drop the downturn, of course, follows a massive rally yesterday that saw the dow post its second biggest point gain ever. But now were back in correction from the major averages meaning thats a drop of 10 from recent highs. And this selloff has every sector and every dow stock lower. Well have moron