Transcripts For CNBC Squawk Box 20240713

Ago. S p down by 151. And the nasdaq would open down by about 435 points this is limit down, they cant trade lower than this. Declines at 5 across the board. If this holds at the open, heres what you can expect in terms of the nyse Circuit Breakers that kick in. If the s p 500 dropped by 7 during the course of normal trading, trading halts for 15 minutes to have a cooloff period if it falls by 13 , it halts for another 15 minute period if it falls by 20 trading halts for the remainder of the day since these were implemented many years ago, weve never seen the levels tested. If youre watching the treasury market this morning, the ten year, almost impossible to believe watching how quickly things have fallen the ten year is yielding 0. 487 . Its been less than a week since it fell below a 1 yield and we have seen it collapse. Thats a bounce from earlier. So much of this has been keying off to whats taking place to crude prices over the weekend. Well explain what happened but you dont see moves like this often. Talking about a drop in demand amid the coronavirus outbreak. And opec failed to strike a deal with russia over oil prices. On saturday, saudi arabia slashed its selling price for april and the kingdom is preparing to raise its production Big Oil Companies are getting crushed. Wti crude is at 33. Some of the big guys here across the board, marathon almost 20 down this is a situation where you had opec and russia, the opec plus as they call it, who had been cooperating for a long time, finally russia said were not going along with this. In part i think to stick it to us. To stick it to everybody. Tough to make money in shale but nobody is a swing producer, if anyone its not saudi arabia anymore. I think it was to stick it to us, thats what im saying. This is supply but it was caused by the spechter of demand going down everything were talking about, all of it, there are supply components and demand components. But the concern was demand and how it was going to drop off. The 30 2krdrop is purely sai arabia and russia. Its amazing some day well look at it, and its not a Silver Lining but things are going to be cheap at the pump sometime. Not falling there quickly. No. Its a reflection of demand globally, which is going to fall but also that there is a supply. Immediately people are saying its going to be tougher to transition to all your esg stuff with 32 oil i think its going to be tougher to transition to the esg with stocks down, pressure on supply, demand, everything you can argue all of our esg conversations were i dont want to say a market bubble conversation when things are going well you can make change. When things are not going well its going to be harder. You can spend this money for carbon tax and everything that goes with it with delta watching demand collapse 100 . This is real and its bad and its real bad. But the end of the world i think it can only happen once. Theres going to be things on the shelves where youre like, wow, i cant have that so the millennials that are like i cant eat here theres no vegan stuff, that might become more important i cant log into my app, my life is ending. All these things we have it pretty good for a while. Im not saying were not going to, but i think the next couple weeks are going to be a stark reality. Challenging. I bought a few things, i admit. Hording i dont know if im hording yet. Dog food. We go through that quickly. Not us were going to talk about whats happened in italy i dont want to say its coming here soon, but i think it could be coming here soon. The lockdown . Columbia University Closed last night. Stanford. A couple private schools in new york city is closed. My sons school is back open but another closed did you read unis stuff this morning . Have you seen it in stark contrast. I dont know whether to look at that you mean as china ramps back up disneyland not the main park right. But some of the resorts. We have to figure out the testing. Part of it is theyve been doing real testing whether their numbers are real or not, we dont know. And whether theres going to be a second outbreak. Here clearly we have no idea whats going on. I saw a south korea mortality rate where they have the best testing and best mortality rate its. 65. Their testing is phenomenal. Its somewhere between. 1 and. 30 not 3. Youre looking at an area people can get health care i think the higher incidents are areas they dont have the same quality of health care. Rights. Germany, how many fatalities very few in germany at this point. Global markets were already under pressure because of the outbreak now compounded by the Oil Price War. Overnight in asia you can see its rough a big percentage moves down. I will point out we said its been a rough couple weeks last week we closed up. I think the dow was up 2 . It closed up. But look at where we were two weeks nobody is arguing that. We cant say its been week after week after week of carnage. Because last week there was a bit of a rebound but today were back, strapped in. That was in large part you watched the close on friday, came roaring back. It was like the previous friday. Yeah. Six, 700 points the previous week as well look at europe, you see 5, 4, 3 in asia and europe youre seeing big italy off 9. 5 . The market selloff comes after two weeks of incredible volatility, and there you can see some of the days that were point swings that were looking at on a percentage basis obviously when you had been up near 30,000, the percentage swings arent as big but the point swings will catch your attention. Our guest host is jason trenert. What are your words of wisdom this morning whenever were in a period like this, we hear, you know, just keep calm, keep your wits, look for opportunities. Is that what you say this time or is this time where you say you get any bounce at all, maybe you should lighten up, where are you on that . Theres what do you do in the midst of this and how do you position yourself as we hopefully get out of it, which we have, as you said the world ends once, i was here january 2nd and said what works is zero coupon bonds theyre up 36 year to date. Thats the most reliable counter weight, more than gold, more than the yen, the frank. From where we are now, its a sketchy bet at this point. If you look Going Forward, the biggest correction weve had in a pandemic is zika which is 12 . And markets have been up after just about every pandemic we had. The peace with Neil Ferguson is h1n1. This is not a 50 year, its not like sars. We dont know its a matter of how much fear it created in the marketplace and how much supply and demand shock theres going to be and credit in the system 100 . I dont want to debate the health issues. By the way, there are people this is a polarizing issue scientists on both sides have different views. Im just suggesting there seems to be i think theres a decent chance at this point theres going to be systemic issues in our companies. Imagine the world shutdown for a month completely and reopened unscathed the impact to markets would be Single Digits but theres Collateral Damage. Thats why were waiting to hear more fiscal policy stimulus. They said the fed should be buying things other than treasuries china does it, but italy announced, south korea announced. You have to do something to tide companies over. When do you do that you should Start Talking about it now my own opinion is youre also likely to have a slingshot in both Economic Growth and cyclical shares in the second half of the year thats a hope. But there are some credit theres some credit knockdown effects, particularly in the Energy Sector more than any other sector by the same token there has been a vigorous response on the part of the fed youre going to see more, and im convinced youre going to see more fiscal and regulatory stimulus plans coming out of the administration. You think the fed is going to cut more i think they have to, mainly because financial conditions are continuing to tighten. Where are the biggest problems the biggest problems are largely the fact that financial repression and pushing Interest Rates down globally by Central Banks, the irony is its created the debt problem you created a problem in which companies can get access to credit how does cutting rates affect that problem it slows things down as far as the Financial Markets are concerned, they dont make things worse for good companies. They should let the tide stay so they dont see whos naked . Yeah. Youre already here. If i told you i was going to anouch announce that i was going to bolster the airlines with some kind of bail out and do Unemployment Insurance for 99 weeks and im going to i mean, you come up with your list. Payroll payroll payroll tax cut would make sense. You do all of those things, i know what the market will do i want to know what you think the underlying economy does. I was in italy three weeks ago where i was in italy, in the last three weeks you were in italy three weeks ago . What part of italy . I was in milan. How long have you been i was in milan. Im sitting next to you. I came back on february 14th. You were in milan yes i was in australia a week and a half after that. Wait a second excuse me we didnt ask where you travelled thank you for being here. We appreciate your time i was supposed to be here at 7 00, its daylight savings time, you sandbagged me here at daylight savings time its 6 00. Where else have you been . Australia, zurich, logan and milan. Youve been home a week and a half. A week and a half ive taken my temperature its fine obviously given what the markets are going through, its understandable that people are nervous. By the same token i think we have to keep things in some sort of perspective i can say three weeks ago in italy it was business as usual there was no problems. Its not today. You are peaking thats the point, its not today. And we dont know youre probably liking peaking, i would argue in terms of the what the policy makers in italy has done, especially in the lombardy region. I guess the question is, do we see measures like that here 10 Million People under quarantine now or who were told they cant go about business as usual in italy. 16, i thought. Is it more . I dont know. We were talking about this off camera but the political issues will be tricky. If you look back at the great recession, you have people that say, yeah, auto bailouts were great. Bank bailouts were evil. I think that coming itll be the lag from fiscal stimulus in terms of the politics that will be the challenge here. I think if we get something meaningful, thats the most important thing because most Companies Need to be if they need help need it temporarily. But its a political challenge. Its a little bit like f you have to treat it a little bit like a bank run, in my opinion. To say the confidence on the part of lawmakers i thought a lot about bailouts because i spent that time in 2008 thinking about it since then, 10 years the conundrum i face every time i think about this, i dont think i could give these companies enough money to necessarily, depending on what kind of company they are talking about cruise lines, Oil Companies. I dont think im going to solve the problem until theres a vaccine that people believe in people needed the money in the bank to create the confidence. Im not sure that you get the confidence unless you have the medicine i would say theres dramatically different dramatic difference between a systemic problem with the Banking System and a systemic problem with airlines and cruise lines. Theyre extremely important, could be a big hit once theres a vaccine in my opinion, you have a dead weight loss. Its only going to be ready for the next season of this. Its a it takes months to get the vaccine. Well over a year. 18 months. Right 18 months. I doubt whether were going to be on pins and needles for 18 months. The question is, can you get your arms around testing so you know how big of a problem it is. Theyre hoping to do that i hope the china model is not replicated exactly but im hoping there is a way to cap it so it peters out and doesnt become millions and millions youre at 105,000 globally, not at 100 million. Say you said you were going to shutdown all business in the United States for two weeks. Say were going to have an incubation period, everyone is down for two weeks right at the end of those two weeks, have you solved the issue in so far as we have open borders, people can come in, you can restart the owhole thing. Thats the conundrum. Its march, we dont know seasonally how thats going to work people point out its one of the less the other thing is children seem like they dont catch it or the symptoms are so mild theyre just carriers. Yes you can make that argument for most people under the age of 50 or 60 that its actually day care. Please go to 60 thats well above that. The problem is really 70 and above or 80 and above. Its also if you have underlying conditions. Yeah. Underlying Health Conditions are the bigger issues. The underlying condition when youre 80 is youre 80. Thats the guess that a lot more people have it but the mortality rate is lower. Thank you simmon jason back from his world tour. With us till 8 00 i feel fine. Theres a 14 day incubation period. I got back from italy three weeks ago, three and a half weeks. I took my temperature, i think its lower you look like crap. When we come back well continue to focus on the markets, take a look much more about whats been happening right now. You are continuing to watch all three of the major averages. The futures indicate they would open limit down, 5 is how low the futures can trade. Thats where you see it on the future change, the lefthand side the implied open is weaker than that dow futures indicated down by about 1300 points s p open down by about 151 points if if we open here. The nasdaq would be off by 435 points this is all coming as youre watching the ten year treasury yielding below 5. 4 . And breathtaking moves in oil and the Global Stock Markets ten year treasury right now. 466 . Up next a live report from italy where the government issued a sweeping lockdown in the north part of the country to try to attempt a halt to the spread of the coronavirus. Squawk box will be right back. We have like 40 years of data thats incredibly valuable . I. I dont know. When did we introduce siracha . Not soon enough. These are our sales. By product, by region. Set against evolving demographics. You can actually see taste trends. Since when can we do that . Since we started working with bdends. announcer people who know, know bdo. Welcome back, everybody. Early yesterday italys government took the extraordinary step of locking down much of the northern part of the country restricting movement for about a quarter of the italian population its seen as sacrificing italys economy in the short term to save it from the worst of the virus. Claudio joins us with more on that what can you tell us this morning, claudio good morning, becky the coronavirus epidemic in italy has taken a toll on the economy here which was lagging behind compared to the rest of europe and now its taken an impact to the point we saw the stock market in milan dropping by 10 i just checked it its minus 9. 8 its hit other stock markets in europe but its one of the worst performances now the Prime Minister of italy aware of the situation and how bad the impact can be said theyre planning to introduce a Shock Therapy to counter act the effect of the coronavirus to the economy. The Shock Therapy includes right now something presented by the economy minister a couple of days ago they said theyre going to inject at least 7. 5 billion euros, thats 9 billion into the economy in terms of investments and so forth and also they are planning to increase the budget deficit goal to 2. 5 , up from 2. 2 with the help, of course, of a more relaxed european restrictions. Claudio, if you look around you, does it feel different there . Youre not in the lockdown area but how does it feel where you are . Well, even if youre not in a lockdown area, nationwide they closed down museums, closed down archaeological sites im at the coliseum, usually this is bustling with people, as you can see theres not many people around because word has spreed the coliseum is closed and all the museums are closed this is one of the sections of the economy that are being really battered, tourism, theres been a massive drop in the numbers of people who are visiting italy and we dont know when this is going to end, becky. You mentioned before about the budget deficit, potential budget deficits, theres obviously been some intransigents on the part of germany and the eu, and it was talked about how that may be the problem if italy was not allowed to increase their budget deficits they might follow the uk i dont know if thats an empty threat or a real one can you talk about that a little bit more because it seems to me this puts the serious strains on the eu some of these eu relationships this is not the first time italy is asking europe to be more relaxed when it comes to budget deficit goals but this year, of course, they have a real emergency that is not just an italian emergency, its a global emergency, so it could be everybody expects that europe will be a little flexible on that. When it comes to the league, they seem to be backtracking a lot on the promises or threats that were made in the past i introduced salvini myself saying do you think italy should get out of the uk. They said no we should change europe from within so he lowered the tone because of that. We dont know whether because of the coronavirus emergency and whether in relation to the fact that europe will be flexible or not with budget deficit goals hell come back again asking for europe to come out of. Thank you very much we appreciate the update, claudio. Coming up here on squawk box a lot more today on the big market move. U. S. Equity futures falling 5 triggering an exchange limit that means things could be worse at the open. You dont want to miss it. In case you missed this, u. S. State department has issued a stern warning telling americans not to go on cruises amid the coronavirus outbreak they said passengers that purchased tickets already should contact the cruise lines directly americans cant rely on the u. S. Government to intervene with ships quarantined at sea. But trying to get your money back absolutely. Well talk about thianotr av recommendations and restrictions and advisories right after the break. Dad, im scared. Its only human to care for those we love. And also help light their way. Its why last year chevron invested over 10 billion to bring affordable, reliable, ever cleaner energy to america. 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 while our competition continues to talk. Our Retirement Plan with voya gives us confidence. So we can spend a bit today, knowing were prepared for tomorrow. Wow, do you think you overdid it maybe . Overdid what . Well planned, well invested, well protected. Voya. Be confident to and through retirement. If you are just waking up, the move in crude is unbelievable, and with Everything Else we have as a backdrop its unsettling but its for different reasons, but there it is. This is better than weve seen in some of the overnight sessions. It was 29 at one point. Yes i was surprised when we said levels not seen since 2016 i thought it had been a while since wed been down in the 20s on crude demand, the specter of that dropping dramatically, amid the virus outbreak, and then opec and russia failed to reach a deal on production its not just that, saudi arabia then saudi arabia. Forget it were going to go full bore. Mohammed is going to be on. Did you read his piece he has a lot to say on what happened saudi arabia and russia have had some moments before and it got really bad this time and saudi is like, okay, youre not going to cut back at all on production, youre going to feel sell twice as much for half as much money and your economy is going to be squeezed. You have to say this whole episode is a big hit to globalization. In my opinion. No two ways about it. Just the way we set up supply chains we made ourselves vulnerable and people didnt realize that if you didnt think of changing your supply chains last year in a trade war, youre thinking about it now. Its almost like ordinary people, everyone is a dysfunctional family and then something happens and people start to view the cracks and whether its russia and saudi arabia, italy and germany, i can tell you there are increasing tensions within the eu because germany is running a trade surplus of 7. 5 and a Budget Surplus and germany, greece, spain are not. There are going to be a lot of things revealed through this. Italy, greece and spain are not. Thats right. This didnt help equity prices what happened with the plunge in crude. On the ten year thats crazy too but im ready to stop watching the ten year. Im not. I am. 7 or. 4, its zero i dont care where it goes its basically zero not getting anything for ten years. If it goes below zero obviously unsettling but about ready to say i dont care if im getting three quarters or three eighths of a point u. S. Equity futures today down limit limit down, meaning they can drop no more. Dow futures indicating a drop of 1300 points, 1303 because the futures are locked down 1255 and you had fair value up 4878. Probably worth pointing out at the open they could open down further because it could go down by 7 before you see any pause, 15minute pause in trading before the break we told you that the u. S. State department has advised americans not to go on a cruise and we talked about this a little bit off air. Its like, yeah, we sort of i came to that conclusion fully on my own i did too a more forceful statement from the government on other travel you heard fauci say dont fly if youre over 70. But the president did not say that there was a report over the weekend that the cdc wanted to say things stronger than what was said in the white house. We need to get the testing going. No way were going to get how many tests will we have by the end of the week we should have over a million tests . Well ask scott gottlieb. Do you have the capability, its slowly ramping up, you have private labs stepping in to do some of these things but it depends on how many are authorized there was a lab authorized here in new york, on long island, they said they could do 90 manual a day to do automatic, they could do up to a couple hundred youll see the capability slowly start to ramp up. That should mark the peak im guessing two weeks from now well have a better idea what the situation really looks like on the ground we are going to see leaders look at president xi. He was , two weeks ago, talking about we need to get back to business i guess thats the natural default position if youre in charge of the economy, leaders are somewhere between not wanting to instill panic and trying to be realistic with the situation. I wouldnt want to be a leader right now. We are watching markets that are open in europe right now and they have been sharply lower. Lets get an update on the moves from steve segwick good morning. Just for a bit of historical comparison i was london 2009 you were pittsburgh 2009 when gordon brown and barack obama led the g20 global coordinated action which lifted markets from the 2008, 2009 low and the worry for these markets is we are seeing no signs at the moment of similar global coordination to what we saw in 2009 for whatever reason that will be. These european markets falling on from that crash in the oil price and sending a host of companies down i can tell you the euro stock 600 behind me. Im looking, three stocks in the green and approximately 595 stocks in negative territory believe it or not weve been worse in the session, down 6 on the euro stock 600 we have been as low as 8, 9 on these. The ftse 100 home of the bigges oil makers on the planet, getting absolutely pummelled in the current session, down 20 plus the ftse had a 59 handle it got back above 6000 the last time we were trading these levels was june 27, 2016, which again our viewers will know was in the jaf aftermath of the surprise brexit decision when the ftse fell to around 5800. And mounted a rally. This time around, the problem is people arent seeing the clarity from coronavirus they thought they were seeing in terms of brexit we talked about germany, the big surplus they run compared with the other eu nations seeing a lot of industrials selling off on the German Market plus the names that have been under vast amount of pressure the last couple years, the likes of the flag carrier falling aggressively in the Airline Sector deutsch bank was down. I will come to italy, down 9. 4 at the moment, the epicenter of concerns about coronavirus in europe but also the epicenter of concerns about the fiscal strength of europe italy runs a budget debt to gdp of 130 . Wheres the ammo, thats what the market is asking today back to you. Investors waking up to a sea of red, what should investors do today . Mohammed elerian is on the phone right now. Hes warning not to worry about the dips i dont know if today will be called a dip, but how are you thinking about it this morning today will be messy, andrew, to state the obvious it will be messy because we have lost basically all our anchors we lost the economic anchor with the coronavirus. Weve lost the policy anchor with people losing confidence in the feds ability to turn things around and over the weekend we lost a market anchor with opec swing producer roll going out the window this is going to be really treacherous for a while. I would advice most Retail Investors to stay on the sideline, not panic. There will be opportunities but not now. Not now, why . What else do you think is coming what you learn quickly when you spend time on the trade floor is to expect technicals. Technicals have a way of overwhelming Market Action and can take you well beyond the fundamentals meaning that unless you get a Circuit Breaker, we can talk about what a Circuit Breaker looks like, but unless you get a Circuit Breaker, technicals feed onto themselves for a while, making any drop exaggerate the next drop. Are we beyond the fundamentals at this point do you think this is a technical issue . Im not sure about that. No. You heard me say initial conditions matter. We elevated prices well beyond fundamentals if the buffer erodes, which was confidence in Central Banks to shield markets from everything, if that goes, you will have quite an adjustment. Now in addition to that when you say quite an adjustment, what does that mean to you it means 20, 30 drop in prices and remember, you know, i came on the air with you all over a month ago telling you the coronavirus is different its a sudden economic stop. Sudden economic stops damage things. I want to be responsible here but i want to ask you a question you know, theres been a conversation that we had whether you should buy the dips throughout this conversation what we havent really talked about is whether you should be selling. If you believe theres a chance that the market is going to drop another 20 or 30 , how should you be thinking about that if youre an investor out there it depends what i have. If i have companies with strong Balance Sheets, cash position and Good Business leadership, they will navigate this. This is not 2008, this is not a Great Depression this is not a paralysis of the settlement system. This is a nasty price correction and an economic slow down. So if i have good companies, they will navigate this. If, however, i have invested in high yield companies with debt sustainability issues then im looking at the prospect of potential defaults and remember the problem here is that you dont get much liquidity to repositi reposition. How do you think about the ten year being as low as it is i know people doing refinancing, a lot of daeal making takes place look, the good news there is good news in this when we turn technicals around well be talking about the following, record low Mortgage Rates that put more money in peoples pocket. Record low lending very low Energy Prices that means the consumer will have more money available for other things so when we turn the technicals around, it just wont happen immediately, andrew, but when we do, you will find you have the conditions for not just a bottoming out process but quite a pick up in Economic Activity we also need, thats the other thing ive been stressing, two medical advances because thats going to be key to establishing a bottom to the economic sudden stop. What are the two advances you want simply one that makes you and i confident that the virus is not going to spread in an indiscriminate way and two, the second advance, hopefully through a vaccine that makes you and i confident i think both of those advances are like a year away at the earliest, no i dont think theyre a year away i think youll find human ingenuity when needed can come up with things much faster were learning a lot about this. But yes, the next few weeks are going to see more economic sudden stops i tell people when you have an interconnected economy like ours its not easy to restart it. If you have the all clear, the restart alone is going to take weeks. You said prices could drop 20 to 30 you mean from here or where we started . Definitely from where we started. That, for me, is 15 by the end of today at the rate were going correct remember, last year we as investor lived the dream we were living the dream we got 30 returns on a passive s p. We got paid for holding riskfree, riskmitigating government bonds and no volatility i kept on telling people, when you live the dream like that, realize that this is pretty special. Dont think it can play on and on so we can unwind some of this artificial elements that have been put into markets by continuous central bank support. Jason here, i was wondering if you comment on gold and what you think that means one interpretation you could have is that central bankers are going to overdo it in terms of fiscal stimulus that you have in an odd way form of mmt as a result of this and youre going to spend more or its just in a world where you have negative Interest Rates, this is gold actually has a positive carry how would you interpret the increase in the price of gold . I think its both i think we will have a, quote, whatever it takes policy response as governments catch up theyll throw everything at this, and Central Banks will as well so we will have a whatever it takes policy approach. It wont have an immediate Economic Impact because you and i will not go back on a cruise if the loans are cheap and we get a tax credit were not going to do that but it will put a ton of fuel in the system thats going to wait for an economic bottoming out. But i also think you said the other thing, which is people are looking around saying wheres the risk free asset and theyre getting nervous about how low yields are, and gold is looking a lot more attractive. We love talking to you and getting your perspective, especially during these Uncertain Times and i imagine and hope well be talking to you a lot more over the next weeks thank you. Thank you, andrew. Talking a lot about oil just waking up were seeing a drop in the price of crude Oil Saudi Arabia said it plans to drop prices escalating a crash with russia. This comes days after opec leaders and russia failed to reach an agreement joining us is our Brian Sullivan hey, brian good morning, joe i cant remember the last time we saw something this significant in terms of moves. We have seen oil go between 200 and 20 we understand its the ultimate commodity, depends on not only the Global Growth but what a cartel does, new production in the United States, et cetera and economies that are so dependent on it they cant cut production. But is it more concerning this time in your view . Yeah, it is its a freeforall. Once russia walked out that door in vienna, they basically said were going to go our own way. The saudis said were going to go our own way, u. S. Producers have been going their own way. And oil has been getting slammed. Some oil equities are getting whacked. Im looking, you have continental resources, option down 20 in the premarket. Its not just the commodity, joe. Its going to be many of the equities today i find no joy in this. A lot of people will lose their Jobs Companies have to come out and cut capital spending, cut dividends, start cutting production theres too much oil in the world and if we see a Coronavirus Spread slow down, we use 20 Million Barrels a day if a bunch of people dont go to work even exxon indicated to open down by more than 10 after being under pressure recently too leading up to this. I know you talked to darin woods, the exxon ceo and thursday, i believe it was, youre talking about 10 moves this morning with exxon on the back of a 20 down move already. Thats whats incredible youre going to have im trying to be careful what i say here listen, ill let the market speak for itself theres going to be theres going to be some equities that dont make it. Because twice a year Oil Companies that have a lot of debt, a lot of them have debt, its not an oil story its a debt story ive been saying for a long time. I wrote a piece and heres how i described it to people yesterday. You buy a house worth 500,000 the house is worth 250, the yard is worth 250 somebody comes to you and says, mr. Sullivan, we found something bad under your yard, we have to dig it up. Your house is no longer worth 500, its worth negative 100 because not only can no one live there we have to take this stuff out because its toxic thats what happened with the companies. You have to revalue all the reserves and all the banks that hold the debt are going to say, whoa, your reserves, which are the collateral for your loans, arent worth half of what they used to be worth so youre going to see a complete revaluing this morning. Its going to be, as mohammed said, messy. I think thats a polite word. So brian, whats the saudi cost of production theyre still okay in terms of its not below but what about our shale producers here and all these these boom areas weve seen in our country, its much higher. It used to look pretty good when it was 50, 60, 70. But what is it right now what do you think it is in the United States right now for shale . And for other production well positioned. We list that for you. Im sorry, air pods occidental and apache, according to goldman, do not appear well positioned at 30. Goldman notes that in times of demand shock you tend to see oil trade down to its cash cost, which the cash cost of oil in america is about 23 a barrel. So the people i talked to yesterday think oils going to get crushed today and it could go down even more. Like i said, theres going to be equities that go away. Its all about high debt levels. Think about this, joe, okay . Im not picking on occidental. Vicky holub is a good leader been great to cnbc they spent 57 billion for anadarko they paid 57 and debt to buy anadarko occidental today is going to have a market cap probably around 15 billion and that includes anadarko. Yeah. I dont know if that gives you a sense of the damage. Yeah. All right. Were going to bring in its a jobs story also, by the way, a lot of jobs lost. John kilduff is here, a Founding Partner of again c capitol and cnbc contributor in this country the breakeven cost is what in general . And anybody below that is ive always said below 5 youre in trouble. Theres trouble out there in Oil Producing land. Because of the debtor because you know, just the economics of it all. All of the associated costs with getting the barrels out of the ground it adds up pipelines, moving it around, producing it, maintaining the equipment. The numbers are, you know the lowest costs ive been able to get driven down to are in the mid 30s but thats a rarity for the most part. We know that saudi arabia has a price chart that they need to keep going russia does. Who has the upper hand in the battle between saudi arabia and russia saudi arabia, absolutely. Their cost of production is in the Single Digits. People confuse what they need for their budget, which is considerably higher than the cost of production no, theyve gone nuclear here. They did everything they could over the weekend to do and achieve the objective that were seeing right now, which is this plumb net m price. Not only did they say theyre going to unleash more production next month. 10 million a day. It could go to 12 Million Barrels a day. Absolutely. Theyre talking about that they gave huge discounts for next months purchases of their oil. Unprecedented numbers. If i showed you the chart massive discounts so that it puts extreme pressure on russia. Does russia reconsider its position they are sticking to their guns ill tell ya, whatever happened at that meeting was more than a polite business disagreement, it was a falling out between those two. Russians are on the wire saying they can withstand this price environment for 6 to 10 years. Do you look at this as the final shoe to drop in this dynamic between supply and demand in the oil market obviously coronavirus has accelerated all of the problems, but even people writing in even a couple of years ago they were having trouble at 45 or 50. This has been a Long Time Coming it is i will say the good news here were 20 off the lows already we were down to 27 wti overnight. Right 32. I wanted to get that this is, joe. I talked about this for a long time to me it was nonsensical for the saudis to curtail production and prop up the price. They were only supporting their competitors, particularly the u. S. Shale producers who were benefitting from their actions every wednesday we have this inventory report from the department of energy, right . Comes out at 10 30 its a geeky thing for us oil people usually but the numbers last week were stunning in that u. S. Exports jumped to a shattering export of 4 million a day and u. S. Domestic production ticked up, ticked up to 13. 1. For me, that was it for the russians theres no way that were going to do anything but compete against these guys from now on on the heels of news that china had bought a huge cargo of u. S. Crude oil, not shale. Exxon mobil last week i did speak with the chairman and ceo darren woods who talked about the yield was something they were going to make sure they were still paying the dividend that was stock yielding 7. 3 before you see the 11 declined this morning what happens does that mean a complete shutdown of cap exto keep up with the dividend or is there a point they have to say we cant do it . On the math ive been doing between them and chevron, some of the machinations and if they stop their stock buy backs, they should be able to maintain that lofty dividend thats something to look at. When the dust settles, who are the winners in the Energy Segment . The well capitalized bridge companies. The strong will get stronger, the wealthy will get wealthier a lot of these shale heroes unfortunately are going to be in the dust bin of history. Do you see collateral on all of the new age Energy Producers . I do. I do they better make those windmills and solarpanels a lot cheaper than they are right now because theyre not going to be able to compete. Theyre not going to be able to compete. So does that mean that the fossil fuel industry is even bigger a year from now or its smaller because of all of the you know, the carnage . Heres what we have to watch out for. If you look at this historically when the saudis did this to vens back in 1998 when crude oil got under 10. By 2,000 we were at 30 a barrel president clinton released barrels. The u. S. Oil sector never recovered for more than a decade we had fields shut in that never came back. It wasnt until the 2010s or so when the shale became profitable again because of 100 close to it oil that made them willing to take a chance. The worry here, joe, is that they take a beating, we lose this production for an extended period of time and were back in the soup. There have been people capping wood tesla is replacing hydrocarbons. You could look at Collateral Damage across a lot of tesla has indicated to open downward of more than 70. Those batteries cant compete with a gallon of gasoline thats 1 or so yeah. Thank you yeah. Jason, coming up, look out below. Futures trading plummet down what pgs os the fed might be considering. As we head to break, take a look at treasury yields theyre all none of them have any numbers on the left side of the decimapot. Mi rhtack. L in we see engineers simulating the future to improve today. At emerson, when issues become inspiration, creating a better world isnt just a result, its a responsibility. Emerson. Consider it solved. 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. Global market selloff this morning. Global markets pointing to a quadruple market plunge. Saudi arabia moves to launch a Global Oil Price war crude is on track for its worst day since the first gulf war. And yields in the treasury markets sinking once again the ten year is less than half a percentage point away from turning negative well tell you what you need to know and how you should be handling your investments as the second hour of squawk box begins right now. Good morning welcome back to squawk box right here on cnbc im Andrew Ross Sorkin take a look at u. S. Equity futures at this hour were in the red were in the red in a very, very big way. Lets explain whats happening were off 1300 points on the dow jones. S p 500 would open down 151. Nasdaq would open down 435 points we should put all of this in percentage terms for viewers. Its 5 its 5 the limit down. Across the board rather among the biggest questions this morning, will the fed step in again and take action . And what else can fiscal or Monetary Policy do here, steve liesm liesman . Im trying to puzzle out how the fed might act. My best guess is they would issue a form of a liquidity statement. I dont know if you remember the famous statement by Alan Greenspan where the fed affirmed its responsibility to provide liquidity for the smooth functioning of markets readiness to serve is a source of liquidity to support the eke no, maam mibck and financial system. That doesnt sound like much given what weve seen the fed do over the last ten years. What i think the fed might be afraid of here is cutting into this huge decline and then it not being effective. The market has already priced in quite a bit of fed action. If you look at where we are, and i want to come back to beckys statement about us being 50 basis points from the ten year being negative ill come back to that in a second first, lets look at the probabilities. We had a 60 probability of the fed essentially going to zero in the fed funds probability. 75 , im using the refinetive probabilities. So thats zero there we go right there, what is that percentage there. Thats 59 right. Then look at the term structure which is that every tenor is below the fed funds. This was about 15 minutes ago. I cant guarantee so 1. 13 is the fed funds. You have the 30 down below in 1980, a much higher structure. Sometime during the financial crisis it happened as well so now lets talk about this idea, which becky raised, which is 50 basis points from negative could the market go negative on its own without being pushed there . Which would mean that the scurrying, the desire for collateral thats just like panic. Of tenyear money was so great that people were willing to accept a negative yield on it right. Jason you still have 14 to 15 trillion in negative yield. Already in europe. Globally. As we said before, gold in an odd way has a positive carry the first time in 5,000 years. All of the rules are being at zero. Are basically out the window. Your investment recommendation, i dont want to make fun of it, if youre going to hold negative, you might as well hold the best you know, im of the view gold isnt a bad place to be right now. I think coming out of this there is a chance you could get whip sawed. I personally dont believe that. You should have to be careful on this because the response is going to be massive on both fiscal, regulatory and what kind of investors are buying treasuries right now . I think its mainly people that i would say pensions, endowments and the people that have to. In the bond market, right because you need a certain amount of yield and youre not getting it anyplace else return in your known not on your money. Yeah. So gold i was just saying etfs, i think i if it were me, i think i might buy some physical gold. Rather than the etf. My statement, i swear i have a lot of gold at the Border Crossing not that anyone wants to leave you have not remember when we were focused on the repo purchases . Yeah, right. When is the last time you mention bed that been a while. Any reason to think will i quit at this or theres some type of imminent thing happening . No, no, no. Like i said, the fed is focused on market liquidity. I dont hear or see anything i think it wants to see how things right. The treasury market has had a big spread between it. I dont know if that means its dysfunctioning all im saying is, becky, its words until its not words the fed ready to provide liquidity. You would laugh at them until they stepped in to provide liquidity. Its not straining . No, its not. With the fed let me back up im not saying the fed is coming in with anything im saying that where the fed would be focused right now is on the smooth operation and liquidity of markets thats what its job would be. If they actually said something it would worry me. It would worry me the markets are more stressed than we realize. I would not expect a statement unless there was a worry there. If things started to gap down. Joe is right, it seems like markets theyre going down quickly and heavily, they seem to be functioning. Functioning properly. Thats the only thing i hope i wasnt unclear about that. Stick around. I want to say one more thing which is that fed officials on friday, several of them already expressed their willingness to do more. Right. You had Eric Rosengren talk about buying additional assets if the fed got to zero in the middle of a recession. Well talk about what kind of assets they could buy. Gabriel santos is here, jason tren ne trennert is here when we spoke to mohamed el erian, he is telling everybody do not buy the quote, unquote dip. Today we will have a major one the other question on the other side, by the way, people worry its irresponsible to ask to even talk about it, do you think the market is going to go down 20 . If you think the death rate in the United States and the coronavirus is going to go up, what do you do were setting up for a difficult day. We think it might be a difficult set of few weeks actually before we get any sort of visibility into development of the new cases of the virus, the Counter Measures in terms of containment of activity to contain the virus as well as any sort of response from Central Banks and from fiscal authorities so it might be a difficult few weeks here. Our approach is twofold. In terms of focusing in the shorter term, being able to weather this difficult period, we need to be able to have protection in portfolios we still think treasuries are a good protection. We can see there is no floor to how low yields can fall when there is a risk off moment we think it is crucial to Pay Attention to credit and the quality of credit that you hold. Are Companies Going to be able to weather this difficult time. Have you been rebalancing over the past two weeks . You know, what weve been doing is we had already come into this year with a more optimistic view but still a focus on quality and focus on some protection. If you were optimistic, you were more risk on. Yes. And that means it probably some lesser credits . So i think one area thats been a particular area of movement and focus has been on the fixed income side decreasing even further the amount of credit, things like high yield and focusing more on the pro tux bucket there is also a second thing to be done because there will be a year after the year of the virus. We cant lose sight of that. We dont want to completely abandon the longterm structural themes if you are a longterm investor that will include equities, that will include technology stocks, emerging market asia you want to dip back in carefully, not all at once. Let me ask you a question, gabriel, about we mentioned globalization before and if you think that i believe globalization is a Massive Force for both growth and disinflation over a long period of time, i think now there are a lot of questions about the future of globalization given whats happening and so if youre trying to look out stocks are Long Duration assets if youre looking at it from a longer term perspective, do you have any opinion about how this might impact inflation or Global Growth in terms of globalization i think we had already seen a bit of a shift last year during the trade tensions i think a lot of companies are thinking about diversifying this this only reinforces certain production so i think that was already a movement that was in place. In terms of inflation overalthough, i think shorter term, this hit to demand, right, is very disinflationary. Arydisinflationary. Combined with this movement of oil what are you expecting to happen in the United States . Let me put it in that context. Because i feel like we dont have a clue of whats happening in this country and whats happening in italy may very welcome to the United States, in which case im not sure the markets are indicating any of that and i think thats exactly part of the lack of visibility for the market is exactly how the new number of cases evolve and how governments react to it. Not just in china and italy but in the u. S. As well. What do you think were talking about here why else is it happening i dont think youre saying its not commensurate with how bad correct okay. What im suggesting is that were talking about unprecedented moves and lockdown limit and oil falling 25 . 100 . Youre saying the markets are ignoring i think this is still based on the idea that all of italy gets shut down and maybe things in europe are going to happen. I do not believe that this is mathematically inclusive of new york city for two weeks being shut down. Thats what were speaking about. Youve been with us for over an hour. Are there things you would buy based on these numbers probably not today. I truly believe this i want to be buying cyclicals going into the second half of the year i know it sounds crazy, but i think energy stocks, i think industrials. I think there are going to be a lot of things on sale today because i do think this will be over i think theres probably going to be an over reaction on the fiscal and regulatory side mainly because any person in a position of leadership is going to have to err on the side of being too cautious doing too much rather than too little. And, of course, we dont know. I dont know the extent of this, but by the same token i do think in the second half of this year youll probably have a pretty good handle on this and then youre going to be adding a lot of stimulus to an economy, at least in the United States, that was quite strong going you know, going into this period. Pretty good jobs number last week we talked about 12 1 2 as a garden variety. Maybe the lows dont hold. Maybe theres more work to do down there because this seems so much more significant than a garden variety pull back in the market we just heard mohamed say he was talking about equity prices, 20 to 30. 20 to 30 from where we started. Thats what i mean. Thats what i mean somewhere between 12 1 2 and 20 to 30, does that sound like you could talk about terminal pricing somewhere . Or i mean, what are you talking . 50 . Would 20 to 30 satisfy you in terms of enough work on the down side. Off of the highs . Off of the highs. Yes 30 would be the sort of firewall on that okay. But thats by the way, thats double where we are now. Believe me, it will be very painful. Does that seem reasonable, by the way . Im hoping thats not the case. I know. The valuations we had coming into this. We had, what, two weeks ago, ten days ago we had 19 times on the forward pe for the u. S so 15, 20 to average valuations go back to december of 18, was it 2315, 2500 . Yes. You got down that happened quickly it fell to 13 1 2 times earnings lets say we dont know what the earnings are you cant figure out im trying to figure out will the s p drk it would go to a similar place and it you know, we thought the sun would come up in january of 2019. Yeah, no. And i think the fed changed its policy pretty its tone pretty quickly after the last rate hike in 2018 by earlier 2019 and then it was it was easing. Sure. I think 2350, 2400 would seem to me would be a pretty reasonable during these periods of time the pe rise snz. Because the earnings estimates havent come down yet but nobody believes the earnings estimates at this point. If i could sum up what jason said he was talking about the Fiscal Authority overreacting i think they have to act first before they over react and i want to emphasize that because people are talking about wanting to see and working in concert with the fiscal side. The lesson from 09 is the fed cant and shouldnt do it alone. They said the fiscal side is the forefront from the Public Health side and congress and the administration i dont know mtd i think it would be set for something positive from the thread one of the issues is partly what youre seeing in the Energy Markets now. Youve kept a lot of Zombie Companies involved. If you cut rates again, okay yeah, at a certain point have you to let the market clear so that you have a pretty decent balance between supply and demand energy i would say and retail are probably two sectors where you havent seen that. This fiscal question is so crucial, i think. We do not talk enough about it. We do not talk enough about it its not just spending money like crazy, its really about preventing second order of facts of the impact of the virus, right . If we are able to protect employment, if were able to protect heavily impacted areas, when it stabilizes we have something to come back to. If not, its a much longer process. I think fiscal micro economic measures are what should give this market much more stability. All right the most interesting tweet i got was somebody arguing for a bailout for the Energy Industry. Can you imagine that . Youre going to have conversations with the Energy Industry bailouts. Airlines, i dont know if you bail out the cruise industry thats where this conversation is going to go. Its going to go. We cant tell from the futures. People are noting that they havent changed. Thats because they cant go any lower. Theyre pinned at limit down so they wont tell us about how the opening might go at 9 30 the etfs continue to trade you can check out the s p 500 etf. Its down 6. 25 . Well check out the dow etf. Or as you can see, similar, 5. 66 and the nasdaq etf to get an idea, you can see, all right. The futures cant trade down more than 5 those are the rules. Only the s p is down more than 5 down more than 6. Only the broadest market indicate mike santoli will talk to us about whats happening in the etfs and what else you can expect when we come back take a look at these names these are dow laggards trading down even more than what youve seen exxon mobil and chevron on the bottom of the shift. Exxon mobil is trading down by 12 . Chevron down by more than 11. 5 . You have the banks there because of whats been happening to the Interest Rates and what the Treasury Department is saying could be happening and then theres 3m down by 4 this morning squawk box will be right back. Yes. Its the first word of any new discovery. But when allergies attack, the excitement fades. Allegra helps you say yes with the fastest nondrowsy allergy relief and turning a half hearted yes, into an all in yes. Allegra. Live your life, not your allergies. 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. Lets get to mike santoli with more on the morning selloff globally that were seeing hey, mike. Hi, joe lets take a look at a threeyear chart of the s p 500. It really captures these wild swings weve seen in the last little while here. This is the etf, the spy, sppy etf which will show you the premarket moves as youve been mentioning, the s p Index Futures trade down a limit of 5 . Were indicating down 6. 4 here. Ive been talking for a while here about the levels that maybe we can hold from the summer of 2019, last year around 2800 on the s p. Thats equivalent to 10 times this thats just add a zero there it looks like its going to be a little bit in jeopardy or tested today. You guys are talking about these lows from late 2018. I think the key is here theres not a lot of relief shown here we had a very fleeting bounce last week. It obviously fell apart by the end of the week and now i think look at the second chart of the volatility index for ten years i wanted a 10year chart to put this latest move in context. It exceeds everything. So pretty much a lot of the Market Dynamics are seen here, also mimic those from august into october of 2011 you had the debt crisis. Perhaps u. S. Debt default, all the rest of it it was a little bit of an after shock of the financial crisis. You did kind of sustain levels of 30 during the financial crisis here. What this tells me is the market is not right now in the mode of lets put an appropriate multiple on u. S. Equities based on what we can know. No, this is positioning pain the markets reacting to itself. The markets reacting to megaextremes in bond yields. Trap door decline in oil prices. I think it kind of takes you out of the zone of equities just doing equity things and trying to say, oh, theres dividend yield. Thats well above treasury yield. Thats not what were doing today. Were trying to get perhaps the meaty part of the decline in the books and see where it settles out from there. We keep comparing this to what happened in december of 2019 if you look at the vix versus where 18. Excuse me, december of 2018, different story. Much different story. It does tell you that probably its a multitude of perceived uncertainties out there. Very wide range of possible outcomes were also look, whatever you think of this economic cycle, were another year and three months into it i do think right now youre kicking back into that zone of does this basically seal a no Growth Scenario for a what i will or is this something thats a little bit more of a market panic that passes. Thank you in the full life change, well see this, we talked about sports rights, media rights and how valuable all of these things were coming. We do have some news from the pga tour about this. At the same time we can talk to jay about what you do with venues, now were seeing maybe theres no fans at march madness. Anyway, this deal, as we say, pretend we can go back a couple of weeks, 70 more reportedly the deal for the pga than the previous deal. Joining us to talk about that, pga tour commissioner jay monahan is here in studio with us and well also talk about contingency plans for what we do lebron in basketball says hes not going to play without fans but there are some things being bandied about that weve never really thought about before. First talk about your deal you probably wont confirm it at 70 . Its a lucrative deal, much more than the last one. I wont but its a testament to our players that weve got some of the best Media Companies in the world that are standing up and standing forward and will commit to the pga tour through 2030 from a network standpoint, were extending with cbs and nbc in a Transformative Partnership from the cable side we will continue with golf channel and then from a streaming standpoint, starting in 22 well take what is now pga tour live and move it to espn plus. For us, this is an opportunity to continue to innovate, to continue to evolve in a dynamic marketplace, the media marketplace, with some of the best companies in the world. Its a meaningful day for our players. We think its a meaning fful da for our fans and thats exciting. All of the different sports leagues have to figure out how much streaming, how much yeah. We dont want too much out there, right i guess thats a balance youve tried to maintain as well . I think the most important thing in the period of uncertainty is to focus on reach. So when we looked at all the opportunities, and there were a lot of opportunities to the point youre making up front, sports rights are extremely valuable, when you come out the back end of it you want to be positioned in a way where youve maximized your reach our fans, young fans across the entire demographic spectrum can find us and well be producing more content be with those partners than weve ever produced before. Have you talked about the 50,000 people being in the same place on a goolf bigger than an arena. Have we talked about it we sure have. Whats the answer to that stepping back and looking at our sport, our tournaments are played over 3, 400 acres and we have 156 players playing in a given week so for us ive been on the greens where youre standing right around in a crowd looking at one player youre waiting to come through i think what weve tried to do, we stood up a business around this subject and we did so several weeks ago we have Leaders Within our company that are pouring themselves into this and as youve heard from other leagues, as youve heard from other Sports Entertainment properties, youve got to rely on experts. So relying on the cdc, the World Health Organization, and given the fact that were playing 175 tournaments across six tours playing all over the world and this is an olympic year, you have to rely on whats happening on the ground in the marketplace. Let me ask you a straight up hard question. Which is what kind of insurance do you have . The reason i ask you this is if you understand why the leagues cant shut down, why they need to actually play is because they dont have insurance that would effectively pay for all of this. So its much more lucrative or even just sensible economically to keep the game going even and lose the ticket sales as opposed to lose everything. Well, listen, i dont think this comes down to what your insurance is, andrew i think this ultimately is whats the state of that marketplace and is it safe for your fans and your players to be operating a tournament in our case so we ultimately if were put in a spot where we feel like were not there, then youre just going to go and do the right thing. You would either postpone or you would cancel for a year. Right. But, you know, we certainly have insurance in certain cases, but that will not be the basis by which you make a decision. You could certainly hold a Golf Tournament with no gally. If you had to, you you could, joe. When you have 156 players, we have our shot link system. You have to make sure you have volunteers in place. Food and beverage. You still have a fairly sizeable operation. Yeah. All right. So this is occupying this new deal, congratulations, but this other thing is probably occupying the lions share of your time, is it not it certainly is the other point ill make is were working with 120 Corporate Partners in every market, you talk about the quality of clients we have, i was talking over the weekend to them. Across all sport, what are the sponsor arrangements with most leagues in terms of this issue . What are the network deals in terms of this issue if there is no audience . Do the economics of this change beyond the ticket sales . Do you have to play . Do you not have to play . Everybody is looking through the clauses this weekend. Youd like to play. You dont have to play i think, andrew, it comes down to common sense. So in our case, you look at it week to week, tournament to tournament, and if youre not going to play, then you respond accordingly. The question is, are you going to postpone or are you permanently not playing it. If you didnt play it for months on end, what happens . We would cross that bridge when we get there but that would obviously have a very Significant Impact on a number of people, including our players. Now youre affecting careers were talking about every scenario. Can i just conclude with this really is a monumental day for the pga tour we couldnt be more proud and thankful for the partners who stood up and its a testament to our athletes and Business Model and winning formula with the companies that have supported us and made longterm commitments were continuing to take our great game forward thank you for being on. We appreciate it all right. Lets run you through whats happening in the markets right now. Take a look first at the u. S. Equity futures if you are just waking up, you are looking at all three of the major indexes down by 5 the reason those losses are dlapd capped there is because they cant fall any farther this is limit down the numbers on the lefthand side are all down 5 the implied is down a little more the s p futures would open by 150 points and the nasdaq down by 435 points and the dow jones down by 1300 points. Treasury yields, at this point the 10year note on friday, i wouldnt have thought this was possible, you are looking at the yield on the tenyear sitting by 10. 42 then if you check out oil prices, this has been the huge story over the weekend saudi arabia decided to really go into a full on Oil Price War. Putting pressure on russia and producers around the world right now wti is down by more than 22 thats a decline of 9. 32. Wti at 32 weve seen it quite a bit weaker overnight down to 29. 50 brent crude down to 39. 58 in asia the nikkei was off and the hang seng down by 4. 25 and shanghai down 3 in europe it is red arrows across the board italy is the biggest decliner. Down by more than 10 . That market off by 10. 2 you see the dax down and the same for the ftse and the cac france squawk box will be right back. At fidelity, online u. S. Stocks and etfs are commissionfree. 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 dont just plan to retire. Plan to live. An annuity helps cover your essential monthly expenses, so youre free to live the life you want. Find out how an annuity can give you Lifetime Income at protectedincome. Org but when allergies and congestion strike, take allegrad. A nondrowsy antihistamine plus a powerful decongestant. So you can always say yes to putting your true colors on display. Say yes to allegrad. Welcome back to squawk box. Futures pinned at limit down they arent going to tell us all we need to know about how the open might go, but etfs based on the indexes continue to trade. What i want to show you right now is s p 500 etf right now youre looking at that off about 6 1 2 percent. A little bit more than 6 1 2 percent. Lets also show you the dow etf. That might give you a little bit of a sense of where we are thats off a little bit more than 6 1 2 . The nasdaq, qqq, thats trading right now off close to 6 . So those are some of the numbers and the way the market looks like it is going to open this morning. Becky . Steve liesman is back on set. Youve been looking through the credit markets this morning. I even watching the declines we saw last week, i am a little surprised seeing how big of a decline were seeing this morning in some of these yields. In terms of yields, but the credit story is going to be high yield to begin with and the speculative grade and whether Companies Need to roll their debt the investment grade, im told, other than perhaps the bottom tier of that, the trip will be minus, is doing well because they have spent the last several years terming out their debt and the walls, such as they exist, and the walls in terming out their debt . Meaning lengthening. Extending. And lowering the rate the walls which are where a lot of refinancings come due are in outer years, 21, 22, 23 when it comes to the investment grade, thats a speculative grade i want to read you this. Ive talked to all of the major Credit Rating agencies this is from Kroll Bond Rating Agency kbra is monitoring it. And risk is skewed to the down side i dont know if jason wants to explain fat tails which could be both sides. If youre looking at the high yield market, 12 of the high yield market we were talking about is the Energy Sector itself its not an insignificant part of the high yield market clearly theres going to be a lot of dislocation in the markets. You were talking about maybe a bailout of the Energy Sector. I was not talking about it just for the record. Some people were talking about it i dont think thats particularly a great idea. I think theres too much of a supply that was driven by a lower Interest Rate. Obviously its very serious in human terms in terms of people who lose their jobs. A lot of capacity has to be taken out of those markets the investors grade market, i agree with you for the most part, its in pretty decent shape. If you look at the spreads, they widened out but not to the extent to which youve seen in the past so thats hanging in there but it will clearly be tested today. Theyre in a tough spot id say, right we have a credit guest coming up you do not want to be the font of panic but at the same time there is a history here of being a little bit late from the financial crisis andrew wrote eloquently about that in his book lets extend this conversation joining us right now is gregory weinstein. Hes at s p global also, john hill who is vp of u. S. Rate strategy at pmo Capital Markets. And, john, why dont we start with you talking a little bit about what people should be thinking today based on what steve just set us up with. No, i think thats absolutely right. One of the most important things thats happened over the last few weeks, its very obvious now that last years 75 basis points of cuts were not a mid cycle in insurance. It was the beginning of a full cut cycle. When you draw that out to its full conclusion thats fed funds back at zero Forward Guidance were going lower. One of the things thats different about this cycle versus any other than weve had in the modern world, theres a full expectation of quantitative easing not only are we pricing cuts to zero the second trade is flood in trade because the fed no longer is in a qe but were seeing a massive is that the right analysis . Do you think the fed will do that i think the fed wants to avoid at all costs negative rates and i think in that context you have to take very seriously what eric rowsengren, one of the more sober theyre not all not sober, but he is straight down the middle when it comes to issues of finance and credit, he did not want be to cut last year. He talked about the fed buying other assets i dont know if we have that full screen but if you get to zero, you have a recession, the fed may go buy other assets. Let me add, becky, for the first time, i dont ever remember seeing this, there is some probability here of the fed funds going negative they are trading with a 20 probability of a negative funds rate in june of this year. Not as far as you might expect let me ask you a question were you suggesting that the cuts you had last year were just the beginning . That the fed was actually certainly the fed couldnt have foreseen coronavirus or do you think the Global Economy was weakening so they were pressing lower rates this year . No, certainly at the time their goal was for it to be an insurance cut, however, when we look back at this 5 or 10 years in the future, we wont characterize it as a price cut it will be starting in july. Greg, lets talk a little bit about where things stand right now. We had already talked earlier this morning with jason about the idea that, look, this is the time when the tide goes out. You see whos left wearing what. Is that the scenario right now certainly, yes. The Interest Rate environment is one thing, but what were most concerned about s p is the risk premium the companies are facing we had already before todays news seen an increase in spreads. As steve said earlier, its been mainly in the low end of the credit spectrum. Weve seen b category increase by 33 in ten days and that was before todays news. Borrowing costs for those very low rated issuers will come up in the oil sector and natural gas, its even worse there are certain sectors hit harder than others by coronavirus. Obviously travelrelated sectors. Those with Global Supply chains and those that are affected by, as we said, the commodity prices. Greg, when we spoke last week, s p had taken credit watches credit actions on 27 different credits out there, corporates out there has that number changed . What do you expect to happen to that number over the next coming days and weeks well, i think that number was from thursday or friday. It hasnt moved considerably, you would have been expected ability to dial back or cutting some op ex as coronavirus, as it becomes more global and people hunker down, we still think its a very, very sharp, very, very painful but perhaps shortterm phenomenon a demand shock and a supply shock at the same time yes, i would expect ratings activity to increase todays action with the oil price really only adds injury to insult for that sector which has already been beleaguered, by the way. Did you rerun the numbers based on where the oil prices are right now . I think everybody thinks this is a steep move. We are looking at oil and natural gas but this is a sharp correction i would emphasize its about duration analysts in that group told me that the cure for a low oil price is a low oil price but that takes time, right and that cure can be more painful than the disease. I just want to ask on the airlines, joe, if we need to worry about that, greg, at all in terms of the airlines, the big ones seem to be in better corporate shape than they have been can you give us any insight on that well, i think with anything else, yeah, you do have to look at credit worthiness going into this yes, airlines, cruise, any travelrelated sector. Weve taken actions on reservation companies, companies that do Foreign Exchange on airports. When you say taking action, what do you mean weve had downgrades. Weve had credit watch listings and negative outlooks. We were talking about the u. S. Air lines. Yeah, there hasnt been an action on that name particularly weve had a number of actions from smaller players in apac were looking closely at the Airlines Sector because of such an impact on demand. Lets talk more oil Oil Prices Plunging over falling demand but theres already a glut, obviously. Fears of an all out price war. Joining us to talk about geo politics, roger dewan. He write a piece this morning. Russia, saudi arabia and the u. S. Shale industry enter a low cost producer death match. It was our it was already a glut you add in the coronavirus and this is what happens. What were seeing is a big destruction of demand. We saw it in the First Quarter in china and now were going to see it in europe and the United States on top of it you have a supply shot where all producers are pumping up well see a very large surplus prices are reacting. Whats happening is we need to pay people to store oil, which means the front end of the curve, the oil prices are going to continue to go down i dont think this is the end of it today. Your first point is a crash of historic proportions. We dont need to worry about saying that, its happened you dont need to sugar coat it at all. No, theres no reason to sugar coat it. What we are about to see is basically a collapse in demand and very steep increase in supply if the saudis follow through. So weve never seen anything of that magnitude weve seen price wars before weve seen demand destruction but we havent seen both at the same time and of that magnitude. So there was also in your piece, there was an ultimatum that the saudis were giving and theres a clear rejection of that and this is where we are. Yes. Theres no going back theres no going back for now. At one point some deal is going to need to be made, but certainly not now. What you have is saudi arabia has been trying to Keep Oil Prices a bit higher than what the russian wanted over the last few months and i think there is a fundamental difference strategically about where oil prices need to be. I think russia looked at oil prices slightly above the marginal costs of producing it in the United States to limit the growth of u. S. Shale while saudi arabia was trying to prop Prices Higher just for their revenue needs. That clash was fully viewed last week and theres no coming back from that in the near term so the strategy is to bring down oil prices as fast and as low as possible to force a deal if possible. Do you have a i mean, youre maintaining your sense of humor to some extent in this piece. Will we ever see each other again . The saudis and russians need some time a pardon theres just no way this unceremonious divorce happens any time soon because they have totally different future viewpoints about where oil should be. Russia needs it for their own current account. Nothing is going to change about that this is how long have you saying this is going to go on where they cannot agree on something. A year you need a catalyst at one point to bring it. One is low prices and you need some visibility on demand and we dont have any visibility on demand its going to take some time in a way what you need is low oil prices to cure some of the problem by removing supply, correct . So you are going to see lower production in the United States and other areas and that will be part of the solution so i think here for at least a quarter were unlikely to see solution the problem though, the longer you wait to bring back diplomacy, the more you bring back storage you stop building oil, the longer it takes to rebuild the market. This is all about shale russia really that hurt them badly, our production here in this country, and they would like to keep that to a monda mum. It will be at a minimum if were at 30, correct . Correct shale will go into negative territory this year and next year into prices sub40 or prices in the 40s will mean well lose a million, million and a half. That would make room for the two other large producer in many ways this is the story of the last three years, the u. S. Grew so fast and took market share away thats the revenge. From north dakota shuts down. Well, everything in the United States shrink the permian will do a little bit better, but everything is going to go into negative territory. Were going to see decline everywhere we have steep decline rates. So when you stop spending you stop drilling. Well start to see production turning over probably as early as the second quarter. Going into the weekend. No way to see this but i guess there was, but its just amazing to see what happened full moon this week friday 13th is on friday. I got married on friday. Thank you, roger dewan. Appreciate it. Well check back. Coming up, an update on the outbreak of the coronavirus. The latest numbers and what you can do to prepare for a spread if it comes to your area the futures right now are the same as theyve been all morning because they cant move until they open. Down 1255 on the actual number itself indicated an eng opin1303 points on the dow. Were coming back. Our Retirement Plan with voya gives us confidence. Yeah, they help us with achievable steps along the way. So we can spend a bit now, knowing were prepared for the future. Surprise we renovated the guest room, so you can live with us. Oooh, well. Im good at my condo. Oh. I love her condo. Nana throws the best parties. Well planned, well invested, well protected. Voya. Be confident to and through retirement. Stay two nights and get a free night for your next stay. One night, two nights, free night. Book now at bestwestern. Com. Free free uh. Free free, free, free. Free. Free free free thats right, turbotax free is free. Free,free free free. Welcome back, everybody. The s p 500 the dow and nasdaq are down meg tirrell has the latest on the coronavirus outbreak. Reporter more than 100 countries are confirming cases of covid19. 3900 deaths worldwide. Italy, iran, south korea are reporting more than 7,000 cases. Italy says its restricting movement for 1 4 of its population there are 22 dead in italy numbers are continuing to increase with the wider availability of testing. Washington state hit particularly hard with outbreak in a nursing home. California has 100 cases each and in massachusetts another 15 cases reported yesterday the grand princess cruise ship with 21 confirmed cases plans to dock and transfers 35 pass accesen gers and crew to quarantine. Mitigation efforts though difficult could slow the spread of the disease and take pressure off of Health Care Systems. Thank you, meg. I want to bring in dr. Bora in an in q tel, medical and biodefense preparedness. Dr. Scott gottleib he serves on the boards of lumina and pfizer. Good morning to both of you. Let me start with you, dr. Gottleib weve been talking to you for the past several weeks this weekend it feels like this whole situation, both in the United States and also obviously in italy, has moved to a new place. This is a new chapter here yeah, i think weve reached a predictable Tipping Point where there will be a rapid acceleration of cases in the United States. We still have a narrow window of opportunity to implement tough mitigation steps but were losing time and we need to start taking more aggressive steps right now to try to contain the large outbreaks that are in probably multiple u. S. Cities right now to prevent a broader epidemic and try to get to a point where we dont exhaust the Health Care System the goal is to make sure the peak of this epidemic, we are heading for an epidemic, doesnt become so large where you get to a point where youve exhausted the Health Care System thats what happened in wuhan, china. What does that look like though just so we understand. What it looks like is widespread School Closures in areas of outbreak. Closing businesses closing places where people gather indoors like movie theaters shutting down large events asking businesses to have workers telework but you have to step in with assistance, not only to assist the localities and states but people who are going to face significant hardships. We should do this up front as an inducement to get localities and states to take these actions were going to end up with a massive fiscal package and bailout. We are better off using that money up front to buy some of the actions that we need to mitigate this epidemic rather than spending that money on the back end after weve had a large epidemic well be better off spending it to induce the actions we need to see. Scott, where are we talking about . Areas that are affected obviously that would be kirkland, washington, but are you talking about westchester, new york there are many outbreaks all over the place. Its broader than that. If we dont take tough measures, we could be looking at tens of thousands of cases in the United States thats not unrealistic if you look at the number of cases in italy and singapore, you are looking at tens of thousands of cases in the United States we have multiple areas that are dense Population Centers where you could see widespread population. Should we be going to school and work in places like new york city, westchester . Very broadly should these things have already taken place here or no the good news is, the private sector has been leading trying to engage in social distancing and reduce the opportunities of rate to transmission looks like santa clara, california, seattle, new york might have a large outbreak. There will be large outbreaks. Were well past the point of containment in the United States and large quarantines and lockdowns like they did in italy and china wont work here. Were well past that point because we have ceded in numerous cities. Hold on we want to get to dr. Borio. He know meg tirrell has a question. Dr. Bori o, its a question for you. How would you assess the testing capaci capacity we are seeing commercial Companies Come on. How are we doing how would you assess the messaging . And where do you expect us to be by the end of this week . The good news is today i believe the commercial developers, the big ones, are coming online and the capacity is going to increase significantly. The bad news or the good news is that were going to be able to find a lot more cases that we know have been circulating in america and were going to see how steep this epidemic curve is going to get we are just at the beginning of this epidemic here and the numbersare going to accelerate dramatically dr. Borio, in terms of how quickly we can get even the testing done properly, im looking to new york at new york numbers, by the way, not to make this selfish about us right here, but over the weekend we went from 49 cases to 116. What multiple do you think is actually really out there right now . Its very difficult to predict, but i know that its already too many for us to delay implementing measures to mitigate this epidemic its very critical as dr. Gottleib has stated to be proactive and take measures to increase social distancing this virus is circulating broadly across the United States, even states that have not reported yet are likely to have cases so its important to do everything we can to enhance social distancing. Now the degree with which we implement those measures may vary from locality to locality based on the number of cases the way i see this is a lot more like a shutdown, a partial shutdown, but not a lockdown we should not be talking about lockdowns in america. Do you think what happened in italy is the right decision or the wrong decision again, the way i see this, the goal is to have social distanci distancing a lockdown does not do anything to enhance social distancing for the population that is under lockdown so the goal is to apply our technologies, apply the Innovative Systems we have the businesses have been very proactive in that and individuals have a role to play, too. Its very important everybody has a role to play individuals, it takes some responsibility to make sure they do not go to work if they are sick and to stay out and avoid places. Dr. Gottleib, youre in washington you live in the tristate area. How are you planning to get back im going to fly back im taking precautions we will get through this we will look back and say, this is bad. When you say you are taking precautio precautions, what does that mean im being very vigilant about touching surfaces. I think a good portion is through touching surfaces. Im not taking things from the stewardess like cups, glasses, food im being conscious of my personal hygiene im trying to avoid contact and engage in social distancing. These behaviors practiced on a mass scale are going to have a Significant Impact on transmission and help reduce the rate of transmission it needs to be led by the Public Sector what about offices where people share computers and desks . I think things should be cleaned. Were going to start implementing heightened requirements for hygiene in office the and workplaces and also deep cleaning some of this is going to last. Some of this wont go away just like after 9 11 security was put in place some of the steps we take now will be in place for a while thats a good thing. The one thing i will say thats very interesting, i flew this weekend. The airlines have done nothing to step up practices on the airplane the stewardess was not wearing gloves they werent passing out personal Hygiene Products like purell if the airlines are worried about reduced volumes and want to inspire confidence, they should step up the measures. Theres no way they can do deep cleaning when you turn around a flight that quickly you watch how quickly they turn those things. Maybe they have to add more time so they can wipe down seats better if they would step forward and tell the public theyre doing that, maybe the public would feel more confident. After 9 11 they stepped up security that helped inspire confidence to get back on airplanes theyve done nothing that ive seen that was visible to me. Do you think people broadly should travel . I dont think were at the point where people should shut down travel right now. I dont think we are at the point where we cordoned off the area people should be aware of being in crowded environments. I dont think this spreads easily through the air on the airplane i think its the touching of the surfaces and passing things back and forth between passengers what starbucks did to stop refilling cups that people bring in for their own coffee, thats brilliant. Someone would bring in their dirty cup, if they had coronavirus, they would bring it to the barista and if they thought of simple things like that, things to reduce transmission, we could have an impact on this we need leadership we need to be talking about these things in a systematic fashion. We need a systematic approach to when localities close schools, businesses, events we all need to work off of the same kind of playbook. Okay. Dr. Gottleib, luciana, thank you both great to see you thank you for being with us, jason trennert. Lets get you up to speed on the markets. U. S. Equities are sharply lower. The reason that you havent seen any change is because the dow is down limit, 1255 on the left you can see the futures change which is about a 5 move the s p indicated down 5 the nasdaq down 5 as well. Etfs are down anywhere from 6 to 6 1 2 that measure where we might be if we werent blocked down limit prior to the market opening and in case we need this today, once the market opens, the rules for a big drop are a little bit different the s p 500 if it falls 7 , trading is halted for 15 minutes. There will be another 15minute halt if stocks fell 13 and a full halt for the rest of th day with a 20 drop. These socalled Circuit Breakers have never been triggered in their current form lets look at treasury yields. All the markets are moving in ways that are somewhat we havent seen in ever before in a long, long time the ten year now is at. 41 and as you can see there, even the 30 year doesnt start with a one handle its at. 85 . One, two punch with the coronavirus and collapsing oil prices taking a big toll this morning. Check out crude oil prices right now wti is below 32 a barrel thats a decline of 9. 30 a barrel more than 22 down if that level held through the day, this would be the second worst on record for the commodity, the worst being the first day of desert storm. Theyve been under pressure because of softening demand because of the coronavirus then this weekend saudi arabia announced big cuts to the official oil selling prices for april. Reuters announces the Company Plans to boost the output above 10 billion barrels a day opec wants its members as well as its allies like russia to agree to further production cuts on top of the cuts that are already in place russia rejected that proposal for the new cuts and key players could not come to an agreement on what to do with the current cuts that are set to expire next month. That means if nothing changes, Oil Producers can pump as much as they want in the next few weeks. Thats why youre seeing the extreme pressure today andrew. For more on what youre seeing in the markets, i want to bring in mike santoli to help us understand where this is all headed beyond just down. Mike yes, andrew one of the ways to think about it is not just how far down but how far back in time this move might take us. If you look at the spy, s p 500 etf, theyre down almost 7 . Basically once we open regular trading as joe said, if this index, the actual index is down, you have a 15minute trading halt, it looks like were a little too close to the hot stove not to touch it at the moment how far back does this take us it takes you to the mid to early part of last year. Were at levels that were first reached in late 2017 youve really unwound a lot of that up side that weve seen a lot of folks are talking about levels right around here, 27. 50, 27. 40. This is the index where you might find some fundamental values were talking about the credit and treasury markets being in such extreme states that everyones compass is spinning wildly all of the models are thrown off. This is the high yield etf this is preMarket Action and a treasury etf heres what you see. Furious vertical rally in treasury prices, therefore, yields going towards zero. High yield not helped by that oil crack going the other direction. If you look at things like credit default swap trading on the indexes, were back to kind of talking about these things as we were in the financial crisis. Furious, furious amounts of hedging going on in the high yield area right now i view each part of the Capital Markets largely reacting to other parts of the Capital Markets and, therefore, the stresses on Institutional Investors and traders as they try to navigate this not so much trading on every headline about the virus or economy, guys. Mike, thank you joining us is jeffrey rosenberg, blackrocks senior Portfolio Manager and barbara reinhart, senior Portfolio Manager and head of Asset Allocation at voya obviously some weird things happening. Jeffrey, lets start with you. What do you do this morning as you see the massive dislocations is this a time to buy or do you step back, see what happens, how things shake out yeah, i think its a time, clearly were in the middle of panic, its to look forward as to what the policy responses are going to be here the bond market is pricing in multiple further cuts from the fed but were long beyond the role of Monetary Policy. So i think what were looking for here are other sources of support, and that is going to take a little bit of time, but i think thats what were going to see next that may be what the market needs to find a little bit of solace as to the what your earlier guest was just saying. We will get through this weve seen these before. And i think that policy response, as its forthcoming, will really be the trigger for the market to see some stabilization. Clearly this morning is full on panic. Your earlier comments about, you know, summarizing the Oil Situation very nicely, summarizing another shock to the system so the market is being shocked in some sense, thats what you need to find these kind of cathartic bottoms. Its also whats necessary to bring about the fiscal policy response that i think is going to be forthcoming. Steve liesman is here hes got a statement from the new york fed is it, steve . Yeah. Right on cue with jeffs call for policy response. New york fed increasing in the last 45 minutes, increasing the amount of overnight repo on offer from 250 billion from 100 billion. Its upping the amount of twoweek term repo this is the longer repo. To 45 billion from 20 billion. These changes will be in effect through march 12th the fed saying in a statement that these adjustments are intended to ensure that the supply of reserves remains ample and to mitigate the risk of money market pressures that could adversely affect the policy implementation. Theyre taking not in response. As far as i know there is no response mike was talking about some of the pressures in the high yield market i dont know to the extent, talk to some people on repo desk later this morning, i suppose, or maybe as soon as i get off set to see if theres been any pressure in the repo markets this is something that looks like the new york fed is doing preemptively to get ahead. I said earlier in the6 00 hour i expected the fed to perhaps make a statement on liquidity. Im not sure this is it just yet. In terms of broader liquidity, this is specifically to the overnight funding rate on banks. Barbara, your reaction . The fed is doing the right thing. Theyre setting a great example of what the Administration Needs to carry over and put in place a fiscal response for companies that are cash strapped and also for even individuals in the gig economy that will be out of work because of quarantines, School Closures so i think the fed is setting a great example, but now i think we have to pass the baton over to fiscal. Steve, when you said the fed could come out with a statement. That might make me nervous if they cede things they might not necessarily be responding no. This has been a flash point since september 2018, yeah, 18. 19, actually. 19 jeff, can we just turn to you. Have you heard anything this morning about any actual dislocation or pressure in the overnight repo markets no. Its important here that we not that we, you know, look correctly at whats going on this is not an area of stress. The markets are functioning fine this is preemptive this is expected, as you were saying, steve. This is preempted. This is not where the stress of the markets are. Its not in the Financial Markets in terms of the funding markets. This is nice to see in terms of making sure theres adequately quit at this its also important to remember that even as we approach these lows in terms of Interest Rates, theres a lot more that the fed can do to support the recovery now its in a different form of tool kit, but the kinds of programs that we saw during the crisis, the ability of the fed yes, the legal manifestations of that are changed in terms of what they have to do to do that, but the fed has a lot of potential here to support areas that are affected, Like Airlines or the oil industry through targeted supporting programs now treasurys going to have to take the lead on that. Yeah. But theres a lot here that can be done and i think well start to see and talk about that in the next few i would im pretty sure the fed does not want to be in the business of lending to airlines i think it would want the treasury to do that. Youre right it cant lend directly. It will have the ability to do that in the amended emergency actions after the financial crisis it could help specific industries with the approval, as i understand it, of the treasury. I think it comes down to, again, the fed is taking a very good leadership role within the Global Economy and also setting the stage for having to move forward on fiscal policy that will be very helpful, very reassuring and i think that the fed is setting a great example of leadership. This is why everybody looks to the fed first because they can do stuff like this on a decision, whereas, whatever it takes to get the Fiscal Authority in line is another who knows how many weeks or months, but the fed can do stuff right away and thats why we always look to the fed for these responses even if in a situation like this a fiscal response would be more effective. And these are also things that the fed is injecting but will also be able to pull back when you normalize. You have to remember this is a very time specific period that we are in. Three, six months from now we will probably not be talking about the coronavirus and the fed will be able to withdraw these measures but i think its really important that youre putting some support underneath pockets of the economy that are feeling most vulnerable. Im optimistic but why are you . Im optimistic because ive been through this before ive been working in the market for 30 years things were watching at voya are levels on high yield spreads where they traditionally go to in a recession in recessions or at the beginning of recessions, not that were necessarily going into one but it may be a technical slowdown, you get ig spreads to go to 180 basis points. The reason im asking is you can look at what happened in china, disney world is reopening over there after two months. Yes. You say thats a very good sign, very positive sign. Yes. But the steps that they took were relatively draconian. We have not seen nearly the kinds of steps or south korea has it together yes. Apparently the infection numbers are on the way down. Correct, but they were theyve tested theyre testing like crazy. Were so far behind its after exhausting all of their possibilities, america will do the right thing. Remember this, Infectious Disease doctors will tell you some of the very basic things that you can do to combat this are wash your hands, wash your hands the way that the World Health Organization tells you to do so, for 20 seconds. You can do a number of things. Wiping down surfaces not sharing, you know, Community Cups and stuff like that. I agree with all of the things youre saying. Im not sure all of those things are taken to account early on in the virus because it wasnt necessarily all that understood. Andrew, if i could add. The other reason for optimism here, a little bit, not maybe this morning, of course, its a difficult morning, but we are coming into this crisis from a position of strength nobodys really covering the payroll report from last friday and obviously thats precrisis, but its a reminder that this is a shock to an economy that was not at a Tipping Point but, rather, was accelerating thats helpful to remember because as the shock of the coronavirus passes, and it will pasz, we m pass, we may have to do more stringent things in regards to the virus, but as it passes, the strength of the economy and the basis will help. The demand side shock here is real and the confidence shock is real thats where a policy response and maybe a more forceful policy response, both in china, the u. S. And globally will be necessary to limit some of those additional negative impacts to the economy. But we were starting from a strong point, and thats important to remember. It is had this happened at the very beginning of 2018, it would have been a very different story. Remember, global pmis had bottomed in august of this year. There had been a significant policy response through monetary channels over 2019 if this had to hit, this is the best time to have it hit. Barbara, jeff, want to thank you both steve, we will see you later. Meantime, folks. Take a look at the faang stocks all deep in the red. Could this be a buying opportunity . Thats the question for tech investors and whether theyre looking for that james is here, partner at clockwise capital. Jean muenster, good morning to both of you. Good morning. Gene, are you buying this morning . Im buying the key tech names that i think will be playing in these undeniable truths when we exit this, and i think maybe, andrew, just to take a step back as the broader market, the question about the optimal time, i still believe has not seen kind of a seismic shock wave Something Like we saw in 2008 when this stress on the system caused some form of a breakage, whether its an airline going under, Financial Institution there probably is still another fear wave to go through the market so the optimal time about when to buy is influenced by when that happens. Crudes a pretty good gene, crude is a pretty good line press its more noteworthy 29 crude. Fair enough were its were close there. I dont want to pick that bottom i guess is my point. I understand. I do believe ultimately when we exit this on the ore side, there are undeniable truths. Whats the new undeniable truth is that Wellness Health care is going to be a bigger concern i think that investors really need to embrace that if you look at the Tech Companies that are really pioneering that, i still think apple in terms of what theyre doing in wearables, 8 of iphone owners own a watch right now it doesnt do a lot. Apple is doing an intense amount of research around your inner ear. If we flashback to our 7th grade biology class, the skin in your inner ear is thinner, stick with me for a second, because of that there are new biometrics that can be picked up. Tell me if i have the coronavirus . James, how are you thinking about it this morning . Yeah, i think were at a peak uncertainty. With the vix pushing at levels that we havent seen from the 2008, 2009 financial systemic crisis, i think its going to get better from here get better from here. Youre calling a bottom here im not calling it i dont want to go on the record and say absolute bottom, but i can tell you that the same thing happened in 08, 09 where tech will continue to lead the way whatever happens, tech will iterate and thats independent of Everything Else we saw 4 trillion Companies Come out of the 08, 09 crisis so that will be no different you do have opportunities looking forward because the earnings picture is already ugly the ten years at below 1 and the vix is has blown past where we were in the dotcom bubble i think that any news at this point, because it is peak uncertainty, will add incremental level of confidence in the market. What i cant figure out here is just sort of where we are and why we think these numbers are going to get so much better any time quickly thats my great concern. Gene, when you look at the tech Company Names in the short term, how do you see how do you see the dominos falling in terms of im curious, by the way, in terms of facebook, advertising on facebook, what you think happens there. Facebook is going to be a windy road ahead i have long been negative on facebook in part because of what its done to our culture, but if i set aside some of my biases and think of their business, its going to be ikt pacted by changes in tech, privacy, disclosure but surprisingly i think that facebook is a beneficiary. Facebook is down 17 since february 19th. Its been one of the worst performers of the faang stocks if you read between the lines, what facebook is trying to do is create environments where people can feel close to one another but still being far apart. The avitars, augmented theme that is one story grossly misrepresented you look at whats happened with zoom stock, its trading at 27 times next years revenue. You look at a company like Facebook Trading at 4 times revenue with some of the same kind of fundamental opportunity to give people the sense of community but a safe distance apart. Does the pardon . Do you think long term the move on zoom makes sense make sense to you no, i dont i think zoom should be should have moved higher but, again, at this time, 27 times revenue, those are the ones that youre going to see slack, zoom, youre going to see those kind of drift back lower you look at Companies Like apple, four times revenue. Massive play on wearables. You look at a company like facebook, i set aside my differences with the company, i think that theyve got some big opportunity. Okay. James, if you could buy one thing real quick, what would it be it would be apple and amazon at the top just one thing i want to say is you have to look at the way were investing is time savings companies. Companies that save consumers time and companies that safe enter prizes time. That will come in the form of auto mization. Machinery and productivity gains and efficiencies on the consumer front. Apple, amazon and i would point out Companies Like zoom, apple, fin tech just an overall james and andrew, just an overall point, james, youre hess sent to call bottom, i understand that. Yes. Andrew, maximum bearishment is usually a companys bottom, right . By definition, could you get more bearish, andrew could you get more worried i think you could. Could i get more worried . Usually bottoms happen when things are absolutely the bleakest, which is weird right. But it always works that way. But youre very youre very guest after guest youre saying its going to get a lot, lot worse. Im just trying to i know, but knowing psychologically how things work yes. That. My nervousness may be the bottom. Thats human nature thats the way everyone operates it could get more bearish. Im not saying thats not the way it operates. Its strange when it looks like theres no hope whatsoever, thats when you make a bottom. Were hearing a lot of people say, this, too, will pass. When you hear people say this, too will pass. You need to get them converted to holy crap, im going to go hole up somewhere and not stick my head out. Im with you. By definition maximum bearishness is usually where you are at least starting to form some its pretty scary right now. You have to admit the vix. The vix. We havent had a conversation dont talk fundamentals name a place where this thats why markets are anticipating things that youre looking at fundamentally baked in the cake im not saying its baked into the case but im saying 29 oil, 0 Interest Rates, markets plunging, you know, the way im saying there is a lot that is discounted. Now is it enough we dont know because we dont know whether wed go somewhere different than china i know people think, you know, that south korea and china are much better. I think were going to hopefully get a handle on this with some of the testing and Everything Else obviously were a much freer nation. I can only hope. We do have some news just out on the cruise industry right now. Were hearing from norwegian cruise lines the company says that its relaxing its cancellation policies for new and existing bookings through the end of september. Customers will be able to cancel their cruise vacation up to 48 hours of scheduled departure guests will receive a future cruise voucher for 100 of the cruise that they paid. People are being warned about traveling on cruise ships. The cdc notes that Cruise Ship Passengers are at risk of person to person viruses including covid19 it is expected to dock today in oakland. Joining us right now to talk about what this all means for the cruise ship industry is cfra analyst tuna amobe good morning. What do you do with stocks for cruise ships several weeks ago when we downgraded the industry as the virus started emerging, we figured best Case Scenario would allow this situation to play out over a few weeks with Recovery Time and a few months later. What has happened, becky, is the worst Case Scenario, that frankly we didnt even invision. Remember we came into this with the fundamentals of industry in pretty good shape. A lot of people were questioning whether it was actually the right call to take a wholesale negative stance believing to joes phrase that this, too, will pass. Well, it just seems that the news gets even worse. I mean, did you ever imagine the state department telling people not too long on cruises. That is what i was just getting at that was never in my imagination. A lot of customers were expressing trepidation about going on cruises Cruise Companies didnt help themselves with the refusal initially to honor cancellations. Initially, its still this is norwegian cruise lines saying theyre reconsidering that same thing with airlines. Thats right. Still some respected Public Relations nightmare for the Cruise Companies its kind of a whole massive cancellations scenario. Heres my question. We talk about how this is going to be a steep economic decline but you could see, and a lot of people expect youll see a vshaped recovery. Is the cruise industry different . I dont think were going to get back to normalcy it could take years. Even under best Case Scenario where theres containment of the virus. It could take up to a year for things to get back to any semblance of normalcy. So when you see declines like this today, 10 or better, larger, does that make you think, okay, its all been factored in. Were steering clear which is a tough call to make a lot of these companies are cut in half, going to get into 60 trading at mid single digit pes in some cases. Its a pretty tough call to the extent that there is no signs of containment and the focus is shifting to mitigation, it gives cause for concern. The cdc is sayingthat you are at risk for lots of different diseases because of the close contact, not just could he vided covid19. Whats striking when you are comparing it to ebola or sars, the number of cases and the number of countries is quite unprecedented, nothing like weve ever seen. Just the idea of getting stuck off shore not knowing where neurovirus was bad enough, right . Should you put 4,000 people on a floating i mean, you may change the whole Business Model. This may change the Business Model forever. I think it will frankly in some respects. What im hearing now is a lot of executives talking about how to navigate this, how to make some fundamental shifts when this is all done china, remember this started in china, which was a longterm opportunity for countries. Now theres no talk about china. What impact geo politically does it have. Tuna, thank you thank you. Coming up, a lot more on squawk box this morning. Which companies are set to get slammed thanks to the Oil Price War saudi arabia launched. Prices are crumbling after the supply cut agreement collapsed last week. Analysis you need to hear. Wti crude down at 31. Futures are currently pinned at a limit down they arent going to tell us all we need to know about how the open might go, but etf, the s p 500 index is down a whopping 7 already. Lets show you the dow etf as well that off 6. 75 the nasdaq etf, qqq trading down right now about 6. 5 stay tuned youre watching squawk box right here on cnbc 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. Welcome back to squawk box. An all out Oil Price War is erupting between saudi arabia and other Oil Producers. It is sending the price of crude plummeting this sparked after saudi arabia announced big cuts for selling prices for april and a breakdown between opec and russia if todays plunge holds, it will rank as one of the biggest daily percentage drops all time, second only to the first day of Operation Desert Storm during the first gulf war joining us to try to help us understand all of this, Steven Richardson is here, head of oil and Gas Exploration and production research. Good morning to you. Good morning. Did you ever imagine wed be at these levels this quickly it was certainly unforeseen, and i think that, you know, positioning of the market suggested that. What does the washout look like the washout looks like we were already having a washout in high yield for a lot of this industry Capital Markets have been closed for some time. The washout will look like at least in the domestic industry wholesale pull back of activity amongst u. S. Producers were seeing that from the indust industry were seeing this of industries protecting Balance Sheets, so you know our team was out this morning talking about 30 reductions of capital in this industry, at least in the upstream in north america. 25 reductions of rate count. Right in terms of job losses, in terms of the trickle through the economy, how should we feel about that industry in terms of final consumption is, you know, around 6 of gdp. Im personally of the view that the you know, the Multiplier Effect is pretty significant in terms of jobs. I think were bracing for a wholesale pull back, at least in those areas. Texas, oklahoma, north dakota. Is there any Energy Company that right now you would actually want to own because you think theres an opportunity here i think its too early. I just think essentially, you know, walking our clients through it this morning, its more a question of valuations where people stop selling than it is valuations where people start buying its literally just trying to figure out the floor certainly we know, you know, this industry and certainly most of the producing nations dont work at 30 oil and i think that was the logic that stuck in 2016 the last time we had this. You know, there are real differences this time, including the fact that demand is falling and we still dont know many of the agencies having conversations with your clients about where a bottom might be, how are you even trying to ascertain that . I think, you know, to the extent that, you know, u. S. If you think about it this way, that if you know, if opec if saudi was out overnight talking about increasing production and i think the logic is if we need to rags somewhere around 10 of u. S. Shale production, thats around 900,000 barrels, a Million Barrels, what price makes that happen i think the mid 30s wti is probably the right ballpark for that again, its going to take time because this industry cant slow down fast enough in terms of rigs, wells, all of the activity thats going on. Right. It will take time, but certainly in a low 30s price you will see u. S. Oil production start to slow and roll pretty hard in 2021 obviously that creates, you know, quite a bit of dislocation for the industry. Steve, thank you very much. I appreciate it. Concerns about coronavirus taking a heavy toll on the Retail Sector as well. However, last week shares of costco, walmart and target all rose as sales spiked amid coronavirus buying in those locations. Joining us right now for more on the story is bill simon. Former walmart u. S. President and ceo and jan kniffen. Jan, lets start with you. The tales of retail destruction. Whats really happening in the malls and some of the other places well, before i was really worried about the supply coming out of china the fact trfactories are back u and running. Its really going to be okay because now we have a demand problem. Nobodys going to the mall all of that product not showing up wasnt going to sell anyway yes, if you go to costco, walmart, target, theres people hoarding i was there. At 9 45 store doesnt open until 10 the parking lot was full. So that side of the business is fine the mall side of the business, nobodys there theyre way down on traffic. Lets talk about the positive story where weve seen excess shopping like costco, target and your former employer, walmart. Theyre good at supply chain and low guess sticks theyre able to keep their shelves in stock frankly, im not seeing what your other guest is talking about. Im seeing fairly steady traffic, not panic buying, and good news for everybody, there is toilet paper so our butts are safe it could be a tale of different locations in the country, too, but when youre out shopping where are you jans in areas like westchester where you have seen lots of cases that have been reported. Sure. Ive been in texas, florida, arkansas and in north carolina, im not seeing any of that stuff. Its coming to you soon yeah. Thats the thing that i think is not being appreciated here. Will the stores be prepared for that, bill, if there are cases that happen in other areas . What are we seeing in places like seattle most certainly. I think that all the stuff that theyre talking about hoarding doe r is domestically produced and is able to get back in supply in a matter of days if not a week so i dont expect any longterm problems from it i think in a month well be through this the worst part of this and in six months well be laughing about it. Bill, i should point out. I havent seen the supply problems either. Theyre getting it back in stock at the stores where im seeing the run going on, but, boy, its going out the door really fast at the cost does acos and wall s im visiting here. What are the consumer changes that are more than temporary what do you think, jan thats my concern if you are already seeing mall traffic drop at 7 per year and now suddenly people arent going to the mall because theyre afraid and they arent selling things because you hoard and need them, what happens when this is over do they just come back i suspect it doesnt we have this trend of mall traffic falling. I think it falls even faster and starts from a lower base i think its true with all other kinds of things. Whats going to happen if we really have all of these games played with nobody in the audience, right . Its only a tv audience. What happens Going Forward maybe tv is fine for that. We discover we dont really need to be there. So i think theres a lot of things like that do we ever go back to going on cruises . I dont know but ill tell you what, nobody is going now theyre going to think hard about it a year from now when the coronavirus is over. Im not that bearish. Demand no, what if its down 5 or 10 , or 3 it makes it a big difference if youre the retailer or the person running the business because its critical on leverage on how many people show up. Bill, walmart making big changes, too, just in terms of allowing sameday or nextday delivery of groceries, theyre talking about that with the club setup too. Thats been in the strategy for quite some time for them theyre doing a good job of delivering against it. I think retail is in transition. Malls have been challenged over the last several years i think the Digital Space and anybody with digital cap bills is moving forward. Virtually every retailer is moving in that direction i think this might accelerate that from a longterm perspective, news of the demise is greatly exaggerated. Its changing and it will greatly change but i expect things to settle out. Bill, jan, i want to thank you both you bet. Coming up, we will be talking to hedge fund tight tall kyle bass on the markets you dont want to miss this interview. First, in case we need this today, once the market opens, the rules for big drops are a little bit different if the s p 500 falls 7 , trading is halted for 15 minutes there would be another 15minute halt if stocks fell 13 and a full halt for the rest of the quk xro a 20 dp. Sawbo coming right back all right. With the futures limit down this morning, weve been tourng etfs. Based on major indices of guidance on where we might open, the s p 500 etf down almost 7 so that might be an indication of what well be looking for in about 45 minutes look at some of the oil names like big names like exxon down nearly 20 . Thats all reflected in what were seeing in the averages in the dow. Many other energy names dropping by more than 30 this morning. Joining us now is kyle bass founder of heyman Capital Management kyle, you always have a global look at things you have areas of the world that are already over leveraged and very sensitive to something that might happen is that where you want to start . Wherever you want to start, you go ahead we just want to listen to whats on your radar this morning well, good morning. I picked a hell of a morning to come on, but i think that going back to your question about oil. You know, being here in texas and knowing a lot of these producers and a lot of people that move oil around, one thing that the Trump Administration has been doing and what kushners job has been caddying around the middle east is to get Oil Prices Lower i dont i think they needed to be careful what they wished for. I think they dont realize that anything below 40 doesnt work and he definitely achieved his mission in getting Oil Prices Lower. As we all know, u. S. Unconventional shale production is going to end up bankrupting itself the one cure for 25 oil is 25 oil. It wont stay here for long because none of the producers make any money at these levels. What will the Collateral Damage be of oil curing its own problem at 25, but in terms of corporate problems and sovereign problems around the world. Yeah. You think about the sovereign players that benefit from a low oil price like japan, china, any of the others that have very few natural resources, then there are those that are going to be hurt pretty dramatically by oil being at 30 or 20 or wherever it ends up. You know, the regime in iran is already dealing with the largest existential crisis that its had with the coronavirus running through the ranks of both the leadership and the rank and file in that population we think that the extent of whats happening in iran is being dramatically underreported so you have places that are lets say not so politically stable are going to go into a state of complete disarray and i think that i think thats also a problem geo politically Going Forward. Hey, kyle, a broader question what do you think is baked into the market right now in terms of how bad things get if youre in the United States and elsewhere . As they relate to the virus as they relate to the virus yeah. Thats what were all trying to understand this morning, what the market is actually expecting versus what could happen, both, by the way, on the down side and perhaps even on the up side hopefully. Yeah. I mean, as we all know, this, too, shall pass. Its our view at our firm that the summer months will end be up burning the virus, burning it down to where we see a decline in new cases once we finally get the cases tested number one, i cant believe that we dont have testing stations in every major city in the country. That should be an open and closed issue, like a canned approach to any kind of pandemic thats something our country should develop but as far as what is factored into the market today, you see european markets down anywhere from 7 to 9 our futures are locked down 5. I think that our market has a lot of this virus factored in. When you look at where Airline Stocks are trading, when you look at cruise stocks, our cruise liners, when you look at anything that has a large public presence like theme parks, you already have a pretty significant recession priced into these stocks. So anything that anything better any turn in the number of ineffections once we get everyone tested is going to be a very positive event. The question that we must have is how many of these companies have enough cash to make it through that divide. Some of them do, some of them dont. There will be Amazing Things to purchase on the back end of this we as a firm hope and we as a country hope that we dont see a resurgence of the virus in the fall because as we all know, the thing that worries me the most about this is that only about 9450,000 hospital beds in the u. S. At any moment in time theres 600,000 of them being used 340 Million People in the u. S. We cant have any kind of significant infection with any kind of acuity here without having real problems with the number of those that need to be hospitalized. I agree with earlier guests who i couldnt see i think its too early we havent gotten around the number that really dont have any youre going to see the ranks put up a few thousand confirmed cases right away thats because were behind on testing. I think peak virus if youre asking for when the Financial Markets see peak virus there are people that are going to do really well on the back of this ill give you one example. Six flags is a theme park company. These companies are heavy in real estate. In real estate. They have great operations around the country like an airline, you cant have revenue disappear when you have a Large Installed fixed cost base those companies are going to be the most convex on the way down and the most interesting value plays once we see peak virus infection rates. You think theres a month to go, what are you doing between now and then watch one of the most interesting financial collapses that weve seen, right, in the last 15, 20 years. This is not 2008, banks are not going broke, but there are places around the world that never recapitalized in the last crash. You think about europe the ecb never recapitalized the european banks if you look at where european banks are trading today and where they will be in the next 6 to 12 months, europe will have a real problem italy, their banks are basically going to become insolvent quickly. Italy has north of 130 debt to gdp, they have no capital in their banks. Whats happening in italy could be the knockout punch for italy, ie either well see a default within the eurozone or well see the germans kyle . Yeah. Im sorry, go ahead theyre wrapping me but i want to ask one more thing after you finish your thought. Thats why i was interrupting. Look, i think germany will have to change and the ecb will have to go in and help italy and let them expand. The other economy at risk is hong kong, the most levered developed economy. Now were in the area i wanted to ask you about. China we had you on talking about the trade war. What does this throw into the entire mix do you believe the numbers that youre hearing from china . Did they handle this and cap it . Should they be reopening factories and natheme parks and Everything Else . What you learn about the chinese come nimunist party, thy dont care about their people as much as they care about maintaining in power if the economy stays too low for too long, its a crisis of leadership theyre telling people to go back to work entirely too early. No one believes any of the numbers coming out of china. The first thing the Chinese Government did was arrest the seven doctors in wuhan that found this virus in the first place late last year, not only arrested them but forced them to issue an apology and then punished them. God only knows what they did to them somehow the w. H. O. Is lauding china for doing the right thing and taking charge of this virus when all china did was a major coverup. Whats most important is chinas Banking System is 3 1 2 times of gdp. Hong kongs Banking System is almost 900 of gdp what well see is something worse than the 1998 asian crisis over in Southeast Asia i think the epicenter will be china and hocng kong. Thank you so much to talk to you about come on back so we can keep walking through this we could use your sanity thank you down to the New York Stock Exchange and jim cramer joins us now. How are you thinking about this open and what to do about it well, i thought kyle was spot on cant really do much selling im not saying its too late the prices seem to be in complete dislocation if you have oil stocks, dont think those work looking at the Balance Sheets of some of the larger ones, like occidental where the bonds are falling 25 points just this morning. We have to be in a situation where eventually we will have very, very good lower prices and a lot of different things. Lowest Mortgage Rates in forever. But we need to see fiscal stimulus and leadership to build up confidence. I dont see that right now its troubling jim, thank you. Well see you in just a minute i dont know if you saw what he was seeing there, jack dorsey, theres a deal reached between twitter and Elliott Management and jack dorsey will stay in place. Well talk about that when we come back after the break. And you should be mad at simple things that are unnecessarily complicated. But youre not mad, because youre trading with e trade, which isnt complicated. Their app makes trading quick and simple so you can strike when the time is right. Dont get mad, get e trade and start trading today. Calfshredding shoes with special rubber platforms designed to increase vertical jump sure, they look ridiculous but nothing looks more ridiculous than going up for a dunk and coming up two inches short. Invest in Innovative Companies with invesco qqq should they downsize . Nesters now. Probably. Will they . Not as long as thanksgiving is a holiday. Planning for the future is about more than just money. Let equitable be your guide. Welcome back to squawk box. Breaking news just mentioned on the break there, twitter reaching a deal with Elliott Management which will see jack dorsey stay in the job looks like silver lake will be making a billion dollar investment that money would be used together with cash to fund a 2 billion Share Buyback program that will be executed over time. Silver lake adding two members to the board, one from silver lake and one from elliott. The end of that saga from now. The beginning of one in terms of the markets today. Red arrows across the board. Join us tomorrow squawk on the street begins right now. This is cnbc breaking news, market selloff good monday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer and david faber we are watching the spdr etf for indications on where we open italy puts milan on lockdown europe is down about 7 . The entire curve is below 1 so well watch futures tumbling. Investors are bracing for more market fallout from the coronavirus while this price war is adding to