Down, yields go up, conversely, yields go down, prices go up, not to the degree. Not helping stocks to the degree you would think, at a time paul ryan trying to assure people theyre on top of the debt, on top of eventually a daca deal that should make nancy pelosi happy. A twoyear budget arrangement senate came up with that should be welcomed by all. Were in a bizarre kind of world, whether that passes or not, it could be daming to investors, if it were to fall through, analogous to the failure of tarp funding back in fall of 2008, that produced 777 point falloff in the dow, even though both sides regrouped, you would still see in the approval of a followup tarp deal, the dow fall another 6,000 points . We dont know whether youre damned if you do, damned if you dont on budget deal, whether you fall off if approved here or not but a catalyst could be or excuse could be failure to reach such an treatment, there are several house conservatives several we talk to next document hours are leery of the deal, adding to debt and all that. That is you know statement. It is dramatically adding to the debt, adding 300 billiondollars in deficits over next couple years. Were looking at the year were in now, a trillion dollar deficit, a trillion dollar deficit one year which piles on to the debt, north of 21 trillion. Now this is beginning to mean something. Every slight uptick in rates adds exponentially to the cost of carrying that debt. What you get used to, right . If youre used to rates being very, very low. In fact obscenely low as they have been better part of the a decade, that party could be ending, reality of that, rep percutions of that is sweeping. Were on top of that next couple hours as number of dow 30 stocks, eight by last count, well into correction territory, meaning they have fallen 10 from their highs, you will see a lot of references to january 26th, the session high for all the major market averages. That was their high water point. Wouldnt you know it, a high water point for a lot of dow 30 components. When you see that january 26th development here, we just didnt pick that out of the hat. That was the high point of the market this is a look at dow 30 stocks. Exxon and mobil are only issues in positive territory. Lets go to Real Clear Politics National reporter Caitlyn Huey Burns and Connell Mcshane as well. Connell, on the markets dammed if they do, dammed if they dont. On rates, what is the trigger, that is a lot i can get for mon money going into a bond . It gets higher as week unfolds. Depend who you ask. 3 1 2, 4 . What you made a key point what weve gotten use to over the years is different. Years ago, rates are higher, not absolute number but type of movement. This is a global move. We saw it in the uk they didnt raise Interest Rates in the bank of england but hey, were going to. Neil im glad you mentioned it is global. 10year yield had the biggest gain in five years. German yield is going up. Fouryear high. Interest rates in general the Point Charles payne was making a few minutes ago. We knew this was going to happen. We talked a number of times, you never know what the trigger will be. Maybe it was the friday jobs report, signs of inflation, whatever it may be. Were in this environment, you add on to this you could describe a tonedeaf move of Congress Spending like crazy at a time where Interest Rates are already going up, knowing basically they wont have to pay for this in a couple of years, but in a couple of years, that is the what story will be. We know it. We already know how this is going to play out. Neil im glad he mentioned the bang of england. Think about it, the Central Banks the world over, led our Federal Reserve provided training wheels for us, to get through a 10year long problem. Now theyre taking the training wheels off. Now theyre signaling, youre going faster now. Were not going to be there to have your back. Were not going to necessarily keep rates low. If anything, were going to start hiking them. More than you thought. I dont know, is that reality has set in. What i find fascinating about this debate in congress right now, a few years ago all the deficit hawks really arguing against this kind of budget. Neil forget about that. When control of white house and congress shifts so does that mentality. But i think right now the focus in washington is getting off the month to month funding bills which creates all sorts of chaos in governing that has ripple effects across the board. This is a huge deal theyre prepared to pass today, but implications of it, they havent really reckoned with yet. Neil they are damned if they do, damned if they dont, if they dont could be like the first tarp failure vote. The market assessing would say it is horrible deal because you added dramatically to our deficits and debt. In a way i felt for speaker ryan, he is in a nowin situation. We all kind of get it but again to go back to your earlier point. We know where we will be next two years. I picked out one quote with the speaker in his remark as few minutes ago. He says most of the domestic spending is onetime spending. When is that ever the case in washington . Dan clifton, i read a lot of his stuff, i was reading what he put out this morn and he put out a note and said this 10year spending bill theyre negotiating probably will pass, has larger impact than tax reform and his context that congress will not scale back spending you create a new baseline. Youre higher. You are talking about all the time, not necessarily the increase in spending where you go off the previous baseline. One thing for the speaker to say onetime spending but where do we raise the baseline. Neil we have a lot of onetime spending,. It adds up. Neil is there a sense youre getting from people you talk to, this is a possible conundrum for both parties . That wheels are coming off or could, could with even a slight uptick in rates with this amount of debt were carrying it down take much to push you over . It should be a concern and always is a concern. The sense i get from talking to folks on the hill they just need to get through things. Get us through it. Were in Midterm Election year where nobody wants to deal with these issues. So always in a way kicking the can down the road. On this, it is significant because they will be funding longer term. But there isnt really a sense of the longer term implications talking to folks. Theyre trying to get through this this shouldnt bring people much comfort. Solves the problem of month to month spending bills. Quick point what we said yesterday, brings it up again, if we get through it, go now from 2018 to 2020, does that how looks similar to the 90s, rates go up to a point where washington is forced to act to deal with the budget. They deal with it two years outs, but we have a situation where market has higher Interest Rates and possibly lower stock prices. Neil Goldman Sachs put out a report, guys says whatever is going on the stock market will have direct effect wiping out stimulus growth for the tax cuts. Were off about 7 or 8 from those levels but that would wipe out the effects of the tax cut and then, then you dont know what happens. Right and thats a huge if, right . They have been banking a lot on this you mentioned that the tax cut bill adds a lot of money to the deficit which was undercoverred in this whole entire thing. Neil but it does add a lot of unexpected boom. These corporations are sharing the wealth. Not a question of sharing the wealth. Neil if im cfo of a company, im looking at this market madness i might think twice about putting more money into my workers 401 k . There was 03 when president bush cut taxes. Yields went up, stocks went down after a period but stablized. The yields set in whatever point they settled in. Stocks then went up again. There is that possibility. Once youre in the middle of these things, they look bad and it feels painful t could be a healthy correction. Neil it could be. We should tell you, there are a lot of people who argued this out politically, tax cuts of george bush, jr. s mitigated damage of recession taking hold. Democrats like to pounce on that. Got the budget deficits rolling again. Even though they extended them. Neil they did. Youre right. The senate is expected to vote on this budget this afternoon. It is expected to pass here when it gets to the house it could be a problem. You have this revolt going on. Blake burman keeping track from the white house. Blake. Reporter expected to pass through the senate but much of what you talked about in your discussion there, you have senators who said look, because of all this spending that this creates were not for this. For example, bob corker and jeff flake came out against this on the senate but the real problem rests within the house. Conservative members of the House Freedom caucus say they came to washington stop runaway spending. They think this new budget caps deal is exactly that. It was republicans for years and years and years on end who were sounding alarms of spending and the need to get that under control especially during the obama administration. Now while it was a much different time in the economy in 2010, 2011, 2012, listen here to paul ryan and Mitch Mcconnell, two of the folks who an geared this deal that republicans members of house and senate are about to vote on what they were saying about spending five, six, seven years ago. Listen here. Ourest goal for this year get the country straightened out. And you cant get the country straightened outabout spending deficit, debt and get this economy moving again. They have no answer to this simple reality. We need to stop spending money we dont have [cheers and applause] reporter the answer now from republican as we just heard from paul ryan on capitol hill is twofold. One, that growth will pay for this. Two, we need to take on entitlement reform because that is really where the spending challenges lie. Neil, you and i and rest of the world will know, sun will rise in the east and set in the west tomorrow they will do nothing here in washington, d. C. , on entitlement reform anytime soon. Seems like theyre hanging not just one hat but all of their hats on Economic Growth. All of this will be one big test in the years coming up as to exactly how that shakes out. Neil going to need a lot of growth. You will need a lot of growth. Thank you, my friend. Blake burman doing a great job at the white house. Go to a crucial player in all of this. Watches all the pennies, doesnt like it. He is consistent with that theme. Some would call him cheap. Professor who became a congressman, dave brat, House Freedom caucus member. Neil, i did my phd in Economic Growth so we need a lot of Economic Growth. Neil talk about the measure out of the senate. You dont like it. A lot of your cohorts on the Freedom Caucus dont like it. Will that doom it . Im not sure if it will doom it if they have enough votes on the house side. Pelosi was talking about a daca deal yesterday but paul ryan, and the house we made our case very clear. We did 12 aprops bills. We did our budget in regular order. We came in 150 days ago gave it to the senate. Now it is all political. We give it to the senate. They jack it up 300 billion in five minutes without us knowing a thing about it. That is on the senate side. Mainly we need nine Democrat Senate votes at the last minute. We should have negotiated this with the American People a year ago and made it very clear how important the debt and defer sit is. If you dont make the case way out front you back yourself into corner. That is where we are right now. It is way more than 40. It is 80 to 100 republicans in the house. This goes against our playbook, and the republican conference plan the whole year. Were bet getting rolled at last minute. Neil you think there are 80 no republican votes in the house as things stand right now. Absolutely. It there are. Neil he will need a lot of democrats. They will need a lot. This is democrat bills right . When you have senator schumer saying he likes this thing neil so does Mitch Mcconnell. I hope he doesnt like it a lot but that is a problem too. That tells you right . The American People gave republicans the house and senate and white house and to get this stuff under control to restrain the swamp. Bernie even ran on that. Were not doing it. Both side are out of control. There is 21 trillion of debt on kids. Were 100 trillion unfunded liabilities. You talked about reforming mandatory programs. There is not the will to eat spinach there either. Were putting ourself and next generation in real bind. I heard your market commentary with the wage inflation, Interest Rates are going to go up. We know that is good healthy sign. The economy is returning to normal but interest costs are going to spike too. So the markets taking that into account now. Neil you had the tax cuts coming, which even people who didnt like the idea of them are being pleasantly surprise what companies are doing with theirs. Yeah. Neil im wondering whether youre afraid now, given this market craziness, a lot of other Companies Look at what is going on, closing up wallets, saying no to these bonuses, no, keeping powder dry . This ironically, volatility in the market is going to hurt this, pay it forward phenomenon that helped on the tax cut front. Yeah. I am still fairly optimistic. The fundamentals on this are pretty good. I was with the tax foundation, a bunch of other people today. All we need to do is pay the tax bill, not the narrow tax bill but pay for tax cuts of 1. 5 trillion, you need to grow. 75 more. If we grow at 2. 75, we pay for it. That is not due just to the tax cut, due to deregulation, animal spirits. Neil i know all of that youre great at economics, one of the reasons i enjoy talking to you, you get the relationship. But Goldman Sachs and other firms, sir effect. Market craziness will offset whatever benefit you get from tax cuts. They base that on 20 correction from the highs which would be a bear market. Yeah. Neil i wanted to throw this number at you. They say that would knock 1. 1 Percentage Points off gdp growth. Completely wipe out benefits of the tax cuts. This is the same firm by the way that didnt think tax cuts would be elixer with the economy. Take it with a grain of salt. Yeah. Neil what do you make of that, ironically the market craziness would wipe out all the good from tax cuts . I dont buy that. Economic growth is a function of bunch fundamentals, labor force growth, technology, human capital, and most importantly capital formation. So i dont know of any Economic Growth model has the stock market in it. Theyre related but that is not a driver of fundamental Economic Growth. By the way, it is incumbent on theory to get it rye, right . The model, when people come on tv hey i have a model that says that, reality in the real world were growing 5 next quarter. That is the atlanta fed guesstimate. Neil atlanta fed saying that. If that data point comes up, the models better explain the real world, not backwards. Neil thank you very much. On a crazy day. Thank you. Neil dave brat. My takeaway of the news item there, pretty good read what is going on in the house thinks 80 republican no votes in the house. That would doom this thing, this twoyear budget deal has Senate Approval written all over it. Getting to the house will be uphill climb. If that were the case, would markets sell off on failure of that not coming to fruition . Or would it still sell off on reality that it does . Either way, poison choice. The markets now are debating, which poise an son we want to poison we want to go with. 2. 84 note, it seems to be itching to get to 3 . Then what . After this. Successful people have one thing in common. They read more. How do they find the time . With audible. Audible has the Worlds Largest selection of audiobooks. For just 14. 95 a month. You get a credit good for any audiobook. And you can roll your credits to the next month if you dont use them. Audible members get free no hassle exchanges. And use the mobile app to listen anytime, anywhere. Start a 30day trial and your first audiobook is free. Listening, is the new reading. Text audio22 to five hundred five hundred to start listening today. We use so why do we pay touters thave a phone connected. When were already paying for internet . Shouldnt it all just be one thing . Thats why Xfinity Mobile comes with your internet. You can get 5 lines of talk and text included at no extra cost. So all you pay for is data. Choose by the gig or unlimited. And now, get a 200 prepaid card when you buy an iphone. Its a new kind of network designed to save you money. Call, visit, or go to xfnitymobile. Com. Neil just a quick read of things. This is a good thing to keep track of. How far the markets swooned since the january 26 highs. That was a day all of them hit records. I believe that was a friday, right . I think it was a friday. We ended the week with all up in record territory. From those levels, and given the added oomph with todays selloff, were down eight and a third from the dow, little more than eight on s p. Not official until you close at those levels. Our stocks editor, all around, economic and market guru, Charlie Brady reminds me of it that. He also reminds me, close to half, dow 30 stocks are already in at left a 10 correction territory. So the trend is not the bulls friend here if that continues. Obviously just a matter of time. Intraday, at least twice we hit 10 better correction from the highs. Only to recoup the losses as the day ensues. They do not count in market lore until you close at those levels. So that is what it is. Go to market watchers. Ted, another another top none were keeping phenomenon, 10year note. They tend to get at higher levels as this goes higher. From a high of around 2. 88 today, now down to 2. 84 what do you make of that, about how this back and forth between stocks and bonds goes . Neil, what happens is people have in their mind they will get a big move in the bond. A year ago it was 2. 62 on that bond. It is not that much higher but it is enough to make people really think. I dont see it a lot higher. We have too much debt to crank a lot of move into these Interest Rates here. I think they have to do some further. But its a tough trade for them right here. Neil how do you think, mark, the markets are going to adjust to a world order that says Central Banks will not sweep in to save the day . Yeah. One of the toughest things i have to do with my clients, we have 33,000 families we work with, pound it into their head they should never, ever, panic. You have seen a lot of investors panic now with the market down as you said almost 10 . Reality is, no one can predict the market. It is perfectly efficient and random. Only new information will turn the prices. Consider this three out of every four years the market is up 21 . Only one out of every four years down 13 . If that was a game in vegas you would never take your chips off the table. Long term, 20 years, not 20 months. If they do that, they have a great chance to have longterm rates of returns against inflation. So my message to all investors, dont panic. As a matter of fact, markets are down, buy more equities as they drop. Neil you know, ted you could make a counterargument of that, last nine, 10 years, has been an aberration. The bull market is getting a little long in the tooth, albeit with slow growth that makes it uncharacteristically tepid over the years but, long, nonetheless. At these session lows here, with the dow down 520 points, what would turn this around, leaving aside cooler heads that you hope prevail . Well, i think people have to realize, were still 10 higher than we were in september. We thought the markets are reasonably overvalued coming into the end of the year. We really thought they were in january. We think theyre reasonably overvalued. There is nothing that makes us want to come in and make a big sea change right here. Neil gentlemen, well watch very closely. Were watching markets from the highs. Not only what is going on today on the dow. Down 530 points at session lows here right now. About 28 of dow 30 stocks, we showed you the exceptions being apple and exxonmobil down appreciably, with half of them technically in correction territory. A couple very close to bear market territory. Right now this Inflection Point, whatever that is would drive investors in. These are fast Market Conditions. Anything can and will happen of the we live in age of algorithms. People telling me there are a couple thousand different al for riches algorithms that measure spreads and dow and foreign markets and how they do it, randomness they do it, and mechanisms they use to keep doing it is beyond my feeble comprehension. This much i know, none of these fancy devices make a memory of Market Forces. They exist. The savage beast that is wall street still exists. Well have more after this. Whoooo. Looking for a hotel that fits. Your budget . 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The most common side effects were pain, redness and swelling at the injection site, limited arm movement, fatigue, headache, muscle pain, joint pain, less appetite, vomiting, fever, chills, and rash. Help protect yourself against pneumococcal pneumonia. Ask your doctor or pharmacist about prevnar 13®. Neil this selloff continues. This is where we started the day. Then it was down, down, down. There are a lot of catalysts for this. Confusion in washington whether two or budget deal is passed good thing, bad thing. Spending of trillion dollar deficit and 300 billion added next couple years whether its a bad thing or not. Theyre all over the map on this there was the story of Interest Rates backing up, the 10year note backing up to darn near 2. 90 . I do know buyers came in, came in much higher level than they did on monday. So whether you glean anything from that is anyones guess but they do want to seam to push this to 3 to see what happens. Well get read on all of this with our own Charlie Gasparino as we have about half the dow 30 stocks already in correction territory. That means they have already fallen 10 or more from their highs. You will see that january 26 reference a lot for both sector stocks, individual aggregates like the s p and dow and nasdaq. That is sort of a crescendo point were using. That was the High Water Mark for all three market averages. So were using declines from that point on to give us a better idea whether were formally near a 10 correction. Twice we certainly hit it on the dow. But it doesnt count, people like Charlie Brady remind me until you close at that level. Were watching it very closely, to the aforementioned dr. Gasparino. What do you think of all this . Really messy market. I say two things when i talk to investors and traders. They say this. There is already debate whether the trump tax cuts, you know, put together on the corporate side was going to lead to higher deficit which leads to much higher Interest Rates which is bad for markets or pay for itself overtime that debate is carried out t was exasperateed by by technical factors, etfs, Program Trading as that debate was doing on. Then we had something happen yesterday which we talked about on the show the incredible absurdity about the budget deal. That added up to uncertainty about tax cuts paying for themselves, but it is clear this Senate Tax Bill will add billions to the national deficit. It will blow up the deficit. So you got that on top of the other worries. Neil as will all the spending in that budget. Spending. Neil no matter how slice it deficits. What is going on in congress, this kind of works into this amid market swoon, we have sources in congress that are telling us, among the leadership, were talking about paul ryan, were talking about kevin mccarthy, the leadership of the republicans they are definitely talking about more tax cuts, not on the business side but on the personal side. They believe, there is a feeling in there that they did not cut, particularly the top rate enough. Remember the top rate went down from 39 to 37, right . Neil 39 point 6. To 37. Neil but lost a lot of writeoffs and deductionses. People will get a tax increase, people paying a lot of taxes. Theyre worried about that from the growth side. People thinking about paying extra taxes in middle of a market swoon is not a good thing because these are the people that buy stocks as well. Neil when do they want to do this . It is unclear. Theyre on the talking stage right now. They listen, if you brought on Grover Norquist he would tell you the same thing, they are talking about it. Do they have plans . Do we know how much lower than 37 or other rates . Neil that is where they are going to focus . You and i could make an argument not bad thing to focus on, electorally, democrats could run, theyring doing it again. They believe, aside from what is going on in the markets, republicans believe they have some wind at their back. They have some momentum. They think they can take the rate down lower. Neil can i ask you your thoughts . I think another factor that has been overlooked here, and a whole bull market really ensued, people play politics, it is obama, its trump. Right. Neil always say it was the Federal Reserve. Brought rates to zero. Under obama. Neil my point is we got used to that a lot of people got used to that. Now very clear, our fed, very clear, bank of england today, European Central bank, theyre all saying to a bank, thats over. Now of course, everything hits the fan they might change their mind to come to the rescue. I hope that doesnt because it is artificial. What do you taper or unwinding of Balance Sheet, what the fed did essentially buy securities from banks. Neil to force rates down to zero. Why did they do that . It stimulates the economy. It did the trick. It improved banks Balance Sheet after the financial crisis. That is the trick. Here is the thing. Theyre unwinding that slowly. When you unwind that slowly markets have to adjust to that even more than that, markets have to adjust to the fact that fiscal policy has to live up to what it is billed. Fiscal policy means the tax cut. Does the tax cut produce, you will get a deficit in the first year but meaningful growth and productivity pays for that long term, improves gdp, 3 1 2 gdp. That pays down deficit and keeps rates lower. That is good for stocks. Or is it huge miscalculation on part of republicans, gdp will not grow that much, deficit widens out dramatically, when rates go up, stocks to down. Neil whatever benefit from the tax cut. Does it not produce the productive type of growth we need. You have to sell more debt. Rates go up. You know the whole drill and the economy slows because rates go up, because mortgages go up, credit card rates go up, it dampens Consumer Confidence and demand for stuff. So thats the debate thats overlying this right now. We dont have Monetary Policy to fall back on. We have fiscal policy that is being debated. Austan goolsbee would take the case, make the case it will not work that well and youre blowing out the deficit. Art laffer, Charlie Gasparino, maybe neil cavuto would say it will work. That is what is going on. Neil a Battle Royale here. Thank you very much, Charlie Gasparino. We were showing the vix index, which is volatile. Market fear at 38 level. Got high as 50 earlier in the week, as low as 27. Its extremely volatile measure. Some people trade on this they come up with flavors to offset that trade and arbitrage against it. It gets very confusing. Bottom line a couple firms dispensed with counter indices to this, because you know what . Were losing money hand over fist. There was a point competing volatility measures. One went from 90 a share late friday to 4dollars monday morning. That is what we call market risk in a vehicle meant to contain it. Telling you my friend. Charlie and i have been around the block a few times covering this. If you think you can outlaw Market Forces or shield yourself from those forces with fancyshmancy gym gimmicks. They come up with fancy products but if you have to explain to your investors youre already losing your investors. More after this. Building a website in under an hour is easy with gocentral. From godaddy in fact, 68 of people who have built their. Website using gocentral, did it in under an hour, and you can too. Build a better website in under an hour. With gocentral from godaddy. Soi want you to pick a newr truck for your mom or dad, knowing that they could possibly pass it down to you one day. Oh. Cool. But before you decide, you should know that chevy silverados are the most dependable, longest lasting fullsize pickups on the road. Which means that ford f150s are not. giggles which truck would you pick . The chevy. There you go. Boom. That was obvious. Plus it looks cooler. No doubt about it. Now they know what to get me. Neil all right. The era of easy money is over. We keep pounding the theme which is the theme of this volatile selloff, whatever you want to call it. It is playing front and center today. Deirdre bolton has latest on all of that deirdre. There is so much going on, neil as you and the team have been covering. Take a look at the dow. Here is where we are right now, this huge drop, probably too early to point out correction levels but i feel like we should say it, 23,955. If we close there, that will be put the dow in correction territory. That is to say 10 off the high we just saw end of january. That is what the dow looks like. Of course the review this week. These are really heavy declines for the week and i think surprising a lot of people. At least my sources that i spoke with about the computer driven trades, the fact that humans are ones obviously putting in formulas. But the computers are executing them faster. A lot of people said okay, monday and tuesday will be volatile. Yesterday was a surprise. Today remain as surprise for a lot of people. Youve been talking a lot about rates. So people people in the cashingmarkets are watching these levels. We you a little bit overnight and how can the economy and underpinnings be so strong and have us be worried about inflation at the same time . And will the fed be more aggressive . We talked earlier the fed was slated to raise rates three times this year. Now people saying that is not going to do it. They will have to be much more aggressive. Backing up these strong underpinnings in normal world would make us feel pretty good where the economy stands. Of course we had jobless claims coming in at 45year low, further bolstering the argument maybe the fed will have to get in here to be a little more active. Erred connell mention earlier b of e, bank of england signaling a potential rate increase. Just to put this out there as well, Corporate America still racking it, right . S p 500 earnings, 78 of companies that have reported have had betterthanexpected earnings. Were really left with this odd argument, neil, you and i have been talking about this, where there are so many Economic Indicators that really look great. Neil right. Volatility is back because we kind of are saying, okay is it too great . Is it too much too soon . Is the fed going to have be too aggressive. Investors from all stripes are asking that question. Were seeing angst show up. Neil all the good news is now bad news. Exactly. Neil more reminders, as you said on the claims front, in and out of 45year lows there. It is fueling argument, rates are too low in this environment. Of course the higher the rates go, higher all borrowing, right . If you get a mortgage, if you get a car loan, any corporate borrowing a company has to do, all of sudden gets more expensive. Neil particularly to that point, lets go to yale professor, robert schiller. To that concern, rate backup could be enough to tip housing or explain . Well, yeah, obviously Interest Rates are major it is the price of time, a fundamental factor in our economy and people watch it. They look at, a lot of people think the stock market is overpriced but whats the alternative . If you go into debt it has been not a very good return either. It is all changing now. Maybe that is the new narrative. Neil when you say it is the new narrative, a lot of people at the margin will this make enough of a difference to unqualify them for the very home they were qualified for a week ago, two weeks ago . Oh, well that is, yeah, you have to get approved. You also have to want to do it. Neil right, right. I think there is a sense of regret now, that some people didnt do it earlier. Now it is going to be likely moving into bad territory. Neil you know regret is an emotion. Neil oh, no, youre quite right about that. You mention this phenomenon. You and i remember much higher Interest Rates. To your point we discussed in prior chats you what you get used to. People young, old in between gotten used to ridiculously low rates. Do you see us around, four, five, 6 mortgages that will be become the new rule . That is what they used to be. Neil im wondering will people adjust to that or will people balk at that . Well the question is what will inflation be . 6 is a pretty high Mortgage Rate if there is no inflation but in the past when we had those rates there was substantial inflation. The thing weve gotten used to, forgetting about inflation. Neil do you think inflation will get to be a problem again . Talking about wage inflation, picking up at 2. 9 clip in the latest employment report, what do you think . Yeah. Well, this brings back an old theory of, called, costpush inflation. Back in the 70s and 80s this was the dominant theory that you heard. It was labor unions that were pushing up wages and then employers had no choice but reluctantly to raise their prices. That was a narrative that was very strong then. It led to hostility to labor unions. Which led to the reagan revolution and a whole bunch of events. Neil right. Now were not so focused on these old theories anymore, but maybe they have some validity. I wouldnt be so alarmed by the recent data on wages. That is not necessarily inflationary. But you know, if the economy stays as full tilt as it has been, a pickup of inflation would not be a surprise. And some people wouldnt mind it so much. You know . Neil yeah. We kept it pretty low for a while. Neil absolutely. A long while. Robert schiller, yale economics professor, nobel prize winner. Rare mind on this stuff. Meantime look at corner of wall and broad. We have a selloff, in and out of session lows right now. It was dave brat telling us a while ago. Forget 40 members strong in conservative house caucus who hate the budget agreement hammered out in the senate. 40 others are just like them guaranteed no votes. I quickly did the math in my head. 40 in the Freedom Caucus. 40 others he said. 80 no votes. In order to get passage, speaker ryan need a lot of democratic yes votes. He is a long way from that. Does the market selloff more on bad budget deal they hate if it adds to spending that doesnt materialize . Even if does, damned if you do, damned if you dont. Oh to be in washington. Oh to be an investor today. After this. Neil 40 members strong, all of you including yourself vote against this, obviously paul ryan has to cobble together enough democrats to counter what youre doing. Regardless your views on this particular budget, does he or are you hearing he has those votes . It is way more than 40. I think it is 80 to 100 republicans in the house. This goes against our playbook and republican conference plan the whole year. Were getting rolled at the last minute. Neil im sorry, i want to be clear, you think there are 80 no republican votes in the house as things stand right now . Oh, yeah. Neil we were already down in the markets. Down a lot more since the comments by conservative republican congressman dave brat, at least 80, up to 100 no votes for the budget. That makes it uphill climb. Rachel, if he is right, it will be Herculean Task to get this thing through the house. Yeah. Yesterday i was talking to leadership they were thinking 100 republican nos. That would be generous. This is not a package conservatives like. I jim jordan was calling it monstrosity. Allies of ryan standing up in a private fence saying look how will we vote on Something Like this when were republicans . Were supposed to be the party of fiscal responsibility. This whole 300 billiondollar increase in the National Spending is not offset . A lot of republicans dont like it. Neil they look at this, they look at backup in Interest Rates and theyre kind of damned if they do or dont on this budget deal. I can imagine stocks tanking if it fails. I can imagine stocks continuing to tank if it doesnt. I dont think it is going to fail. This will pass, probably tonight. In the hearing if you get as many as 70 votes. This is bipartisan. Conservatives that will peel off. Folk on the tar left. Neil a lot democrats. They will need a lot of democrats. Nancy pelosi will not back this until she get as solution on daca for the dreamers. She doesnt have a leg to stand on, Chuck Schumer in the senate, is backing this 100 . A lost dems will ultimately john with moderate republicans to get this over the finish line. Neil rachel bade, with politico. A darn good one. Interest rates are backing up, up, up. No matter how far they back up, buyers are not coming in and pouncing preferring that investment over these investments. Into correction territory, very close we go right now, the dow hovering close to that magic 10 level from the highs. Not quite there, but everyone more than quite worried. Today, smart planning is helping the new new york rise higher than ever. As the world leader in unmanned aerial systems, were attracting the worlds best talent to central new york. And turning the airport into a firstclass transportation hub. All while growing urban areas into vibrant places to live and work. Across new york state, were building the new new york. To grow your business with us in new york state, visit esd. Ny. Gov. To grow your business with us in new york state, thats it. Im calling kohler about their walkin bath. Nah. Not gonna happen. My name is ken. How may i help you . Hi, im calling about kohlers walkin bath. Excellent happy to help. Huh . Hold one moment please. [ finger snaps ] hmm. The kohler walkin bath features an extrawide opening and a low stepin at three inches, which is 25 to 60 lower than some leading competitors. The bath fills and drains quickly, while the heated seat soothes your back, neck and shoulders. Kohler is an expert in bathing, so you can count on a deep soaking experience. Are you seeing this . The kohler walkin bath comes with fully adjustable hydrotherapy jets and our exclusive bubblemassage. Everything is installed in as little as a day by a kohlercertified installer. And its made by kohler americas leading plumbing brand. We need this bath. Yes. Yes you do. A kohler walkin bath provides independence with peace of mind. Call and ask about saving 1000 on your walkin bath, or visit kohlerwalkinbath. Com for more info. Neil all right, volatility has returned to the markets a lot of people asked me what does that mean neil when you refer to volatility. Technically youre right but when you swing in more than 3 ranges within a day and oftentimes many many many times in a day, thats volatility and thats pretty much whats been going on here ever since this ensued the middle of last week but right now be have all dow 30 stocks in negative territory, and Interest Rates backing up, whether thats the elixir or a point at can people pounds and buy a 10year note when it gets into the mid 280s, close to 290, thats when i notice some buyers are coming in. They took as little as getting up to 282 earlier in the week, sounded a little arcane, but what thats telling you is over the course of the week people are coming into the safety of bonds remember theyre backed by uncle sam at higher and higher levels so that could be a discon setting development here because that means they would both denied bonds and stocks in that environment. Theyre not convinced either is a good investment so yields back up so do stock prices. Right now, in and out of session lows down about 600 pounds and our highs reached on january 26 that will come up a lot youll see that january 26 a lot. That was a session high for all of the major market averages and right now they are at a level which has been very very close to 10 corrections acrosstheboard. You have to close at that to make that official. Weve been there intraday a few times now over the course of the last week or so. We should let you know as well half the dow stocks are well into construction territory, at least half have fallen at least 10 some are getting very close to 20 . Nicole petallides live from the New York Stock Exchange where theyre trying to keep up with it all i guess, ha . Nicole yeah and theres a lot to keep up obviously weve had such a great run since the election and 2016 november but this week obviously with extreme volatility were seeing more than 500 points several days in a row five in fact and our editor Charlie Brady bringing it to our attention, more than 500 point swings since october of 2008. This shows you the volatility were seeing, its up 20 right now, at 33. 21 and thats part of the reason weve had this because people are getting those vehicles, the vehicles which were betting to the other side getting squeezed and they got it wrong. It went up to 50 and they were betting to the downside and not onetime but two and three times and then theres you actually have etrade banning margin trading on all volatility on the volatility etf that they were looking at. Taking a look at the dow laggards all 30 names are in the red today, 17 of the industrial stocks at this moment are in correction territory, with all 30 of them, 5 off their recent highs. Then also since the market closed into record close of january 26, were not down 10 , were down 8. 8 , so not correction territory, but were back here looking people want to know so they recheck those close and lets take a look at some of the names that have been in correction territory, including General Electric which has cut its dividend trying to do restructuring, exxon, chevron , we know energy has been under pressure as weve seen more u. S. Production. Those are some of the names that are in correction territory, so well continue to follow this the Traders Keeping up with the volatility but the vix is key to here. Back to you. Neil nicole thank you very much i want to go to charles payne. Charles hates when i say that because youre telling people that im all, charles is old hes old like me so were one of the seasoned here. Good to see you my friend. Charles thanks. Neil is it a big deal that we closed some time, 10 from our highs just to get to socalled flushing process done . What do you think . Charles i think that its a big down. I think it would be pretty good and weve got to remember the last time we went through Something Like this although maybe not as many days as brexit and it sort of, you know neil that came and went. Charles it came and went and neil that was what june of 2016 charles yeah, so it was pretty swift and we went over 400 trading sessions without this 5 correction and now were looking for, you know, a 5 pullback and now were looking for a correction to be technical about it the right technical terminology here i think it matters to some people but i think the more important thing is whatever is gnawing at the system it has to get out. I dont think its one thing. Neil help me with this thing. Charles its not a problem per se but i said it a lot last year and i never extended the conversation further. I said last year many ways was the best year ever for the market that i know. Not of course that it was up the most but if you take the strong rally that we had coupled with the zero amount of volatility, it was so tranquil. Neil no volatility. Charles it was so tranquil almost every day. Neil but then youd worry about that like id like to see a little bit more because were getting a little sanguine. Charles because you could only go up from there. Its like fed Interest Rates being at dear otranquillity being at zero you can only go up from there and how does that jar the system when you go from the perfect tranquillity as an investor particularly an investor that missed most of the rally and just got into the market, it was there was trepida tion before you pulled the trigger, you got in things are feeling well and feeling great and all of a sudden wow theres a lot of red on the screen and i hadnt seen that before and of course the law of large numbers these numbers are so large although percentage wise, a thousand dow points of 26,000 is not the same as of course 20,000 but the psycho long it call impact is so interesting but i felt there was a deliberate attempt also to shake out weaker hands in this market and this is the kind of volatility. Neil who are the weaker hands . People that just jumped in . Because the dirty little secret is retail participation has always been pretty constant. It took a bit of a jump in the last few months but not a dramatic jump. Charles it took a dramatic jump with respect to selfdirected folks and people who are buying more individual stocks. Neil ive gotcha. Charles youre right the constant part is for the most part 401 k , particularly Companies Neil at 52 . Charles exactly but the other part because people are looking at the markets saying wow the market. Neil the shoe shine guys. Charles im not saying cabbies, but the household in a 401 k for a number of years. Neil and they got more aggressive . Charles because they wanted to make more money because guess what their mutual fund has under performed. Neil right, right, right. Charles so they say well maybe i could do this myself. Neil ive gotcha. Charles its not the joe kennedy shoe shine boy scenario. Its one of the things where people have been in it but wanted to take greater control and this is what id put on my conspiracy hat because its always seems when we get a big swath of those folks we get these shakeups and it gets them back in line. You know what . Return that custodialship of your account to a professional. You cant doityourself. Neil well you mentioned the joe kennedy thing he was famous for getting out of the market when he did before everything hit the fan equally famous for coming into the market when few were. Its the latter we want to hear from right . The people, either the Big Companies or buying back their stock because it gets to depressed levels or more of the mark cuban types saying im buying in aggregate like the s p 500. Are we hearing more of that or is it not happening . Charles from me im hearing people up until today, theres been an extraordinary amount of confidence and most people wanted to buy rather than sell. So far today the message is starting to slip a little bit. There are more people who are contacting my office saying should we sell anything and theyre expressing a little bit more nervousness so theres no doubt the anxiety is growing and as long as this continues like this it will grow. Neil what do you tell your clints real quickly . Charles were Holding Stocks that are amazing. This is what im telling people. Have you ever woken up and you turned on tv and saw wow this stock is up 25 today for instance twitter. People woke up this morning and saw twitter was up 25 do you know what they said . I wish id bought that yesterday im saying tomorrow is yesterday we have an amazing opportunity to buy these amazing stocks real soon at prices that you wish you would have gotten into them the last time they made a big move up so tomorrow is yesterday thats what im telling them. Neil all right so for those who have gotten particularly hit and were looking at some of them flashing across the screen including the big names you were mentioning earlier, apple, all of that, you cant catch a falling knife but you cant ignore it either. Charles theres two ways you buy this market weve been talking about support levels. Lets talk about on the upside because you can buy once the dust is settled for me for instance dow 24, 900 thats a place if we close above there you start to buy above 25,000 you get more aggressive. Now these numbers could change if we keep going down but right now thats my point to really become very aggressive as a buyer, not trying to pick the bottom, but try to find out established resistance points that weve established over the last five or six trading days and using that as my buy trigger neil youre the best buddy thank you. Charles payne very calm investor in fact everyone else freaks out charles im old. [laughter] neil all right, thank you very very much my friend. Were down to about 572 points. There can be other outside events that could at least whip saw the markets at the time. We can all remember at least i certainly can remember when the dow fell 777 points after the first tarp vote well in the house. They scrambled to try to retry that, ironically to avoid the market and it did pass but ultimately the dow would fall another 6,000 points, so the next catalyst seems to be this vote on a two year budget deal which seems to dam buyers or sellers alike. The market will fall if it doesnt happen and if it does. To have a balanced budget one way or the other our federal budget not so much so governor year ringing our hands as to something that will add to spending or not and the market might punish them regardless if they approve it or not. What do you think of that . Yeah, im concerned about it. I think increasingly weve got to be realistic with respect to the amount of debt this nation has. If we were not the worlds reserve currency, this gig would have been up long long ago, and there are, youve seen them moving their way about people are now passing around these multibillion dollar notes that what became the currency in countries and people want to be little that and say were a much larger more Global Version of the very same thing, and the event would be catastrophic if we were not the worlds reserve currency. You cant have 20 trillion in debt, so my two cents worth, im not that impressed with the idea that were going to jam another 300 billion worth of spending down the throats of the American People, and the fact that were using the military as the spoonfull of sugar to make that medicine go down is wrong. I would say that indeed if people want to support our military and we should and we need to modernize and well equip im a military veteran so i have a little bit of bias there i appreciate the significance of it do that as a standalone vote if you want to put 160, 180 billion there let that be up or down dont put a punch of fat in there to get the votes needed to do what everybody would do if it were done by itself. Neil you know, i was talking to congressman dave brat, hes a very conservative member of the socalled Freedom Caucus 40 republican conservative strong not keen on supporting this. In fact he added you know, neil there might be 40 to 60 other against this, so this could, could potentially fail in the house and let Speaker Paul Ryan is able to muster enough democrats to compensate for that so lets say it passes through all of that. It sounds like you wouldnt like that either. Here is the thing to understand. Victory does not simply mean passing of bill. If passing a bill is the measure of success, we have gotten too far afield. The bottom line is what is good for the American People. What is good for the longterm Financial Health of this nation and we have 20 trillion in debt im amazed that at any interest level then in the world still buys our debt apparently with the impression were going to pay them back. We get to print it, and give them more of this fake money, increasingly its getting to the point where its in plausible that we can pay them back. It is now multiples of our actual ability to produce that wealth if we were to apply every cent of the gdp toward Debt Repayment this is becoming a problem and i would encourage people in the house to hold firm challenge this, republican and democrat alike, this is not a partisan issue. The bottom line is this. We have a debt problem in states like ours we dont have the luxury of printing money or borrowing it but ill tell you what at the federal government we really dont either. We just get to get away with it because were the worlds reserve currency but that gig will be up soon. Neil i apologize governor. Another gig that could be up is this low Interest Rate party weve been enjoying for upwards of a decade now, and it looks like world Central Banks not only ours here but across the globe are saying well that stops now, we watched england very closely today, they did not raise rates but they telegraphed they are going to go up just like our Federal Reserve reserved they go up so the punch bowl is being taken away that has gotten us used to these ridiculously low rates. I dont know what the equilibrium is but its higher than what were getting used to so then what . Look at the returns in the market. What has been driving this growth in the market has been in large measure the fact that there is no yield anywhere else. There is none of the historic ability to invest in any kind of a fixed instrument at all, to get any kind of a return, that would give you the belief that thats a safe place to be so if you are retired if you are in a fixed income you have been driven to the market is the only possible place to get any kind of return as you start to see some normalization some return to any kind of a yield youre going to see dollars coming out of the market so its going to be an exacerbating effect i think some of this air coming out of the balloon is going to continue to come out for some period of time and weve got to be realistic about all of this and not just this knee jerk response. Ill tell you this as a republican as a conservative as a taxpayer as an american citizen, as a veteran as a father, as all these things combined, i speak for a whole lot of people, i think, who are some variation of the same thing were offended at the idea that our government regardless of whose in charge regardless of which Party Continues to jam debt down the throats of the next generations. Its irresponsible, its not what people were sent here to do theres not one person who runs on this platform and yet they come to washington and they suddenly become i dont know what siren song is played in this town but the bottom line is they come here and suddenly a little bit of other peoples money is just the right solution and its not. We need to stop spending. We need to cut entire facets of government out. Neil yeah but thats politico lit beingly unpopular governor. I mean republicans this whole budget deal is about busting caps that were hardly caps before, so that everyone can get their goodies. Again, everybody wants the sugar now. Neil absolutely. But it is at a certain point and this is where again i look to those conservative members in the house in both parties frankly. This is not a political issue. Hold the line. Dont stick it to our children and grandchildren at a price thats more than they will be able to bear. Neil governor thank you very very much we needed that bipartisan hit there. Be well, thank you, sir. Thank you. Neil the governor was speaking we came off our lows still down a lot down about 555 points that works out to 2. 25 here this is the story of the day that the Interest Rate party is over the low rates are over, and that the good news is something that actually has treated as bad news so whether we see jobless claims coming in at a 45 year low today or, you know, twitter rising unexpectedly 20 after betterthanexpected Earnings Report and a host of other companies more than eight out of 10 on the s p 500 that have reported far betterthanexpected numbers and guided the markets far betterthanexpected numbers and then softbank in talks to buy with up to 10 billion stuff that would normally be interpreted as great great great great great. Now, just the opposite. The feeling that this good news is going to be bad news. Its going to lead to a backup in Interest Rates, today were getting a backup in Interest Rates, like historical comparison still very very low. Here st. Worry the markets have no idea how much higher they could go and its that unknown coupled with a lot of giddiness that got ahead of itself thats a onetwo punch for markets that didnt see them coming until they did, so the markets are playing a game, after this. Neil all right, you know whats a big deal when all the News Networks now are doing the socalled dow bugs, you know, some didnt taste this on the way up nor should they but i think if youll be up a lot, get a bug for up days and down days right . Now were at a down day here down 467 points im telling you this is about 135, 140 points off our worst levels of the day, but in these fast Market Conditions, who can even hazard a guess how this all ends up, a lot of these are just algorithms and you push a button and it can aggravate any any of this momentum here. A lot of it based on improving economic numbers, good sentiment reports, 45year low and jobless claims in the latest week, companies saying they see very nice rising led to a backup on the Interest Rates on the belief maybe rates or bond market isnt factoring all of that in, so rates are backing up although not as far bass cabbies they were earlier and stocks are taking on, and then there is this drama unfolding in washington as to whether they can cobble together a twoyear budget deal that looks pretty safe in the senate looks anything but in the house and in the middle of it is a dreamer deal that might be looking more like a dream just getting approved any time and i mean any time, adam shapiro following it it all. Adam and it looks safe in the senate we expect the senate to pass the deal some time this afternoon, early evening and then send it to the house where it has sameday authority so they can deal with it once they get it through rules committee and they write the whole thing within a couple of hours of receiving the paperwork but what about leadership in the house . You have nancy pelosi who made that speech yesterday eight hours talking about dreamers and the need for dreamer protection and then this morning whether en she was addressing reporters she said she likes what the is in this compromise, in fact she was part of the negotiations to craft this deal and yet she says shes going to vote no . Here is what she says. Many of our priorities are in the bill. I have unease with it and hope that the speaker will man up and decide that we in the house can also have whats a Mitch Mcconnell guaranteed in the senate, a vote on the floor. Adam and the vote shes talking about is a vote about daca, protecting those almost 700 students who came to the United States illegally, brought by their parents, so speaker ryan has pointed out that hes always said there will be a vote on daca whether it passes or not is another issue, but here is what the speaker had to say when reminding nancy pelosi that thats been the case. To anyone who doubts my intention to solve this problem and bring up a daca and Immigration Reform bill, do not. We will bring a solution to the floor, one that the president will sign. We must pass this budget agreement first though, so that we can get on to that. Adam so again, the number of students were talking about is around 700,000. Thats how many had registered in the program when president obama first initiated it deadline approaching its kind of an artificial deadline but everyone is using march 5 as the deadline although the courts and some of the undecided decisions with the courts may push that back a little bit. Just to give you a sense, neil of whats happening though you may have a revolt within the democratic party. Steny hoyer the whip there is saying theyre urging members to vote no because the deal fails to provide a path forward on protecting dreamers talking about the budget deal fails to provide a path forward to protect dreamers, but several democrats are telling fox that they want to vote yes on this and theyre happy to separate the two issues apart. Back to you. Neil thank you adam very very much. All right, market all fixed and joined at the hip here with a lot of nervousness in between. I could talk about any administration any market fall off, any market anxiety in recent history, former white house director of Economic Policy under bush 41 with us right now, todd and i were reminiscing about times there are only three Major Networks covering the world and abc, nbc and cbs, and that was it. Now weve got so many different flavors in the internet so we can obsess a bit too much, ha . Well thats right, and we dont need an Attention Span any more because my gosh, im in the seat here, i feel under great pressure, neil. I have to make an important point just three seconds and neil well give you five. All right im take my time then, ask away. Neil so the anxiety seems to be that washington is damned if it does and damned if it doesnt. The other Economic News i mentioned that they cobbled together a two year budget deal the conservatives hate, liberals dont flip over and the markets fear will add to our deficit and our debt, so pass it, hell to pay, dont pass it hell to pay. Either way, bad. What do you think . I think its a very good point. The markets dont like dysfunction, on the other hand, this budget deal if it actually happened will add half a trillion dollars to the debt. Why . The republicans are supposed to be in charge. Republicans are supposed to cut spending. Neil the alternative they say would be another sixweek continuing resolution to cobble together. You know, here is what happens. Politicians want to be remembered, so youve got the ed koch bridge here, youve got looking at it this way. In new jersey nobody knows the name of any former governor except maybe christy and before that brendon burn, why . Because theres a brendon burn athletic arena in los angeles. Nobody knows the name of any former mayor except for tom bradley. Why . Because Los Angeles International airport there is the tom bradley terminal. Politicians like to spend because that gives them stature, it attracts votes, and its really hard to rest those powers away even from republicans, so theyre going to spend and its going to create more debt for our children and neil but thats been happening under republicans and democrats alike so im wondering if youre donald trump and youve attached success to the performance of the stock market, all right lets leave that aside now its going to be hard to do but you could still attach it to improvement in jobs improvement in retail activity all these companies that have given very good guidance earnings, is that enough any more . Well, yes, the economy is in very good shape and donald trump has the right to take credit for the economy. Neil hes right to say the fundamentals are sound . The fundamentals are very very sound. Companies are hiring, good news as youve been saying all day has become bad news, and here is the real issue. Are there people whether its my mother or your mother or relatives or friends or we ourselves who have money in the stock market who would rather put that money in a bank cd if the bank were offering four or five or 6 . Are those people out there . And the answer is yeah, there are people in the stock market today who would prefer to put that money in the bank if the bank were paying them four, five , 6 . That hasnt been the case for 10 years, if that becomes the case again, money goes out of the equity market, into the bond market or into the bank vaults. Neil todd very good seeing you youre right about that trigger point what could it be right now it doesnt appear to be rates that backed up to the degree they have already because you got virtually nothing in a cd that is slowly changing but at what level would that ground that investment ground, sick of see seeing signs like that point to the safety of just putting it in the bank and sleeping a little easier. We dont know, but thats going to be an important trigger to watch after this. Achoo snap achoo snap achoo achoo snap snap achoo achoo feel a cold coming on . Zicam cold remedy nasal swabs shorten colds with a snap, and reduce symptom severity by 45 . Shorten your cold with a snap, with zicam. Sucthey read more. Have one thing in common. How do they find the time . With audible. Audible has the Worlds Largest selection of audiobooks. For just 14. 95 a month. You get a credit good for any audiobook. And you can roll your credits to the next month if you dont use them. 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As a republican as a conservative as a taxpayer as an american citizen, as a veteran as a father, as all these things combined, i speak for a whole lot of people, i think, who are some variation of the same thing were offended at the idea that our government regardless of whose in charge regardless of which Party Continues to jam debt down the throats of the next generations. Its irresponsible, its not what people were sent here to do neil all right the Kentucky Governor not a fan of either party pushing the two year budget deal thats just going to worsen our budget and drive us deeper indebt House Freedom caucus member Arizona Republican congressman agrees in fact he has termed the expression not only is he a no vote hes a hell no vote on this thing. Congressman still a hell note vote on it . Absolutely what were being presented is both premeditated and disrespectful. We were sent here to stop the waste, cut spending, and were doing quite the opposite were growing government, thats not what the American People want. Neil do you think i guess the pitch that Speaker Paul Ryan is making is it avoids this from continuing resolution to continuing resolution six weeks at a time and clears the deck so to address some of the important issues like the one you outlined totally wrong. Its actually incentivizing bad behavior. We got ive always believed that its always good process, builds good policy, has good politics. What were missing is leadership what were doing is were enabl ing in this two year window , neil, not having any tools like reconciliation to get at some of the big issues that really benefit the American People. What were doing is rewarding the senate for not doing a budget. Thats totally wrong on this application on whats being presented with this budget. Neil so you know the draw here that a lot of people are saying no matter whether this thing passes or doesnt pass, the markets are going to tank i guess if it doesnt pass youre just stumbling along with these continuing resolutions and if it does, youve got this baked into the cake for a couple years of more deficits and debt. You dont seem much to care what the markets are going to say about this right . Im more interested in the longhaul, neil because weve got a problem. Bad behavior should never be rewarded and americans say theres a beltway. Those people drink the water, they go crazy when they go back there. This is totally wrong. We dont have a revenue problem. We have a spending problem. We need to shrink the size of government. What we need to do is look at nets so if youre getting more out of a military budget by giving more flexibility to the military and taking the waste, fraud and abuse out of it isnt that better than just throwing money at this problem and wasting 0. 20 of every dollar . Its ludacris, kneel neil, here. Neil he thinks that besides the Freedom Caucus there are another 40 to 60 no votes, 100 no republican votes do you agree with him and if you do, Speaker Paul Ryan is going to be a busy fellow trying to cobble together enough democratic votes right . Absolutely but once again, here is where leadership theres a price to be paid when you disrespect the process. We were led down this line because we backed the play saying lets fund our military for the full year, lets do Discretionary Spending on a cr, so that the senate will actually do their budgetary protocols, but we were told no. When they were all along coming up with the same plan. Fool me once, shame on you and fool me twice, shame on me and that aint going to happen again neil congressman thank you very very much. Thanks, neil. Neil we could get a sense of all this later on today right now it doesnt look good how factors out of the market is anyones guess im taking a peak at the dow, besides the fact were down about 510 points right now all the dow 30 stocks, exxonmobile are down and among those that are down, half are well into correction territory and a couple are close to bare market territory. More after this. Think your Large Cap Equity Fund has exposure to Energy Infrastructure mlps . Think again. Its time to shake up your lineup. The alerian mlp etf can diversify your equity portfolio and add potential income. Bring amlp into the game. Before investing, consider the Funds Investment objectives, risks, charges, and expenses. Read the prospectus carefully at alpsfunds. Com amlp neil all right, is all of that Interest Rates keep repeating that but thats what this is all about Interest Rates responding to an economy thats doing betterthanexpected and fears that it can continue to do so that might seem like perverted logic but obviously the better the economy does the better the numbers go we hit a 45 year low in jobless claims filings on top of so many Companies Reported betterthanexpected news and telegraphing they expect that to continue in their guidance. Normally the stuff of which rallies would continue to sustain themselves but we hit this Inflection Point where people are waking up saying do you know, rates dont really reflect that reality add to that Central Banks the world over saying were poised to increase rates now more than we otherwise would because of this including our own Federal Reserve and now under new leadership and now indicating that we could see a couple more rate hikes than were planned i think they were looking at two to three this year it could get up to five or more. Theres no way of telling or saying we sustain all of this by days end right now were down 445 points and then you add the market mayhem that could be happening in washington, will they cobble together a budget deal will they not and if they dont is that a good or bad thing and if the stocks selloff regardless so the center for freedom and pairity chairman dan mitchell and independent womens forum senior fellow patrice lee. All right, patrice to you first does this rattle you the fact that markets are still rattled . It doesnt rattle me. I mean, i think weve been expecting there would be some pullback, some Market Correction to whats a really extraordinary growth in the stock market but again the fundamentals of our economy are strong and investors are just responding to that. Now if this continues for another month and i think there could be some cause for concern and especially if we do see those Interest Rate hikes. Neil dan . Im not quite as optimistic about that. I think that weve had a problem with Central Banks not just in the u. S. But around the world having too much easy money policy holding Interest Rates artificially too low flooding the system with too much liquidity and at some point, that all sort of creates a bubble and when that bubble pops which might of course be happening thats something to worry about. We went through this with the housing crisis last decade,s decade before that we went threw that with the tech bubble. When are we going to learn not to have Central Banks trying to manipulate the economy . Neil you know he does raise a good point, brian that the Federal Reserve and all these other Central Banks with the best intentions at the time i think ben had said when all this is going down he wanted to avoid another depression but again people get used to the cheap money. It was very very cheap it was at 0 for a while so if you couldnt make money eventually or turn things around in that environment then you were doing something wrong and now theyre saying we mean it this time we are stopping this and reversing this. How do you think thats going to go . Well, i think the economy right now is growing okay and i think its safe for Interest Rates to go up a little bit because again, the economy is not neil but whats a little bit brian. Thats a hard one to peg isnt it . Were about 2. 53 growth right now which is better than the 1 growth which i think justifies normalizing Interest Rates a little bit more to what we have seen in the past say before the recession. Neil all right well that would be close to four or 5 on overnight Bank Lending Rate which is higher than where we are now. Sure, i think they can gradually rise as long as we dont see the economy react too negatively to it. I think the rates have been low for too long. Neil you know, patrice its one thing to say that the president always talked up the market now hes not going to talk down the market or talk about the down market but there are other thins he could still refer to these companies that are still reporting betterthanexpected earnings, the job gains and do you worry though hes going to be marked because hes stressed the markets going up so fast that regardless theyre going to remember more the markets reversing what he said . I think thats only true of the media and the left who are really trying to hammer him on the stock market now but kind of ignores the extraordinary growth over the past year. Its true that he did peg himself pretty closely to the markets rise and so hes going to have to take a little bit of a hit but when you look at all of the other benefits that americans are experiencing from their tax cuts that theyre receiving this week and over the past week going forward, but also some of the good benefits i think that will overweigh it and when we look at his jobs Approval Rating, were seeing that rise to a level that president obama wasnt even at at this time in his presidency. Neil i think the first 2010 for president obama he was at 48 Approval Rating and this president is inching up to that well see what happens. Dan is it your sense that the good Economic News, the tax cut that seems to be a pay it forward thing with a lot of companies sharing the loot the unexpected sight of seeing this in peoples checks as they look at their higher net pay, that that will win out over the crazy markets . If six months from now, we havent experienced some sort of 2008 meltdown i dont think people will even remember that we had a couple of days of down markets, but im worried that we might see more of that kind of bad news because Central Banks have put us in a position where theyre there probably is somewhat of a bubble in the economy. Now having a good tax reform bill yes that helps stabilize thins and its helping to show up in peoples paychecks and its showing up in Investment Decisions by companies, but lets consider the other side of the issue here. Spending. This new budget deal, i think, in the long run, makes it much less likely that well be able to sustain lower tax rates and maybe thats some of the nervousness were seeing on wall street. Neil well its certainly among the noisy items theyve raised. Brian does it make a lot of negative noise to you . If im an investor, im concerned right now. The budget deficit is probably going to move to about 1 trillion next year and go to about 2 trillion a decade from now. Thats going to spook investors. I think its right to price in some difficult decisions going forward. We may not be able to sustain the tax cuts if lawmakers dont get spending under control. Additionally if Interest Rates do go up, every point they go up is going to raise the deficit about 150 billion in interest costs, so if im an investor im a little nervous about whats going on in washingtonment neil guys i want to thank you all very very much. That fear is being realized in stocks and bonds right now. There had been a flight to quality and rush to bonds in certainly the last probably 20 minutes or so that has brought the yield down to 2. 86 , but it is not at some magic level that it got down to earlier in the week on tuesday i believe we got down to 2. 69 there was that volume of buying that offset what was going on. This time, its taking higher rates to encourage that buying, constructively that is not good. Well have more after this. Retail. Under pressure like never before. And its connected technology thats moving companies forward fast. Ecommerce. Real time inventory. Virtual changing rooms. Thats why retailers rely on comcast business to deliver consistent Network Speed across multiple locations. Every corporate office, warehouse and store near or far covered. Leaving every competitor, threat and challenge outmaneuvered. Comcast business outmaneuver. Neil all right, lets take a look where we stand right now these are from our highs so you not drill here you have to get to a 10 fall off from those highs to count as a correction, have you to close at those level s certainly within the dow, i dont know what he makes of this, how do you feel about all of this, alan . Whats going on . Well as you know, neil, ive been bullish and im feeling good about the way the markets been reacting over the last couple of days. Today, weve tested those lows a little bit still have been attacked those serious Tuesday Morning lows, which is very much a positive sign. Markets usually dont reverse themself and go straight up or straight down afterwards, they usually go back and retest those levels and weve had a bit of a push in the downside today, but the big but here is volatility is nowhere near where it was that extreme where it was. Right now its only up two on the day, nowhere near the 50 level so the fear factor isnt there the markets are more stable and youre seeing that in a lot of other internals. Neil you know volatility is always in the eye of the beholder i know you have this measure in the cbo vix thing you talk about here but when we see these wild swings, a lot of people think of that as volatile a lot of people look at all these algorithms, very smart folks are using for all i know maybe youre using, and that adds to their sense of volatility and how quickly things can change up or down. What do you think of that . I try to get people to look at this on a weekly basis and it can affect your Long Term Plan just to put it politely. I do want to point out a couple basic things here. I talked before about separating the market from policy, separating it from politics, and actually now i look to separate from the economy and just focus on the price movement, thats what drives the market and thats what impacts stock prices thats not changing any time soon, so this is a much needed profittaking pullback in the market for traders for investors but corporations, their bottom line is still doing nothing but increasing with Profit Growth each and every quarter. Neil you know, alan, i know you follow fast Market Conditions as well, and you can trade on the second. I was reading going into the market today going into today that on a price earnings basis, which is a key measure of value, the s p 500 was trading close to around 17. 5 times forward earnings which is down from what it was but it is still historically high. Do you think that this is still a rich market albeit not as rich but still a rich market and has a ways to go to sort of correct . No not if you factor in the Earnings Growth thats projected for the rest of this quarter, were half way through the quarter. If you look at next quarter still doubledigits, doubledigits the next quarter after that. Again, how much money are these corporations making . If its growing and growing and that neil but wasnt all that factor ed in before, that was baked into all these high valuations people had sorted that outlooked at the tax thing. The companies themselves helped us do that. You say no that is not . As of now im going to stand here and say nothings changed. The s p is still up 15 in the last year. Its up 73 last five years, and 98 in the last 10 years. I dont think anything has changed fundamentally yes rates continue to tic higher but we know rates have to go up eventually. Its not a game changer just some of the perception may have changed a bit and youve got a little bit of fear to cause people to take money off the table. So far thats all thats happened, lets see where we are by weeks end but it is a healthy turnaround we saw key reversal in stocks, a key reversal in the vix, meaning new lows in the stock market and now highs in the vix and lower close. Those are both very close. Neil alan good seeing you again my friend a calming presence we needed that so you had a lot of people freaking out and very bullish and buying on all these dips and alan would be described as middle of the road so we always try to cover it making sure all our bases are there so this is historically very significant or a blip that will pass. Take your pick, right now the dow down and well have more after this. Neil the president is having lunch with henry kiss i think gear. I cant tell you how i love to do Henry Kissinger impressions. Now is not the time. That is come back from where we were. Well be exploring all of this, fallout of all of this, rep percutions on your investments on cavuto live. 10 through noon eastern time, and beyond. We have you covered. Fox means business. Does trish regan every know it. Crazy times huh . Incredible. Trish were all over it. Neil. Another day on wall street, as investors fear a Strong Economy will send Interest Rates higher. I want you to observe an absorb that here. Good Economic News is causing the market to sell off. A little bit strange but were going to dig into it and well explain why. Were also going to capitol hill. Congress has 10 hours to pass a budget deal to keep the government funded. Will weigh have another shutdown because of
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