Transcripts For CNBC Squawk On The Street 20141015

As we said, the tenyear getting awfully close to 2 . Inversion blowback. The killer here, shire down 25 and a lot of big event funds getting crushed. Earnings from bank of america, blackrock are out, both beating on the bottom line. Can financials lead the market higher . First up, new data adding to concerns about the economy. Stock futures extending their losses this morning after september retail sales fell more than expected, down 0. 3 . Thats excludeing autos. Sales declined 0. 2 . Also seeing a bigger drop in oil prices after that tuesday selloff. Thats crudes biggest oneday slide in almost two years. Oil is down 23 , jim, since june. Its cost opec hundreds of millions of dollars. Larry fink that morning saying he thinks gas prices are going to come down 30, 40 cents into years end. Gas prices are based on brent. Brent has come down a lot. I think thats a nice prediction. You need oil to go to 70 if that happens. Is oil possibly going to 70 . I had harold ham on last night, who a lot of people feel is the originator. He thinks oil goes down by bounces. The man behind the big liquefied natural gas export says 60. 60 . Yeah, 60, not a problem. No place the put the oil. Were pumping so much, were not stopping. Saudi is pumping. Iran i know, 60, i think, is extreme. I think the 70, 75 is possible. Technically, 77 has held many times. The suki case, and he does not do well with oil at 60. Natural gas. Because natural gas loses, exactly. Loses its value proposition. But this is uniquely a perfect storm against oil. You needed to see a ram, which is coming back online because the sanction is going away. Saudi is pumping like mad. Venezuela, not a lot of clout. Theres a lot of false numbers out there about how much money is made. You keep hearing the u. S. Oil companies do poorly at this price. No, thats the problem. They do well. Its 60, the internal rate of return is very good. So dont think were going to shut the spigot off. If it goes to 70, production could be cut in half. Harold ham said 70 is going to be theres going to be a big slowdown, not just rig count, but you have to watch how many wells are being drilled. There will be a concerted slowdown. 16 states, the states that are responsible for the great employment rise predominantly are at risk unless they export oil. United states has to export oil. Thats the way to get around this. The refineries are operating 95 you cant refine anymore. You dont have enough pipes to get the stuff out of where it is. It costs too much to truck. You have to export. It seems to me to be a highclass problem. Yet, im trying to understand what the impact of this incredible fall in oil prices is. Is it a negative or a positive . I want to tell you what i worry about, but yesterday he cut me to the quick, just like in wizard of oz, when i said ebola is underestimated in this country. Unless you have dominos pizza. Its just a windfall for people who want to spends more money eating out, going out. But if dominos, of course, you eat inside. It actually would be a beneficia beneficiary. Yes, there is a windfall. But the country has jobs at risk. We had a bad retail sales number this morning. Not good. We underestimate ebola. We underestimate russia. We underestimate isil. We underestimate the decline in commodities. We underestimate the decline in the chinese growth. We underestimate germanys resolve to be able to stay balanced. We wake up this morning and see the futures down as we try to price things better. I dont even want to talk about the real event thats davids. Yeah, in a moment. Before we get to it, larry fink with becky this morning said the selloff has been what he called fast money exiting. The meltdown of hedge funds. And no Sovereign Fund he knows of has been selling equities in the past six weeks. Does that ring true to you . If Sovereign Funds were at the margin look, larrys terrific. If you go back to 2008, it was hedge funds. I want you to look at the Master Limited partnerships. A lot of hedge funds decided we can get kind of like what happened with commercial mortgagebacked securities. If we borrow a lot of money and we buy Master Limited partnerships that yield 5 , 6 , 7 , were going to give a superior return. The decline in the etfs that are involved with the Master Limited partnerships is ferocious. I think thats also at the root of a lot of the problem. A lot of these guys were set up very long oil, betting that isis would take baghdad and betting that iran would not come back on, betting that by the way, libya is pumping like mad. Libya is a huge producer. Dont forget, were adding 1. 1 Million Barrels every single year in this country. About to accelerate to 1. 5 million. Lets see what happens. All right. I want to get to a story this morning. May be having the largest impact on the overall market. Thats the potential for one of the largest deals of the year, one that was an inversion and still is because it still remains in place, but potentially is about to be dissolved, i guess. Youre saying it right here. Youre saying this is not negotiations. Well, we dont know, jim, exactly what is going on here. I want to add, typically in Something Like this, abvi last night puts out a statement basically saying that the board of directors intends to meet to consider whether they should withdraw or modify its recommendation to support the merger agreement that would combine them with shire. This is a 50 billionplus deal. Its an enormous transaction. Its widely owned and deeply owned by a lot of big funds. Pahlsson, for example. Lets call it 27, 28 million shares. A lot of people, jim, are trying to figure out, okay, is this some sort of play by abvi to cut the price . That seems highly unlikely. Why . Because under u. K. Takeover law, take a look. You really cant do that very easily. Rule 2. 5, the potential offer will not be allowed subsequently to make an offer for the Offeree Company at a lower level of consideration other than in holy excepti wholly exceptional circumstances. Looking at a lot of research this morning, theres been one or two precedents for that. If you wanted a price cut, this certainly would not seem to be the way to go about effectively doing it. Im not getting any insight from any of the players here, i have to tell you, which you would expect if they wanted to hold your hand, if they wanted to give you at least some sense that, dont worry about it, perhaps some in the media would hear about it. Perhaps some of the holders would. Billiondollar breakup. Also lost money on the currency if theyve been hedging it already, given whats happened to the euro. That being said, jim, we dont know what abvi is thinking. We dont know if its a split on the board. Which seems more likely right now. This as they were forced to do under u. K. Takeover law is simply a prelude to them saying were done, were out. September 29th, david. The ceo quoting hes more energized than ever about our two companies coming together. I have that ready to go. See how it works . I like that. He did. In fact, a lot of shareholders here took this as a good sign. This came after. This was more than a week after the change and the inversion treatment by treasury. So you got this handholding, so to speak, talking about, as you just said, all the good things they say were going to happen. Apparently the cfo of abbvie very recently has been out talking positively to shareholders about the deal. This has got to be the lawyers here who may be a small group of people really know whats going on. Bernsteins out today. They say it could be what they call a routine board review in light of the potential new regulations. All you got to do is get the lawyers to say, you know what, im worried about jack lew. Could it also be someone on the board . There are a number of people who are chicago people on that board, so to speak, some of whom have connections to the Obama Administration at least, with thinking being perhaps the Obama Administration has put some pressure on them. Listen, i dont have a great amount of insight for you unfortunately. I wish i did. I would love some people to start to reach out here, give ugh something. I know abbvie pretty well. They need to steal in order to have the upside. Abbvie is a good company. What im saying is abbvie, if this deal were over and you have to pay that breakup fee, abbvie should be yielding 3. 5 and should not be able to hold 52. Abbvie is down this morning. A lot of people have done the math, just as you did it. In fact, other analysts have done it saying even without an inversion, this deal makes sense. Thats why you had so many big funds, so enormous in this name. They believe that you were talking about a difference in cash in terms of, remember, you can no longer use overseas cash to help had the acquisition. So another 6 billion. People were trying to understand, what changed here . What didnt we understand . When we did the math in terms of what it would mean for you in complying with treasurys new regs, it didnt hurt the deal enough for you to walk away from it. Take a look at this note. What if there was a change . We still think the significant tax savings available to abbvie. The potential stax savings without an inversion would be worth nine pounds a share. Theres a part of the story we simply dont know at this point. I want to point out the Broader Market implications are youve got these funds that are going to suffer massive paper losses. Medtronic is good. That deal is good. If youre one of these guy, youre losing your year or more right now on this deal. Nice haircut. Thank you. Well, viewers are getting an up close and personal look at it. People saying, whoa, easy. Yes, its a little much. Shocks even me. Im going to move my chair back maybe. Maybe we can get truth and reconciliation on the abbvie deal. When we come back this morning, new developments regarding ebola here in the United States. Well get an update straight ahead. Later my main goal is to make sure that our airport and our screening process is in place. If theres a problem there, then we have the backup through the Public Health system and our capacity. Chicago mayor rahm emanuel talks to us expressing his concerns about ebola. A lot more of that coming up later in the show. Take one more look at futures. Well get to bank of america and blackrock and intel and the tenyear. Intel . Squawk on the street from post nine continues in a moment. In a world thats changing faster than ever, we believe outshining the competition tomorrow requires challenging your Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Some wicked action in futures this morning. S p still down about 18 points. The tenyear is the one to watch. This could be the biggest oneday drop in yields for the tenyear in over a year. So keep your eye on that. Can i just say that for those of you who watch this show for more than just stock information, if you can lock in anything, if you can lock in a 10 to 20year, you miss your chance last may. This is it. They want to give you seven year and readjust or a five year and readjust. You got to call today. You got to refinance. The rates are fabulous. Im just telling you. Call your refinance guy, call your mortgage broker. This is it. I cannot believe youre giving this gift again. Try to get under three. People who dont have the credit, they can probably get three and a quarter. Maybe three if you get one more down the ten year. Sometimes you just want to go outside stocks and just say, you know, you may have to make a call here. Meantime, a Second Health care worker at a dallas hospital has tested positive for ebola. We have the latest from hg. Good morning. Thats right. This Health Care Worker, like the nurse who was diagnosed over the weekend, was involved in the care of thomas eric duncan, the patient with ebola who passed away in dallas last week. Health officials havent identified how the Health Care Workers became infected. Because they were exposed, others could have been as well. Theyve identified 75 other people in mr. Duncans care who are actively being monitored. Details just coming out this morning in a briefing, the Second Health care worker was also a woman. She lived alone and had no pets. Decontamination of her living area is under way. Mayor Mike Rawlings spoke about communication. I continue to believe that while dallas is anxious about this and with the news this morning, the anxiety level goes up a level. It may get worse before it gets better, but it will get better. Health officials will identify whether that Health Care Worker had any contacts that need to be monitored. We know the nurse received a blood transfusion from dr. Kent brantly. Any experimental treatments would be up to the patient, her family, and her doctors. Its been more than 14 days since mr. Duncan was initially admitted to the hospital. None of his 48 contacts have shown any symptoms. Carl . Well keep our eye on that. Theyre getting into a period where we might get more optimistic. When we come back, cramers mad dash. Well count down toward the opening bell, take one more look at the premarket, as it does look like stocks are going to sell off hard at the open. Were back in just a minute. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. Philosophy is, reynolds . No. Not exactly. To attain success, one must project success. Thats why we use fedex one rate®. Their flat rate shipping. Exactly. It makes us look topnotch but we know its affordable. garage door opening sighs honey, havent i asked you to please use the. We dont have a reception entrance. Ship a pak via Fedex Express saver® for as low as 7. 50. You say volatility, well its been back these last couple weeks. Again today you can see the futures pointing to a decidedly lower open. A confluence of events, including a potential deal breaking, another ebola case. Panic in treasuries. Oil prices falling dramatically over the last few weeks. These are all violent moves, like the tenyear. Were going back to may of 2013 when you got that once in a lifetime, turns out to be twice in a lifetime. Lets talk about earnings season. Bank of america ended up doing quite well despite the fact they had the 6 billion check to the government. Government litigation now behind them. Back value, 14 and change. Youve got a situation where theyre making a lot more money than i thought they could. That interest margin kind of stabled. They obviously need higher rates. Theyre getting lower rates. Put this in a category of good. Maybe the feds are going to relent, allow big buyback. A lot of cash building. Solid quarter, no one will care. Why wont anyone care . No one will care because the Interest Rates are going down so low that people are going to say, wait a second, theyre set up to make 3 billion on the fed raising rates by 100 basis points. Its now frightening to me. By the way, every single year it seems that you came into the year saying this is the year to short the treasury because yields are going up, youve been dead wrong. Every single year. So much blowing up. Theres someone blowing up in treasuries. You dont find this out until after the fact. Someone blowing up on the abbvie shire. Many levered players out there who are being carted out today. Theyll be down 10 to 15 and be done. Then you wonder about liquidations or forced selling. Intel had a good quarter. Hewlettpackard resumes the buyback, which then is just code for were not going to buy emc. Yeah, the emc talks are done, i can tell you. Still Due Diligence going on, even though there were no longer cotoco talks. There were still a semblance of these talks that had become fairly serious some months back between hewlettpackard and emc, which would have involved hewlettpackard buying all of emc and Going Forward with that split. They could never get anywhere near the right price. Emc wanted a premium deal. Hp wanted that market. Now its over and done with. And they can buy back stock. I happen to like the printer business. Why . Because theyre going to go in, and i think theyre going to destroy the 3d printing business. I think theyre ready. I think thats part of the sex appeal. 3d printing is for real. I think hewlettpackard wants to come in and own that. Can they do it . I dont know. Intel, pointblank, saying that the server business is good, the pc business is good. Now, downgrade intel because theyre saying its not so good. Obviously the stock is going down. Im not going to fight that. Hewlettpackard will not go up if intel goes down. Hewlettpackard tied itself in knots with this decision. Lawyers putting out these statements we cant buy back stock. Youve been in this business for years. Ive never seen it. Its weird. Whats going on with strange statements by ceos . Well, it wasnt by the ceo. It was the lawyers. It is hewlettpackard. Given whats happened in the past, they want to be extra cautious. All right. We have a market open youre not going to want to miss. Cant say its necessarily going to be good to watch, but its going to be important. Were back with it right after this. p its monday. A brand new start. Your chance to rise and shine. With centurylink as your trusted technology partner, you can do just that. With our visionary cloud infrastructure, Global Broadband network and Custom Communications solutions, your business is more reliable secure agile. And with responsive, dedicated support, we help you shine every day of the week. Centurylink your link to whats next. Youre watching cnbc squawk on the street, live from the Financial Capital of the world. Well get the opening bell in just under two minutes. A lot going on. Earnings are just the beginning. Were watching ebola, second case in dallas. Obviously, oil weve talked about this hour. Were beginning to talk about the lows of the tenyear. Back in 2012 we were below 1. 4. You called it a panic in treasuries. The largest drop since november of 2011. This is one of those moments where when you get a violent move, the violent move has very little to do with the fed. Usually its someone who made a huge bet and the bet is blowing up. Italian money moves around all over the world. We saw that. I point out when you see these kinds of moves, eventually what happens, these should the u. S. Government be able to lend you money at 2 . Does that really make sense to you . Or by the way, the italians at 2. 3 or the spanish what is the u. S. Government doing . Why isnt the fed selling all these treasuries . Well, as joe wrote, remember when we worried about who would buy treasuries after qe . The chinese ought to be ringing the register and be doing the biggest Infrastructure Project in history. Theyve already been doing the biggest Infrastructure Project in history. I want some empty buildings and i want them now. Theres the opening bell. A look at the s p at the top of your screen. Down here at the big board, Great Western bank celebrating its ipo today. Over at the nasdaq, Gh Financials doing the honors. Really quickly, jim, sentiment. People say its shifted so quickly that there was not the bullish sentiment that you would expect at the top of a bull market. Some people think ma means the longterm bull has more to go. Look, i think the confidence is just totally shot here. At the same time, like i said, were going to look back and say, wow, why didnt we buy things when oil dropped to 70 . It was such a great thing for america. We could have a tax cut by the president and it would be nothing versus this. Were going to look back and say the cdc after initially not having ebola under control got it under control. Were going to say, okay, the russians cut the gas off, yet europe didnt do that badly. Were going to look back and these things are going to happen. But right now were in that moment where nobody is looking back. Theyre looking at the numbers on our screens and theyre saying, all right, i want my money back. If im a hedge fund investor, i dont trust this market. Whatever they put it in is not going to be as good. So lets be in coke. Lets be in proctor. Lets be in a company that can raise the rates. Im calling clorox frantically today. Can it kill ebola . Then i got a 3 yield with a company that never killed h1n1. Interesting to have one of the most highvalue company that has no growth whatsoever be an interesting option. To what extent is this period analogous at all to when we saw the fall in the high multiple stocks . Then suddenly everybody got all scared. Then about six weeks later, everything was fine again. Those stocks never came back. Well, some did. Netflix got hit. Tesla got hit. They came back. Youre absolutely right. And go pro. Go pro wasnt even public then. We did have a rebound. That was the late february, start of salesforce. Com. On tonight for mad money. But you get into the situation where it is pure panic. Then you sit back and say, well, you know what, i didnt need to panic because im not on margin. I can go back and buy the highgrowth stocks. I can buy the dividend stocks. I guess what im trying to i know this sounds really sane, but im offering a calm view. Really . Wow. Okay. Just putting it out there. I know its such a great moment to panic. I feel the urge to panic. I remember there was a point where i turned to my partner and said, it is amazing they know how to seal these windows. They know how to seal the windows. A lot of people were mad at me because like i was encouraging suicide. Im saying calm down. Calm down. Look at the benefits. Theyre not today because we got too much abbvie, treasuries, isil, ebola. But some of these issues will be solved a few months from now. Thats the hope. And the last one is the one that the solution seems far away for now. Well have to wait. It does. Intel is the biggest loser on the s p. By the way, Morgan Stanley cutting it to an underweight. Pc volumes up 15. People now worried that they block too much, their customers block too many pc microprocessors and are going to take their time buying more. You can go through the actual text of the comp score, which by the way Morgan Stanley says as good as it gets. There are two moments where stacy smith, who was on cnbc last night, basically saying, look, its not good, not bad. They actually use that term. They say the server business is good, the tablet business is very good, the cell phone business still not going that well. They return a lot of money to shareholders. They also issue a lot of options so you dont get this big shrinkage. Because your pcs are old, it was a good quarter. People are now saying it feels a little like micron, but they took a lot of share. Is there anything really left of amd . Only 5 billion in lev news there. It was a good quarter. People are going to decide the intel downgrade at Morgan Stanley, despite the pc client groups being so good, besides the data group center being so good, that intel was not a good quarter. Im telling you it was a good quarter, it just doesnt matter. Those are two different things. Microchip was the outlier then . And qualcomm goes and buys a company that microchip was looking at. I read through the quarter last night. I said, this is darn good. Then i saw the futures, read through it again this morning. Okay, i see the negatives. The other day, its like, it cant change that fast. It wasnt a bad quarter. We talked about time warner yesterday, jim. Today is the actual Analyst Meeting where theyre going to be laying out a lot of their plans, potential cost cuts of some significance. I do notice the shares i mean, listen, shares are weak across the board, although theyre getting beat up almost 4 . 68. Even 85 looks good from here. Holy cow. I got the cbs upgrade today. Fox sold to you at 90. Anybody, anybody . Well see. I know this is going to sound crazy no, not now. Youre like my daughter. You read my mind. Drives me crazy. Guys, we have the tenyear now below two, i believe. The nasdaq, we should mention, has fallen officially into correction territory. Just briefly. The tenyear yield is now yielding 1. 98. People were talking about three seems like just yesterday. If you can get a bank to give you a loan, theyre giving it away. They have so much money, the banks. Whats interesting about bank of america, theyre just swimming in money. A lot of oddities going on. It is stunning. Its just ferocity of that mov just stunning. And whos getting hurt here . Not the American Consumer. If youre looking for a mortgage and filling up your tank, youre a let better than you were a month ago. Dow is down 300 points. S p has lost its gains for the year. 1847. We closed 2013 at 1848. Not only is the dow now down, what, 2 , but the s p, dead money for 2014. I want to hit the phones and get some color for whats going on from some people who are managing money. I will guess as well that the potential end of the deal by abbvie to acquire shire is having ripple effects through the market. I completely believe that. How dramatic the losses are for them right now. We have shire. Of course, thats been trading in london. Abl also, abbvie is down sharply. We dont know what was behind the decision to say theyre reconsidering the deal. It was on it was obligated to give thee days notice. There were no back channels saying dont worry about it. A lot of people are scratching their heads. A lot of other people who own this thing in size are doing more. You want to talk about panic . Trying to put some perspective on this thing. When you have really fabulous things like rates going down. Now, someone is going to say, jim, dont you remember the republic before hyper inflation . Im not going there. The American Consumer is strong. The American Consumer is worried about ebola. American consumer benefits from these Mortgage Rates. Benefits tremendously by gasoline. We need some leadership in the country, leadership by cdc. I think youll find people coming in and buying, but we dont have that yet. Dow is now down 344 points. Lets get to bob posani on the floor. A rough day and doesnt really matter what you look at. Were down across the board. I want to show you s p futures. Those of you wondering why we dropped so much. It really happened largely at 8 30. Although, we were weak going into that. That trio of disappointing data we had of retail sales, ppi and the new york october manufacturing numbers. We dropped a good nine handles. You can see this is were showing the futures here for the s p. The important thing here, i think, is the retail sales numbers. September was really disappointing. Remember what was going on. We had a nice drop in electronics thanks to the iphone. Everything else disappointed. Remember, oil was supposed to be a positive declining, but that decline really has come in the month of october. I think, and a lot of traders feel this was a reverse wealth effect. We drop 1. 5 in the month of september. Remember, theres been a lot of reliance on the stock market rising, a support for Consumer Spending. But we havent had any wage and salary growth. Everybody knows that. Weve sort of been relying on the stock market going up. I think there was a bit of a reverse wealth effect here. Nobody down here has been arguing thats not the case here. One of the things i think might happen now as a result is q3 gdp estimates could come down. I would not be surprised this morning to see a handle with a two on it for gdp growth in the third quarter. Thats whats being discussed right now. Take a look at the sectors. Were down across the board. Technology, energy, materials, these are the growth sectors. Consumer discretionary. Down right across the board. Everything is down about 2 right now. On bank earnings, dont matter that much, but just put up the numbers here. Bank of america, smaller than expected loss. 1 cent a share for that. Revenues were also short. You can see thats the big decline. Pnc did pretty good. They Beat Estimates by 8 cents. As you can see, it doesnt really matter in this kind of environment right now. Its a very tough environment to go public today. But there are two of them. I want to note, there was a big bank that went public, western bank. It just opened a moment ago at 18. So that did get done. Although, at a lower price than anticipated. Its a tough time to go with a Master Limited partnership. I know, jim, you were talking about it this morning. But the dominion midstream, they priced at the high end of the range, 19 to 21. Were still waiting for them to open right now. Jim, you were talking about potential people selling out of some of the Master Limited partnership etfs that are out there. Theres no doubt. Eshlgs etfs are pretty small in the Master Limited partnership space. This one is only 8 billion in assets under manager. Thats a fairly small amount for Master Limited partnerships. If you like at Kinder Morgan energy, thats a big one. Thats a 38 billion market cap. Thats a Single Company out there. You can see the decline that weve had up there. We were in the 90s there just a few weeks ago. That stock down another 2. 7 . Mlp at 2. 28 . Finally, want to talk about Exchange Traded funds. Blackrock reported numbers. They were outstanding. Remember, blackrock owns ishares, the biggs etf company out there. 30 of their business in europe, by the way. They had great numbers overall here. We saw ishares continuing to grow its part of the business. Overall, 7 growth in it the ishares etf business. I know its a rough day for the markets. People who own those etfs still doing very well. Guys, back to you. All right, bob. Thank you for that. The tenyear now at 1. 91. Lets get to the bond pits and check in with Rick Santelli. Ill tell you what, carl, what never happens down here, the east board and north board on yields are different. Why . Because theyre moving like wildfire. You know, i never use the capitulation word. One, because its hard to say on live tv. Two, we see it so rarely. But this is starting to fit the bill. Just consider this as you look at the charts, which have already changed on comps. Ten minutes ago the twoyear was comping at november of 2013. It was at 35 before retail sales. Its trading 26 now. Fiveyears, we were comping back to june of 2013. It was 140ish when we were looking at retail sales. Tenyear was at 216 looking at retail sales. It was comping back to may of 0 2013. Were now slightly over 190. Were playing around in the low 270s. Chart goes back to december of 2012. Does it end there . No. When things like this happen, were all trading the same market. Look at the guilt in the u. K. Under 2 . These levels havent been seen since may of 2013 and maybe farther. Markets moving so big. Lets take a look at boon yields. Im not going to show a long chart. Theyve never been lower. Look at the intraday. 75 basis points and counting. How has all this affected the dollar index . Dollar index showed its strength early. Federal reserve showed its concern late. The market month to date on dollar index, it isnt doing what it did prior to october. Its actually moving a bit lower and its under a little bit of pressure. But to be fair, it had a humongous move, especially against the yen and euro. Wow, what a day. Back to you. Rick, were going to come back to you early and often. Jim, forced selling at work. How much of that is part of today . A huge part. A lot of people on the wrong side of trades. I keep going back to when we have a conference like delivering alpha when you see guys who have billions under management. Im trying to recall anyone who had it right. Lots of people were saying, look, Interest Rates have to go higher. When you listen to the bank earnings, everyone was prepared for the fed to raise rates. There was a particular moments when janet yellen said inflation was noisy. Prices are plummeting for every single commodity. When i had pat doyle on last night for dominos, he was saying, listen, the only thing thats left that hasnt come down yet is cheese. Coffee hasnt come down yet. Cheese will start coming down because corn is coming down. I pick this out because its positive. The hedge funds that are taking action today would make you indicate the world is coming to an end. I think the stock market was too high in relation to ebola, russia, isil. I think people feel there are events lurking that you pick up the paper this morning you tweeted around quarter to 6 00, second case of ebola. The futures dropped very big right then. I think were underestimating the negatives short term. Overestimating them long term. There are still people cheering. Great western bank behind us. Remember Great Western . Yeah. What happened there . You soured on the markets right around the second week of september. Yes, i did. You didnt like the setup from ukraine. You didnt like the setup from the fed. Ebola we hadnt even thought of really. Its not like you have concerted talks to try to solve russia ahead of when they can set off the natural gas. Merkel, how many days does she have to come out and say, im Herbert Hoover and were going to have a Great Depression . Sorry, thats not what shes saying. Theyre not using their considerable buying power to do anything but your impulse to buy is not there. This is not the dip. This is not the dip to buy. You know i like dips to buy. This is not the one. Is ebola under control . You got a vaccine. Thats terrific. Its certainly not under control in west africa and those three countries. The headlines are bad. The World Health Organization numbers yesterday were frightening. 17 Million People watched a show on sunday night. They didnt watch the eagles giants game. They watched walking dead. The country actually has this kind of incredible fear of something coming along, and its ridiculous. The fear at that level is ridiculous. Ive got like a dozen diseases im reading about right now that are killing people that are spreading in this country that are not ebola. But you know what . This is very high profile. That said, the s p, i looked five minutes ago, was down 2 . Now down 1. 5 . We are coming off of lows. Remember, there are margin calls. I was seeing some forced selling. For example, shares of agn had been down as much as 7 . Now down only 4. 4 . That would be a name if you were under significant pressure and in ab fund you have to sell. So that was going on. It is still going on. But that stock has come back rather sharply. Now the s p down 1. 47 . Not that isnt a significant loss, but were well off the lows at least we were just making ten minutes ago. Dupont, stock back to now below where nelson peltz took a stake. There are so many different stocks that values are being created. I know that again, i want to reiterate there will be margin calls if the market doesnt bounce here. But there are values for people who are thinking, i want to buy stocks out three, five years. But you have to understand that you could still get hit if you started buying in limited partnership today. There could be a forced selling later on today. Im just saying that people levered up to buy these Master Limited partnerships. Now you have some of the smaller oil and Gas Companies at 70 that will not be able to make good on their projections. Thats who bought these contracts to be able to ship natural gas and oil through the pipelines. People are saying they have to issue more stock. Theres a series of negative short terms that are very real. Let me ask you this. We never got to on an ordinary day, we would have talked about apple being added to the best ideas list. Are those irrelevant right now . Yes. Thank you for mentioning that. You look at nike, the stock went to 92. And it has hung in there this morning. Everybody said, you know, if i ever could get a pullback in nike, i would buy it. Now you get a pullback. Goldman sachs does the absolute right thing. Thats the stock to watch for today. Because nike just reported really good numbers, all regions. Even china. They said a lot of good things. By the way, i will also put intel in that group. Because intel, he was asked pointblank, have you checked how youre doing since microchip . He said, yes. Business is good. So we have companies that are saying business is good, but we have hedge funds that are flailing. We have a gigantic tax cut in the form of what opepec is giv. We have 16 states that will get hurt. I would add, there are some stocks making moves up. Hewlettpackard is up. Of course, reinstating its buyback. No longer any talks with emc or anybody else because theyve stated theyre not in possession of any material public information. Theyll make up what they lost by not having bought back stock in previous quarters. Cisco was up for a moment there. And time warner, which i was watching because of the meeting today, was down 3. 5 . Its now up. Cbs is up. Do you want to buy pepsi you know, look at all these 3 yielders where they can raise the dividend. Look at the tenyear. I can make a strong case that you should by clorox and buy pepsi, cocacola. Now pepsi co. Is totally hedged. Stock was up 8 yesterday. They say, everything is going our way. Am i supposed to say, no, its not because i looked at the stock market . Im not going to download your app, this is really terrific. As a matter of fact, im not going to order the cheesy bread. Thats it with the cheesy breads. Because the tenyear fell to two . Not only that, but shire. Im not going to order the extra toppings. Is that what happens in america . No. Time warner aims to deliver 6 a share and adjusted earnings per share adjusted by 2016. 8 by 2018. Those are the new targets. They successfully rejected foxs overtures. Fox perhaps unwilling to pay 100 a share. The onus now on the Management Team at time warner to deliver value. Perhaps value from which they can then sell the company two years hence. Also saying they will more than double earnings in the next several years. That has kribtded to that stocks gain. Of course, a rarity on this negative day. Also brings to mind citi today upping cbs to a buy. Cheap stock. Alibaba momentarily traded at a level ive been saying if this stock gets to 82, you have to buy it. It kind of hit that. Again, we have margin calls during the day. So remember between 12 00 and 1 30, a lot of hedge funds will get called and say, please sends in the money. If they cant, send in your house keys. Ive made those calls. Theyre not pleasant. Go pro is always a bit of a guide post, at least in terms of momentum. Pacific crest does initiate them today at sector perform, saying optimism is priced in. Is that critical enough for you . If you get go pro in the 60s theyre having a huge, huge holiday season. You cant stock the stuff. At 93, no thank you. At 50, 60, thank you. Ill do it. 50 is still 24 from here. You want me to say go pro here . You think its proctor . I dont want you to say that. Im glad you didnt. But you did say buy it at 50. At 50, im in with go pro. We havent gotten to some of the other banks. Pnc beat by 8 cents at 1. 79. On the show last week. I thought, you know, lebron, maybe the browns. Well, looks like key corp. Isnt in there. More of a johnny manziel, johnny half dollar. By the way, time warner i dont want to dwell on this. Up 2. 5 . You like talking about that. I do. Time warner has been significant. That is interesting. It says if you have a good story to tell, people listen. People seem to be listening. We got a bunch of guys saying facebook is right today. Better than expected quarter. Nobody is listening yet. A lot of stocks are coming back. This was a panic low like we havent seen in a long time. If the lategreat mark gaines were here, i think hed say this is a little overdone. The day is young. If youre long shire, youre sitting there and thinking, boy, i hope the margin clerk doesnt get to me. Maybe that margin clerk wont look at my balance today. Csx remains under pressure by about 1 . 51 cents did beat by 3 cents. Although, shipments up seven. Revenue per shipment up one. No comment on canadian pacific. Stock was up because of canadian pacific. I particularly like the coal line, which was very good. I like the ag line, but theyre saying is thats because of a peculiar upside. The chemical line is oil. I could understand given the fact the stock is up that people dont want to own that. Thats a very good quarter. Yeah, and with oil now at 80, its amazing how oil 81 a week ago would have sounded ridiculous. But here we are. Heres an example. Everyones kind of i mean, when everyone says that oil is going to 77, what does oil do . It goes up. You know, well, we are watching a market that has now crawled more than halfway back from its lows. The s p down 0. 96 . Its under two on the tenyear. Do you mind if i buy companies that spend where the largest line item is gasoline. By the way, back to focusing on the dividend payers. I guess we are. The leaders today, right . And it has been. That rotation took place some time ago. But its back. Look, a company like General Mills does not have a great story to tell. But at 3 plus, its pretty interesting. You know what youre going to see . Youre going to see Oil Companies eventually with the ones that have big cash flow will begin to win over the ones that are that dont. Thats not happening yet. But i do think again, im trying to think five days ahead. Im trying to think when General Electric reports on friday, honeywell. What happens if dave kody says things are good . Look at boeing. Down horribly. What happens if he says things are good . The chart is bad. By the way, on every stock that i like, im hearing, but jim, i know you like the fundamentals, i know you like the dividend, i know you like the buyback, but if you looked at the chart well, okay. You know, certain points of panic, charts matter. Is youre going to have a lot to get to on mad. Whats coming up . Salesforce. Com. Hello. Yeah, i think marc is good. Don wood. Shopping centers, theyre doing quite well. Omni channel is back. Do you mind if i look at that stock . Not at all. I want you to. You do . Yeah. You go ahead and look at it. You being back is so great. Its good to be back. Whoa, really . Lets not start that. It feels very Kansas City Royals right now. He says the same thing when you come back. I was just trying to do some work. Thats all. All right. Jim, well see you tonight. 6 00 p. M. Eastern time mad money on cnbc. Were going to continue to monitor the marks. Dow is down 200. Thats a lot less than it was earlier. Back in a minute. Having a free checked bag. With my united mileageplus explorer card. I have saved 75 in checked bag fees. Priority boarding is really important to us. You can just get on the plane and relax. I love to travel, no foreign transaction fees means real savings. We can go to any country and spend money the way we would in the us. When i spend money on this card i can see brazil in my future. I use the explorer card to earn miles in order to go visit my family which means a lot to me. This is charlie. His long day of doing it himself starts with back pain. And a choice. Take 4 advil in a day or just 2 aleve for all day relief. Honey, you did it baby laughs welcome back to squawk on the street. Boy, you have to be watching today. We just had august business inventories hit the wire. Up twotenths. We were looking for up fourtenths last month on change. That that isnt the news. Weak retail sales, Global Growth concerns, energy Price Movement have all contributed to one of the biggest intraday treasury moves in a tenminute period i think ive seen, especially in pr percentage terms. I was here in 87. Look at these intraday charts. Breathtaking. We saw 24 basis points in a two. We saw 185 low yield in tens. Now popped over 2 . And 30s got down to 267. Theyre at 281. All this intraday movement gets lost on many charts. Should the bounce continue because its based on closes. But ill tell you, capitulation in treasuries, this might not be the big chapter, but this is definitely one of the little chapters as investors obviously werent looking to get in, they were looking to get out. Sarah, back to you. Unbelievable. Thanks very much for keeping an eye on Broader Markets besides treasuries as well. The three major averages seeing big losses right now. The dow is down about 140 points. So weve made up some of those earlier losses. Still sharply lower. Rick just mentioned it. Earlier sinking below 2 . Hovering just at that level. Bond king speaking out yesterday saying he expected the tenyear yield to hold and will cause stocks to bounce. Maybe spoke too soon. Lets bring in bonnie baha, doubleline founding partner. She had the Domestic Corporate credit part. He spoke too soon. Tenyear hit 185 this morning. What is going on . You know, i think we all want to know whats going on. Certainly theres got to be a lot of emotion in this trade because fundamentally, whats really changed . I think there are fears surrounding ebola. Theres a second case in texas. Thats a real concern. And when you look at the eurozone with the german tenyear trading at 80something basis points, how do you explain that . What this really means for u. S. Investors is that the feds got to be on hold. Im watching the dow here, down 120 points. We just swung more than 200 points in the opening half hour. You see this as a sentimentdriven trade . Oil, by the way, is now trading higher. Interestingly enough, sentiment driven, absolutely. I guess everybody wants to know when weve really hit the capitulation trade. Thus far, its been a situation where bad news is good news. I mean f the feds on old, that means the party keeps going and stock profits keep rising. But the bad news narrative is getting scarier. Youre hearing deflation more. Central bankers are running out of bullets. Thats got to be a scary thought. It is. I guess whats more concerning is mario draghi came out a while ago and said, whatever it takes, right . Okay, well, it was like thats over. Now theyre talking about implementing qe in the eurozone. How exactly will you execute that when you have a common currency in these disparate markets. You know, really, i think people are starting to think through that. But its more profound than that, isnt it . It looks like to be a major repricing of risk. Some sensible people are saying some extraordinary things. Last time jeffrey was on, he said, look, the only reason for the fed to actually raise rates really is to get out so it can come back in again when the economy turns down. Right. Now youve got people suggesting actually they may not get high enough on that terminal rate that they have to implement qe in the next recession. Then the argument goes, if every other Major Central Bank is executing qe, assume the europeans can do it, they have to bring qe forward in order that the dollar doesnt shoot higher. Well, again, a strong dollar is a good thing up to a point. When our exports become uncompetitive, you know, even by fed accounts that could shave about half a percent off of gdp in the year forward. Look, repricing of risk, thats really what it is. Even yesterday, you had a couple of fed governors floating the idea of qe4. What do you think about that . I think its a real possibility. Because while things have sort of stabilized in the u. S. , its not like were at a skate velocity. How would the market react . Doesnt that just look desperate . I think theyre already pricing it in. Which is what were seeing. On the upside or downside . Thats a good question. The bond mark is pricing in the fact certainly that the fed is not going to be raising rates any time soon. Qe is officially supposed to stop at the end of this month. Does it stop or does it stealthily go forward . I guess thats the question id kind of like to see the answer to. I dont know if you follow miked gayard. Hes suggesting this is a profound moment and a turning point for the market. The last great bubble is popping, and its the faith in the Central Banks. Its the belief that the Central Banks can do whats needed and support asset prices. If hes right in that, thats very serious. That has serious implications on most asset classes. Thats a very astute observation. We may be getting to one of those turning points where theres no close. I mean, so far in the eurozone, its really been all talk and no action. They still have yet to implement the Structural Reforms necessary to truly recover. I was reading just the other day in greece, were looking at their rates back up around the 7 plus level, and 24 of the greek population still doesnt do what buffett says when you see the fear in their eyes. Thats the point you buy, particularly on the equity markets, particularly within energy. Would you have sympathy with that . With energy, no. With commodities, its a different story. Its a good news, bad news sort of thing. For the first time in decades, the u. S. Is energy independent. Thats the good news. The bad news is theres too much oil floating around and the saudis have already said theyre not going to cut down on production. Thats going to have knockon effects. For example, the highyield market, which is part of the portfolio my group manages at double line. 15 of highyield corporates are in the energy zone. Thats really been driving the spread movement. So again, that might be catching a falling knife a little bit. Nobody rings a bell. I certainly wouldnt rush to buy into this. Again, theres opportunities here. Very quickly on the energy question, helpful at this point to have these low Energy Prices or hurtful because its a sign that Global Growth, u. S. Growth could be slowing . Im going to sound like an economist. On the one hand, energy has really been the bright spot in the u. S. Economy. 2 unemployment rates in areas around the shale. Its been a great driver of growth. On the other hand, its great news for consumers who are struggling already. Were looking at median incomes in this country that are really still stuck at 1995 levels. So lower gas prices are going to help. 50 a family i see on average is what they believe theyve saved since july. Its something. I mean its a lot of money. And again, its not a panacea, but it certainly helps the consumer. In this economy where its been a tale of two economy, really, corporations have done fabulously well while consumers have continued to suffer. Lower gas prices will certainly help on that front. Crude oil, 81. 87. Its turned around a little bit. Bonnie, always good to get your thoughts, especially on whats been going on this morning in the markets. Thank you. Okay. So cut to the eye of the storm and see exactly where we are trading on oil. Jackie deangelis. Good morning. Well, it looks like Energy Prices have reversed course but just barely positive here. Yesterday we saw some extreme selling as we headed into the close. That was triggered by electronic trades that were coming off of steep technical levels. Traders telling me at this point theres a coupling of things that theyre watching. There are a lot of factors in the hopper here when it comes to oil prices. Of course, theres the oversupply issue, the iea cutting its demand forecast. Remember, youve got a little bit of a weaker dollar, but were still at an 85 handle. Also, there are those fears over Global Growth. But a couple of other theories floating around down here that i want to share with you. The first regarding supply cuts and opec. Opec is kind of playing a game of chicken with the u. S. Producers saying, were not going to cut supply. Were going to wait until wti prices go below 75 and force you to cut supply. This could get really tricky here if everybody starts to dig their heels in and not give way to the supply situation in the market. The second thing, your guest before mentioned ebola. One of the traders telling me that theyre talking about ebola fears impacting the crude market. That is because if people are scared to go out of the house, scared to get in the car and drive to the mall or go to the hospital, theyre going to stay home, not be spending as much money and not necessarily be buying as much gas. Were looking at a lot of factors here, causing a bit of fear in the marketplace, if you will. One last thing. Usually when i talk to traders, we get a little bit of consensus about where were going on prices. Today theres confusion. Everybody is going a different way. They are saying were looking to trade singles and doubles here. Were not necessarily looking for home runs at this point because its really difficult to predict which way this market will go. In terms of pricing, we are looking at wti over 82, but we did dip below 80 this morning. Of course, that was quite significant. Guys, back to you. All right. Thank you very much, jackie. Now on to a deal in dire straits. Having a broader impact on the market perhaps than is being appreciated, although of course the s p itself has come back from being down over 2 to now being down, lets call it, 0. 8 . Im talking, though, about the decision by the board of directors at abbvie to reconsider its recommendation to its shareholders for the acquisition of shire. This is one of the years biggest deals, if you recall. More than 50 billion. A tax inversion deal. It is now in dire jeopardy. Although, its not clear what is behind the decision by the board to say its going to reconsider it. It hasnt yet recommended against the deal. It will have a meeting on october 20th. It was required under the merger agreement with shire and under u. K. Takeover law to give them three days notice. Hence, we heard about this late last night. It has created nothing short of panic certainly in the Risk Community and those that run event funds. Im talking of course about the likes of paulson, magnitar. You can go on and on. There are so many funds that own this thing in size. Why . Because even with the changes of treasury in terms of inversion rules, when you look at the math, this was still going to be a very accretive deal and did not seem to be impacted enough. In fact, management was telling employees about the benefits of the deal. Take a look. There was a letter out then that gave a lot of the comfort to those who owned shire shares and owned abbvie shares as well when the ceo said, im more energized than ever about our two companies together. Im more confident than ever about the potential of our combined organizations. To those who would say, hey, maybe this is simply an attempt on the part of abbvie to get a price cut, well, take a look at u. K. Takeover law. Its very difficult to negotiate a price cut under the u. K. Takeover code. Rule 2. 5 states very clearly that the potential offer will not be allowed subsequently to make an offer for the Offeree Company at a lower level of consideration other than in wholly exceptional circumstances. Perhaps thats the case here. Perhaps not. As you might expect and as i mentioned, paulson, 27. 8 million shares. Were talking an over 2 billion position. Also owned a lot of abbvie. They put out a statement a while ago saying simply, we believe the transaction creates enormous value for abbvie shareholders, a combination both strategic and accretive regardless of the tax inversion. We hope the abbvie board reconfirms its commitment to the transaction. They better hope thats the case. The paper losses right now are enormous with shire shares down over 22 . Abbvie also getting hit. One has to think as this board goes in to deliberate amongst itself that is will say, gee, our shareholders dont seem to be particularly enthralled with us walking away. Not to mention were going to pay a 1. 6 billion breakup fee. And weve been hedging currency thats cost us. But its very much unclear exactly whats behind this. Were not getting any guidance at all, which we might typically if they wanted to say to people, dont worry about it. There are people in europe who believe that they are after a cheaper deal. Could you not argue these are exceptional circumstances . Because the treasury is pulling the rug under you and tax inversions, that changes one of the major dynamics of the deal and therefore its worth less. The precedent for doing this apparently is infan ses mall. Theres one or were to times when its happened. So to go to this length to get a price cut doesnt seem to be strategically that smart a move if thats all you were after. When we come back, markets in the midst of this selloff. But as we sometimes say, off the lows, the dow is down 108 points. Biggest move for the tenyear, intraday in about a year. The dow has moved 600 points in about 30 minutes of trading. When we come back, gary koh min ski of Morgan Stanley will join us live, help make sense of it all. Go ahead and put your bag right here. Have a nice flight traveling can feel like one big mystery. Youre never quite sure what is coming your way. But when youve got an entire company who knows that the most ontime flights are nothing if we cant get your things there too. Its no wonder more People Choose delta than any other airline. Welcome back. Its been some ferocious selling at the open. Lets get back to bob posani, get some insight into whats driving this mornings selloff. Its been a fascinating morning. Great to be a market reporter. This is the kind of day i live for. Let me show you some of the etf action thats been going on. The vangaurd 500. We had some panic selling about 9 40 to 9 43 or 44. Then, boom, all of the sudden the volume went through the roof in this thing. Were trading more than 100 of the normal 30day volume right now. Just through the roof. Why did this happen . Folks, somebody decided to start buying. Sometimes dont overthink it. Its as simple as that. I saw similar action in another one i watched carefully. Ibm, thats the russell 2000 index. That also saw enormous action at the same time, about 9 44. Turned around, the volume went through the roof. Probably doing close to 80 of the normal volume. Now, what happened . Was anything a catalyst . Its hard to point out. A number of people pointed out to me that crude oil about that time, about 9 40, west texas went positive. Crude does not normally lead the stock market. We all know that. But about that time it happened. Some people feel oil is being watched so carefully. That may have been partly a catalyst for the turnaround. But it is rather strange why the market dropped so much to begin with. After all, retail sales were disappointing, but down 370 points in the dow . I dont think so. Retail sales would never have dropped that much just a month ago. I think all of you should listen carefully what david faber has been saying about shire. This morning as i called around on my usual rounds on the desk, said, what do you think . Bob, abbvie blowing up is a huge problem for the funds because those guys have had problem after problem. Carl, weve seen them long u. S. Growth stocks. Theyve gotten killed. Im talking hedge funds. Long shale plays. Theyve gotten killed. So everything david said this morning, that this is a big, compounding problem for the hedge fund, i think was a major factor for the early declines that we saw. Quite a turnaround. Bob, can i just point out one thing . Actually, the market dealt with that very sudden fall well. There was no flash crash. The volatility picked up. The liquidity picked up. Off we went to the upside. Perhaps in contrast to friday, or monday when some of the the market went the other way. Very good point, simon. This was a real good indicator of stress here. Right at the open, down 370. Suddenly, a quick reversal. Ive been looking for points of failure this morning. I havent seen one. I havent done a complete exam, but thats a very good point. All right. Thanks a lot, bob. Of course, markets coming back just as bit here after a rough morning. Joining us by phone this mortgage is Morgan Stanley vice chair of Wealth Management garry kaminsky. What happened this morning . Well, you know, i was going to echo exactly what bob just said and give credit to david because basically what happened at the open, theres a couple different things. What i heard happened earlier this morning was exactly as bob and david pointed out. When you have a big riskoff deal like that collapse, youre going to have ramifications. Thats exactly what happened. It was sort of shades in some respects as david will remember, the airlines of 1989. You have a lot of derisks as a result of that. When you put that on top of a weak tape, thats what you get on the open. What about walk me through what happened with the ten year and crude. All of those things related to abbvie shire . The tenyear has been something as you and Everybody Knows that ive been talking about for the better part of two years. Thats really the result of the global fears of deflation. Weve been talking about that, and thats been front and center now for many years. I think ultimately, you have to make a decision if youre a buyer of equities, whether you believe deflation is going to be here in the United States or it wont. The fed has been able to create an environment since 2009 where weve had growth but its been slow growth but it hasnt been a recession. I think what happened today was, again, a bit of a panic mode because we have a lot of concerns out there, but at the end of the day when you look at other fixed income instruments that should have traded down in yields, up in price with the subpar 2 tenyear, it did not happen. So when you look at that, you can say specifically this was a move by Hedge Fund Investors to get into the riskfree treasury and did not see any other fixed income instruments. Gary, its sarah here. You know, people have been saying we need a correction, we need a correction in the stock market. It cant just be a oneway ticket higher forever. Is that what this feel like to you . When you talk to your clients, do you tell them this is a healthy, normal correction to make new highs, or is it something more worrisome going on . You know, great question. Theres never a healthy correction because it always feels terrible. But i think that there was a belief earlier this summer that the growth was going to be greater in the second half of 2014 than its going to turn out to be. Maybe this is a recalibration of what was expected growth in the United States and around the world thats now being recalibrated. Again, what i tell the clients and what the clients believe is were either going to be in a recession or were not. If were not going to be in a recession, then the strategy thats made sense given the central Bank Planning thats been going on for the last several years, thats not going to change. Whats the best asset class the last 12 months, as one of my colleagues reminded me this morning . Very simply, municipal bonds. Why is that . Its because of whats happened in Interest Rates, in terms of the economy, and whats happening in terms of taxes. So gary, for people and we should note that the s p is down 5. 5 now over the last week. There is clearly, as you mentioned, a major repricing of some assets here. Ultimately, how do you protect the wealth that you have . You cant put it all in munis, can you . Well, simon, as you and i both know, a lot of people probably wish they did, but of course you cant. You need to do the same thing you and i have spoken about on air now for several years. You need to be a balanced portfolio. It sounds mundane and boring, but you need to asset allocate in a way that protects you for all scenarios. Yes, not all municipal bonds, but you need to have some fixed income exposure. Even when many strategists and advisers are telling you that it doesnt make sense and that you should be 100 in equities. I tell clients the same thing i do for myself. I am balanced to protect myself in all these different scenarios. Because we have no idea, nobody has any idea how this is going to play out over the next several months. Im not talking about the stock market. Im talking about the economies of the world. Thats how you protect yourself. And just one last koe that on that. When it comes to ebola, whats a reasonable conversation supposed to sounds like . Carl, thats the toughest question there is. Like yourself, im not an expert here. But its a real fear. Im on the west coast right now. I travel through airports earlier this week. When you start to see this, you start to worry as you think about Economic Growth. I wish i could give you an answer. I dont know. But i will say its something that everybody is talking about. So it becomes it feeds on itself much like the abbvie shire deal feeds into the overall market. Its something that all frontfacing, consumerfacing businesses are going to have to Pay Attention to and see how it affects their businesses over the next several weeks. Gary, thanks for joining us last minute. Good to have your experience and wisdom here during this turbulence. Gary kaminsky is Morgan Stanleys vice chairman of Wealth Management. The dow down 131 points. A lot of action in fixed income, where youre still seeing lower yields. The tenyear back above 2 . Find out what this means in terms of the Federal Reserves next move. Plus, the topperforming Hedge Fund Manager of the year last year. Find out how hes handling all of this market action. Shes still the one for you. And cialis for daily use helps you be Ready Anytime the moment is right. Cialis is also the only daily ed tablet approved to treat symptoms of bph, like needing to go frequently. Tell your doctor about all your medical conditions and medicines, and ask if your heart is healthy enough for sex. 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The dow is now down well call it about 157 points here. Well off the session lows. We were down about 37 0 at one point. If youre looking at where the bounce was, check out whats happening with both Energy Stocks as well as material stocks. Among the gainers in energy, check out southwestern, neighbors, and halliburton. All of those stocks have been hit especially hard in the recent selloff. Materials also bouncing here as well. You can see some of the biggest gainers there. Down just about 0. 5 overall with material stocks and Energy Stocks among the biggest losers. So simon, international paper, monsanto among the names to see a bounce. Interesting, dom. Thank you very much. Well, many people would argue the weak retail sales figures we got this morning was one of the reasons we sold off, potentially changing what markets believe the Federal Reserve will do. Steve leesman has more. Simon, thanks. Apparently markets were banking on the idea that u. S. Consumers could save the world economy. We learned this morning in the retail sales reports thats not the case. Seriously disappointing retail sales numbers, including a decline in autos, clothing, and furniture sales along with a recent concern about Global Economic weakness and deflation. All of it changing dramatically the outlook for the federal see serve and the Interest Rate hikes next year. Take a look at this chart here. The outlook for rated hikes from the central bank. Ive not seen a drop like this on a fed funds futures chart. This is the december 15 fed funds futures. It had been trading very consistently around 75 basis points. Think of it as threequarter point rate hikes. Now trading at just 38, which is barely one rate hike. So some of the market now dialing back expectations for any rate hike next year. Heres what they said. These three reports add to the view that the fed will be in no hurry to raise hikes. Also seeing economists lowering their forecast for gdp this quarter. Im seeing around three basis points. Well a an update in the next hour or so. Many economists say the market is overreacting. Guys, one bright spot. Electronic sales up 3. 4 . Why . Iphone showing up in the national data. Steve, what does it say to you that the view on the fed has shifted so quickly, so dramatically . I think its a bit of an overstatement, overreaction here. I dont think the feds going to react to this one month. I think you need to wait and see next month if this weakness is confirmed. I think the idea youre going to get some bounce in Consumer Spending and therefore a bounce in growth off these Lower Oil Prices and better jobs numbers makes sense. There was clearly a pause in the month of september, but i dont think its a reason to hit the panic button yet on the American Consumer. Steve leesman, thanks it a lot. Talk to you soon. Meantime, todays selloff also sending Mortgage Rates down sharply. Diana olick is in washington with more on that. Hey, carl. I was getting warning this morning even before the yield dropped below 2 that Mortgage Rates are, quote, snowballing downhill. Were looking at levels not seen since june of 2013 when rates last spiked. Now we are firmly into that psychologically significant 3 range. Now remember, the average rate on the 30year fixed had fallen to record lows thank yos to the fed. When the fed signaled its pullout, rates shot back up. They started to fall again this past summer. Today, again, were going into the threes. Matthew graham at Mortgage News Daily said yesterday the first few rate sheets were right on the edge of 3. 875 . 4 would still be more prevalent for most borrowers. Today well be solidly in the threes unless the bond markets reverse course. He adds these drops wreak havoc on lender pipeline. It will take Time Spent Holding this ground. Now, Home Builders stocks are up on the falling rate, ignoring the broader selloff, even though Mortgage Rates to buy a home dropped last week. They do create urgency among some buyers, but there are bigger barriers to entry rights. This is all really about the refi. Those applications jumped 11 last week on just slightly lower rates. Still down 27 from a year ago. Remember, this is all about the rate, not the credit availability. These low rates go only to the top borrowers with money down, good credit, and strong personal balance sheets. Simon . And that really is the issue, dia diana, isnt it . Can you get the loan and will they offer it at a decent rate. That continues to be a major problem here clearly. Yes, absolutely. Because what we hear is people get excited about these rates. They call it a refi and found out theyre simply not eligible because of their debt levels and income. You have to take these low, low rates with a grain of salt. Okay. Diana olick in d. C. Thank you. Straight ahead, hes the Top Performing Hedge Fund Manager of 2013. Billionaire and mogul Larry Robbins of glenview is here at post nine for a live interview next. Find out what hes doing with his money when we come right back. Health can change in a minute. So cvs health is changing healthcare. Making it more accessible and affordable, with over 900 locations for walkin medical care. And more on the way. Minuteclinic. Another innovation from cvs health. Because health is everything. But what if you could see more of what you wanted to know . With fidelitys new active trader pro investing platform, the information thats important to you is all in one place, so finding more insight is easier. Its your idea powered by active trader pro. Another way fidelity gives you a more powerful investing experience. Call our specialists today to get up and running. With the Market Selling off, who better to talk to than the topperforming Hedge Fund Manager of 2013 . Having another good year, at least until recently. Plus, hes landed himself on cnbcs next list. Larry robbins joins me now at post nine. All right. Were having a really big, bad down day. We are. You show up wearing a hockey jersey. Why . Well, first of all, thank you for having me. We appreciate cnbcs support. I reason i agreed to come here is to support robin hoods investor conference, which is next week. Its the second year of the event. Robin hood invested over 180 million in new york citys Community Last year. So investors who come out to the conference, not only will their 7500 ticket support needed services for families, whether it be food, shelter, education, but also last year the ideas there offered 1,000 basis points of alpha for the investor. If somebodys running a milliondollar portfolio and used those ideas, they had 100,000 of excess performance on a 7500 ticket. Thats the ratio of the impact that robin hood has in the community. For every dollar that robin hood puts in the community, it has about 13 of poverty fighting benefits for the city of new york. So we appreciate you taking the time. And yes, i used the billboard capacity in order to direct people to robinhood. Org. Well done, larry. Of course, youre on the board. Its an organization i myself have been supporting now for almost 20 years. And we appreciate that. Great work. Lets get to the markets this morning. Lets get to them actually this morning. Its not often we have an opportunity to talk to someone who manages as much money as you do as successfully as you have. What is this were going through, and how are you approaching it . Sure. First, lets all be humble about the fact that were all trying to figure this out as well. If we think about the fact the markets had during the last five years have been areas of elevated concern, and there had been significant drawdowns in the market, but theyve turned out to be more noise than actual change. For us, the question is, whats really happening to the economy and most importantly whats really happening to liquidity. Outside of what happened to greece overnight, where weve seen greek bonds elevate to over 7 , if you look at the sovereign debt rates of spain, of france, of countries that people were concerned about, their actual ability to pay three years ago, those debt markets have never been cheaper. Look where treasuries are. Look where corporates are borrowing. So we dont believe theres a systemic issue out there. Clearly, europes economy is weaker. Clearly the things that have elevated in the news flow in the last three to four weeks are scary. Isis isil, ebola. Theres been a lot of things that as Portfolio Managers, as human beings we have trouble processing. From a market perspective, the Economic Data is quite conflicting while Empire Manufacturing this morning was pretty weak as well as retail sales, it was down to a level we saw consistently throughout 2013, when was a very good year for the markets. Our own checks with companies indicate that the economy is doing reasonably well in the u. S. Clearly some challenges overseas. So we dont believe that this is a change in tone in the market thats likely to be here to stay. We believe this is a transitory risk bubble that whether it lasts another day, another week, or another month, were not smart enough to figure out. Transitory risk with oil falls as much as it has, perhaps a reflection of a global glut and then a reflection of of course perhaps weaker Economic Growth than anticipated. A tenyear that falls to 1. 9 something this morning. Im not sure i can explain that one. Obviously an extraordinary move and speak es to the liquidy in the market. Its just simply a huge move. But if we think about the fact that a month ago, one of the chief concerns out there will the fed tighten every meeting, will it happen in march. When we look at the futures today, theyre now pricing in the first tightening of february of 2016. While oil falling is bad for Energy Companies and potentially globally destabilizing. On the other hand, if youre the u. S. Consumer, right, you see your wages going up 2 , you see the cost of commodities going down 4. 5 to 5 . As a u. S. Consumers, thats quite good news unless you happen to be long Energy Companies. So what does it mean for what youre doing with your portfolio . A lot take risk off in an environment like this, which means sell stocks. Have you been doing that . Is this a case where you see some value . In our portfolio, we did get more conservative in the second week of september. We took down our net exposures between half and twothirds. Not because we saw this coming. In fact, this was bigger than we thought. But simply because we looked at the laundry list of risk items from september 12th to october 12th, it was somewhat elevated and running into a period of liquid it i. We took risk actions then. Weve now started to rerisk about halfway to where we were before because of the fact we are finding more buying opportunities in this endeavor. Knowing of course were fwhnot trying to make a market call. But what we see is that our portfolio has fallen down to 12. 5 times 2015 earnings. And the dramatic moves weve seen in some stocks belie the fundamentals in those markets. We as Hedge Fund Managers and Portfolio Managers sometimes are the transmission mechanism by which a worry in one sector becomes a worry in all. And so those things are important over the short term. Over the medium and long term, cash flows, ultimately, thats whapg whats going to drive value. Case in point, the rental car industry has been horrifically hurt. You recommended hertz at our delivering alpha conference this summer. It has done extraordinarily poorly. Yeah, so hertz is down about 20 since we last talked. Avis is down about 27 from the recent highs only one month ago. Obviously, all airline and travel companies have been negatively affected by the ebola scare. Theres a common perception that itll cease travel for a bit. But ultimately, the rental car industry is a threeplayer market. Some people six months ago when we talked were calling for a change in the ceo at hertz because there was a feeling that he was creating undue price competition. That ceo changed happened at the end of august. We have a rational old goply. Theres no question the results over the next month or two will be more challenged than we would have thought six months ago. In terms of the weight of the stock over the next three to five years, were quite confident that industry will operate on a very healthy basis. Take avis. Its trading at ten times next year and seven times 2016 earnings. Its Free Cash Flow has been 135 of those earnings. Management has shown a great skill at holding constant leverage and using their Free Cash Flow to repurchase stock or affiliates when they can. So that capital cycle will fuel economic Value Creation over the next couple of years. I know youll be presenting some ideas next week at the robin hood conference. In the past, youve also talked about a big position of yours being monsanto. You use convertible equities in the sense theres more upside for names like monsanto. So youre right in saying theres no such thing as convertible equitequity. Convertible equity is a concept. If we can find a nice, safe business which is bondlike in its growth and has recurring cash flows and stable and secular growth and we can buy it at a reasonable price, that alone makes it a reasonably attractive investment compared to a 2 ten year. That makes it a wildly attractive investment. If we can position capital where theres a call option that something good and extra could happen that could make those returns go from good to great, thats where we want to position our capital. Lets take monsanto. In the last four months, monsanto has announced theyll be repurchasing over a 15month period 20 of their shares. Well, share purchases isnt a panacea, but if youre buying back stock in a Franchise Company like monsanto at 17 times in year and 14 times next years earnings on a lowleverage balance sheet, that will be value accretive. If you look at the Major Players in the ag cycle, whether it be monsanto, dow, dupont, they have allact aif shareholders. Syngenta is a Swiss Company that has no staggered board and an offshore lower tax rate. All five Major Players are likely to be thinking about asset shuffling. In the ag business, one plus one does equal three. The synergies of combining those businesses are significant. So we like our basis investment in monsanto. They grew earnings 14 last year. 18 precurrency. 21 before they spent back in this climate corp. Business. And if you can own a 20 recurring grower at 17 and 14 times earnings to allocate capital, that is the definition of a convertible equity. Larry, were out of time unfortunately. Cant even talk about the next list. Maybe me, you, and lebron james will get together sometime. Yes, maybe well do that. Larry robbins, thank you as always. Thank you, appreciate it. Carl . All right, david. Markets continue in selloff mode. Dow is down about 238. Well get a lot more on whats moving the market when squawk on the street comes right back. Big day . Ah, the usual. Moved some new cars. Hauled a bunch of steel. Kept the supermarket shelves stocked. Made sure everyone got their latest gadgets. Whats up for the next shift . Ah, nothing much. Just keeping the lights on. laugh nice. Doing the big things that move an economy. See you tomorrow, mac. See you tomorrow, sam. 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At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Health care stocks certainly a focus for investors. A battleground if you will. Right now its shifting between at least losses and even worse losses as the markets are developing this later morning. Back over to you, carl. All right. Dom, come back to you in a few minutes. Lets get to Rick Santelli this morning in chicago. Hi, carl. If its wednesday, its home and jenkins jr. Day. Welcome to my special wednesday guest. Thanks for taking the time. Good to be with you, rick. I love todays oped. Pops the green policy bubble. Lets start at it with the volatility weve seen in energy and tell me and synthesize your thoughts from todays piece. You know, i think the most important thing in energy right now is the fact that all of these big shale plays and arctic plays and many other big investment projects in energy by now would be growing again. Its a terrible policy failure by western politicians that have caused our economies to continue not to grow. Thats why Energy Prices are falling. There just isnt a demand. Its nice for consumers, but it really is a bad sign for Global Growth. You know, we prioritize things wrong. This is just my opinion. But we have todays the day for the science deniers out there. When you look at the subsidies going on, we had jay leno on today. Jane wells did a great job. E says elon musk is a car jen yus. I totally agree. But the product is just unrealistic. Its based on expectations that dont really take into account the realities of the world. Throw in subsidies. Your thoughts . Yeah, no, i love elon musk. Entrepreneurial ambition. I think an electric car company could work in america if it sells cars to rich hobbyists who want to play in that market. Its absurd were subsidizing these cars for rich people with the tax dollars of people who make average income. It doesnt serve any Public Policy purpose. I dont think musk really needs it. Its just absurd Public Policy. You just got too much government doing too many ridiculous things. Yes, you know, mario draghi is really in the hot seat. Of course, hes the head of the ecb central bank. Im going to paraphrase. In yesterdays wall street journal, he said things along the lines of, listen, i as a central banker have to slow down because im enabling politicians not to solve problems or address problems. I think that is as spot on as anything ive heard in the last four years. Your thoughts . I wish ben bernanke had said that five years and at least in return for qe gotten some real policy reform from congress. You know, tax reform, some kind of entitlements reform. He should have held out for that because those are the things that are really going to bring the economy back. Its not just goosing it with more inflationary dollars, not that weve seen the inflation yet. But at some point. Good grief, you cant run an economy on print money. Absolutely. My last topic is my least favorite, and its politics. Ever since this whole thing with with the irs, i think that the conservative voice has been squashed, but nonetheless, how do you think all the current market activity weve seen, whether its stocks or oil or Foreign Exchange or panic in Interest Rates, is any of that going to affect the outcome in any way in your opinion of the midterms coming up . Last question. I sincerely doubt it. Gas prices going down might lift spirits a little bit, but i dont think its going to bail out obama. He just had a terrible year. I think people are sick of it. Well, listen, its always a pleasure. I could talk to you for a half hour. Thanks for taking the time. Lets go back to sarah and the began on squawk on the street. Thanks for bringing us the conversation, rick. Still ahead, venture capitalist and chicago billionaire j. B. Pritzker will be joining squawk. Well be right back. Requires precision and anattention to detail. G it takes knowledge, hard work and a plan. At baird, we approach your Wealth Management strategy that same way. As an Employee Owned firm we have the freedom and resources to create customized financial plans built to last, from generation to generation. Well listen. Well talk. Well plan. Baird. The getaway vehicle for all the confidence you need. Td ameritrade. You got this. Welcome back to squawk on the street. Its been a wild ride for markets. The dow falling as much as 370 points before some bargain hunters moved in. Among the biggest losers so far today on the dow. Intel, microsoft, disney and home depot. Nike still in the green. Being added to goldmans conviction buy list. All ten sectors still in the red. Negative territory. The biggest losers, the banks. Citi, j. P. Morgan, Morgan Stanley. The airlines were mixed as Oil Prices Continue to fall. Now oil prices are stabilizing a bit. Momentum stocks took a hit before coming off their lows as well. Netflix, tesla, gopro all in the red. Among the names hitting 52 week lows today mcdonalds, boeing, united technologies. Michael kors. The battle continues between the bulls and bears. Back to you. Its interesting that you start earning season and start with the financials and its the financials now that weve had a good look that are done. Bank of america. Key corp. Caught up in the momentum but if the market Interest Rates are falling which is what you have seen today that doesnt help profits moving forward. And wild moves across assets. Dom mentioned oil turning positive. A lot of people are pointing to the weaker u. S. Dollar. Passing 128. A three week high for the euro and one month throw for dollar versus japanese yen. The trades are now reversing. Lower yields make the u. S. Dollars less attractive which makes oil a little more attractive. So the correlations are rejiggering right now as were seeing volatility coming back. Good morning. 11 00 a. M. On the east coast. Volatility not going anywhere. Major selloff today. The dow down about 370 at if low. Currently down about 202. Historic action in the temperature year which well get to in a moment. The interday chart, the dow moving over 600 points in just the first 30 minutes of trading. Despite the comeback, the dough on track for a worst five day losing streak in over three years. Normally we try to focus on tech but it is a day where you cant take your eye off the markets at large. Art, good morning. Do you want to explain what happened in the first half hour . Yeah lets put it together. You started in the morning. The futures were weak. You had isis. You had ebola. You had a break up of a big corporate deal. And you had oil continuing to free fall. So that kind of dislodged a lot of things