Transcripts For CNBC Squawk On The Street 20180209

The german dax is down about 10 and so is our s p 500, the 10yr note yield, thats a cheap culprit. Rates have been backup yesterday. We are right around 2. 84 it is the expectations of higher rates to a certain extent. The prospect of inflation has caught the attention of investor over the last tentrading days and resulted in a significant decline for the s p 500. Lets ged t to our road map this morning. The dow facing its worst week and s p 500 worst week since 2011 you just saw stock futures are pointing to a rebound. It would be the largest tech opposition until it is or it is not. Qualcomm officially rejects broadcoms buy offer theyre going to meet. Jim and i will have the details. And Winter Olympics. Carl is going to sit down the comcast ceo, Brian Roberts later this hour. Wall street has never been happy it is a friday bracing of what could be a volatile session the dow and s p 500 are in correction territory that means they reached down 10 from todays highs in late january when we saw those highs. Since then, the survive lost more than 2. 6 trillion in market cap. Nasdaq just shy of a correction. Jim, you know you sat here in the mornings with me and we see whats a relatively open last couple of days so up or down or very little down and by 10 00 we have seen to be and by the time you leave the show it is going up. You keep on warning just wait. Do you do it today as the volume dries up well feel better. I will just give i want the symbols to be known. The uvxy, vxx, this is a very complicated piece of paper the first and second month of vix. Tvix, thats another one these traded a hundred million shares of the first one and 85 shares is the second i will tell you what come on, the volume in these is not what we are seeing and there is a broader sentiment in the marketplace. Rates are going high it is all this well, look this ucx is 110 million shares yesterday you look at this piece of paper tpix, you see tpix is down today. There are a lot of bets made on these by people who are very important. Here is why it is important. They have to settle up and sell common stocks and typically own these and buyers cannot figure out why are there such concentrated selling these are margin calls elated to these. If you have a margin call at a particular time lets say 3 45. If you know you are down this, you come in and sell, take a look at the action from 3 to 4 that should not happen the market is very thin. Rates did nothing yesterday. No, they did not. They did note backup al at a. I would argue that we could be up today provided theyre real buyers who can absorb what is indeed not that much money. There is a lot of paper making the rounds on this there is a fella, i dont know him personally, chris cole, january 25, he says there is basically 1. 4 trillion involved with these that i just mentioned. Thats 60 or 10 of the actual capital. This is as parody strategy suddenly under scrutiny and they dont seem to be under the cu culpr culprit. I think because they are hidd hidden i was speaking on a reporter today on a major Radio Station yeah. Shes terrific, she was asking me about cryptocurrencies i tried to explain what the did you just hang up . Nice person i tried to explain ultra vix futures and how the s p 500 short term fusion. You cannot do that. I did not have her at vix you can barely do that here when the value dries up, you have a couple of these these are the fog of war the war is Interest Rates. The fog of war is the stuff that some people are saying can over ride anything. I disagree once the volume dries up you know the xiv were to closed the other day. I mean if President Trump were watching and we know thats a lot of time and hes engaging in other pursuits if hes watching this, look, it is hurting my deals and ratings. Can we investigate this piece of paper and close them he can send the market up. If you are like i think thats the place for him to but it is for the sec to investigate on the volatile. I think they should i urge people to look at charts and yields and you will see how this could be such a big part of the equation again, it is boring and obscure. All you got to do is margin call burst of selling of margin calls often come and you say wow, some of them must know something. No, it is someone that did not know anything. The volume of these things got to be coming out now, is it . Thats a great call some of the volumes have already began and diminishes quickly and a lot of good people are looking at that. I am sorry. The big picture again big picture is the stock market is down so much it is, you think so based on your expertise. You are going to buy yeah, at this point it is out of hand i see stocks that are too valuable, i am not going to say listen, these stocks are a waste of time because they are all caught up in these nonsense. We can only go down marginal i think it is time if you see the market down, that causes more. If you see a piece of paper and you see this uvxy, the volume expands from 110 million then you will have morse selling. I interview a lot of ceo s in te show now theyre saying what the heck is my stocks doing down here quick to be calmed is not what people want. You are just calm and you ta i can a look and you buy something. It is pretty simple. Typically now ime now to get pacific. Thats where we are headed to quintanilla, hes at the Winter Olympics in pyeongchang south korea. Reporter i know it is a busy morning. The Olympic Games do roll on and we are here in south korea, 2800 athletes, guys from 95 National Olympic committees four now sports are going to make their their debut the first winter games of more than 100 gold medals it is truly business and sports. It reads like dow. Coke and ge and proctor and gamble, and samsung and visa it is a big project for our bosses at come cost and nbcu and 2,400 hours of coverages well talk to the ceo Brian Roberts about the game as and n. And about mma and tax cuts and well talk to bob, mike evans of their new global sponsorships of the games and of course, the Opening Ceremony tonight 8 00 p. M. Eastern time on nbc, guys, it is going to be a busy couple of weeks. Yeah, we are glad you made it there safely, carl anybody there talking about the markets or do they focus on the forts . Look, i think there is a general sentiment and i made this point this morning, the games are, they dont make room for the world to suddenly get calm for political disputes and National Security disputes and market volatility to go away i dont know if you recall in 08 in beijing of the entire olympics and the summer games. The athletes here are focusing on their sports and the sponsors are focusing on getting attention to their brands and that does not change whether the dow is up or down a thousand points a day or not. New york city it certainly does not well, thats nice i like to hear that because life goes on, carl. A lot of people exist because not everybody owns stocks. This is not relating to issues involving collapse and oil sector and it must be hard for a lot of people say hey things are good, why are things so bad in the market it is kind of contrary from what a lot of people are feeling, is it yeah, i guess so. We are so u. S. Centric although i think one thing you may point to the degree of asian selloff are worser than our own. Well talk to mike evans of the volatility and the degree of maybe in the short terms of some of these large global players, are they putting projects on hold or could it affect the ipo market thats a decent question for evans in addition to their brand new sponsorships for the games and all that kind of stuff carl, we look forward to it china markets hit a low that we have not seen since may. Hell be joining us and made it there safe and sound we got a lot more to get to this morning including qualcomm rejecting broadcom and if it goes to three, everything i said about the 10yr. If it holds 2. 8 and the stock market holds, well have a nice day. You heard it there. You got to hold the line at 2. 8. We got a lot more coming off and yesterdays big selloff, we are back after this. Finally taking dowron the that schwab billboard. Oh, not so fast, carl. Oh no. Schwab, again . Index investing for that low . Thats three times less than fidelity. And four times less than vanguard. Whats next, no minimums . No minimums. Schwab has lowered the cost of investing again. Introducing the lowest cost index funds in the industry with no minimums. I bet theyre calling about the schwab news. Schwab. A modern approach to wealth management. Its technology was engineered beeping . While its design was meant to be seen. Experience the new 2018 lexus nx, and the nx hybrid. Experience amazing, at your lexus dealer. You or joints. Something for your heart. But do you take something for your brain. With an ingredient originally found in jellyfish, prevagen is the number one selling brainhealth supplement in drug stores nationwide. Prevagen. The name to remember. All right, yesterday after the post, qualcomm came out with a release saying they reject the offer from broadcom. For any number of reasons, they are willing to meet. That was an important moment and of course, it was expected by broadcom which has been looking for an opening trying to engage with qualcomm about that offer and trying to address their many concerns and of any antitrust risks of potential deals would hold last night in the middle ofthe night, they send them back a letter and a merger agreement trying to at least to start a conversation in dealing with some of their questions when it comes com comes to antitrust wei hey, we are glad to meet you on friday or saturday we hope you are will to meet with us in terms to reach an agreement. After having that most of the largest stockholders last week, we have no doubt this is their strong desire as well thats what we heard from broadcom last night, jim on the board of directors, the 82 share number did get some people attention lets at least have a show of good faith here and sit down right the expectations are however i would say early going here but having spoke with a couple of shareholders and others that it is not going to get them anywhere well see. Is there a willingness to go beyond best and final. We heard best and final plenty of times only to see thats super se superceded by a higher bid both sides have questions and responses, qualcomm of course putting something out last night thats in record straight. I cannot really show it to you here, regulatory challenges and a fourpager and sending the merger agreement to qualcomm last night broadcom says it dealt with a number of different questions that they had. I will tell you some of those questions, well, in talking to people they still have them. They say could be swiss cheese and there is no obligation on broadcom part at this point or obligations investing in qualcomm businesses. The obligation to vest is capped by the material adverse effect and plus to qualcomm, the 8 billion break free, not 10 billion. They were considering and may still go to if they get to an negotiation amounts to 5 a share. Shareholders maybe non plus here is some questions i have for you. Black rock, they announced 15 at qualcomm. Do we know how theyre going to vote we dont. How would you know if you are the broadcom people that they could have canvas the two large holders. Do you think they canvas that . No. You know well having follow them, too. Things change and can change the last moment. Why did you say that you have talked with them and things are going broadcoms way i dont know. I mecan you riddle me that i cannot. Qualcomm would tell you something some what different. It sounds like the old day. We meet on tuesday and i think there is a sense or a question is how sincere qualcomm is really is and certainly a lot of questions of whether broadcom could come close to addressing those concerns on antitrust. By the way, the ticking fee that they had and this thing goes longer it only gets paid if they close the deal it is important because it is a largest take over of all time. To avoid it and focusing on instead of microns pe is five we have not started talking about nxp again which has been down it is been very down and concerning all right, we talked a little bit about that well have much more for you and nvidia we have jims mad dash coming up one more look at futures, you can see we are set up of what would be a higher open but that does not in y y veanwaha anything to do with where we close later in the day more squawk on the street after this really helped me up my game. I had a coach. Math. Ooh. So, why dont traders have coaches . Who says they dont . Coach mcadoo you know, at Td Ameritrade, we offer free access to coaches and a full education curriculum just to help you improve your skills. Boom thats lesson one. Education to take your trading to the next level. Only with Td Ameritrade. Each day our planet awakens but with opportunity comes risk. And to manage this risk, the world turns to cme group. We help farmers lock in future prices, banks manage Interest Rate changes and airlines hedge fuel costs. All so they can manage their risks and move forward. Its simply a matter of following the signs. They all lead here. Cme group how the world advances. Thank you so much. Thank you so were a go . Yes we got a yes what does that mean for purchasing . Purchase. Lets do this. Got it. Book the flights hai si si ya ya ya what does that mean for us . We can get stuff. Whats it mean for shipping . Ship the goods. Youre a go you got the green light. That means go oh, yeah. Start saying yes to your companys best ideas. Were gonna hit our launch date scream thank you goodbye we help all types of businesses with money, tools and knowhow to get business done. American express open. All right, lets get to mad dash this morning, we have a fascinating situation that unfolds of newell. It has suffered greatly in the stock market this is around, jim, i did not get to it yesterday as we were covering so many things as to an activist would show up a lot of people thought it would be mr. On icon a man who stepped off the board. They want to take over the entire board of directors like dard darden what do you think . It is a hostile take over with no premiums m lets go back to 55 just like these Sporting Good channels, lets just say a target channel. Remember they got hurt online and mike poe developing online and doing very well. The problem is the channel was bad for everything is johnson doing okay . But it is the Sporting Good companies thats apart of jardens and you know look if you want to know and i think that Martin Franklin he can do a better job by maximizing cash flow. It is extraordinary the guy steps up the board a few weeks ago and coming back now wants to be chairman of the company we are talking about unclear of how much stocks they actually own. The leak they gave seem theyll go higher. He wants to do another take over without a premium i find it extraordinary Martin Franklin is a genius, there is a lot of things that he surprises you. I know that though it may not matter whos running mike poe did not see this decline coming david, he preannounced three times. That means hes not a good forecaster franklin has a very good case. It is a battle that well be following. The meeting for newell is may 9th. Well be following the markets closely when that opening bell rings just a few minutes from now, stay with us from squawk on the street. 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Shake it off, get your head in the game, guys i am watching the 30year and the uxix i bet it is a 10yr holding at 28. Remember how old i am. I do think 10yr plus those obscure instruments that i mentioned the one that traded to uvxy if you see the volume dry up, well rally. Tell your beat up friends. Tell them what . They should follow what i am saying of course, they should. David, how about fedex and ups. Well take a look at them when they open ten seconds from now. There it is the beginning of trading. It is friday, february 9th on the big board. Bri bringing to the great charity. Fedex is down 15 points and ups was down 8 just to give you a sense of how there is a little bit more levity today fedex is down 3 and ups is barely down. There are some buyers today. Some are embodied by the Se Semiconductor stock where led by Nvidia Jensen wong is a little bit of a video man even though hes shy of tv. Nvidia as we pointed out so often was the best performer in 2016 one of the best in 17 why would that be there you are, forefront of the data center of gaming and Machine Learning and Artificial Intelligence and yes, lets say it, cryptocurrency they got it all working and he pointed out a number of time. This is not luck hes a brilliant eye with a great team and hes a nice guy by design i am not doing that to him. This guy is seriously inspirational figure and anyone who has followed him knows hes the best that we have how do you think of jensen . We should put him in the same category as zuckerburg this thing is approaching tell me a little bit abo about you dont want to see that. Right obviously, you have to follow the vix. I hate having to follow these things that are really bogus stocks they were created by wall street there is a lot of things created by wall street the vix is down every time we have a crisis, we realize all things that wall street created and comes back and haunt us do you know reddit is yes the best article was in red and i am going to use it millennials, it is experimental and it is exciting you know how they like bungee jumping and cruises and they like playing the double x ultra vix two times action, they can do it on instagram they instagram themselves doing it okay, do you think this experience will have any sort of lesson for them . Yeah, theyre going to get it beat out at them next thing you know theyre going to go to grad schools. You talked a lot about these products yes they are products here we are at a strong open this morning, the s p 500 is up 1. 2 thats good and nasdaq is 1. 5 you may expect facebook and alphabet and amazon. Are you fanging me . I am fanging you. Is this any tougher for what i am going to see for the end of the day . It is it makes it so the pressure is off margin calls and these plus and buyers underneath are coming in and make itless likely that they are brokers, i need your car keys or the key of your house, the vxx, it is good news. Thats a fund that offers. Could you get more other than a ten year treasury more precious than a piece of paper . No, it dis not Retail Investors want to play volatile they like dollars and vxs it is what people do. David, people are so stupid, it is frightening the First Amendment protects that it is protected class of morons who have been reckoning everybodys stock portfolio. We can blame it on the 10yr if the president were to come out and explain the vxx, it would be a little insane it is not going to happen hes not going to explain it. I watched faber and cramer, look at that, it should be faber and cramer, they should i should investigate because i am calling the head of the sec right now, being reduced to 6 trillions maybe they will how about general kelly how about we move on . Okay. Yes not a great quarter there. If you read it, there is nothing going on the former ceo moving onto uber, a new management at this company, i would argue not the most suspicious beginning. Thats a negative this is an investment here. Whats that code for we are doing poorly. An investment here reset did you know that yelp is having one that stock was down big. The 18 outlook is 6 to 11 thats a big range thats why you are seeing the weakness here. The top of a big range in growth the only thing thats slightly above expedia and target if you want to have the key to the fundamental porgtion o f the market emerson electric. Him upgrading, emerson is only 200,000 shares of volume watch that stock he has the power by virtue of how right hes been o f the General Electric speaking of ge. Let me ask you a question i have been thinking of something. 120 billion market value now and new lows yesterday but also not gaining anything back with the markets this morning let me ask you something. Yes, sir. If you are a people of running bakery use, would you not drop that last part in order to raise your valuation . Baker use and oil service company. I might you get rid of ge, it is called rebranding, i would rebrand. Ge is smaller you should rebrand. Speaking of branding, you see this athena healthcare would you put a release out saying of the new chairman would you want people like that david, you dont have anything nice to say, my motto is right if you dont have anything nice to say, you dont say it my ma is right you are not going to say this david, this is the business i have chosen. I am saying nothing. Right thats not helpful to me, jim. Really . Smaller piece i need you to talk. No mr. Bonds. I dont want you to talk what operation was that . Did you remember we had grand slam thats the best one at denneys it is very metoo. Gold finger is a great song i am looking at the banks. I am looking for leadership. You will give me a sense of where you think it should come from at this early rally bank of america they are the ones that stands. They need to have Interest Rates to go higher it is a great tell because they need the 10yr to go higher. 2. 857. If this 10yr ticks in three i all right, 3 is the key area for you and a lot of other people you mentioned ups at the start of the broadcast or when the open came. It is down about 3. 5 from this amazon news they are moving nor aggressively ups is the stock is down badly. Yield of 3 point what happens with the activist talk . I dont know. We have had a lot of activist talks. We got a lot of spring meetings coming up and there is a lot of names going around this week newell is one of them and interestingly it is down and not up on this news that we were talking about earlier. Taking over with no premiums and the entire board of directors by franklin and led by jeff smith whos a busy man. The market does not seem to care they care more about the 5 million shares already you just dont want this piece of paper tvix. What it does is it is not typically well here by the way the cbo has been week because of the vix related products. People are saying it is going away david it is really interesting. When people see nvidia only up 9, theyre thinking what is that about. It was down a lot yesterday. It is going down because right now there is a pressure on the market we are getting margin calls at this moment and it is driving the market down and we have to hope that it holds all right for the early going here, s p 500 is well off its highs already. Because you have margin calls and the pieces of paper thats going up that i just mentioned theyre going in the wrong direction. Their variables. Nvidia should be 20. How much is going on in terms of washington affecting people thinking there was a more a conversation around a trillion dollar deficit and the enormous sales treasury thats taken place this year and you get the budget deal thankfully rand paul is sitting there on the floor and saying well, we care about deficits under the obamas but we dont care about them nianymore. Is there a concern for the first time i hear people saying its gotten out of control in washington. Where were they when these people basically made it to the government they dont make much money unless the gdp explodes. It is not going to explode it is impacting the 10yr piece of paper that holds, boy, we are going to rally this decline it should stop declining today as the volume of this piece of paper tries to come down the uvxy traded shares i had nothing else to offer other than whats really causing the decline. Okay. Thats all i have to offer. Lets see what bob pisani has to offer now we are done with you thank you take it away here a little bit of a balance here lets take a look at the leadership, the s p 500 is down 5 for the week. The old leadership banks, banks are trying to get some tractions here there is the old regrowth trade that we have ignored for a long time there is a lot of strategies ouou there thats getting deleveraged. You have the short volatility long stock, that was the biggest trade all last yearment some of these are in short vix traded products most of it are not there are other ways to express that there is momentum strategies and risk parody that targets volatility, the Common Thread in all of these is the last week or so there is been the leveraging, thats why we are getting the massive volume in the middle of the day. It is hard to figure out how much is index ed of the strategy it is frustrating. The s p 500 is down for the year thats no t the best way to look at it. The average price what we call the v whop is 2750 thursdays close is at 2581. We are at 2600 today the average lows for the average guys bought the s p 500 is 6 and not 3 bear in mind we look at the flows for the Exchange Funds equity funds is through thursday now. 30 billion in out flows. Thats a pretty big number most of these out flows are the biggest etfs out there 25 billion from spy, this is used by professional traders to get in and out of the market if you take that out just take a look at the s p 500 funds with three big one out there. The other two thats used by Retail Investors, ishares and vanguard, they are smaller if you look at the spy volume, this is the we had three times normal volume of this gigantic fund of the last several days monday and tuesday and wednesday and thursday, these are titanic number that we are seeing overall. Finally i want to note ipo business, very, very tough this week, we had a couple of pricing today, Oil Servicing company, 10 of 12 to 15 and i think the important thing is we have seen four or five ipos postponing this week. This the kind of knock on effects that we get this gigantic volatility that we have been having. The Dow Jones Industrial average is up the 210 points guys, back to you. Mr. Pisani, are you going over your list there this is as day we should rally and if we get some volume on the upside, the people are marching calls, we have no problem of selling and so this is a for real deal we are focused as jim has focused us on the 10yr at various levels there time to turn to mr. Rick santelli to find out whats going on in fixed income market. Well, it is fascinating lets start out with the weekly metrics. Always important it is prioritized, more important than daily closes. 2yr is down 285 right now for 10yr is up one. The winner is a 30yr bond hovering at 350 and almost 360 it is up 7 basis points on the week lets go to the charts. For the most part, it is been a steady eddie year to date of bond, we are up 44 basis points and thats a lot of ground. Dont want to dismiss that for the most part you can see there it is just been kind of walking up, just about almost every session since the year end. Look at today, bund is not up much it is by 33 basis point. Considering it is still rather force full considering how much and it is moving 10 basis point in favor of wider on 10yr no yield in this country. There is a lot of talk about the hyg and the lqd. If you go to the spread charts, the actual securities, they haves been rather well behaved take a step back and look at the one year chart, thank you, barclays certainly they turned up a little bit if you put them in a one year time frame, it sends a message that it is not as crazy when equities get a little volatile or a lot volatile. You see the fixed income markets having such a big year this one is really fascinating this first chart year to date of the dollar index for 2018. Take a good look at it here is the year to date dhacha of the dollar index of 2017. Boy, dont they look alike everything is going on with Central Banks really is quite amazing. David and jim, back to you Rick Santelli at the cme. Carl is at the Winter Olympics in south korea, well stay on top of whats going on in our market and you can see we are having a rally 20 minutes. Keep it here. At fidelity, trades are now just 4. 95. We cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. And at 4. 95, you can trade with a clear advantage. Feel that . Thats the beat of global markets, the rhythm of the world. But to us, its the pace of tomorrow. With ingenuity, technologies, and markets expertise we create the possible. And when you do that, you dont chase the pace of tomorrow. You set it. Nasdaq. Rewrite tomorrow. Take a deeeep breath in. And. Exhale. Aflac and a gentle wavelike motion. Liberate your spine. Aflac and reach, toes blossoming. Not that great at yoga ya but when i slipped a disc, he paid my claim in just one day. So he had your back . Yup in just one day, we process, approve and pay. One day pay. 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We sat down with Brian Roberts the ceo and chairman, talked about the fact that there is more live kebtd cocontent comin these gauges than the last two Winter Olympics combined and we also talked about the degree to which comcast is keeping some powder dry for additional m a or potentially more buybacks that they have given guidance for and then of course the loss of thursday night football which is an asset that went to fox take a listen. We said we wanted to change the target leverage to actually be a little bit higher than weve previously said. So we talked about 2. 2 times previously weve been 1. 5 to 2 so that is an increase which would suggest that we could do more buybacks, but weve also found things to buy during the year that in the past year like dream works animation, so we do at least a 5 billion stock buyback, we increase the dividend 21 , tax reform is a big part of adding Free Cash Flow and we want to invest in the business, but we also return to shareholders and that leverage allows us to give guidance in a way that has some flexibility, but not that much thursday night football, will you miss it . Of course you miss it we said when we bought Nbc Universal we wanted to be financially disciplined with sports that hadnt always been the case and we are sorry to lose it. We have sunday night football which is the number one show on television and we have that for many more years. So we really appreciate the relationship with the nfl and wish thursday night football well everybody has different models in our case, we made the best bid we could and we got outbid a couple other points from brian. By the way Opening Ceremony tonight 8 00 p. M. On nbc on the east coast one, they gave credit to at t to establishing sort of a leadership position on those thousand dollar bonuses that came out of tax cuts two, they would comcast would renew to extend the olympic rights which are not up until 2032, but if they were up today, they would extend. And then three, as far as tax cuts, roberts did point to at least one concrete example of an investment where the roi was sort of on the fence, this involving the theme park where in fact the passage of that legislation did was enough to push it over the goal line so interesting discussion from brian. And well hear more from him in the 10 00 a. M. Hour. Carl, is it taboo for anything in tv or sports in general to mention the poor quality of thursday night game as because i actually am friends with a bunch of players and they all recognize it is too early. Their bodies cant heal. They feel like it is a bit of a they all know that the product is not that great. And yet i never hear anyone say i dont really want that particular game because it is not a great game yeah, we talked about this on super bowl friday, right, before the big game i thought it was interesting to hear him say we need to be financially responsible even with sports. And if you couldnt make thursday work, maybe foxs Business Model allows them to do that and as he said to us, we wish them well. But it is just not something that comcast was able or willing to do. And fox stepped up. Carl, thank you. Carl of course joining us throughout the morning from the Winter Olympics in pyeongchang, south korea. Time for i always watch that. Very excited always watch norway Northrop Grumman speaking of norway there will be a big increase in defense spending in this country. Incredible what were spending yes, and it is the only one that really has the if there is any sort of doubt how have we been underspending . You would imagine given weve spent more than the other ten countries behind us combined, weve been spending enough, but apparently not no, and northrup is the epicenter. And what i caution people is it really that much of a shock that the government continued but at the same time, the numbers go higher. Watch vxx. Right now were okay volumewise. I know i bore you. I do not care. I know you dont. You will just keep giving me these names. It is like sister mother. I im your sister mother yes what have you got on mad money i dont have a clue just kidding proof point which is in the heart of cybersecurity, dont forget cryptocurrencies are used by all the people wh and excuse me, want to grab that jensen by the way the stock should be up 40 by the way if there is any justice why because that was the best beat that weve come across. And it is going to be significa sustainable. It is a sustainable beat you do believe that yes, i do i think he is amazing. Artificial intelligence. You will have on mad money. No, i dont care. The stock is not as high as when it was opened this morning. And were talking about invidia, one of the great performers over the last couple years. And can i just leave you with one coffin september concept you can leave me with plenty actually okay, im done with it. But important that that go down today. A half hour into trading, are you pleased, do you care if im a bull, im pleased because there is enough volume that even if they do that the margin calls will not be made because these pieces of paper arent erratic so if you see a day where it is just okay, that will embolden people on monday to come in. They will think about it over the weekend. You said you think this may be today is the day. To start to buy yes, my charity bought something today. First day this week. Waste management has a good dividend and business is a little related to construction in the country, construction is going on so this was fun today. I blew out a couple breaks the suit feeling good. You are looking good. I lost some weight the last i cut out candy and booze. This still was a great week for you. Come on. I get up in the morning and i say we won, were world champs, i go to bed saying were world champs and i have that the east of my life thank you mr. Laurie and coach pederson, a great man. And i do want frank wright to stay, offensive coordinator, but i understand a head coach job in indianapolis is something that maybe someone has to take. And please dont go because i love you that was a weird move on mcdan yelled iels part there. That was ill advised. Jim, have a great weekend relax. You have a great weekend. Happy birthday. Thank you and ill be up in your neck of the woods to celebrate all right great. And we have Economic Data across the tape lets get to Rick Santelli for the numbers. Thanks. Listen, if you are interested in any upward revisions closer to 3 for gdp fourth quarter, this number will interest you these are december inventories and trade sales and they are both more portion hhorsepower m expected inventory, we were looking at preliminary versus final there wholesale trade and sales, up 1. 2, that is three times more than we were looking for and a positive revision 1. 5 to 1. 9. Wow. These are powerful how powerful most powerful since november and if we look at up 1. 2, you see these are lofty. First five months of the year, three were negative numbers. 185 and k45i7k would change wou of the cycled highs. David, back to you thank you mr. Santelli. And weve changed out seats. Welcome back to squawk on the street. Were live from the New York Stock Exchange and Carl Quintanilla is joining us from the Winter Olympics in pyeongchang. He will join us shortly. It has been a strong market. The s p up 1. 28 you can see the dow also having strong gains and the nasdaq the strongest amongst our broader averages while wti is down of course continued focus on rates given the impact that they seem to have or the concerns of course that people are focused on for higher rates and the overall stock market and that is where we will start our roadmap this morning stocks continue that wild ride volatility, well, it is still there. The dow, s p, nasdaq as you saw all up bulls looking to claw back from the more than 1,000 point drop we saw yesterday and what could have been the largest Tech Acquisition of alltime, qualcomm rejects rival chip maker broadcom. Those details are straight ahead. And plus the Winter Olympics getting ready to kickoff in south korea. Well take you live to pyeongchang where carl speaks with the parent and ceo of comcast, Brian Roberts but first, lets get straight to the markets it looks like we have turned lower right now. On or, no, down for the day. We are out of correction territory for both the dow and s p. The nasdaq closed just above it yesterday. We are higher, the dow up 256 points but again, it has been quite a few mull chew tumultuous week a still poised to have one of the worst weeks in years for more lets bring in chris ailman who has as sets under management of just over 225 billion. Thank you for joining us you bet and. Given when weve seen in the market this week, given how much money you oversee invested in this market, are you you changing any of your allocations . No, were a long term investor, so we are very focused on not just this weekly action, but we look at it at months and at years i really have a decadelong perspective. So good to step back, stay calm, and really look at this market, this kind of volatility is what we normally would actually expect out of the market last year was an aberration. And traditionally rising rates or higher rates have always been pretty good for pension funds. How closely are you watching rates whand is yoand what is yo . Were watching rates very closely. I just told the board yesterday what my focus is actually on the slope of that yield curve, were watching the ten year and the 30 year not so much that it will predict a recession, but just the fact that the yield curve goes flat is not usually healthy for the economy. We actually are very close in fixed income, but we think that that is a diversifier for our portfolio and certainly a diversifier in 401 k s they have to have some fixed income to balance out their equity exposure. And you just mentioned fixed income and certainly Global Equities it looks like 55 of the fund is there is a point at which that would change . We have the ability to move that back and forth, up as much as 6 and down as much as 6 but were actually staying very close to home. When you look at the fundamentals behind all of this volatility, it is not that bad and we think it is kind of a goldie l goldiloc goldilocks it should be an area that we want to stay at. Well stay really close to home and not take a lot of volatility or a lot of risk in the portfolio in this kind of an environment. We were up almost 17 last calendar year, so we want to just keep riding this wave and hold these kind of levels. Those kind of returns, 17 in the year, the broad equity markets gave you better than that, it brings up the question of what you expect from here on out to get in the way of stock market returns obviously it is a tremendously important input in your Asset Allocation and how much you have to fund for liabilities down the line well, like i said, i looked in terms of decades. So if i had to forecast, i looked a where we were relative to long term highs but when i look at the decade, it has been a very solid decade. Weve been able to produce over a 10 return since the 08 financial crash. Those kind of double digit returns help the funding of the plan and we think that the Global Economy is really going to continue to do fairly well. Not overheat, but do well enough that well balance the portfolio. So from our perspective, well stay very diversified. We think we can generate around a 7 return over a ten year period not year to year this has been a great year the last kooim years hacouple yearsr solid. So Going Forward it will still be tough for the rest of the decade, but when i look out into the 2020s, innovation coming into the world is just remarkable so you have to step back from the daelg volatiliily volatilitt the trends but i do wonder about those trends when it comes to fixed income which has capity va ttiv people at what point codo you start to see a yield that does make you move from a 14. 7 weighting to a larger weighting we really Pay Attention to that 30 year bond. Weve been bhooiing so ingbuyin3 year bond as a diversifier away from the equity portfolio because normally with this kind of a selloff, youd expect a 30 year to rally more than it has in the last couple days. So for us, we probably only increase that fixed income allocation maybe to 15 or 16 , were using other things to diversify the portfolio. But i really tell people with their 401 k , this is a great time of year to sit down, be calm, rebalance and look at fixed income it wont be a great investment as Interest Rates rise, but a worth quhil plawhile place to h money away from the equity markets. And just to wrap this up, given the fact that you manage retirement money for teachers, other educators, given the fact that i think there are many people in the world who are tuning into the markets for the first time in a long time this week and going what is going on, what is your message to them my message to them would be calm, invest without emotion, think long term. Dont focus in on a one week the stock market is a roller coaster. And this year is very uncomfortable. But you have to recognize that stocks for the long term are a better place to be so you have to look at your risk and build out your allocation. We invest for the 30 year horizon. That kind of money should have exposure to stocks, not in the usa, but around the globe. And then balance it out with other things so that you are diversified. Dont put all your eggs in one basket old adage, but still holds true. Well, thank you chris for joining us my pleasure we have the latest slide in stocks wiped out and even more more ket cap from tmarket cap f. It adds up quickly especially when it happens as quickly over the span of just a week and a half or so. It was just january 26 when we saw record highs in the s p 500 and other major indices. And you can see year to date were already down about 2. 5 , were getting a little bit of that back today, but certainly not all we just lost over the last couple days take a look if you look at the market cap that has been lost, that big number so far stands at around 2. 5 trillion through the end of yesterday in the s p 500. If you take a look at the breakdown of that particular component, the biggest drivers of that market cap decline are the names in the Biggest Companies in the s p 500 they are the Biggest Companies out there. Google has shaved off about 114 billion through yesterdays close. Google meaning alphabet. Alphabet and apple here down 83 billion as well. Berkshire hathaway not immune, shaving 63 billion off. And exxonmobil has lost about 55 billion as well. Those are the big drivers. Of course these dont reflect the percentage declines. Were just trying to illustrate the fact that this market may lay has cost billions for a lot of the Biggest Companies but to put things in perspective, as we talk about that 2. 5 trillion that has been shaved off on the zs p 500, we should note that even with that decline, we are still about 3. 6 trillion better off than we were since the election so there is a balancing component and something chris ailman says natures because in my old days as a financial adviser, i used to tell people you you are making a bet on 5, 10, 20 years, whatever your risk tolerance is but if you feel as though the world would be a better place five years from now, 10 years, 15 years from now, that is when you go into the marketplace. If you dont have that kind of a time horizon, it might be a good time to assess whether these markets are ones that shave not billions off their market cap, about you hundreds of thousands off your portfolio back over to you yeah, were coming off a pretty high base there appreciate it. Joining us now with insights on positioning is dan niles he is joining us by the phone. Dan, thanks for calling in i guess just right at the outset, tactically speaking, have he with seen the lwhwe sees good news is we came into this week with a fair amount of cash we had about 25 in our alternative investments sitting in cash. We are actually as of right now the longest we have been all year in other words, how many stocks we own relative to the ones we are short. We actually covered a huge amount of our shorts yesterday at the close i think from a shrt term ports perspective, i think we are near the lows this correction is really good and i think the market will go higher im not sure it will surpass where it was in january, but i do think the path from here is up as we get further clarity on inflation and where that is headed so if you feel like we maybe can set up base here and climb at least back up in the direction of the highs, i assume it means you dont think that this market has been telling us anything about a recession on the horizon or earnings estimates that are going to be on the decline so if that is all the case, where within the market looks like it was a Good Opportunity here that was served up by the correction yeah, i think the thing to keep in mind is to put it in perspective, which is sort of what youre referring to normally you you get a 10 correction in the market every year weve only on gotten four such corrections before this most recent one over the nine year bull market. So we were way overdue s p was up 15 i wanted monmonthf you include dividends. As to th so this is good flp it in terms where it resets. And were looking at the tech names. Because i think what will be different if you look out over the next one, two, three years is that in the past when youve had problems with a stock market, you have been able to go hide in dividend yielding names. You can buy consumer staple stocks, telecom, utilities i think if rates are going higher, some of the tech names, social media names, entinternet names may be some of the safest in a weird way because you dont have guys owning these names for their yields you have them owning them for their growth and i think this year in particular with the midterm elections will be good for internet advertising and i always think of technology with you and in particular chips so given that you have laid the ground work, invideo reportvidt 5 do you have an opinion well, yeah, i think im sensitive to valuation and i think people discovered valuations do matter soconductors in total are way too expensive given the expectations that are built in i hear so many people talk about, well, the industry is not cyclical anymore or it is a lot less cyclical than it was in the past and these are industrial type stocks. That is just notthe case the thing that scares me about invidia and jensen, the qvc is probab q ceo is probably one of the best in america and the stock is up to incredibly high levels. Is ceo is probably one of the best in america and the stock is up to incredibly high levels. Im not a big fan of cryptocurrencies, so from a standpoint of that they are actual currencies. So for me invidia, as much as i love the company and what they are doing in Artificial Intelligence, that is not a place that im investing a lot in im actually investing in space augmented reallility which i think will be the best this the next five years. 10 that is kind of more where we are focusing right now all right dan niles, thanks. The 2018 Winter Olympics are kicking off in pyeongchang carl is there. He is live take it away, carl i alive and thank you very much. You know, it is just now Early Saturday Morning here in pyeongchang. And you will see opening ceremonies tonight but the staging for it, i got to say it has included some remarkable political theater kim yojong is the sister of kim john un. She arrived here today, literally the first member of her family tois have it south korea visit south korea since the korean war some speculation here about whether or not she will use the games to propose somehow a summit perhaps between the north and the south. At the same time, Vice President pence arrived and said that the games should not be used as doors to talks and then they were seated together at Opening Ceremony in the same box you can see her right over pences Left Shoulder here with that blue lanyard around her neck no indication that they actually interacted, but the proximity of her, head of state of gentleman pan, the vic japan, the Vice President , it has a lot people asking whether were trying to write a new page when it comes to north korea diplomacy, something of course the white house has pushed back against as a narrative dont forget Opening Ceremony tonight 8 00 p. M. Eastern time on nbc just one of the many narratives this whole National Security theme that well be talking about over the next say couple of weeks here at the games guys carl, what are koreans saying or how are they reacting to the fact that it seems like at least for the time being there is i guess a friendliness or a respite between north and south . That sorry, the question is whether or not there is a softening . Yeah, are South Koreans and people in the area very upbeat about the fact that you have got north Korea Joining the games and there seems to be less tension at least right now yeah, i mean there is some hit tore cal pre historical resident for that they marched together in the ceremony not too long ago. What is new this time is the actual playing together in the competition, in this case womens hockey that is a bit of a new page. But i dont want to give away too much about the ceremony tonight, but the level of cooperation within the ceremony itself, whether or not it is symbolic or not, i think was surprising you will see that tonight during the ceremony but clearly they are trying to open some avenues perhaps for discussion down the road the question is whether or not the u. S. Will pressure the south to hold back on those efforts as we continue this pretty difficult situation. Yeah, that is for sure. Carl, thank you. At the Winter Olympics will he will be for well, for quite some time to come yet. When we come back, exspeed i cant ex speed i cant is gettig hammered and Brian Roberts will quai wein on streaming wars, taxes and a lot more oh, and theres the closing bell. sighs i hate missing out missing out after hours. Not anymore, Td Ameritrade lets you trade select securities 24 hours a day, five days a week. Thats amazing. Its a pretty big deal. So i can trade all night long . All night long. Is that Lionel Richie . Lets reopen the market. Mr. Richie, would you ring the 24 5 bell . Sure can, jim. Trade 24 5, only with Td Ameritrade. Sharesof expedia down double digits after they reported an earnings and revenue miss, increased spending weighing on the travel companys results. For more were joined by the ceo of expedia nice to have you with us you said on the call that 2017 did not end up as we planned from a financial perspective what are you doing to change that in 2018 well, we set out a broad plan to step on the gas on the number of areas i think importantly well double the number of new Hotel Properties in 2018 that we had in 2017 and of course is this an important part of the formula. Weve added new properties that gives more selection we have a disciplined track record of making calculated investments. This is one of those and were confident it will accelerate our growth and people do seem concerned about the pace of costs. And expenses at this point what kind of assurances can you give them particularly given the reception youre getting in the stock market today that you are going to be able to have sales growth outpace the costs of getting those sales . Well, i think you have to look closely at the source of the Cost Increases and really there are two things here first of all, it is our migration of our data centers into the Cloud Computing environment. That is already Free Cash Flow accretive. Two years ago we spent 180 million on capital expenditures. Last year 50 million. So a 13 e ex. And well continue to make the smart free flow cash investments. It is absolutely the right thing to do. And then of course the supply investments, and this is not a new big bet. Weve done this for the course of the last four years it has been incredibly successful, we see the returns we are making more of the same investments. So we feel really confident in the returns of what were doing. And we think people really look into the drivers of the costs, they will share our optimism and youre talking about adding more hotels, more properties to the mix here but im also seeing upcoming contract renewals with the large hotels that the expectations will ask for lower commissions and more Cost Effective fee structure. That doesnt sound like it is necessarily that great for business can you elaborate . Yeah, listen, we have very constructive dialogues with all of our large chain partners. And they really do see the value of the platform. And the direction that weve been going with the renegotiations is actually just being much more flexible in the way that we do business with our Hotel Partners we have a number of contracts in place where we give hotelses flexibility to give either their own Revenue Management centers or their individual hotels the ability to bid more to get more stroll im wh volume when they need it, the ability to spend more on advertising pa ro duroducts to r volume so i think what you will see is more intelligent marketplace type appraising. We have it in place with many of our more forward thinking Hotel Partners including the big ones and that is the direction i think it has created a much more constructive dialogue for us and one of the initiatives both those in the investing in new properties say about the moment were at in he lodin lodg cycle . It seems as though your business doesnt have as much leverage as at other points in the cycle and is that something that might continue well, you know, i think the lodging cycle has been at a pretty hot spot for a long period of time but we take a different perspective on our opportunity we are not just sitting here in the United Statess that is our only opportunity we look out into the market, we see a market at 1. 1. 6 trillion. We just did under 90 billion of bookings last year there are multiple alternative accommodations out there we see a world of opportunity ahead of us. And we are dead focused on executing on that. 2018 will be the start of us really getting serious about expanding that opportunity and we think there is lots of opportunity ahead. But you did say on the call the real benefit to adding supply comes in the second year and subsequent years when you can really see the full year impact of the properties youve added. But you did go on to say you hope to see that in 2019, but at this point, there is no guarantees i guess investors would love some guarantees for you. Investors always love guarantees but i think the essence of this is that we know the returns will come we have seen it happen in practice and the question is when you see accelerating room night growth, when you see axle raising revenue growth, i think at the end of 20 on 18, well ha108,20 answer do we let that goodness fall to the Property Line or invest new into geographies and keep it going. And that is a decision we havent made right now but no question returns will come i guess if you were amazon, your stock might be up, but youre not we aspire to that in the future as Many Companies do. Mark, thanks for joining us. Lits get back to the market of course which is rebounding. You can see it right there up on all the major averages s p though off of its highs this morning. We are out of correction territory. Art cashin is joining us what is your take on the early trading here well, i think we just had a little fade a couple minutes ago. And i think that was in front of wall street folklore says margin calls come in around 10 15, 10 30. I think some of the buyer backed away waiting to see if there would be and on slou onslaught when that didnt show up, we bounced back, a decent bid you may get another minor fade in the afternoon margin calls thought to come out shortly after 2 00 so well look for that also. This is a bottom seeking process and it has volatility. That means that it doesnt necessarily react to news or an event. It can just suffer from a sudden loss of momentum the rally starts to fade and it is oh, my god, get out of the way. So i heard dan niles before. Maybe im counting them defrt , differently, but i count a few more corrections like this since 2009 but they are multiweak affairs they get people all confused and once they stabilize, then the buy the dip crowd says oh, my god rktsz i forgot to buy the dip and we start to rally again. Have you been surprised by the swiftness of this correction this week . Well, yeah, to a degree because it is somewhat psycho c psychotic. Wednesday looked like a terrific day. You were waiting for the people to come out with the all clear flags. And then you had thursday. And then we are beginning to see it spread around the continent you have heavy selling the other day in europe. Asian markets got banged around overnight. Shanghai has gone into a 10 correction itself. So, yeah, it has spread somewhat further. If it was all simply the worry about the slightly higher Interest Rates and the Hourly Earnings report, et cetera, it wouldnt necessarily have spun out into the foreign market. So it is something a little bigger than that i think it is the central bank as a whole is giving people pause. Certainly in the psychology by the same token, you are not necessarily seeing the standard script of riskoff translate into things outside the equity market i dont know if we take assurance from that, the fact that credit seems okay and the yen is not rallying huge or any of these other riskoff indicators move into other assets, youre right and other significant pullbacks, weve seen that with the correlations begin to shift and you dont even see a full safe haven play and so that is really rather different. So what time should we be paying attention later today about 2 15 to see if there is any kind of fade apparently there were no margin calls this morning and that is a healthy surprise after that big selloff yesterday and well see if we can get through the afternoon without them too all right good art, thank you my pleasure lets send it over to sue harathat herera and the news up. Good morning here is what is happening. President trump signing a budget deal to reopen the government after a brief shutdown he tweeted, quote, just signed bill our military will now be stronger than before first time this has happened in a long time. It also means jobs, jobs, jobs, end quote. Vice president pence meeting with north korean defectors including some tortured and abused by the kim regime he was joined by Fred Warmbier the father of Otto Warmbier who died just days after his release from the north were very grateful for your presence were very grateful for your courage on our second visit to korea. My wife and i wanted the honor of meeting with men and women who fled the tyranny of north korea. Here at home, a winter storm moving across the Great Lakes Region leaving roads treacherous in a lot of areas. The storm is expected to drop about a foot of snow or more by the time it moves out tonight. So far hundreds of flights have been canceled. That is the news update this hour back downtown to you sue, thank you very much and when we come back, the chairman and ceo of our Parent Company comcast Brian Roberts is with carl in pyeongchang what he has to say about streaming for the winter games and more give investors even more value. 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Gov we cut the price of trades to give investors even more value. And at 4. 95, you can trade with a clear advantage. Fidelity, where smarter investors will always be. Welcome back the 2018 Winter Olympics are here and carl is live in pyeongchang. He sat down with a special guest. Carl we did indeed 900 million in ad sales for nbc u and comcast, more than the company did in sochi several nights of primetime are sold out in the coming days including Opening Ceremony and nbc u has tinkered a bit with the ad strategy out of rio. We talked to Brian Roberts about the fact that having the super bowl and the olympics so close together provided some opportunities. The Advertising Team has gone into the business of really trying to come up with solutions for our clients. Using all these media, not Just Television but the social media, the on demand, the streaming. So when you go to look at the results, i think obviously the world has changed a lot over the last decade. So even the super bowl ratings go down a bit. But if you add up all the ways that people consume, i think more will enjoy this contents than ever before it gets harder ever year and thats why you need to use new technology so the idea of part of it is on tv, part of it streaming, is too simplicity a view . Absolutely, but florida isth part of it it isalso using snooed to brioco bring awareness and tell stories, and the on demand and using voice technology, pick your favorite athlete, get notification, see it on snapchat, back stories from buzzfeed it is a snowball of everybody wanting to get involved with the olympics and to see how if you take all the other television combined, more people will watch olympics next 18 days than everything combined. So it is an amazing moment and i think the American Team is ready. There will be more success we believe in many Winter Olympics maybe ever, so im just excited to be here and rights go through 2032. If you could extend today, would you . Absolutely. Every time we come to the olympics, were reminded just how important this is to the xwle media landscape. And it is like 17 super bowls. Obviously the super bowl in america, nothing quite like it for that one day and the nfl is an fafantastic, t there is also something amazing for all of us. I saw a little bit of a coverage planning and what will happen at the opening. And it reminds you of the dreams that we all have as kids wanting to some day be an olympian whether you make it yourself or get to experience it through the television or on your mobile device or many ways, we fall in love every two years and i think were ready to fall in love again. It is a nice respite from the pressures of life beyond it all begins tonight 8 00 p. M. Eastern time on nbc the Opening Ceremony for the winter Olympic Games david, brian likes to point out at the super bowl they had 100 cameras and 500 people working on the broadcast here it is 2,000 people and an additional 1,000 people back home working on delivering this incredible amount of content which by the way is just for u. S. I mean, think about all the companies that have rights to europe and rights to asia and china and india and australia. You put all that together and you begin to get a sense of the scale that the olympics operate at every couple years. It is pretty astounding. The numbers are enor mugs and as you well know, this preparation goes on all year long in fact there is a team at nbc that is devoted to the olympics, that is their job for both summer and winter preparing for them, preparing so much of the great video that we get and stories get about the athletes as well. Absolutely. They have been coming to south korea for the better part of two years, engineers have been in here for months laying down cable, setting up all the infrastructure that makes the tv signals work and then once the games wrap up, it will be about tokyo in 2020 and beijing in 2022. So the lead time you need to pull something of this magnitude off is pretty impressive in the next hour youll hear one last segment with brian, well talk more about industry trends, ott migration on a week where we obviously got big news from other companies as well in the xwle media space. Disney one of the names that comes to mind given their direct to consumer offering that will start happening in entertainment and also in sports with espn plus certainly want to hear what mr. Roberts had to say about that. Well be back to you shortly Carl Quintanilla at the Winter Olympics now to the etf spotlight high yield bonds relative to the market volatility. Yes, high yield bonds through etfs and what the action there says about the broader environment, not just . Stocks so if you look at the hyg, biggest high yield bond etf in terms of asset under management, you see this since january 26, that is basically stop of the stock har eithemarket just from under 88 to under 85 a relatively big move talking about a bond market index effectively. But you need perspective to interpret what it means. A lot of folks say is there some kind of an systemic issue . You have a two year look at the high yield bond market, it has been extremely healthy it has been a very strong asset class. And this has been one of the pull backs weve seen, you know, over the court of the last couple years it is really not all that remarkable and lets look at this third chart because you can only interpret the message of Corporate Bonds relative to Treasury Bonds so the orange line here is a 3 to 7 year treasury etf, right . So this is basically a similar maturity profile to the high yield bond you see that they are both going down what does that mean . Yields are going up. Treasury yields are going up so when yields go up on bonds, prices go down so that is why the high yield bond prices are down it is much more about the rate effect and right now, it is not as if the credit market is giving us a scary message at this point. Not like 2015, early 2016 when that was the epicenter. Very important point. Yeah thanks mr. Santoli. When we come back, bond yields have been spiking. Rediusl scs. Mo squawk on the street back after this [ click, keyboard clacking ] [ click, keyboard clacking ] [ keyboard clacking ] [ click, keyboard clacking ] good questions lead to good answers. Our advisors can help you find both. Talk to one today and see why were bullish on the future. Yours. There is again talk about the possibility of the bond vigilantes Michelle Carusocabrera joining us to explain what they are in a 90s flashback it is a bond market investor who protests inflationary fiscal policies, in other words too much Government Spending, by selling bonds. Therefore increasing yields. And the word vigilante is used because it highlights the ability of a bond market to restrain Government Spending when Interest Rates go up, a government has to decide inadvertent more and more money to paying interest on its debt and away from the polyiciepolics the term was coined by ed yardeni. And there is talk because the Federal Reserve is reducing how many bonds they buy. And the tax cut means less revenue for the government to use to pay back their debts. And this week the decision to do a big spending package which means deficits of more than a trillion per year in the coming years. Now, still the bond vigilantes havent reared their head in the u. S. Since bill clintons time as president however, they were search out in force during the european financial crisis the power of the bond market often surprises politicians who are unfamiliar with it there is it a very funny quote from James Carville wellknown adviser to bill clinton, he told the wall street journal in 1993, i used to think if there was reincarnation, i wanted to come back as the president or pope or a. 400 baseball hitter, but now i want to come back as the bond market. You can intimidate everybody we may be feeling that right now. Yes maybe getting intimidated again. Michelle, by the way a very colorful quote from bill clinton about bond traders from the same era that you can look up but the same idea. So thank you for that. For more on the markets which are kind of rolling over, the dow just turned negative, were joined by Oppenheimer Fund cio and head of fixed income and also Morgan Stanley fixed income managing director. Thanks to you both is this actually the world were in where Interest Rates are going to kind of take flight and they will try to rebel against this inflationary future or Central Banks or not yet not yet i think the bond vigilantes left the continent and are nowhere to be found but the point is inflation is really missing in the world. And until that rears its ugly head in a meaningful way, no the just modest spike, i dont think bond market is going to be really in a big tizzy. Clearly rates are rising the fed is tightening policy and that has to have impact on equity markets but it is not the end of the world by any measure as you were talking about with respect to the credit markets the credit markets are telling us that from a fundamental standpoint, things are actually working nightly. How quickly could that change and i ask because just this morning, tyson on for example said that they will have to push up meat prices because of higher shipping costs due to truck driver short annual and higher labor costs. So if we start to see more companies do things like that, how quickly could the narrative become a risk . I think it if there is going to be inflation in the economy, from an Economic Policy making standpoint, i think that the area to focus is really not goods and those types of prices. It is really Wage Inflation. If Wage Inflation comes back, then i think things are going to be very different. That is just increasing but not increasing enough north of productivity for it to be a big drag jim, one of the features of this selloff in the stock market has been obviously that treasury yields have not backed down. We have not had the familiar response ever yields goi sof yin is that because the big fear is no longer inflation so we are in a different set of muscles being used here . Does it mean were in a higher range for rates it nothing else . Yeah, if nothing else, i think were in a higher range for rates. Low rate, low volatility environment is probably over we know that kiwi is coming to anxious end. So forces that were pushing rates down, probably all but subsided at this point so what that means, you have to give more expectation for Interest Rates to rise so when we have good Economic Data and good growth and good jobs and good wage numbers, you should expect Interest Rates to rise there is an offset to other Financial Assets what the markets are going through, they are trying to make that adjustment this risk premium. So discounting for inflation risks is coming through the market, putting pressure on other markets. But if you look at high yield, emerging markets, investment grade, all these markets are handling it very well. Performance is still reasonably decent yes, some give backe, bback, bu liquidity is good. And number one thing to watch if you want to know if this will become something bigger is the dollar the dollar has become a funding currency that people have used to borrow money and othe risky assets if there is a whole sale liquidation in just Financial Assets, its going to get repatriated back to dollars. Were not really seeing a significant amount of Dollar Strength that should be a signal of calm for the markets and understanding this is more probably of a technical thing that is going through equities right now. Were not seeing this as a global systematic factor to your point about both the age of volatility being gone and equity specific thing, we did see the stock market rollover. Were showing you the dow down 182. It was down more than 200 after being up more than 200 this idea of the kind of weak rallies getting knocked down at least all week have continued. If we are in a slightly higher range for rates, what does it mean for stock market valuation on the longer term i think we have to kind of maintain the context here a little bit rates have risen they may rise some more. But relative to what earnings yield is, the profitability of companies, rates are still relatively low in our view so i think the rates even at these levels continue to provide valuation support to the market. And i think that will be the case for quite some time still. I think jim is absolutely right. This is not the end of the world. This is us getting used to the idea that rates, markets, and other markets will provide volatility and equity markets react to it. Were still up relatively big amounts since the beginning of last year. If you look at trade markets, things are very, very stable this is not a systematic issue this is a correction people say a healthy correction. Its a correction. We just have to adjust to it jim, i think you believe that the new sort of band for ten year yields is between 2. 5 and 3. 25 . Why . I think if you look at growth and if you look at where inflation dynamics are headed, inflation is headed to around 2 this year. The question mark then becomes do we get better growth expectations into 2019 i think the answer is probably yes. So can we get to 3 . Can we get a little above 3 yes. Can we sustainbly stay there we need to see good Economic Data continuing down the pike in order for us to sustain those levels i think levels above 3 in the ten year note are really hard to maintain unless we start to see better growth, better inflation dynamics and we believe it is sustainable in 2018 and also into 2019. Until we make that switch, i dont think we really get materially above 3 . All right jim, krishna, thank you very much here we are with the dow bouncing on that we got the s p up again after a briefly falling into negative territory. You can see the dow is down by 70 points. And certainly different than we saw for the first lets call it hour or so of trading. Stocks will be keeping a close eye on them on squawk on the street. Stay with us where can investors seek predictable income in an uncertain world . Pgim sees alpha in real assets. Like agriculture to feed the world. And energy to fuel its growth. Real estate such as ecommerce warehouses. And private debt to finance transportation and infrastructure. Building blocks of strategies to pursue consistent returns over time from over one hundred fifty billion dollars in real assets. Partner with pgim. The Global Investment management businesses of prudential. Mom anits not theirs. Car. Its mine. Mine. Mine. And it always will be, forever and forever. The new rx 350l with three rows for seven passengers. 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This has been the pattern all week you have tentative rallies, seem to get knocked down by supply whether it is margin calls or Something Else signs earlier this maybe the fever had broken the volatility index, the vix is down off the recent highs. Right now though, hovering still above 30 i think there is a sense out there that maybe these volatility markets, these funds that are tied to it are not yet done cleaning up what they have to clean up and reducing exposure and the rest of it. You see its down. But still above 30, maybe going into the weekend is still pretty elevated and well be watching right around 2 45, important point in time it seems when we come back, well have more on this wild ride for stocks stay with us squawk alley is up nex test test [ click, keyboard clacking ] [ click, keyboard clacking ] [ keyboard clacking ] [ click, keyboard clacking ] good questions lead to good answers. Our advisors can help you find both. 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