Transcripts For CNBC Squawk On The Street 20180206

It was a good day. European markets have been reacting to the day we had on monday and, they are all losing to the tune of lets call it over 2 you can see germany dax have been particularly weak not just yesterday but last week as well. The german what they should be higher than ours, their central bank loves to try to take business. They have not reached those negative rates yeah. Speaking of rates by the way, it is such an enormous concern i guess of our markets as we watch the 10yr hits a 4 and 5 last week on job number on friday we backed off on the yield as you can see that upton pri o price. Oil, that hurts now, on our road map this morning. It starts with the global sell off and the markets around the world. U. S. Futures you saw it pointing to another big day of potential losses with the stock market plunging of just whats driving this decline and what are you doing to protect your portfolio. Well look at whats taking the biggest hits or find any bright spots thats out there it will certainly be more as the day goes on with various pockets. Shares dropping in asia and europe u. S. Futures are pointing to another rough open at least. Yesterday we had a rough opening and we came all the way back and of course, we really dipped a dramatically you are looking at time lapse of the dow yesterday. It went positive early in the session and fell almost 1600 points at its lows that was around 233, i remember and finished the down. It opens eyes but it is nowhere near the top list of your percentage loss since the dow and s p 500. I think whats important though, jim, to start off with okay, we had an incredible move out of the box in january and we have been talking about investor managers this morning so i lost my year on back for the year and now it is february 6th big deal, i got 11 months. I think youre right i saw the trucks the local news truck out front i dont know. They get in and they see the truck there zi tweand i tweetedf those pictures when you see those trucks it means that wow, we are about to have Something Big happening if you have been trading from 3 00 to 4 00, you would say there is a huge bull market. 3 00 a. M. Sleeping, big mistake, you got to take it in. Xiv went bust last night thats a piece of paper that you and i are discovering, turns out a lot of people are hiding that. Well talk more about that in terms of perspective there of. I think it is important to point out the direction, certainly right of giving the spikes and bonds when they came up with portfolio insurance. And mr. Bullard and if you remember, going back when we are this much over sold, august in 2015, that was a great time to buy. Lets talk a little bit more of august of 2015 because we were down 11 or 12 it was quantitative driven as many would say the machines dictate so much and the algorithm do that was on the chinese valuations and there were a lot of concerns. 215 on friday on xm wow we were down dramatically in twoweek period. We look back and say why was that and we can say because of the fed. Right we can say because of Interest Rates is that of what we have seen over the last a lot of people are saying because of greece. There is 8 Million People in greece, did that cost a thousand point . The machine broke down but we want to identify the filling, there is no lex luther no, when we look at the technicals and the quantitative driven models, we wonder how much further there is to go and if you can try to ascertain that if it was some what similar to what we are seeing here, we are not quite done yet, are we the idea of the market really breaks down the concept. I cannot say did exxon go down at 3 00 a. M. And down 10 at 7 00 thats the equivalent of what would happen pick something that you really like use the stock like costco. Costco made its quarter. You have to believe right now as of this morning that the Wealth Effects have been destroyed. No one is going to get the sample of crag legs at costco this weekend i think costco is a good one to look at. You want to look at boeing boeing got a 10year view of things not a 10 seconds yield of things which indicate you should sell it i lost my voice yelling for the eagles i understand. Are you going to be wearing green for the rest of the year from here until Saint Patricks day. A little over a month ago i dont blame you. You sound more than Warren Buffett than anybody else right now . I am that old you are talking about 10year, thats not the jim cramer i know. I am sorry, jim cramer changed after the super bowl, you got to get with the program. Why did i say costco the tax code and consumer influx and employer is strong i can pick home depot. So what you are also saying that nothing is fundamentally changed at the Economic Outlook at this point there is that can happen occasionally and we saw significant downturns in the market and we do pay less. I think some are saying we are as low as 16 times now, of course, they are using that as an indicator why you should buy. I like the over sold for indicator. I think financial would have been bought if it was not for wells fargo and janet yellen here is your hat, dont let the door hit you on the way out. That was amazing did you love how wells came out and told you not to worry, it impacts earnings a little bit but dont worry well go somebody should get a hold of wells fargos lawyer you and i have friends with some lawyers. You should take a vacation to go with a permanent of the election thats about to be on right now. You are talking about wells fargo of the final moment of yellens year of the fed chair of this extraordinary penalty. This is no like slap on the wrist. Theyre not allowed to grow in 2018 until they get their house in order and the board of director is taking responsibility of everything they should. Thatll take place by or before the end of this year the stock went down dramatically yesterday and we have the large selloff and it is down another 2 today you cannot focus on that when you are talking about the banks. I am just saying and i will also say, mr. Sloane, a very nice man the regulators give you their time frame wells have been wrong with a lot of things in terms of regulators first of all, they really matter and second banks are regulated they really hate that. Theyre human beings that put their clothes on i dont want to be told by those who i regulate what i am supposed to do, mr. Sloane should take that back hes a confident fella hes trying to dig out. Why dont you stay in the pound box until it is over you have been quite critical. Yellen, shes no longer the fed chair which has a regulatory as p econne aspect to it which we just referenced it is now a man named Jerome Powell i got to go to grade schoooge on cold on i am just having fun it does a occur to me that greece span 10year is powell is in a position where hes already facing an earl challenge and here you can make an argument hes going to be dealing with a complicated issues when it comes to rates and inflation and all of this was set off in part by wages of 2. 9 . We got a decent employment number on friday and you got a fed thats no longer engaged in qe endless amounts of notes and bonds to sell. They had the great chance does does it concern you . Yes that we got a new fed chair right now . Hes got to say things because they have these discussions that are like, you know, where they have the talk hes got to really do some major explain things thats implicit hes in a much guessable situation than janet yellen ever was. Yellen was retired. Although she would have been happy to take another fouryear. Thats my judgment because i think shes a Great American and did a fabulous squljob. I like mr. Powell and known him for a long time. He has been there and has nice gray hair i want friends with his wife, do you want to go there . I am making a point that appearances is important to some of our leaders what are you talking about . I am not talking about much of everything. You look like John Garfield he was very left wing. I dont know if you ever look into it. I have always felt that you between pena and John Garfield it is a done deal i suppose i am a deskt doppleganger i am more churchill all right, when we come back, we got a lot more from this man so well have a lot more from the markets where investors should be putting their money and keeping their money and taking their money from, lets take another look for futures, it is moving all over the place here we are off the lows of the Early Morning but setting off for what would be a far lower open. We got a lot more squawk on the street right here when we come back we have a question about your brokerage fees. Fees . What did you have in mind . I dont know. 4. 95 per trade . Uhhh and i was wondering if your brokerage offers some sort of guarantee . Guarantee . Where we can get our fees and commissions back if were not happy. So can you offer me what schwab is offering . Whats with all the questions . Ask your broker if theyre offering 4. 95 online equity trades and a satisfaction guarantee. If you dont like their answer, ask again at schwab. An Exchange Trade security is supposed to be back this is a complex story involving a traded notes to be and this one, the bank promises the return of the under lining index and in these cases you are talking about people who are betting on low volatility. They were short volatility thank you meaning up and down. Correct and a lot of people have been playing volatilities some are waiting for it to come back and the way to do it is through many of these efs. People thought theyre making money month after month and thinking it is a safeway to make money. What i am reading here is the value of xiv on february 5th was equal to or less than Credit Suisse is the sponsor of etn right jim, what they had the ability to do here apparently were termination events which the funds must liquidate that appears to be happening here amazing because volatility moved yesterday. Right in laeaps and bounds. You had to change and settle this so to speak at 4 00 so it caused the thing to be wor worthless. This will spill over into the s p 500 market yep what will happen is the s p will be down some what mechanically far more than it should be. Which is why i said pick a couple of stocks if you notice, look at gm. The numbers were good and the stock is up. Micron announced the better number and the stocks are up so that maybe what the market looks like without the pressure that comes on the s p from the xiv. We are talking about what 2. 5 billion totaled from the two of them. Yes, they approve things. The government approves them i know there is one hedge fund but there is no reason to inflict pain on that there is some funds that blew u on this and there is a spill over that wont hurt you own this thing and you are hurting a lot. Well, you are, in fact, and credit sweep by the way was well define on this i have not heard from them we have not heard from them yet, i dont believe. Specific to this, the acceleration date, on february 21st, which is three business days, you are going to get back a cash payment for etm and closing of indicative value on the accelerated valuation date this is not etf accelerated means we are done exactly the other side of that is automatic, there is a formula that says that you have to sell stocks which means the s p 500 and it has to be done at the opening. Lets take the kacase of amazon the price targets all went up big. The stock is well below where it was reported if you are saying i want to be in amazon and take advantage of it theoretically, this would be the moment to do it. We have to go back to the fundamental idea, should the market be down it is certainly possible the market has been up a great deal the power ball, it is being repealed should it be down this fast . No, because of what you just talked about a piece of paper that no one ever heard of it thats a billion and a half dollar. And during the violent move we see Collateral Damage on this is there a big take away on this the take away is once again how many people read the perspective . I am sure most of them did not. But, the problem, david, is in the end when you are this over sold, you have to step up and take the risk but, my problem is david, if you are an investor and you just got in the market and you finally felt safe and you forgot 2008. The asking class is too fragile for people it is why so many people went into treasury serving nothing. They said how can i trust this i feel badly because we always forget, why do people leave stocks well, because of this nonsense how sensitive these instruments are. No one can understand the act of god cause of the xiv someone put this together. The sec blasted. If you go back when they did double and triple, they thought the market was so deep that they could not impact the s p that was wrong go back to the original etf you will see how incorrect they were it is hard for the government to say, you know what, we made a mistake. The closing value on this thing was 108. 36 on february 2nd all i can say is so long sucker well count down on the opening bell and jims mad dash. We are eight minutes away from an important opening here on wall street you can see everything is well in the red more squawk on the street from the nystigc raht ahead [ 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. Talk to one today and see why were bullish on the future. Gglobal bonds, and highdividend strategies. Sure, these are investments. But theyre not what people really invest in. What people really invest in, is what they hope to get out of life. But helping them get there takes a pure focus. Because when you invest their money without distraction, hidden agenda or competing interests, Something Wonderful can happen. They might just get what they want out of life, and maybe even more. All right, a little bit more than five minutes before we get to the opening bell. Time for mad dash. We want to stay here, we want to talk about nvidia. What are you mad dashing it . A lot of people dont understand nvidia is a company that has a market capped worth of 120 billion it is important, why because it is big. It is the hottest stock in the last two year of the s p 500 thirds it reports on thursday. There is a lot of money in it. People are saying that can be the coil springs that reignite the markets. The next thing you know it went down to 180 if you are looking at nvidia and you want to play so to speak and even in a blow out quarter, it got hit. People want to buy something ahead of a quarter i say be careful even when you are right, you can lose money and nvidia. Well, he position that company. Allan iverson sorry, i meant intelligence. Machine learning and crypto counter currency i would say jp morgan it is up so much and it has not come down much again, i want to remind people that the only time it exceeded that in the last three years have been phenomenal buying opportunity they did not actually happen that moment. That could be this time. The xiv and the pressure is going to put at the opening. Be ware the xpx at the opening should be paid for there are margin calls that happen later karen cramers old rule and you have to wait for it. Any sense to what happened yesterday to explain we were here yesterday and you were, of course you were not here because you were still in your state of euphoria, not in the morning with me and carl we watched the s p 500 get back to flat and actually be up how funny was that . That was people backing away from the margin call and sellers came back. A couple hedge funds blew up yet people want to say what was the Federal Reserve and some people want to say it is the tax reform i suggest those are ridiculous because to say at 240. It is 347 this morning when the s p 500 blew up, was that tax reform no, you are not talking about a lot of volume there. It is a bit different than what took place yesterday around 2 00, it starts to plummet i would urge people that it will bounce back to first. Should it be retailer, domest s domestics . Employers cause a lot d a lof problems well, wages thats better trying to buy the housing stocks thats the worst performer now this year. They went up to most and that makes sense. People think that Mortgage Rates are going to go up i like retailers because they are finally cooling off. I dont like people to chase if you are going to commit capital. Please dont commit all the capital but it may be a good moment the other one is the aerospace investment the what aerospace the velocity. Amazon is hard because it was the best quarter of 2018 yes that was really an amazing quarter and i dont think you would get it at discount the parabolic move was distorted of what happened last night and last weeks trend. Ken fisher had some great point. You may not see this there is a robot up there, i want you to pick it out for me if we can get it there is the opening bell well have a lot of red on the board. You are at the big board robots, do you see her there shes kind of moving her head slowly back and forth. Wow, hasta la vista baby. Freaking me out all right, we are under way, jim. Well, you know, it is distorted and i dont want people to i want people to realize that the Asset Classes is not certainly broken. We went up too fast and we went down faster. So you know i can look at individual stocks and narrate the tape disney should be down, too facebook is down 10 from where it was i can play that game if you want me to. I would rather spend a lot more time thinking, the market is a concept is not as good as the individual companies and their stocks they do diverge at this moment. Interestingly they accelerated and buy back they have the most cash yes, it is a percentage of their market value it is no longer an issue because it is being repatriated. Lets talk about sky work solution they had a pretty good quarter certainly better than apple. They make parts for cell phones for all different cell phones. Very good quarterly and griffin delivers a really kind of classic great job. Yep the stock is up 7 should it be up 7 . I dont know the guys that are buying it, they should step back. It could be 2 or 3 micron made a Statement Last night that shows you what the market could be like if it were not for the s p 500 pressure if you want to know at pressure. Look at allegan did reported on a better quarter it does matter that thing has been a permanent recli decline. It does feel like allegan has been on a decline. We dont have to worry about invergence anymore it will most likely change the behavior of u. S. Corporations looking for tax domiciles that are different in terms of tax tax regime dont be as negative about apple. Apple may go up on the sky works. Apple is integral to the sell off. You are not allowed to mention apple. Whats the first rule of apple you cannot mention apple we have not mentioned broadcom and qualcomm no, we have not we should get to any significance that the fact that apple is up it does seem to trade differently and a barometer in some way i caution people it is 9 33 what i also dont want people to do, lets announce to the super bowl because a lot of people are watching it. There are moments where you do a fake, a play action fake or a run option fake where you literally looked like you are going to run it and you end up not doing a pass but it is a pass to foles in the end zone. Bill belichick is one of the smartest man ever, his team did not see that i am saying that because in the xiv, you may be having a fake out and i dont want you to bite on the run when it is a pass thats what could be going on right now. It is a bite on the run again, if the greatest team could fell on seeing that play, a lot of investors could fell and thats what i think is happening. So xiv is foles in the corner saying hi, you know when you play touch, hi, it is me, i am over here. Even bill belichicks team did not see it you can be faked out tom brady dropped the pass. I felt bad for him, that was stupid Comcast Company is also up. I dont know if i would call it comcast, there is no shortage of greens i am seeing. Bank of america. Thats the they think thing u about. 9 30 gm is up. Gm you referenced accordingly, did you want to spend more time about it, it was a decent quarter and the stock is responding to it this is an example of what happens when you have Corporate News verses the nonsense that you are having i do think that it was a decent quarter for gm sky work is the tail for this market a couple of stocks that got hit that reported really great quarters unh. That was in double bound first got hit at a great quarter and it got sold off because of dimon and berkshire. A lot of people saying it isfo real because they want their cost down so therefore theyll have more money than walmart that early in that effort, yes, United Healthcare did get hurt there a look at walmart, it is also down you mentioned retail there walmart is a buy here. Walmart is down a quick 10 points nothing is happeningother than good i dont want people to say you know what, happy days are here again as they did at 3 47 this morning when the futures rough dont be faked out it is actually right that this stock market was down. It was the velocity. We got a lot of stocks coming back we got the s p 500 down less than a half of a percent at this point. If not for the day proceeding it we would be here nvidia was down the truck is in the front it is like the equivalent of an ice cream truck. Back to gm for a little bit, 2019 thats next year. Nothing gets by you, my friend this that what the robots ar about. Shes still up there. Theyre starting to move her now. Wow, really where is john conner theyre taking her away one thing thats a wild card is the president and his attempt to be able to link himself to this yes thats been it caused people to say. There she is. Thats a robot. Wow i know. Shes going to be out in the front seat of your self driving car just to make you feel better i feel better already especially with those 18wheeler coming down on the right of you s p 500 is down about a third of a percent, jim. That was to be expected of that thing i just said trying to get people you know what, yesterday to be fair, we started down rather sharply and we came all the way back and we hit a great deal of volatility later in the day. Remember there were people who bought at the bell yesterday and can flip out at their stock and making a lot of money which will cause the second downturn if we get one. I told you the opening will be phony. It was lets not get carried away unless there is actual news micron, a couple of guys upgrade. Micron shares, technology is almost up 7 gm being the third. Yep, we should take a look at shares there it is, it is having a strong day something you and i did not get to discuss yesterday, of course was broadcom and qualcomm. Qualcomm stock, people may look at it somebody is bidding 82 a share to buy that company. By the way, still up 3 . Jim, your take yesterday, i was sharing my reporting on the situation. There were any number of people in qualcomm shares who seemed to continue to believe that broadcom is sort of misread the shareholders base of qualcomm and saw yesterday as it is a pitch, i dont think it is that quite on hock tan part he did meet with investors yesterday as well talking about the virtue of their deal they dont believe qualcomm earned what they say the 82 bid is significant in terms of premiums and not to mention the antitrust concerns that does not seem to have gone very far theyre relying on shareholder pressure to try to get qualcomm to the negotiating table we have not seen those kinds of letters or Public Discourse that we may otherwise in certain situation where a large shareholder would come out and say talk to them i am surprised that the six investment banks that involved on hock tan side are giving him great comfort. That turned out to be ill advised. I think this is ill advised. But, how about the idea that they raise the stock portion why is that inflation taking the 60 bucks cash and 22 stock. That stock, of course, of broadcom as you pointed out it is quite weak since we launched i. It is horrendous. I feel like a complete bozo. This downturn may help qualcomm. They help us. Oh man. I have people telling me suddenly this morning, well, it was 130 last week, maybe it is 125 this week. I would tell you those who tell you that are a day late and perhaps a dollar short or 8 short. Yesterday we watched ge which we talked about often. You had to bring it up. I was having a good day with the eagles you had to do that. Too early to buy ge yeah, probably. They gave a not terrific accounting of that first quarter. He knows yahoo and what would seem is some of these people would have to is do a big entry offering the nasdaq is up by the way, which shows you how phony that opening was. I hate to use the word phony the ma yeah, i can pick somebodys work it was a saturday night opening. You got the best words. I got the 800 i didnt quite get there. It does not correlate and does fnot get you anywhere here we are at the s p 500 kind of working you back to flat lets get to bob pisani on the floor. We are positive on the Dow Jones Industrial looks like the expensive was p o go positive. The opening, everything was down 2 right across the board. The important thing s p 500 and industrials and tech and materials now are all turning positive most of these are down 2 or 3 . A couple of things i will be watching is volatility thats the most important thing. In terms of whats driving the market, thats what matters yesterday. We were driven by technicals and not fundamentals volatility was the major issue a lot of people did not have protection far out of the money. A lot of people reached for volatility and protection and they charge a ld a lot of moneyr it and thats what drove the vix up the vixs front month contract is very expensive compares to the back month contract. Thats very rare, this is coming down we are in the 40s earlier. Volatility already starting to subside. Next thing is etf. Remember the ocean of money that came in on january, and 55 billion. It is been some modest out flows in the first or four days. Watch what Retail Investors do how will rerail investors react for those who bought at the beginning of the year. If you want the average price for the vix, well, it is about 22,770. Now, thats well, well above where we were yesterday. The close yesterday was 2,648. We are 140 the average investors bought the vix at s p 5,002,770 how are they reacting that cease and desist what everybody is watching more to watch. Demand by brokers and traders to deposit additional money if their accounts dropped well, record level there, that can be an issue. The credit spreads, are there stress or not . If the credit market dont show any stress, it is likely if the stress spreads the credit, i think there is a lot more concerns. So far, i dont see it and dont hear about it. The volatility product, you heard a lot about the xiv that jim has been talking about it. Volatility is down 5 . Here is the big problem, folks, what happens when volatility goes up 115 thats what happens yesterday and thats why these products have problems and issues and as you heard, it is being liquid e liquidated today this is these kinds of products and Exchange Traded notes need to be thought of at a different way. In verse and Leveraged Exchange products are not etfs. So the bottom line is a lot of issues around funds in the open. Lets talk about the opening and whats going on. Here is the man that actual linos everything about the opening. Tom farley is joining us yesterday to talk about the close, how did the open look i saw major iswapping and other than the additional media here, it feels like any other morning. We saw the enormous opening down a thousand points and some delays in stocks you made some changes and the way the mark opens and things have gone very smoothly, tell us about those changes and what you are doing . We made a lot of changes, we had several volatile days. You mentioned august and brexit and june of 16 and the trump election and the last time i remember of over night selection of volatile today. It is worth taking a breath back and acknowledging the dow is up 40 since that night unemployment is down by 1 gdp is up by 1 . So, a moment of volatility like this is to be expected and as a group we need to take a deep breath and realize that well be okay things are okay at this moment going to the open, a lot of people had been concerned about the ability the market handled big sudden moves you made some changes after august 20th when there was some delays in the open to make sure there is a quick and efficient orderly open from what i can see, you tell me we had big days like the brexit and the trump election and the markets have opened smoothly ever since then. What changes did you make . It was smooth and my colleagues deserve to be appl d applauded as well. We did not have a single stock that enters a limit up or limit down stage which was a sign of trading and not a single stock listed here on the New York Stock Exchange while the trading was volatile but it was orderly i expect for it to continue today. There is the message from tom farley, orderly, trading to expect to continue jim, back to you. Thanks bob paisani on the floor. I dont want to get people to get caught up on the upside here either there is one name i want to talk about lululemon, a 10 billion company, announced their ceo being replaced because of his behavior and not the best interest in the company. Any take away from your perspective . We dont know what behavior it was . I am trying to reach him because hes not answering his email are you surprise his stock is not down more . Should be, hes the king of so obviously, people must think theyll have a seem Less Transition yep i dont know. Hey, david, here is some interesting facts. Please. I got during the break. Yes, tell me. So using the s p 500 which is a constant that i have been getting since 1994 we have been over sold five times. Four out of five times, the market was up the following week four out of five times it was up again. You can eye ball it and see wow, it is been up of an average of 10 when you have one of these declines and by the way, the fifth was not so bad it was up 1. 4. The fifth wasnt bad it was enough to take the risk of buying. So im in favor of, just on this basis, taking that its not a shot, but four out of five aint bad. 80 , thats not bad the dental market is very weak because people are having technology and theyve had to switch to invisiline but thats bought of instagram not unlike este lauder it is the selfish generation and youre looking your selfie best yeah. Yeah, buts tak estee lauder had a remarkable quarter i told you it was phony the is nicely in the green. The nasdaq is having a real rally. Thats how this works alibaba, all up allergen is up. Its not going to be able to you know, snow in july so if allergen is up, theoretically, what does it matter people were be witched and bewildered by that that was my room at harvard ralph waldon we yeah. The real rammer. There were remarkable numbers this morning and i think that stock is remarkable emr is good i think if we want to pivot from emerson to emerson, thats not a bad buy right here no, its not. How are those retailers that i suggested . Thats up. Xiv. Lets briefly leave the equity markets to go where the fixed income markets. Good point. Rick santelli is in those bond pits from the cme group good morning if you just turned off your stock screen yesterday, it would have felt like a roll tile day, for sure but what i want to draw your attention to is that oneway chart has lots of intersection with earlier in the week if you look at a yeartodate of 10s, i think this is most important. Here we sit at 2 7 on the day, were up six the curve is steepening still. But more important, we settled in the low 240s, so were still nicely up on the year. The high yield close of the year is 284 so were not getting far away from point here. Remember, Exchange Traded products or funds or notes, whatever you want to look at, theyre derivatives of derivatives. So as you look at a oneyear chart of the bark ilys yield, it turned up yesterday spreads widening is your negative there but its historically compressed contrast that with the htf which is at the low he level since december of 2016 the point is is that if youre holding ill liquid high securities, first you buy an etf that includes them and price them and boxes it up as a second derivative, your behavior is different, especially during the exit stage and i think thats important to Pay Attention to if you look at it, a yeartodate of whats going on in boones, its a very similar story to the fixed mcmarket here its not having a very large correction and its Still Holding the 60 handle which was very hard to get it took a monster move and a lot of nervousness with regard to what mario draghi is going to do in light of our fed. Finally, the movements here are not co in mmiserate with the 1989 crash the ranges just arent there finally, today, the dollar index shows improvement, but not to the level to make one scratch their head and think, whats up with the Foreign Exchange markets, still well down for the year jim and david, back to you all right thank you thank you, mr. Santelli here we go with what, jim . Well, i dont know. Your call my call listen, im looking at a market now that were having a significant rally. Weep up over 1 in the s p down side really . Because we were up big at 347 this morning you keep bringing up 347. Well, why not david, theyre all connected to these you know, to these pieces of paper that werent well thought out but theyre done, right yeah. Why because you had to sell that s p at the opening and that was known by the i feel badly, a lot of people get faked out once again. We did a lot of talk this morning about crashlike symptoms that doesnt happen. Dont forget the trucks outside being a fabulous indicator lets take the big picture before we as we sort of back up here. A little red, what is red earnings, youre expecting earnings growth. This year, i would assume, still benefits from tax reform yeah. But remember, retail is a big winner and retail. So boeing is up 10. You know, when it was down 20 earlier, that kind of shows you the fallacy of portfolio theory of the perfect markets, so to speak. Yes do you remember that theory yes, i do the random walk walk down what as we often to, lets end the show here. At least our hour together with stop trading im going to do a rarity here the not that long ago, i guess it was really about a half hour ago when you asked me about the mad dash, i suggested we look at nvidia, which was down about 15. Now its up ten. So nvidia has journeyed 25 points since we started talking. What i worry about is up 10 ahead of when they were born on thursday that seems aggressive to me. It does my Charitable Trust owns it, we sold higher looking to be able to get back in lower the only one that i suggest people can still buy the at 27 would be amazon. Okay. It is a long day. Once again, i want to congratulate coach pederson, mr. Lurie and the entire staff of the Philadelphia Eagles for making me cry. I saw that. It was emotional over 550,000 people saw me cry. My wife nailed me. Its a high you cant take it away. A lot of anxiety and then theres release. You cant take that win away. I addressed the team in the last week of july and suggested they were going to win the super bowl you did and was somewhat admonished underpromise and overdeliver was your message dupont was last year yes take no prisoners my guess is youre invited back to training camp. Thats because coach frank wright, coach jim schwart and the head coach pederson, they underpromised and overdlifrd eld all year what do we have on mad money tonight . We have core lab in the doldrums by the way, we take a look at the fifth anniversary of when we coined fang on mad money. Now everyone has appropriated it its nauseating it you dont own it any more i love you, man dilly dilly people are still saying that. How about the guy that came up with that ad campaign. Maybe i kind of fell like its over. Im going to skip the parade. You are i think thats smart im going to do my job. Okay. Dont get sucked in its a long day. All right well this is still the first quarter. It is, of the day and they can strip the ball with a minute left and the next thing you know, you can throw to gronk all you want and the next thing you know, youre holding up the trophy now over to Bertha Coombs on what is also a rally bertha yeah, and its being led by the nasdaq big caps. The nasdaq 100, in fact, here is really the strength that were seeing of course, it is early on and we have been seeing some waffling back and forth part of what is driving this today is very much the turn around in apple. But we saw this movie yesterday. Apple started lower, moved higher, yesterday the story was apple tested and held a technical level, a bearish technical level. Its 200 Day Moving Average this morning, it is bumping up against that and as apple moves up above that which is at around 159. 62 a share, as apple moves above that, we see illustrate gain strength and we see the market gain strength. Its pulling up large cap tech, as well. Those fang names that jim is talking about. Again, we saw them start off lower. Now they are moving substantially higher it looks like netflix which had been in correction yesterday about 10 from its recent alltime high, just slightly out of correction here so were just seeing some green shoots in some of these large caps this morning start getting bouncing back, start getting a little bit of a bid here after two, three days of big selling in tech. The interesting thing, as well, is the biggest source of pain today is what is leading us higher, as well. Chip stocks. Chip stocks are moving much higher they had been in correction. And they are led by some ofs those earnings winners, including sky works and micron right now, we are going to move ahead, guys. Tossing it back to the nyse. Okay. And we will take it. Thank you, bertha. Of course, reporting from the nasdaq this morning. Good morning to all. Welcome back to squawk on the street. Im david faber along with Michelle Caruso cabrera. Ka carl is on his way to pyeongchang for the olympics its been a very interesting half hour. We came into the opening looking as though we would be down sharply. That quick le reversed now you can see we have the s p, the dow, nasdaq all higher also interestingly, crude oil, actually commodity complex looked to be down. Crude was down as much as 1 or more in the early going prior to the equities opening at 9 30 but it is also up. Of course, over in europe, the declines were fairley significant playing off of our declines yesterday as i said, stocks were racing early losses this morning, after what was that 500 point plunge in the dow at the open the volatility, though, continues. And lets bring in art cashin from ubs, director of floor operations going along what you might have thought after a day like yesterday, art, or perhaps somewhat different no. I think its exactly what you would be looking for the move down overnight again after an early rally attempt Global Market all beginning to feel the weight particularly in asia but markets remain thin and they remain volatile and, quite frankly, this is just what you need for a bottoming process to succeed. Chopping up and down, testing and retesting levels and the tests hold, then you might have gotten past the volatility and things get better. But the viewers should not jump ahead of themselves. Let the market tell you where its going by zigzagging back and forth and holding the previous levels. So if theyre asking right now is the worst over, are you saying its too early to tell or no, im saying were in what looks like the beginning of that process, the bottoming process and, again, youll see zigzagging what would erase that . If they rolled over, retested and failed bag badly that would tell you that you have further to go, maybe even further to go on the downside. But further certainly in the process of bottoming out and getting back to somewhat less volatile market. All right we have the volatility index which, of course, is getting all the attention down 11 points, down to about 25 still elevated, but much more normal levels. So we obviously had that kind of forced buying in the vix related options. Has the fever broken there what can we take away from there in the way of figuring out if the market is now operating on somewhat more normal supply demand terms . Michael, i think its getting there and i think it saw some of that in these inverse and reverse setups, the etns that they had some of them got absolutely blown away in in trading the vix. Theyre losing 70 overnight and i think by some of their prospectuses, they might have to be wound down. They are going to be, art Credit Suisse came out this morning calling it an acceleration, essentially. But thats over on and done with i mean, it kind of shows there is some risk, significant risk in those using these etns to obviously profit from what they thought would be a very quiet market absolutely. But that removes one minor pressure from us people forget, they look, they saw the selloff there were many components to this there was mortgagin selling, there was redemption selling, there was fear of redemption selling. Im running a fund, im worried michael is going to come in and redeem a lot of the shares outstanding. So i do some selling from the portfolio to be ready. And the etfs themselves, not just the etns, theyre easy to sell but when the backers have to sell the underlying stocks, theyre not so easy and that results in what looks like the occasional mindless selling. You see theres a vacuum, you see theres no bid, yet they keep selling into it because they feel they have to liquidate to stay on top of it overnight yesterday, we saw the tenyear yield get very close to 3 . That leads to all of the things you just talked about. The future of the market from here, very releant on whats going to happen with those longterm Interest Rates should we be watching that yeah. I think people are looking at the tenyear and wondering what happened here is when we have very good news on wages and in fridays unemployment report and that spooked a lot of people they said that could perk up inflation. Could it have gotten out of their reach . Will they find that they are wind the curve and that is what sparked this multi day volatile selloff that we see thank you my pleasurier fms, among the hardest hit in the past week. The index is largely flat this morning. Joining us now, kelly king to talk about his business and the banks. Good to see you. Thank you good to be with you. So a lot of things seem to be hovering over the industry in this little stock market panic has not really seemed to be much about the underlying economy we havent really gotten anything scary in terms of whats happening there but on the Interest Rate front, what is your baseline assumption for what the fed is going to do and ought to do in reaction to where the economy is at . Well, i think youre right. You know, the immediate activity around the stock market causes a lot of concern but it really doesnt impact the real fundamentals in the real economy. The fact is, the real economy is doing really well. Its improving its very optimistic all the structural foundations for a growing and steady economy are there. That is what the fed will be looking at while in extreme cases the fed, in my view, will reaction weve seen that a time or two over the last ten years to a dramatic change in stock valuations this kind of change wouldnt change them a bit in my view i believe this morning if you polled them all, they would say theyre still on the trajectory of three or so tightensing this year that is what they need to do rates are still relatively low a lot of people are panicking. The rates are still really, really low higher rates are not going to im pete the growth in the which he. All the higher rates are going to do is provide additional income i think the fed stands back, theyll still raise three or so this year. So that is the short end of the current, but the long end of the curve, the tenyear yield seems to be something that spooked the market do you have an assumption about where the tenyear is going and or at what level is it a threat to the stock market when should be says, you know what . If i can get x percent in a riskfree tenyear government bond, why would i put it in the stock market whiches has a lot more risk . Well, we were having fun the other day talking to one of our people who model this all the time and i bet her a cheeseburger that by next march the tenyear would be at 3. 25 whether im exactly right or not, im fairley sure the rates are heading up on the middle to the longer end and the reason is simply this. You know, we have a strong and improving economy. We have historically low rates we just approved a 1. 5 trillion tax bill that in the short run will create huge increases in inflation. The fed will be borrowing 1 trillion this year were going to have higher invasion were going to have higher Interest Rates it is not bad for the economy and so the fed will continue to raise and it will be good for banks, but its overall really good for the economy, as well. It might provide some competition to other areas of the market dont move because Kayla Tausche just got some comments from treasury secretary Steven Mnuchin on this market michelle, the second is here on capitol hill for an annual and routine regulatory hearing but we caught up with him to ask him about the administrations reaction to the stock market drop yesterday here is what he said were. Monitoring the situation. The fundamental economics are very strong. The economy is doing very well tax reform is clearly helping earnings a lot and markets look like theyre functioning normally in terms of liquidity. What about the reaction across the world again, markets move in both directions and theyre functioning very well. People should be focused on the long Term Investment americans should focus on the stock market over the longterm has been one of the best investments and well continue to monitor it. So secretary mnuchin talking about the economy. One congresswoman who we talked to on her way in said she, of course, is going to ask him about how markets have been behaving the treasury secretary is confident in the longterm fundamentals of the longterm economy. Back to you. Got it, kayla well be watching to see if he says any more in that testimony. Mr. Kirn, what did you think about what he said the secretary is very smart, in my view i thought what he said was very reasonable and appropriate the markets are functioning properly markets go up, markets go down this, when we get through analyzing it, was largely a technical reaction over the shorting of the vix. So i think all that will settle down, people will realize the economy is still really good i dont think there is any caution to action here on anybodys part other than the question question about why are you investing . My view is this. If youre relatively young, and middle aged, you should be investing heavily in the stock market as you get older, you should be in the bond market but most importantly, you should be diversified one of the things ive learned in the 20078 to him frame is there were three really big mistakes made. One is that people did not have enough capital that means they borrowed too much money they did not have enough liquidity. They thought they would never need any shortterm liquidity and they did not have diversification. The firms and the individuals that had real trouble had difficulties in in those three areas. So if you had diversified, you had reasonable capital and hold some really good cash, you know, shortterm liquidity, then you should have your longterm Stock Investments as a longterm view and these crazy markets happen, you should just go to the movies yeah. Mr. King, while weve got you, apart from the markets and the economy, id love to get your reaction to that extraordinary move by the Federal Reserve involving wells fargo and the asset freeze there as somebody who runs a fairley large banking institution, what is your reaction well, i dont want to talk as you would expect about any one individual but clearly over the last ten years, the banks have been responding to a lot of regulatory changes, increased requirements, increased pressures. You know, sometimes these kind of culmination in the end, kind of like the final selloff before you go into a bull market i think you get a little bit of that same reaction in the regulatory environment, as well. So that it may be some possibility of overreaction towards the tail end of this cycle. But what i do know is this vertically every ceo that i talk to, every Industry Group im in, we have been working really, really hard over the last ten years to make sure that any weaknesses that we did have were not perfect. We made mistakes but any weaknesses we have, we have work really, really hard to assure them banks have more capital than they used to have, dramatically more liquidity, our governments processeses are better for everyone involved im not saying were perfect, but were dramatically better, safer, more diversified than we were years ago so whether or not any one institution has more work to do i cant speak to but as an industry, cart maddic improvement has been made. This is a really sound industry. And lets remember the purpose of the Banking Industry is to try to help the economy grow what we dont need to do overly shackle the hands of the industry so we cant do our primary jobs hopefully were in a period of reduced regulation rather than increased. All right kelly king, great to have your take on that chairman and ceo of bb t thanks very much thank you the ticker that everyone on the trading desk is talking about today and last night is xiv, an Exchange Traded know that is short volatility in the form of vix futures, mostly. Leslie joins us now with why it matters today. And chris suite announcing about a half hour ago that it would be winding down the security this comes after the Exchange Traded note plummeted about 85 in aftermarket trading yesterday which could cause more than 1 billion in losses. Xivs snet value was recalculated at just over 4 following a huge spike in volatility during the trading day. Credit suisse says the last day of trading will be february 20th the firm says it has not suffered a, quote, material impact, but Credit Suisse appears to hold about a third of the etn. A source familiar with the matter told me the exposier is inflated chris swit down marginally at the open compared with as much as 7 in the aftermarket yesterday. Most of wall street participants ive spoken with believe that these types of products are contained, that they have a low likelihood of actually posing a Systemic Risk to the rest of the market however, it has drawn attention to the Exchange Traded notes and they tend to have a bit more leverage blackrock put out a statement this morning urging more regulation of etns guys leverage, when it works its a drug when it doesnt, it kills you. Its brutal, absolutely thanks, leslie. Thank you so coming up, Interactive Broker ceo Thomas Peterffy with more on this extreme volatility. Dont move people dont invest in stocks and bonds. They dont invest in alternatives or municipal strategies. What people really invest in is what they hope to get out of life. But helping them get there means you cant approach investing from just one point of view. Because its only when you collaborate and crosspollinate many points of view that Something Wonderful can happen. Those people might just get what they want out of life. Or they could get even more. A quick check of the markets, dow industrials were up i believe a couple hundred points at one point. Weve now dipped down into negative territory this is the kind of gyrations i think you would expect to see after a steep drop and a lot of moving parts and selling in the last few days. Were obviously going to keep an eye on that down. 25 . That would mimic the pattern we saw yesterday higher in the Early Morning and well see what happens for the rest of the day. Lets bring in thomas. Thank you why do you think what has happened over the last couple of days happened . So its easily foreseeable that it would happen because over the last five years, we had the most consistently profitable strategy was to sell above market calls and sell below market goods the people who boast these options are professional traders, not speculators they use these long positions and options to sell into up markets and buy into done markets and that has diminished volatility it was like a rubber band it hudly had to sxloes and thats what happened in the last few days and it is going to, i think, top of the time most of these offshore positions are covered by the brokers its going to be very painful. There will be lots of margin losses so a watching out at some point or you think thats happening right now. Can i ask the cause a lot of people thought was a rise in Interest Rate being the catalyst that forced that move that you described. That is correct, but once there is a little bit of a move, people have to hedge their option positions and they have to sell into an up market and buy into a down market this market is going to move up and down nervously and Market Makers who have suffered for a long time will make a great deal of money in the next few monthser or days weve been focused on the publicly listed instruments. There is a sense out there that its just sort of the visible part of a much larger market where institutions have been trying to capture that volatility premium, basically do the same types of trades, bet of a calm market. Is there any way to gauge where theres a bigger problem to work through or do you expect its a multi day event to try and square these things up it is going be a multi day or multi week event its not going to be longterm, as i said. The short option positions have to be covered. People who are long these positions are not going to let them go because they enjoy very profitable situations where they can sell into up markets, buy into down marketes and make more money on that than selling the options that they own. So this is a sticky wicket yes so this is a complicated discussion if youre a novice viewer to cnbc if we could simplify it more, where do you think Interest Rates are going . Are they going to plateau here or do you think theyre going to keep going up . When Interest Rates rise, a lot of people say wow, im finally getting some yield there why dont i just buy into that what do you think is going to happen with longterm Interest Rates . Rates are not competition to the stock market a good stock market, as you have seen, can go up 10 , 20 , as he can it will when the option positions get covered. Also people being short volatility when people are short volume tild, eventually they have to cover. Weve certainly seen that mr. Peterffy, thank you for joining us this morning. Thank you good to have you on lets go over to leslie picker again for more on fidelitys website issues. Fidelity users experiencing some technical difficulties and errors in accessing their accounts following some of the volatile market activity weve seen a folksman for fidelity saying we are experiencing some intermittent technical difficulties on our websites im checking on the status to get more information but the same thing happened yesterday among several investment firms, including t. Rowe price so certainly something were keeping a close eye on they say dont check your account when the market is volatile maybe this is a blessing in disguise for people who cant access it. Well see. When we return, Goldman Sachs David Waldren joins us mom and dad got a new car. Its not theirs. Its mine. Mine. Mine. And it always will be, forever and forever. The new rx 350l with three rows for seven passengers. Experience amazing at your lexus dealer. But prevagen helps your brain with an ingredient originally discovered. In jellyfish. In clinical trials, prevagen has been shown to improve shortterm memory. Prevagen. The name to remember. The dow has bounced back from, what, being down over 500 points,although we are moving around quite a bit this morning. Here the with some insight, john waldrem. Kind of nice to have you here today. Nice to be here give me a take here in terms of when you pay close attention and what your expectations are when with we start to see things that we are over the last lets call it week we have an environment where theres much less volatility where the market has moved very far and very fast. Were looking at the market as being quite volume tail, but over the longterm, clients focus on the fundamentals. And those are the longer term trends that dominate the conversation if if you are extended periods like this, it can bfkt difficult to ascertain the correct brice, cant it . Sure. If the volatility persists, that makes it harder to price transactions youre having a harder time pricing market transactions. So if that persists, thats problematic. We expect over the longterm fulds will win out we bring on your strategists and all those guys do you have any expectations in term of whether this will be short lived . Im not a market strategist, but certainly if you think about the optimism that persists in their minds around the economy and policy in particular is very supportive of longterm growth in the u. S. Economy and the coordinated growth going on globally were very constructive in the overall growth in the economy and the overall opportunity for companies to transact to make investments to grow their earnings lets take a look at mergers and acquisitions its been an interesting year. I think you were on the belief that there are disruptions occurring in traditional Business Models that are forcing companies to consider transactions they might not once have for example, a story i know well and one you know pretty well, too, foxs decision to sell most of its company to disney our time with companies has evolved markedly over the last ten years where more and more were spending time talking about the disruption happening to core businesses, core franchise, franchises of companies that have been quite sessfuccessful r a long period of time. Supply changes, disruption, etcetera theres lots of shift in terms of how companies are prosecuting their business ands those changes are very xwafktful in terms of how the companys earnings stream are being valued its a big dee deal for a ceo to say, my world is changing and i need to go in a different direct s to see, hard to do, but that is forcing companies to be much more proactive and in some cases reactive to show they are still competing globally to the longer term how does that show itself i mentioned fox, disthee, i guess cvs etna could be another example. Are we going to see more transactions like that i think youll see a number of transactions looking for ways to grow and reactive and defensive to a threat coming to an existing Business Amazon whole foods was a good transaction to point out across the consumer space and across food fox, you certainly see the impact on the media franchise. You have the potential threat to the pharmacy and retail element of Drug Distribution we see a lot we expect to see more. And youre seeing that considerationgoing on amongst ceos absolutely. You mentioned the broughter economy when i brought up the market one of the keys is tax reform. Early days here to just sort of figure out what the true impact is going to be what are you seeing in terms of how companies are considering the potential benefits that they will receive as a result of the lower tax rate theres no question in our mind that the tax policy in the United States is very supportive a lot more cash being deployed and on the Balance Sheet u. S. Cash was more constrained so the payment of dividends and that is point one. Point two, significant pressure to find ways to deploy that capital to grow earnings the marketplace is now market volatility notwithstanding, valuing those earnings on the assumption that theres going to be a higher Free Cash Flow stream over time so now the question is how do you deploy the capital and the cash to continue to grow those earnings so were expecting to see a lot more m a you are well see pressure to return that capital to shareholders i think an interesting dynamic will be to see as the m a emerges as we expect it to merge over the course of the next several months into the balance of this rest of this year will if the m a isnt successful or if there isnt as much success as we think, will shareholders the put that capital back to have it return, right. So if you had to list it, you can give it back to employees, deploy for mergers and acquisition. But to your point, you have the money here now, so its burn ago hole in your pocket, so to speak. You can obviously invest in the business, cap ex right now youre getting it back immediately in terms of tax reform or you can do a dividend and a buyback. Which do you think companies are going to prefer . I think its very facts specific i think the pressure on Capital Allocation is the thing right now, which is the the focus from shareholders is how are you going to deploy incremental cash that you now have in your coffers, so to speak so youre certainly seeing more investment in the Employee Base and wages in labor there will be more investment in capital equipment. There will be more investment in the business internally and then we think there will be more m a but we think it will be a component of each. And those activists will continue to be an active force, so to speak, forcing companies to it feels to us like there is a bias right now, even from activist shareholders, to have that cash deployed offensively my view, and our view, is that over time, if the cash isnt deployed effectively, the pressure to return more of that cash will start to be more you know, more aggressive. John, thank you for joining us appreciate it. Thank you john waldron, Goldman Sachs michelle, over to you. Thanks very much, david were going to go over to sue herera with a quick news update. Good morning, everyone. Here is whats happening at this hour Vice President pence arriving in japan on the first stop of his sixday asia trip. He will meet with Prime Minister shinzo abe he will lead the u. S. Delegation in the opening ceremonies. A British Court rejecting a legal attempt by wikileaks founder Julian Assange to have a warrant for his arrest dropped he faced arrest for skipping bail in june of 2012 by seeking refuge in the embassy. After years of tests, delays and is setbacks, spacex is poised to launch its falcon heavy rocket this afternoon. It was designed to be the most powerful rocket in the world but in a slight change in strategy, the company says it will be a step and not the ultimate vehicle to transport astronauts to the moon and beyond and youll need a passport to go to the moonand passport fees are increasing 10 to 35 beginning april 2nd. The new cost of a u. S. Passport will be 145 for adults, 115 for children 16 and younger. That increase does not apply to those who renew their passports by mail. Thats the news update this hour ill send it back downtown to you. Michelle news you can use. Thank you, sue now to our etf spotlight and a look at why some of the typically safe haven etfs arent performing the way we might expect mike yeah. Michelle, its interesting if you look back to last fridays high in the stock market, obviously, tremendously dramatic moves we got our 10 pullback in just a few days but in the bond market, meaning the treasury securities and gold where you would normally like to see or expect to see some of that stress turning into higher prices really didnt happen this time look at some of the etfs attached to these markets. The gld which, of course, holds physical gold, the gold trust there. Tlt is longterm treasury bonds. Thats very much a safe haven trade. Those basically tracked somewhat lower. They did not follow the stock market which is the green line there. Basically, were steady with slight losses as opposed to getting a bid, implying people were rotating out of stocks into those supposed safe areas. And a couple of ways to read this, one, this really wasnt a macroeconomic panic. This wasnt really about a stock market decline that was sniffing out some kind of credit problem or some economic demand issue or anything like that or even, frankly, a radically different Federal Reserve expectations it really was a stock market specific event and i also include here the high yield bond etf, thats high yield corporate bonds, hyg, which often sometimes will weaken when you see that idea of economic stress happening and its barely done so. So, really, this was almost a localized stock market phenomenon, so its interesting you did not see that response. It supports the idea that this was not the stock market indicating some kind of bigger economic issue weve seen correlations in other areas. More squawk on the street next as we flothe ldolw eswi market swings. Dont move weve been preparing for this day. Over the years, paul and i have met regularly with our ameriprise advisor. We plan for everything from retirement to college savings. Giving us the ability to add on for an important member of our family. Welcome home mom. With the right financial advisor, life can be brilliant. Lets go to dom and take a look at this wild ride just to put things into perspective, we want to show you a chart over the last two days of it is roller coaster ride that weve seen. We know predominantly its been to the down side we tested that 10 pullback level. At one point, down 1600 points to close down about 1100, 1200 all of a sudden, rally back down and go negative again. Simplistically put, traders may be watching. You take a look at some of these charts, take a look at the Dow Jones Industrial average the average price over the last 50 days for the dow, that ends up being more of a shorter to medium term trend line for the markets. There have been a handful of times weve touched that level weve now violated that level. The next step here is to take a look at other moving averages below it we havent seen any kind of move down there in well over a year lets take it to another step with the s p 500 weve now added three different moving averages to this particular chart the pink magenta line is that average we mentioned before. That puts the 150Day Moving Average in some peoples sites here so something to keep an eye on for the broader numbers, lets take a look at these if youre looking for where that 10 pullback happens, these are the numbers youll want to watch. For the dow, 23,955 or thereabouts would represent, michelle, a 10 pullback from these levels for the s p 500, that level that you want to see, that 10 pullback becomes 252585. Ask and the and for the nasdaq composite, 6,7 5 5 back over to you yeah, sure. Levels to keep. An eye on thanks, dom. For more on the selloff and what investors should be doing right now, lets bring in daniel ahead of equity Model Solutions and jeff clinetop. Gentlemen, good to have you here jeff, what do you tell investors right now . Are you getting a lot of calls are people nervous there is a little bit of nervousnessness. But i think there are three things investors can do right now. One is do nothing. Stocks are where they were at the end of last year if you didnt feel compelled to do anything then, dont do anything now you can also sell. Its possible if you havent rebalanced your portfolio, you may be overweight stocks after this pullback, look at those longterm targets. The last thing to do is buy. If youve got some cash, youve been underweight stocks, waiting for a pullback, congratulations. I dont think you have to be selective given the broad economic back drop of strength but if you want to be, financials look good here and emerging market stocks look pretty good. They benefit from the driver, the underlying root cause of this pullback which is the return of inflation and stronger broader growth daniel, you are executive director and head of equity model portfolio solutions. Tell me about how you divide up a portfolio when you start to worry about rising Interest Rates and what impact that has on the stocks in your clients portfolio. What do you tell them . Right were positioned for late cycle sectors like financials, as well we also Like International stocks, particularly after theyve pulled back over the last nine days or so, like japan, like europe but before i get into those areas or those rationales, lets talk a little bit more about whats been going on behind the selloff and i think jeffrey alluded to this, but we think were going through a shortterm adjustment. It could last a number of days if not a number of week. We dont think it will take months but the markets often go through these shortterm adjustments amid longer term recoveries and, frankly, that was the case 18 months ago the market was reluctant at the time to accept the synchronized Global Recovery and the powerful earnings recovery that was going on then. Today and more recently, investors have been reluctant to accept these late cycle inflationary pressures that weve seen and frankly, that wage data, that spike in Interest Rates a week ago, that was a wakeup call that these inflationary pressures are real and theyre likely to continue so we continue to be positioned for late cycle sectors as well as international stocks. And the Dow Jones Industrial average has gone positive now ohm by 5 points, it was up 20. Jeff one mentioned in passing that we now are in, perhaps, a higher volatility regime and you and daniel have talked about being late cycle this seems to be the premise on which a lot of Market Strategy is based right now, right . So weve kind of maybe hit the peak for melt up momentum in late january now we have this sort of higher volatility chopping around period but youre suggesting there is still further to go in a final phase of a bull market is that how you see it playing out, jeff . I do, mike. We all know what happens in the year after the yield curve inverts, right thats a clear sign. Were in the late cycle, we get a recession, we get a bear market but what else is talked about is what happens in the year before the yield curve inverts in this late cycle environment thats usually a great environment for stocks, double digit returns, but accompanied by a lot of pullbacks usually tied to views on what the fed or other Central Banks might do so get used to this volatility dollar cost average if youve got money to put into the markets. Theyve only begun to get to this later stage of the cycle. I think weve still got upside to earnings and up side to the markets in the year ahead. Dan, give me the last word on what would tell you that this adjustment period, as you put it, is over . So essentially, what are we looking for aside from the fact that the market just calms down . A number of things. Number one is typically with these types of moves, theres a retest of the lows if we can retest that low and stabilize and hold that low, that might be something technically to keep an eye on. Secondly, i would offer that weve still been going through werings seas earnings season. But Many Companies have been in a blackout period and theyve been unable to buy back their stock. We know corporates have continued to be a massive bidder of stock over the last couple of the years. So we think in the next couple of weeks as we get through earnings season that could be another potential area bottoming. Got it. Thank you, gentlemen daniel and jeff. All right when we return, ed la zeer joins us hes going to have more on the uncertainty that we are seng re back in a moment markets seek at big sell to start the week were going to tell what you it all means for your money long term go. To tradingti d tnaonidhe cnbc. Com nobodys putting their money into equities. Theyre not investing in commodities or fixed income. What people are really putting their money into is what they hope to get out of life. But helping them get there requires a real refusal to settle for average. Because when you approach investing with a tireless desire to beat the status quo, Something Wonderful can happen. Those people might just get what they wanted out of life. Or maybe even more. Lets get you to the cme in chicago. Rick santelli is there with a very special guest. Hi, mike. Thank you. Id like to welcome former president of the president s council of economic advisors, ed lazier thank you for taking the time today. Pleasure, rick. Thank you. I want to talk about the jobs report in so far as was it a catalyst for some of what were seeing in the marketplace . Year over year wages, earnings, were up 2. 9 . However, we saw smaller work week listen, you watched this a long time is the potency of the 2. 9 questionable considering the drop in the work week . Good point. First of all, im glad youre focusing on the drop in the work week as you know, that. 2 of an hour is equivalent to 800,000 jobs lets go back to the first question, the issue about inflation. Even if you take that 2. 9 nominal change in wages year over year, remember that productivity rose by about 1. 1 . Not what we want to see but still 1. 1 if you take that off the 2. 9 , youre talking about inflation rates, Wage Inflation rates still below the target level so its hard to argue that there is significant Wage Inflation associated with that last job report excellent thats kind of my read as well but are markets willing to be pushed any catalyst sometimes gets exaggerated a bit now leadership at the fed. I was, you know, in the pits when we had some of the leadership changes like mr. Greenspan, of course, all the following. It does seem to be somewhat ironic that change of leadership sometimes leads to wild markets. What do you think about that notion yeah. Id be very surprised if that were the cause of whats going on i dont see the new fed chairman as being radically different from janet yellen. I think obviously he spent a good bit of time with her and they were together and his policies are not dramatically different from hers with possibly the exception of regulation but thats not what were seeing going on here. So its really hard to point to that as a factor in causing a market decline over the past couple of days you know, fed fund futures is basically a short term instrument like a t bill right. When things get dicey, they buy it if it causes what the perceived percentages are to drop in terms of tightenings, so im going to ask you, does the fed should the fed, will the fed Pay Attention to the follow vilt whether it continues or not is an important question. In terms of potentially the ceiling on the number of rate increases this year in your opinion . Well, i would think that a new fed chairman has to be very careful about the legacy that he is going to create for himself over the next few years. And i would think that he would not want to do anything that was dramatically different unless there were some really major changes in the market. And, you know, despite the fact that the past couple of days have been tumultuous, i dont see those as sufficiently significant. So i dont see that happening. Now, you know, rick, youve been pointing out for a long time that you think the rates are going to rise. And again, you know, the nafact that we had the tax changes and earnings are up, that is consistent with seeing long term rates up going from the demand side that is a longer run explanation for what were seeing. It doesnt explain the last couple days. But it is consistent with the pattern that we have seen in the market over the past month or two. Excellent ed lazear, thank you for your thoughts and your notions of how the job report and inflation and wages may be linked. Michelle, back to you. All right thanks very much, rick santelli. Good to have mr. Lazear on its not even 11 00 and the dow is down almost 1,000 point trip from bottom to top another day of volatility. You know, bottom line, i really think this is a little hint, what weve seen over the last couple days, if Interest Rates, long term Interest Rates really do start to rise dramatically, this is a little bit of a tell of what the markets could be like as a result yeah. Definitely shows you there is a raw nerve when it comes to any hint that the financial conditions could tighten, higher rates. I would say what were seeing this morning is a mild tentative bounce here. Even at the highs to day we were recovering are a quarter of yesterdays losses so its what you want to see, i guess. You have an opening down side flush and then people come in and try to see if values are going to matter as opposed to just trading the technicals and the prices yeah. I mean the role of the quantitatively driven funds, its very important here, mike i dont know exactly what theyre on or what their key Technical Support is they dont rickng a bell and say okay, were done its going to be something were going to have to watch for i will take nasdaq outperforming. Its almost as if large cap growth is kind of like a little more invulnerable to the market moves than your average sector of the market. All righty. Terrific thanks for having me, guys any time. Squawk alley starts next. 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. 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Im jon fortt. With me at post nine, david faber. Were closely tracking this market of course this morning given the major volatility weve seen the dow and s p 500 trying to bounce back from the worst day we had seen since 2011 and weve been all over the map this morning s p 500 had been up more than 1 at one point but backing off of those highs of course, we came into the morning with the dow futures down as much as over 500 points. But that was quickly erased in the very first minutes of trading. Lets get to our bob pisani on the floor for what is behind the wild swings and what we may expect the rest of the day its been a wild, even today, just the last couple hours, lets take a look at the s p 500. We moved in a 55oi