Transcripts For CNBC Squawk Box 20160624

Opens in percentage terms. S p would open down about 3. 5 . Dow futures down by 2. 7 . The nasdaq down 3. 4 . Counterfactual here from the fear mongers. I think the sun will come up tomorrow. The european markets are having a rougher go of things this morning. Ftsi down, the dax over a 6. 5 . The cac in france down 7. 9 . Italy stocks down close to 10 and in spain the ibex is over 10 . Concern about weaker potential economies what would happen if after brexit the rest of the European Union starts to fall apart lets start working on. We have grexit as a word. Italianexit. Spanexit. Portugo. We need to start working on the signs. I think its already gone someone told me. Some that ugly looking thing. Lets look at the currency markets that is where much of the havoc had played out again. The pound had gone into this on the assumption that this vote would go and the uk would actually remain. As a result we saw the pound almost at 150 yesterday. Right now down by over 6. 5 to 139 but went as low as 132 in earlier trade today. That would be the biggest drop since it started floating back in the 1970s. Right now were back. Before the polls change we were at 140 and change. And it went to 149. So that does not portend the end of civilization either gained 7 in the week leading up to it on the expectation this vote would go through with the conventional wisdom. How did that feel to those guys long the pound . I wonder how however we did see even weaker numbers earlier today. Some people probably so you would on the low too. So that hurts. It does. In asia the markets have closed. Check out the nikkei. It was down almost 8 . Markets in china weaker as well. Hang seng down under 3 . The shanghai down 1. 3 and the price of gold touched highest levels in two years. Yeah yeah yeah. Okay. I know. The guy who missed his buying opportunity. Biggest one day rally since 2008 but right now up 58. 1321 an ounce. Ie tallleave. By the time we get those it will just be europe leave. Is the sun up . Its coming up. Its not only coming up tomorrow. It is actually. Its here. Its mere yields move substantially as well. You can see the 10 year is now yields 1. 5. We had gotten up to about 1. 7 so the yields got squished quick on that risk off trade going through. The 0 year in and out at 2. 39. The 2 year at 0. 574 and crude oil down about 4 earlier this morning. Right now down over 4. 5 percent. Wti down 2 and 32 cents to 47. 28. Brent also down. Across the pond right now the United Kingdom making history with that vote to leave the European Union. David cameron announcing hes going to be stepping down in october. Mark carney trying to soothe markets joining us with reaction in the uk is wilfred frost. Wilfred. Good morning guys. Listen ive been awake now for 7 or 8 hours i still cannot believe this has happened. On almost any time frame we look at. Whether 12 hours, the betting company, the markets the pollsters were all suggesting this was going to be remain. This was never expected. Certainly David Cameron never expected the result of this. As we know hes had to fall on his sword this morning. Extraordinary development. No doubt implications if are the uk of course and for the eu. You mentioned italeave. Lots of potential options there. But before we get to the eu lets focus on what happens next here on the uk. First of all three months of solidarity over the summer. David cameron saying hell step down but not until october. After that well have a leadership contest within the conservative party. We dont have another general election. The party just chooses a new leader. That person then becomes Prime Minister. The negotiations with the eu could then become once we have a new Prime Minister in place. David cameron has said hell go to the meeting next week but not to start negotiations. When negotiations start the new Prime Minister could invoke article 50 which would set a two year time period for negotiations to take place but he doesnt have to invoke it. He could do itt more relaxed and amicable pace. Negotiations wont start until a new Prime Minister is place. Lets look at who could be the next Prime Minister. Cameron was clear he felt the new leader who should carry out these negotiations should be someone from the leave camp. That basically means Boris Johnson or michael gove. A lot of people also suggesting theresa may is a possibility. Shes kind of kept her head low not really taking a side either way. Boris johnson is the big favorite. George osbourne is now a long shot and expected to have to resign at some point as well. Huge, huge developments here in london for the uk and for urp a and. We are still down sharply on the day guys. Did you get my i sent you an email wilfred. Maybe you havent checked yet. I saw it briefly but we didnt have any breaks in Worldwide Exchange so i havent been able go through. What was the theme of it. [ no breaks for t] michelle messaged me. She says shes not surprised all the this happened. And it doesnt doesnt go to the economic issue. Goes to what you have always pointed out the sovereignty issue. It is almost status to have four unelected bureaucrats overriding the rules of parliament. And in that is why im im surprised it is only 52. First of all i point out ive already adopted you i call you uncle joe you have a camera. And it is always a wonderful day to be british. Certainly many people will be echoing the sentiments you are suggesting throughout the day. Nigel farage certainly did in his speech. And Boris Johnson of course due to hold a press conference coming up. Im sure words like Independence Day will be used by him and nigel said there should be a day of holiday on the 23rd of june for use to come. Right it is sompbt that resonates. The question enforce going to ask is how much do you think this is being embraced . I saw interviews just in the past two hours dare i say on the bbc that where people who claim to have voted for leave said i never thought that we were actually going to leave. I just voted this way because i thought i was making a statement. Well listen, i think it is a big surprise. 52 , whatever the percentage, it is above 50 and that is the important factor. People expected this to go the other way. So whether people were doing it as a protest or not, the result is britain has voted to leave. Perhaps europe can make some big statements back and try and renegotiate and try to make them stay . Some halfhearted way but i dont think that is going to happen. And in terms of reaction David Cameron has been stoic in his response. One thing he could have done was invoke article 50 immediately and then there would be much more uncertainty because negotiations would be happening already. He hasnt done that out of spite or whatever. And also he hasnt desperately tried to hang on to power for years ahead. Hes decided three months will be enough to bring back security, a sense of calm and then hell step down. I suppose we have to commend him for his response. Frankly his political career is now over and he may well will remembered as the british Prime Minister who led to the break oucht the United Kingdom. 62 of scottish voters voted to remain. Wilfred weve got to jump because former london mayor Boris Johnson beginning a news conference. One of the leading voices of the leave campaign lets go there now. That decision. Ive known David Cameron a very long time and i believe hes been one of the most extraordinary politicians of our age. A brave and principled man whos given superb leadership of his party and his country for many years. Reforming our public services, delivering one nation conservative government, making this country the most dynamic economy in europe and with his own brand of compassionate conservativism that rightly earned his party the first majority government for decades. It was his bravery that gave this country the first referendum on the European Union for many years. The first many of us have had a chance to vote explicitly on this question. Today i think all of the politicians should thank the british people. Because in a way they have been doing our job for us. They hire us to deal with the hard questions. And this year we gave them one of the biggest and toughest questions of all. Some people are now saying that was wrong. And that the people should never have been asked in this way. I disagree. I believe it was entirely right and neinevitable and there is indeed no way of dealing with a decision on this scale except by putting it to the people. In this end this question is about the people. About the right of the people of this country to settle their own destiny. It is about the very principles of our democracy. The rights of all us to elect and remove the people who make the key decisions in their lives. And i think that the electorate have serjd in their hearts and answered as honestly as they can and in likes we have never seen before in this country. They have decided that it is time to vote to take back control. . In voting to leave the eu it is vital to stress that there is now no need for haste. As the Prime Minister has just said, nothing will change over the shortterm except that work will have to begin on how to give something to the people and to extricate this country from the Super National system. And as the pmsz has rightly said there is no need to invoke article 50. And to those anxious at home or abroad this doesnt mariean tha the United Kingdom will be any less united nor does it mean that it will be any less european. And i want to speak directly to the millions of people who did not vote for this outcome. Especially young people, who may feel that this decision in some way involves putting a drawbridge or any kind of isolationism. Because i think the very opposite is true. We cannot turn our backs on europe. We are part of europe. Our children and our grandchildren will continue to have a wonderful future as europeans, traveling to the continent, understanding the languages and cultures that make up our common european civilizati civilization. Continuing to interact with the peoples of other countries in a way that is open and friendly and outward looking. And i want to reassure everybody that in my view as a result of this britain will continue to be a great european power, leading discussions on Foreign Policy and defense and intelligence sharing and all of the work that currently goes on to make our world safer. But there is simple no need in the 21st century to be part of a system of government based in brussels that is imitated nowhere else on earth. It was a noble idea for its time. It is no longer right for this country. And it is the essence of our case that young people in this country can look forward to a more secure and more prosperous future if we take back the democratic control that is the foundation of our economic prosperity. I believe we now have a glorious opportunity. We can pass our laws and set our taxes entirely according to the needs of the uk economy. We can control our own borders in a way that is not discriminatory but fair and balanced and take the wind out of sails of the extremists and those who would play politics with immigration. Above all, we can find our voice in the world again. A voice that is is commence rate with the commensurate with the fifth biggest economy on earth. Powerful, liberal, humane, an extraordinary force for good in the world. And the most precious thing this country has given our continent is the idea of parliamentary democracy. This thursday, yesterday. I believe the british people have spoken up for democracy. In britain, and across europe. And i think we can be very proud of the result. Thank you finally to everybody at vote leave for the extraordinary and positive campaign you have run. Thank you. That is Boris Johnson. Former mayor of stuff. Reaching out right now trying to say that the younger people who were worried about this who wanted to say. He said we cannot turn our wax on europe. We are part of europe. Also said there are no need for haste. Echoed David Cameron saying no need for article 50. That work will begin but this will be a slow and gradual process to figure out what to do on this. A gracious statement reaching out and recognizing that 48 of the people actually voted in favor of staying. Whichever camp won was going to face difficulties with trying to make sure it could bring together a divided population. Weve also heard from wiz leaders this morning. Business leaders. A lot of scare talk leading into in this morning. Voices quite a bit calmer. Morgan stanley saying uks vote is a significant decision which will have considerable impact. The extent of which will not be known for some time. There will be a period of two years before an actual exit takes place. There will be time to implement changes to adjust our environment. Continue to monitor the developments. Also hearing from caterpillar, they say as a global manufacturer with a large footprint in the uk and europe but call on the government and European Partners to move forward swiftly to quotienegoti new settlement. They are urging all parties to reach an agreement that quick removes the uncertainty. Allows the uk to retain access to and from that Single Market and protects the entrants of businesses with strong commitments and investments in the uk. It will be tough from the back of the queue. As we know our lecture in chief informed the british that would happen. Eu wants to make it and what kind of lesson they need to actually set in stone everybody else that is the whole game here now. I dont know if the eu is going to be flexing their muscles too much at this point. Interview with the member of the green party from germany saying they may vote to be out of this. That just means they dont have a say at table. They still have to listen to what were doing. Julia chatterly joins us from the European Capital of brussels. What is the reaction there . Good morning. I dont think anyone really believed uk voters would decide to brexit. It is quite interesting, while Boris Johnson was speaking and saying look we dont need to do this too quick. We dont need to invoke article 50 which is what contains the details effectively of a divorce from the eu. We heard from the leaders of the institutions they put out a statement saying we expect the British Government to move as soon as possible. To move ahead with the brexit proceeds effectively. That they are also have article 50 in place which will allow them do that. So extraction process. So already were seeing differences in the approaches here. And actually the key line for me basically says there will be no renegotiation. So they still seem to be taking a tough line that you cant vote for a brexit here and then come back and go okay guys well use this as leverage to get better. Remember these guys want to send a strong message to those in germany, in france, in the netherlands, they are also saying hey wed like a referendum here too and simultaneous like these guys are taking a firm line. Their president of the counsel this morning said what doesnt kill us makes us stronger. Id say at this moment i dont see whether it is for the uk or the eu quite frankly what makes it stronger here. Back to you. Julia in brussels and well check in with her later too. Right now for more reaction troth uk decision to leave the European Union were joined by enrico ledda. Hes currently the dean of the paris school of international affairs. And Prime Minister thank you for being with us. The markets are surprised by this. I assume you are too. Oh yes of course. First of all im very sad. That is the first emotion. Also surprised. But now we have to be very serious in applying the decisions. And we have to do it as soon as possible to avoid. This is why i heard your point on Boris Johnson statement and i think as the joke because it is they decided to leave. And it is impossible to say now yes we decided to leave but we dont want to apply the article 50 of the treaty. I think we have to apply this article as soon as possible. We have to remove uncertainties and we have to rule and to run this diverse as soon as possible divorce as soon as possible in order remove all the uncertainties. In terms of the European Response you think this is not going to be smog that goes smoothly. You want out and move towards it immediately . I think so. I think it is important because of uncertaintyies in the world. If we start a long period of two years as the treaty says of unassociau uncertain uncertainty, instability it will push many investors to move their investment in other areas of the world and not in europe. The second is the fact that this vote sclooerl a vote against the establishment, against europe, against this way to run europe and to run the european. So i think there is one negotiation and one divorce to apply immediately. But there is a second big mission and the european leaders they have immediately to react. And they have immediately to react at one voice. Without speaking 27 different languages. And timing is crucial. It is important to do it immediately. Are you suggesting, sir, just that the reaction should be swift and harsh . That if you want out, that this is going to be an ugly break up, an ugly divorce, to use the term you just referenced and free trade will shut down and open markets will shut down . There is this first need to rule immediately the divorce consequences. But there is a second big point and it is how to react in terms of the future of european integration. The leaders and first of all the 19 euro area countries leaders. They have to relaunch immediately. If not the domino effect i think will destroy all it has to be punitive framework. Yes. Immediately if not not just speed but punitive. Meaning you have to lay down the law and if you are spiting yourself to cutoff your what is the phrase. Cutting your off nose. Cutting off your nose to spite your face in terms of the economics in eu. The problem is to remove uncertainties and to immediately set up the afterbrexit situation. On on the other hand can the 19 euro area leaders have a clear responsibility today. Is necessary to say to our citizens and the rest of the world what is now the mission of the rest of the European Union. And the mission has to be clarified. We cant say now okay business as usual. We continue. We have to relaunch with new missions and it is clear that citizens, they need to have different set of responses of answers, reactions, new missions and European Union has to be more effective on security, migration management, youth unemployment. We were until now too shy on this topics. And this is why the result is like that. I wonder about it italys future too. Did italy ever hit any of the parameters to be in the eu in the first pras . How many times did you miss on gdp or debt . The entire system seemed to be people looking the other way on the whole intention and whether any of the countries are actually part of the eu are actually living up to what they are supposed to do to even get in eu which almost seemed like it was kind of a charade. Am i wrong in that is this. I think it is important that theres first a full european the leaders they have to speak the same language and the italy has to be inside this languages. But also there is a need for italy to be absolutely clear in our european commitment that is in my view fundamental. Because italy without European Union would be a very weak country. For many reasons because our economy, our public finances, because our geography. We are a very open economy. And as an open economy we need a successful European Union. This is why i hope the Italian Government will take an initiative to lead this european relaunch. And i am sure the european government will do all the best to avoid any contagion, and domino effect and give clear messages to the market in the word today. Mr. Prime minister thank you for your time. We do appreciate your joining us this morning. This i. In the meantime were going to talk about the british pound plummeting to a 30 year low against the dollar. And sara iez season tracking the move. She joins us with more from london. Good morning. It was a night not to forget on the currency desk here in london. Before many british people went to bed last night the pound had surged all the way up to 150 against the u. S. Dollar on optimism that britain would vote to remain in the eu. That was what the polls were saying the betting odds and certainly the message out of the markets loud and clear. And then boom, as those numbers started coming in overnight showing the out vote, the pound plummeted. All the way down to the low 132s. Just above 132. That is a level we havent seen since 19 85. It is a move in magnitude that the british found has never seen. The color were getting this morning not a panic move. Not necessarily problems with liquidity. It was orderly and would suggest that it is just a recessment that the markets got the story wrong. Also, have to be watching the your. That is where we could see any spillover effects on a bigger economy. The euro zone if you do see the rise if. Earlier this morning seeing the biggest move lower for the euro ever since 1999. Its called down a bit but well be watching into the u. S. Session back to you. Sara eisen thank you very much. Right now if you are just waking up at the bottom of the hour here britain has voted to leave the European Union forcing the resignation of Prime Minister David Cameron. He might have been either way even if it was close and went the other wi. Greater unity since world war ii and investors are waking up especially in the european markets. This special hour of squawk box will start right now. Welcome back to squawk box right here on cnbc. First in business worldwide. The top story this morning, the uk voting to leave the European Union. The markets are plunging on the news. At this hour the dough looks to open down at least 512 points. The nasdaq opens off 160 and the s p 500 looking to open down about 76. Lets tell you whats going on overseas in europe at this hour. Big moves in the down direction. Lot of investors caught offside this morning. Spain and italy seeing down almost 10 . The dax down almost 7 . Cac off almost 8 ftsi 100 where of course the uk is off about 4. 5 . Quick take a look at currencies quick conversation with my wife this morning who said we should go on vacation to london now. Good idea. Not so bad the pound at 1. 37. Just to put nit context. Ran up five. Ran up about 7 . It was not so different. And gave back all what it gained this right. Couldnt help looking thinking of spain and italy and all the structural problems in the dmek economies of those countries and how many things need to be done that maybe werent getting done because germany was strong and these strong players in the eu and they are able to benefit from the strength. Even here where we think the fed has to get out so we do the things we need do. We cant rely on some art initial means of getting back. And maybe italy has to face its own issues. What the former Prime Minister just told us. Italy without a eu would be a weak country. He said we need a successful eu most of those to this day deba didnt qualify to get into the union in the first place. And greece never did. They want greece in because it was 2,000 year old doctor 8,000yearold or anyway. Lets have a conversation on this Market Reaction. Some people are here. All three are contributors. It is unwlooefl how news can take. There was a lot of other news yesterday and another really important decision that i was very happy about. I dont know whether you saw it. Led zeppelin gets the own the rights to stairway to heaven. That was [inaudible]. Peter. Can we take i know how you feel about the fed. Weve got what happened here was an unelected bureaucracy was basically finally brought to task. And we heard about what would happen if we looked into the aby abyss. The counter factual. Do you think maybe some unelected bureaucrats here that maybe run the fed . We hear things would be horrible if they ever raise rates. Maybe wouldnt be as bad there either. The ruling class is getting called out for failing the average person whether its Monetary Policy, fiscal policy or just general governing and the uk are going to adjust for this. I think the this for them as the gigantic inconvenience. Deals will get renegotiated and life will move on. The question for the rest of the European Union but the uk will deal with the eu just as we do and everybody else. Were you antibrexit before this. Im sthitingympathetic to th. To have these 40,000 employees in the eu to tell them how to run their businesses and run their government. So im very sympathetic to it. And i acknowledge the shortterm chaos and disruption and everyone going crazy but over time the uk will adjust and move on. It was called Great Britain for a reason. Wasnt it . Right. How did they see sovereignty in the first place to unelected bureaucrats . I cant believe it lasted this long . 132, will that happen . Or is 139 . Maybe you look in the abis and turn the light on. The sun did come up today. It came up but think a couple more clouds for uk. Were at 138137 right now. We were up close to 140. Americans are looking at newspapers and headlines and they are selling again. So i think 132 is the minimum were going to see. Some said par. This is worse than the uk being forced out of the erm and at that time we saw 5 fall and another 5 in the week following. These numbers are doubled in the case. So i think we could see another 7 to 10 drop especially in the amount we squeezed off the lows today. The low was around 132. So, you know, i dont think the sterling itself is completely priced in the damage this will have for the shortterm. In the longterm we can debate whether this is good or bad for the uk in general but i think in the shortterm a lot of businesses and investments are freezing up. A lot of monies being pulled. And so now that americans are waking up were seeing the second leg of selling. Im sitting at this desk. Trading all night. I traded while sitting at this desk riding this move lower and i think we have more juice it. Does this paralyze the rest of europe . It is one thing to talk about the uk. Then Something Else to talk about yump and then you have to Start Talking about us and everybody else. That is the real domino effect. Very good question. We saw from the votes that scotland, you know, basically decided to stay. So you are probably going to see another referendum there. The netlands probably in two years. This is not only ripping the british pound apart but also the whole eu itself. The euro actually is falling but not as much and seeing more tempered decline because i think money is starting to mauve away from the uk into the euro but it is not out of woods. This is going to be at least a month of sustained weakness for both currencies. Okay. Longterm i dont know. We started to get a sense of this. How do they play it . Are they going to stick the uk and try to hammer them . Or do they channel Abraham Lincoln and Charity Towards all and malice towards none and use the model itself as peter alluded to. Norway and switzerland get along just fine with the European Union and not officially be a part of it. But if they want a outlouden and be disruptive than that former Prime Minister was tell us he bants to see a swift divorce and quick repercussions to prevent a domino effect. That so me sounds like other nations dont start to leave. Which wont be good for markets then. Reaction. Teach everybody else a lesson today then this wont be good for the markets. The british leaders were on board for the most part with the eu and they did everything they possibly could. They begged, fear mongered. They are angry with David Cameron for allowing the referendum to begin with. I understand that but that is fundamentally undemocratic exo exo. And to see it in a democratic fashion, there is democracy and essentialism and really they are calling themselves this should not be that big of a deal. I dont know how you react to a country that 52 of the people that live there immediate their own bed. They have to sleep in their own bed. By the economics of it. Political. With your wallet . Maybe not. But what if people do have to suddenly deal with their own issues structurally instead of relying on where the currency. Sometimes takes a crisis to get a politics to make a right decision. Were going to need inflation to come back we start there also maintain their positions. Look this is a beginning of a real populous swell that could go through the rest of the countries as well. Given a choice between an undemocratic, unelected bureaucracy i would chafe at the idea these people need to be punished for not getting in line with the socialist order of europe. That poster too with the high gradients behind the that was also part it. The open borders issue economics and immigration were the three things. I think it is foolish they will have to play by the eus rules and there is going a luol lot of retaliation and they are not going to be so apt to jump on and renegotiate the trade deals as readily as they think. Which leaders are strong now . None of them. Barely have a heart beat here. [inaudible]. How about the juncker and some other . They are wounded. Cheap immigrant labor. Look at the markets again. We are off the worst levels of the session. If you look just in the last hour things have gotten weaker when you are looking at european equities. Spain italy down. These are some of the weaker members of the European Union and if the European Union were to fall apart those are the countries that would suffer. We heard that from the former Prime Minister of italy just this morning. Also the u. S. Futures. Dow futures down 50 5 50. Lowest levels are down about 730. So were off the worst levels but also off for the strongest measures when we were only down 450. S p futures down 80. You said you were trading from the desk right now are you buying any of this. Absolutely not. What i was doing before i came onto the show is sterling was trading around 139ish and i thought america is going to wake up. They didnt stay up all thiegt. Not everyone like i did and decided they wanted to sell and that is what happened around the 6 15 turnover when everyone sat it a their desks and i took profits because were on the show right now and i cant be catching how this effects the u. S. Economy. Europe is already slower. Maybe the gets a little slower so the fed doesnt they stay at zero it is not going to be so bad for us. Nothing changed. Nothing changed overnight right now. Bad positioning. We saw a [ inaudible ] it was 51. 49 that was going to end up happening. Betting market a wise guy trade over the past week. One thing you brought up the Federal Reserve. Fomc was right. Well i dont know well you have got we get to see the counterfactual. Do you think bank of england actually raises Interest Rates . That is the other they could no. No way. They are scared of this kind of thing. They like the status quo. They like brussels, joe, right is this. Anymore. Right. They are left with nothing. They are in cahoots. The unelected status. I think emergency meeting are happening right now and i think the greatest risk, right now Central Banks are handle the move so far. But if we see another you know, another significant leg lower were possibly going to see coordinated stimulus on some sort and carney 250 is the just the beginning. And thats right. First bullet people before brexit, before even acknowledging it was going to happen saying that the feds actions over the past five years are going to come in central bankers that it is going to come home to roost. Guys already seeing the stock markets in for a day of. You cant tribute it all to brexit. You have to tribute it to the other things. Were looking a pictures of the Angela Merkel speaking right now in germany. Saying this is a setback for the european integration and more. Well bring you update as we talk through some of the things as well. There was a statement earlier from the bank of england where they basically said they would do anything to make sure they were meeting their responsibilities. Their monetary responsibilities and financial responsibilities. Well central bankers elevated asset price, didnt generate sufficient growth. Left us with excess debt and no margin of safety if something goes bad whether it is an economic downturn or Something Like this or whatever. So they have left us in extremely vulnerable position and have no weapons to deal with it. I can imagine what shes saying. I dont know what exactly what it is. But i think i could probably i could do a translation maybe but that wouldnt be a good idea. Probably not. Im seeing some translations of things already on twitter which are probably accurate but also no point in how many i keep manking this point. And too big the fail. The treatise on that. Weve never tested a counterfaction. Weve always avoided counterfactuals. Like the well the world would have ended if we havent done these things and that is a fact. The world would have ended we heard the same predictions so finally we get to test a counterfactual. Maybe well turn the light on in the abyss. Maybe it is not as bad as the is ready especially for us. Maybe not the brits in the next month. The other thing i thought of coming in here. T old expression, interesting times. To me the only measure of this is going to be look two or three years. Not going to be able to measure with any perspective for two oar three years. And were also going to see what the impact is. And then were going to know. If everyone stays put if its less than we think well say one thing. If it it is much worsz and we have to sustain downturn in the uk and ricochets back and then well all say. You really think it is a stretch . Is it a stretch to think if it forces this collection of euro socialist states to do the things necessary to grow okay. The donald gop candidate is beginning to speak . Scotland where he was visiting one of his courses. Looks like hes going to start right and hee got the red or the white make America Great hat on. He arrived in scotland earlier. Oh a protester. Thats why he hasnt started. Over even in scotland they have some protesters. Boris johnson this morning when he was a leaving had people chanting and screaming yeah. Honor, amazing day. Very historic day for a lot of reasons. Not only turnbury. One of the big votes in the history of europe and scotland and everywhere. Very exciting coming in. And we were landing and we had just heard the results. So i wish everybody a lot of luck. I think that it is purely historic. And what is happening is historic. So it is an honor to be with you. My mother was born in scotland. She loves scotland. Shu would be here a lot. She would come every year with my sister marian and elizabeth. And she just loved it. Her loyalty to scotland was incredible. She respected and loved the queen. And she loved the ceremony and the pomp. Pomp and circumstance. And she was something special. And to think that wed be here owning turnbury one day would be incredible. She would come to turnbury with her friends and they would have dinner at turnbury. She didnt play golf but they would have dinner there. So having taken this hotel and done the job weve done with it is just an honor that i was given the opportunity. We brought it about four and a half years ago. The town counsel has been incredible. The local politicians and all of the politicians all throughout have been absolutely incredible. They approved virtually everything that we asked for. We asked for the right things but the approval process because it is historic had to go through many different layers. But every single thing that we wanted they agreed that they thought it was good and some cases great. Weve taken the lighthouse, chaz very important building in florida i mean in scotland. And weve taken that building and made it something really special. Inside the lighthouse right now is incredible suites and it is called a Halfway House because this is the 9th tee and it is called a Halfway House. And in the bottom you have dining and golfers stop and get something to eat and go onto the 10th tee next door. And it was in disrepair. And all of the people from landmark scotland and all of the people we had to go through were i just thank you. Because it was after long, difficult process getting that approved. But they really wanted to see it at the highest level. And now it is really at a higher level than it ever was. And when you see i dont know if you will get the chance but in you do you should try and get to see the suite because they are two of the most beautiful suites you will ever see. And when the water rough today it is very calm. Ive almost never seen it like. Sometimes you have waves literally crashing on to this piece of land. One of the most beautiful sites you will ever see. The royal and ancient has been incredible. They have worked with us on design. They have wanted to do these changes for probably close to 50 years. Because they were so obvious and weve made certain changes to the course. In addition to that we fully renovated the course novated th new greens and new everything and jet it is the same turnbury. The hole 99. Were going talk that re goi which they then put to the membership given that august is in between, it seemed pretty obvious it wont be until the early autumn as we would say or the early fall as you say. The new Prime Minister would have to form a government. None of that is locally to be in place before october. In the meantime, over the next few months there will be an enormous amount of market turmoil affecting m britain and british markets. Since london is one of the two Main Financial t centers of the world it will affect world markets. Ld so, several months of uncertainty. I could then go further into the future, ifo you like. Right at the moment we are in limbo withn a very considerable risks of economic turmoil and a transformed country. We talk about the turmoil. If you could put it in context for us. How do you estimate or calculate whatever you think the losses as a l function of this are going be f. I suspect, from a global point of view they will probably be very modest v. Britain, i think, is very likely to go into recession. At the moment we dont know more than that. But britain is, after all, only a very pretty small economy. About 3 of the World Economy if i remember correctly. Soco the not much more. So the direct effects on the World Economy of a british recession shouldnt be too large. There will t be a big adjustmen in sterling. In fact, thats probably alreay largely happened. That could further disrupt the uk. But i think that, unless the vote is seen to destabilize europe in a really more profound way,un raising the chance of copycat events in europe, or unless it looks as though the relationship with europe will in other ways break down completely, i would expect that the global economic, as opposed to geopolitical consequences, of this will not be really large. Nothing at all like the financial crises or the euro zone crisis. You cant see it next to you but we are watching stock markets across the globe. All down. In some cases 10 . Italy, spain. Because of the idea that this press aujs a whole series of copycat measures. How do you think the eu responds and how punitive are they to the uk to the degree that they need to avoid more copycat efforts . Thats a very good question. It seems to me likely that markets have overshot, but we really dont know. Certainly the economic effects are large. No now,e the eu has a very diffict balancing act here. It will want to make the divorce smooth and reasonably amicable. Britain is an important country, its the second largest economy and country in europe. Well, leaving outside russia which i dont regard as fully part of europe. Its the most important trading partner for the rest of europe. So they will want to make this smooth. At the same ttime, theyre dealing with a britain that doesnt have a government and doesntov have a coherent polic which will be very, very irritating, which has rebuffed them in a brutal way, which is even morech irritating. And more important, as youve noticed as youve noted, they are fear copycats. So they are not going to be too accommodating. I think that is pretty clear. And that could make the negotiations painful and difficult and possibly even explosive. So there is a balancing act here. They want it not to be too terrible but they want it to be modestly terrible. How that balancing act will work out at this stage we dont know. We appreciate your perspective this morning and always, thanks. When we come back, this coverage of theck uks vote to leave the European Union continues. We will get reaction from london, from the european continent and from experts here at xphome. Plus, the fallout in the Global Markets. Yeah. Across the board there has been some major weakness. Uk down by under 5 . But in italy, down 10. 5 . Spain, ibex down 11. 5 . Squawk box will be right backw , used by this bank, to protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this Vice President , this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. They all have insurance crafted personally for them. Not just coverage, craftsmanship. Not just insured. Chubb insured. Looktry align probiotic. Our digestive system . For a nonstop, sweet treat goodness, hold on to your tiara kind of day. Live 24 7. With 24 7 digestive support. Try align, the 1 ge recommended probiotic. Welcome backs, everybody. The Global Markets in turmoil after the uk votes to leave the European Union. David cameron announcing that he will step down by the fall. The bank of england saying its prepared to handle any market shock. The United Kingdom shocking the world and the markets. We have full coverage that continues right now on squawk box. Welcome back to squawk box, here on cnbc, first in business worldwide. Im joe kernen along with Rebecca Quick and Andrew Ross Sorkin. An historic day in europe. Uk voters did what was said would never happen, they voted for brexit. For leaving the European Union. The european markets this morning are trading sharply lower. Check out the equity futures. I think its interesting that the uk is down less than some of the other countries that benefit benefited. That would benefit from the uk staying in. One of the stronger players in the eu, which helps explain to some extent, some of the feelings of the 52 that voted for brexit. There is down 542 in the u. S. Which is i dont think thats quite 3 . Maybe it is by now. Currencies at this hour showing a lot of action. But you remember the pound ran up from about 1. 41 to 1. 49, and as you can see today, 1. 36. Below 1. 37. Been as low as 1. 32. Gold. I saw was up 50 earlier. Now its up 65. Or it was a couple of minutes ago. 63 now. See that little place right there . Right to the left . It looks like right when it was at around 1200, becky. My paperwork is trying to get in had to open by that much. Then thought, forget it. It was ready on the friday that we got the bad jobs number where it was up 50. Of course, i couldnt buy at 12. 20. Oil right now, probably not surprising, down significantly, almost 5 , on the notion that this could hurt demand globally. Well be discussing the vote, the outcome and what it all means for Global Markets and much more all morning long. Julia chatterley is in a place that factors large here in brussels. Covering the European Union. Wilfred frost is in london covering all the angles of the referendum and reaction and dom chu is at cnbc headquarters with the latest moves. Lets go first to wilfred frost in london. Thanks very much. Yes, indeed, an historic day weve been discussing throughout the morning. Comments from world leaders, past leaders, current leaders, potential futures leaders like Boris Johnson. Lets get first of all to Prime Minister David Cameron, who has fallen on his sword and announced he will resign after a summer of solidarity to try to bring a bit of calm into all of this. Lets listen into what he had to say relating to the renegotiations that will have to take place with the European Union. A negotiation with the European Union will need to begin under a new Prime Minister. And i think its right that this new Prime Minister takes the decision about when to trigger article 50 and start the formal and Legal Process of leaving the eu. As for what happens next, that summer of solidarity, then we will have a leadership vote within the conservative party. The new leader of that party will also become Prime Minister likely by autumn. Then re negotiations could take place. Interesting to hear Boris Johnson, the person whom people assume is the favorite to take over saying there is no rush. I want to add another comment weve heard from donald trump hold on just a moment. We were hearing comments from donald trump. Now hes taking questions and answers. I havent even started my campaign yet essentially. We have done very well. Were raising a lot of money for the republican party. Im going to be funding a lot myself, but we are raising a lot of money, john, for the republican party. Youll see the numbers come out over the next 30 days. In particular 60 days. The numbers that were put out last week were just the very start. It was a very small period of time, just a start. But we have raised a lot of money, especially money coming in in small from small donors. You will be amazed when you see the kind of numbers we are talking about. We were amazed. I was amazed. That will be reported fairly soon. I see a parallel between whats happening in the United States and whats happening here. People want to see borders. They dont necessarily want people pouring into their country that they dont know who they are and where they come from. They have no idea. I think, you know, not only did it win but by a much bigger margin than people thought would happen. You have to embrace it. Its the will of the people. Its not a question of approaching it. Its the will of the people. Its always the will of the people. Ultimately that wins out. Reporter would you like to see scotland leave, sir. Nobody knows. If the pound goes down, theyre going to do more business. When the pound goes down, more people are coming to turnberry, frankly. The pound has gone down. Lets see what the impact of that has. I think places like scotland and england and different places in Great Britain, i think youre going to see a lot of activity. If the pound got high and people werent able to do maybe what they wanted to do but for traveling and other things, i think it could very well turn out to be a positive. Nobody really knows. Youll know in about five years. Youll be able to analyze it. Maybe it will take even longer than that. What is known is that theyve taken back their independence, and thats a very, very important thing. Katie. Reporter momentous right now, and you are on the world stage. Are you traveling with any of your Foreign Policy advisors . You knew this would happen today, there was going to be some sort of decision. Are you huddling with them to find out the best way i have been in touch with them. There is nothing to talk about. I have been saying i would prefer what happened. I thought this would be a good thing. I think it will turn out to be a good thing. Maybe shortterm not but ultimately i think it will be a good thing. I have actually been in touch. Some, by the way, dont like it and some do like it. Theyre advisors like everybody else. They probably know less somebody said, gee, you should advisors that have been really hot for the last five years. I said really . I think i want to use ones that havent been involved. Take a look at whats happened in the world. Katie. Reporter we have a special relationship, the u. S. And uk. Their standing and influence in the world will certainly be diminished. Will they still be the first call or the u. S. . I dont know first call or second call. Theyll be a very powerful call. Its a great relationship. They will be great allies. They always have been. I think zero will change on that score. There has never been a better ally. I think nothing will change on that score. Reporter do you believe the u. S. Should move immediately to renegotiate trade deals or should the uk bhov move to the back of the line . I guess president obama said they should move to the back of the line. That wouldnt happen with me. The uk has been such a great ally for so long, theyll always be at the front of the line. Theyve been amazing allies in good times and in bad times. Sometimes they make mistakes together, as we know, but theyve always been great allies. I will tell you, i think that i was very surprised when i heard president obama say that. And i think he said that because he thought for sure it was going to stay together, but it didnt stay together. And i felt it wouldnt stay together. And again, i think thats whats happening in the United States. Its not staying together. Its a really positive force taking place. They want to take their country back. The people want their country back. We dont want to lose our jobs. We dont want to lose our borders. They want wage increases. They havent in the United States, folks. For the members and my members at turnberry, we have had hardworking, great people who havent had a real wage increase in 18 years. Theyre working harder now and are making less money. Reporter a quick followup on that. The treasury secretary and fed chairwoman have both said they fe expect it to have a negative effect on the u. S. Economy. We dont know. Well see how it plays out. I love to see people take their country back. Thats really whats happening in the United States, and i think you see that. Thats whats happening in many other places in the world. Theyre tired of it. They want to take their countries back. This isnt such a phenomenon like some people are saying. When people asked me what i thought would happen i said, as you know, i think theyre going to break away. It was surprising because the polls indicated that probably it wouldnt happen, 80 . When i landed this morning, the first thing i asked is that. It was fairly close but it wasnt that close. So well see what happens. I think it will be a good thing. You are taking your country back. Youre going to let people that you want into your country. And people that you dont want, or people that you dont think are going to be appropriate for your country or good for your country, youre not going to have to take. You know, look, europe, like the United States, has made tremendous mistakes over the last period of time. Look at germany. Look at some of the things that are happening. There have been tremendous mistakes that have been made. So i think its going to end up being a very good thing, but it will take time. Reporter your campaign has gotten global attention all over the world. People know who donald trump is in your campaign for president. Do you think anything you said in the United States influenced voters here in britain when it comes to leaving the eu . Good question. If i said yes, total influence, they would say thats terrible. His ego is terrible, right . Ill never say that, tom. I would like to give you that one, but i cant say that. Look, the question was what do i think, and i gave my opinion a few times over the last few months, but i also said i really dont want people to listen to it because its not me. Its about them. Its about them. Its their country. But my opinion is that what happened should have happened, and i think theyll end up being stronger for it and theyll control their country and theyll control everything about their country. Yes. Reporter David Cameron said that you were wrong when you proposed banning muslims from entering the u. S. Do you think he got the mood of his country wrong, and do you think he was right to resign . I like David Cameron. He had a couple rough statements. Thats okay. I think he is a good man. He was wrong on this. He didnt get the mood of his country right. He was surprised. I think he was very surprised to see what happened. He is a good man, and he felt that way and probably did the right thing. But well see what happens. I like David Cameron. Yes, sir. Reporter do you think following your arguments about sovereignty, do you think scotland should have its independence . Would you support that . Thats up to the people of scotland. We have been through this. And really, again, i leave it up to the people. I love the people of scotland. Thats why i built you know, i built in aberdeen one of the great golf courses of the world. It was just adjudged to be the greatest course ever built new. New defined as 1960 to present. We are very proud of it. I have gotten to know the people of scotland so well, through my mother and through everything else. The people of scotland are amazing people. You know, that question really has to be addressed to the people. It was a very, very close vote. I dont know that people want to go through that again. I was here when they were going through that vote. I didnt take sides. But i will tell you, it was a nasty period. And i cant imagine they go through that again. But the people of scotland may speak differently. Yes. Reporter just on what you said as well about europe and other countries in europe. Would you support the breakup of the European Union, because that seems to be what would happen . It looks like its on its way. Well see what happens. I can tell you i have a lot of friends living in germany that have always been very proud germans, to a level that you wouldnt believe. They would be bragging about their country. They would be talking about their country as though there was no other place. Theyre members of maralago and different places that i have. Now those same people, some of them, are saying theyre leaving germany, theyre moving. They never even thought of moving. Now theyre thinking of moving because of the tremendous influx of people. We have been listening to donald trump speaking in scotland this morning, talking about the brexit vote saying that this is the will of the people. He also pointed out that, if the pound goes down, he thinks theyre likely to do more business so it could very well turn out to be a positive. He admitted that no one knows for sure and we probably wont know for five years, maybe longer. For more reaction to trumps comments. Michelle michelle. What do you think about what trump has been saying about what this means in the markets . You can say what you want and think whatever you want about donald trump, but he is a marketing genius. Its one of the most important days in modern european history, a huge event, and he has managed to turn it into a marketing event for one of his golf resorts. I mean, its really, really astounding to watch. Not surprising that he said he is not he wouldnt be surprised if the breakup of the eu is on the way, seeing the vote here in the uk has a harbinger of something maybe bigger and also suggesting the way i think a lot of americans maybe look at this vote as a move in terms of a Democratic Movement and the decision about the future of the country and taking control of their country. We certainly heard a lot about sovereignty here. Walking through the streets, i struggled, actually, to find people who were voting for remain. It was mostly young people, but many, many people were very, very upset about what they called the bureaucrats in brussels. And they were also very, very tired of being lectured too. Ill be snarky for a second here and say all these extremely smart people who are also extremely important told the british people how dumb they would be to leave, and they did anyways. How is that possible . It suggests that there is a really tin ear in the leadership of this country, of europe, and maybe the entire world. I mean, you know, its too cliche at this point to draw this parallel between donald trump and the rise of whats been happening here throughout europe. But certainly that comparison has been made. Michelle, and even on a bigger issue, just statism, unelected bureaucrats. Globalization without nationalism. There are so many things that i i have asked, actually, if we can i always like to play music that fits. Something happening. Buffalo springfield, for what its worth, were going to be playing, because this is significant. Yep. And i know, you know, we have talked in private about these things, but the one thing thats not surprising is that people might chafe when youve got bureaucrats hundreds of miles away that arent british that are overruling parliament and, you know, making these bureaucratic decisions. I think that in a nutshell is what happened. I am not convinced. May have a couple rough days or weeks, but i am not convinced that this isnt some type of triumph for democracy. You know, David Cameron is getting pummeled here for actually having given the people of the uk the right to make a schoi choice, but i heard you say earlier, joe, maybe it was the best thing ever. Give them a right to make the choice, because the eu has been criticized for being so undemocratic. The response you see kind of feeds into that. You know, early, early, early in the greek crisis George Poppen droe wanted to give the people a choice and he was slammed down by the euro zone and the people in the eu and he backed down. Maybe in retrospect he should have done it back then and let the people speak up for what they want. Michelle, well also have a lot of the establishment types that talked about the end of the world, theyre going to be the people who we talk to today. I think we were set up to interview people that had talked about remain, and i would like to have a few people that actually talked about leaving. Were going to hear all the same stuff. I dont know how much credence conventional wisdom was against it so the majority of people werent saying. I love conventional wisdom. You remember the fiscal cliff in the United States, joe . Yeah. Right. The planes were going to fall out of the sky. Were going to test the counter factual finally. I think it has implications for the Federal Reserve. We always hear that if oh, my god, if we let them do things michelle, i was thinking, we were listening to the italian former Prime Minister talking about how can we possibly do this. Italy, greece, most of those countries never hit the gdp or debt levels that were required to get into the eu for the first place. And the bureaucrats looked the other way and gave them more time. It was never it was a charade all along. Yep. Absolutely. Make no mistake, this is absolutely an existential threat to the European Union. They have got to respond in some way or figure out what went wrong here. Because remember, the people in the uk, they dont even use the euro, which is for most of the people in the euro zone, thats the toughest part. It really whats a good word . It keeps them so confined and leads to so much deflation within their own countries. Greece is a perfect example. So when you dont even use the euro and you want to leave, its a pretty, pretty strong statement. The euro is weaker today, and thats for a reason. Okay. Thanks, michelle. In the meantime, joining us to talk more about the Market Reaction is christina hooper, u. S. Investment strategist and head of u. S. Capital markets research and strategy at alian. Gi lambau. Covering the economic angle lindsey piazza. Lets start with you. Market reaction shows us that Market Players were not anticipating this. We knew that heading into it. You see it this morning with the futures here and the equities markets overseas. Absolutely. I had mentioned a few weeks ago when i was on that we were very skeptical about the polls. It seemed clear by yesterday there was such an incredible relief rally that none of this was priced in. I think the reaction were seeing in markets today is far more exaggerated, far more pronounced, because it was so unexpected. Which means you would tell people to buy . What were telling clients is not to panic. What we are saying is, first of all, this is going to take a long time. Nothing has changed today. There will be negotiations that take several years, and there will be Many Political twists and turns between now and then. Opportunities will present themselves. You need to be active. You need to be opportunistic. Im hearing from you, youre telling people dont sell. Dont necessarily buy right now because things could get worse . Well, what we dont know is some huge political unknowns. We dont know exactly what kind of negotiations will take place because this is just so historical. The ball is now in the eus court. Its their turn to react. Absolutely. Article 50 has not been invoked. We have a long time to see this play out. And we have other elections weve heard from some eu people today, including former Prime Minister of italy who says he would like to see swift repercussions. He would like to see a quick, fast divorce. Hed like to see article 50 invoked immediately and the olive branch Boris Johnson seemed to hand out today, he said its a joke. If thats the eu reaction, what is the Market Reaction in turn . We dont know if thats really going to be the eu reaction. Thats the unknown. We dont know what will happen politically. We do an annual survey of institutional investors, what we found is event risk was one of the top risks they named for this year. I think this is a perfect example of that. You look at the growth just of Economic Growth over the last decade in europe. How much do you ascribe the benefit to the eu itself, the the freedom of movement of money . And how much of it is Something Else . Thats fundamentally the ultimate question about all of this. I think its very, very hard to quantify. But one can assume that it was helped by the marginally or helped a lot . That really whatever the answer is answers whatever you think those numbers on the screen are supposed to but i i dont know if it necessarily answers questions about the future because we dont know exactly what kind of a relationship is ultimately negotiated between the United Kingdom and the eu. We dont know. There are so many unknowns right now. Lindsey, thats a good question for you too. This economic question, what so many have been concerned about, you are seeing it play out even in the oil markets today, oil prices down 5 . Does Something Like this, a vote like this, actually hurt the Economic Growth potential of the eu . Well, we certainly could see it have a negative impact. We hear from the bank of england that they expect hundreds of thousands of jobs to be lost or relocated into somewhere else within the European Union. They talk about investors and businesses pulling out. Potentially short term as we wait for uncertainty and volatility to subside. But what were looking at the market now, shock waves have been sent out. And it will, at least in the short term, have a negative implication. Longer term we certainly could see that the independence spurs further investment or further confidence in the region. So it really will be a wait and see scenario for some of these kneejerk reactions to subside and allow the market see cooler heads prevail. Gee, what do you think. Tenyear was yielding 1. 75 . That was a pretty dramatic fall in yields over night. Fair . When i saw tenyear yields coming in the door, i brought my crash helmet along for the days worth of trading. What i am focused on has nothing directly to do with the uk, has nothing directly to do with the eu. It actually has to do with china. I have been tracking the traded offshore yen, cnh currency. We saw it fall by about 1 versus the dollar, by the time i stepped off my desk a few moments ago. The biggest concern i have there is that the big decline of the pound causes the chinese yen to reset, and thereby furthers the appreciation of the dollar that really caused a problematic negative feedback loop across Global Financial markets in january or february this year. Thats a real downside scenario to me. It has absolutely nothing to do with whats directly going on in the uk, the eu or the two currencies, the pound or euro or equity markets. It will take probably a week for that to play out directionally. Thats the buy or sell signal when it comes to risk assets and the tenyear note as well. Its fair to say the Federal Reserve was right to hold off on the rate hike last week to see what happened here. This obviously wasnt the reason. There were a lot of economic reasons for them to be on pause at the moment. But that is clearly the case. I think essentially this vote deteriorated the chance of a july rate hike to zero, a september to somewhere very close to zero and a december to probably less than 50 at this time. Its conceivable that weve actually reached the high overnight Interest Rate for this cycle. Having said all of that, what do you do . Youve got your helmet out this morning, youre issuing them across the desk. What do you do as a trader . What do you tell investors to do . We reduced the risk to the firm. I think there are certain Asset Classes that will be whacked by the ugly stick. U. S. High yield, for example, tightened by about 25 basis points earlier in the week. We could see spreads in that sector widen by at least 50 basis points in the next few trading days. That would represent a good buy opportunity. For the short term, the greatest value is cash for the next couple of trading sessions. Thank you very much to all of you for being here today. Lets take a focus on the pound again this morning. Joining us is Shaun Osborne chief Foreign Exchange strategist at scotiabank. Par is not going to happen, right . What will the absolute lows be . Go out as far as you need to go. Will we get to 1. 25 . Or are we already making a bottom here. Might be a bottom in the short term. Maybe the only comparable experience weve got when the pound fell out of the Exchange Mechanism in the 90s we saw an extended mood. The pound was hugely overvalued at that point. The pound has prize, if you like, in the sense that it can go on these tremendously significant downward moves historically. I think it would be wrong to underestimate how far we can go. In the short run probably 1. 30 is reachable. Beyond that, there is not that much in terms of sort of identified identifiable support levels that we can pick out at this point. I think 1. 20 or 1. 25 is reachable. Not sure who to believe on a lot of this stuff. We had people that the world was going to end if it happened. Establishment types. One told us there is definitely going to be a recession now in the uk. Why, with a cheaper currency, would that absolutely be the case . Or is it questionable whether we can just already write it i mean, we wrote it up that we were going to stay. Can we write it up that the uk goes into a recession even at 1. 30 on the pound . Yeah. I think even even on the sort of bestcase view was a remain. Even in that scenario we were expecting growth in the uk to slow down in the second half of the year. House prices, the pmi data, that march and april were a little bit soft in the uk. Some of the harder data, employment and retail sales, had actually held up Better Running into the referendum. There were indications that we were expecting a flat second half of the year. The uncertainty in the short run that this provokes from an investment and trade point of view and from a hiring point of view, there will be significant headwinds for the uk economy here certainly in the short run. A Weaker Exchange rate offsets that to a degree but it takes time for those to feed through. With the trade outlook, particularly with europe, somewhat challenged at the moment, shall we say. Then its not clear just how quickly the benefits of a Weaker Exchange rate will come through. Shawn, how quickly will banks like jpmorgan and others, multinationals move on the plans they suggested they would make ahead of this vote . I see jpmorgan. They talked about it. 1,000 to 4,000 jobs. Jamie diamond said this morning, this will take time. We do have time to assess all this. That becomes the question. Is this something that happens over six months, a year or over three that will have a huge impact on ultimately the economy there. I think the banks will take it under advisement. The exit process as you have alluded to takes quite a bit of time. Its up to the uk government and the Prime Minister whoever that will be after october to invoke article 50 and then the process probably takes a couple of years after that. So we know at the least it will take two, two and a half years before this gets anywhere down the road. In the meantime banks will look carefully at how and where theyre positioned and where they want to be geographically. Thats one of the biggest Downside Risks for the uk economy. Financial services generally in the uk is a significant contributor to employment and growth. And any challenge to that status or stature of that part of the economy i think will be a significant Downside Risk to the growth outlook. Shaun, thank you for your perspective this morning. Appreciate you weighing in on such a historic day. Welcome. In the meantime, lets catch you up to speed. Great britain voting out of the eu. The pound plunging, stocks slammed. Bond yields dropped. Gold soaring. We have the Global Reaction covered from start to finish. The other piece of news, David Cameron stepping down saying his country needs fresh leadership after the british voters have had their say. Here, here. Welcome to squawk box right here on this historic day for Great Britain and the markets. I am Andrew Ross Sorkin along with joe kernen and Rebecca Quick. Youve been watching the futures this morning. We have seen red arrows, pretty sharply across the board this morning. Check out whats been happening in the u. S. Equity market right now. We have seen the dow down by as much as dow futures, by as much as 733 points. Right now you see the dow futures down 130 points. S p futures down by 79 points. Nasdaq down by 162. Those declines are much narrower than the losses we have seen in european markets this morning. You can see the currency also taking bearing the brunt of this. The pound is down by almost 8 this morning. 1. 37 is the last. Been as low as 1. 32. Joining us is mohammed el erian. We spoke with you last week. At that point you were still concerned about the potential for a brexit vote. You took this pretty seriously. Now that the vote has gone that way, what do you think happens . I think its both historic and consequential. Youre going to see a whole series of political, financial and economic effects. We are seeing the politics play out with the resignation of the Prime Minister, the conservative party will have to get its act together. Scotland, ireland are weighing various issues. And the rest of europe is wondering whats the next domino. We will see pretty sharp market movements, but there will also be opportunities for those who have cash in the days and weeks ahead. What does that mean . Is this an opportunity right now . Should investors be looking at major moves like this, whether its the s p futures down by 5 or the pound down by 8 . Is that an opportunity to buy in . I would be a little bit cautious right now. We havent yet seen the leverage accounts having to cover. Thats going to come today and early next week. I would be a little bit careful in the short term. But in the long term, you are starting to have opportunities. Look for companies in particular with very strong Balance Sheets and positive cash flow. And there are quite a few of them in technology and other sectors. Would you be telling people to avoid the financials, any of these sectors that really have a lot at stake and that are going to have to see what happens over the next couple of years . For now, very. There is a lot still to be redefined in terms of institutional relationships. There are more questions than answers as to what happens next institutionally. I wouldnt rush into the financials right now. Were seeing some big discounts. Jpmorgan chase down 6. 5 . Citi down 7. 5 . Goldman sachs down 7 . Even with those discounts you say the uncertainty is too much . Yes, because you have given a major shock to the institutional setup. They are he goi theyre going to have to reconnect the pipes over the next quarters. Remember, markets had gotten comfortable with the notion that this would not happen. I think people underestimated the extent to which the majority of people out there have decoupled from Expert Opinion and decoupled from the political and business elites. What you are seeing is yet another example of this, and its not going to stop. I mean, this is a fundamental phenomenon thats happening on both sides of the atlantic. Does that mean you think the odds are raised that we could continue to see votes like that happening . Donald trump was just talking about what that means and how he expects it to continue in the United States. You think that too . I think the United States is a little bit different. In europe this is going to embolden a lot of the antiestablishment parties on continental europe. So there will be lots of questions raised as to what happens here and what happens i think ultimately the eu will do fine, but ultimately, in the short term, youre going to have a lot of political uncertainty, and thats going to lead to financial uncertainty. And also there is an economic hit coming because you are changing institutional relationships. You served at the world bank, so you know how the International Bodies tend to react, what the politics are behind the scenes. Weve been trying to figure out how the eu reacts to what the uk has voted to do. We spoke with the former Prime Minister of italy earlier this morning. He was calling for swift retribution. He wanted a quick divorce. He wanted to call on article 50 to be invoked right away. He wants the uncertainty period to leave. He also wanted to prevent the domino effect, preventing other countries from thinking they can get better terms by doing this too. Do you think there will be a swift retribution . Do you think the eu will come down hard on the uk and that its going to mean the closure of this free trade . The temptation would certainly be there in order to dissuade anybody else, but that would be a huge mistake on europes behalf. You cannot replace something with nothing. My hope had been that there was a plan b that was being discussed behind closed doors, that europe would come out and say it is very unfortunate that britain has voted for brexit but we understand, thats a sovereign choice, and we are willing to offer britain some sort of association agreement. That was my hope. Maybe that will still happen, but i think that is a much better way to deal with it than the retribution way. The retribution way risks even more damage. Thank you for calling in this morning. Always great talking to you. My pleasure. Thank you. Jillian tent with us, the u. S. Managing director of the financial times. From d. C. This morning also we have greg ipp also joining us this morning. You just heard what mohammed had to say. Do you agree . Do you think there is any chance that there is a plan b thats actually nice, an associate membership . I think the hope of a rapid plan b is vastly naive. The european leaders never act swiftly on anything, even in good times. Secondly, this has completely caught them off guard. They were very complacent going into this. Most assumed like the market traders, that it would be a remain. To my mind the key question of every investor should be asking themselves this morning, is this going to be a Lehman Brothers moment where you have a nasty shock that causes contagion and significant damage to the Financial System or is it instead going to be more like ltcm. When you think back to when the hedge fund collapsed, it was also a shock and you had a sharp market plunge but it came back very fast and didnt cause lasting damage. Can i suggest that neither of those seem to be related, to me, in this way in that this is now basically a political bet, right . Whatever the market whatever investors are going to do are betting on what the politics of europe will be over the next two and three years, and were not going to know that. So its not something its a triumph, if you like of the sociologists and the anthropologists over the economists. Its the triumph of the pollsters over the market betting system. Everyone looking at the numbers yesterday i was doing some shows yesterday, economists and former policy makers were saying the betting markets, the Financial Markets, are never wrong. They get it right. No matter what the polls are saying, we believe it will be a remain. Goodness me, how wrong that turned out to me. Greg, weigh in here. There have been some who have said the economic damage will be terrific and tremendously terrible. And others who seem to think the sun has come out. The sun comes out every morning and were going to live to fight another day. I think the first thing people have to do is realize that you cannot really take anything from anything that happens in the next 24 hours. All the long positions positioned for remain are being shaken out today. This is not giving us good information about what happens next. I dont think the parallels and a Lehman Brothers or grexit are appropriate. There is no reason to believe any Large Institution goes bankrupt here given what the bank of england has said about its willingness to provide basically unlimited liquidity to the british Banking System. Were not talking about redenominating the currency. You have two years of profound uncertainty. More important, globally the lesson you take from this is that people are not responding to economic arguments. If you think about it, this whole campaign was economic fear versus emotional desire. And emotions and nationalism won out. That is the complete prerogative of the people. They basically said, we hear what youre saying about the economic benefits, but we want our country back. I think every time one of these big things goes to the votes, whether on greek referendum or the u. S. Election this fall, its an important reminder its not that theyre disregarded the economic arguments. Its that they dont believe them because they dont feel them. Thats probably true. The average brit like the average american does not feel theyve been a beneficiary of globalization. I can point to five or ten studies saying otherwise but they are not listening to the studies. Every investor thats been investing on the basis of nice charts and economic inputs and a vision of the world based on numbers, should hire a historian, and anthropologist. This is in some ways a revolt against economics and economists. When you look at the true Economic Impact thats what you know, its not just what people feel or dont feel, its what do we really think will happen over the next year. Do you actually think well see huge job losses in the uk . I think we probably are. I think its tragic. Unfortunately there are a number of companies, tata which was looking at the future of the steel plant in wales has come out this morning and said, were not sure if we can keep the workers in place. I think there will be job losses and a big economic hit. Last word to you, greg. If you look at the weak spot of the global economy, the u. S. Especially, has been business investment. In the u. S. Two negative quarters of business investment. This will hit it where it hurts the most, throwing a pal of uncertainty over what to do next. We know the sign, its going to be negative. Unemployment, uninvestment. There will be ripple effects. No getting around that. Jillian and greg, thank you. Joining us now. Mark grant, managing director at hilltop securities. You are you have been i have never seen more churchill quotes over the past couple of weeks than i have seen coming from your shop and from you, mark. I dare say that i mean, were you sure that brexit was going to prevail . You were you definitely gave it a greater likelihood than almost anyone else thats been on the show, i think. Joe, i have been telling people for quite a while not to believe in the polls, not to believe in the betting, that we were going to have to see, and i have advised the institutions that our firm does business with to have cash, have a good stack of cash, and to be ready. And thats exactly whats needed to do, a bunch of cash to be ready. And the worstcase scenario is what, mark . Youre talking about having a lot of cash to be ready. To be ready to circle the wagons or to redeploy after a nearterm se selloff. I think it will be several steps. I think a lot of people and the politicians in europe are trying to get the media to focus on britain, which is certainly an incredibly important issue, but the more important issue is the future of the European Union and can it survive. I think youre going to have the spanish election sunday and then major issues in the netherlands and in france. I was delighted it was a win, a tremendous win for democracy that the people in britain got to vote for their future. I was delighted that, whatever the vote was, i said many times i would have voted to leave. I dont want other people running my country. In terms of investing, you know, the people that have taken my advice and were in american securities, american bonds, closedend bond funds, have done very well. I think they will continue to do very well. I expect yields in america to decline further. Its going to be a big issue for the equity market globally, including america, until we begin to see how some of this shakes out. Mark, someone wrote in, you know, i have talked about how the demise of capitalism comes when the leisure class becomes so fat and happy based on the benefits of capitalism that they dont even remember how they got fat and happy and then it starts collapsing. Someone told me that that prophecy now that it will collapse is wrong because it collapses from corporatism and bureaucracy leading to collectivism. And we were on that path and now the english people have put a stop to it, and maybe theres in that way theyre looking at it almost as a almost as like something that could save capitalism. Joe, there is not going to be any collapse in capitalism. I mean, the world goes on. The world went on like it did did you misunderstand me . If the eu continued on its current path with unelected bureaucrats in brussels, you know, bringing along the weak and the strong or bringing along the weak on the backs of the strong without the you know, without the people in the individual countries going along with it, that could lead to corporatism is what theyre talking about and bureaucracy. In this way, the brits are taking their country back. I see it the opposite way. Absolutely. Theyve taken their country back. Like stay and remain stay or leave. Go ahead, mark. Well, obviously the brits have taken their country back. And i applaud them for it, and i think thats true across a lot of europe. You have this look, lets be square about this. Youve got brussels where the offices are. Most of the major decisions are made in berlin. So you have got a lot of people that are tired in europe. And i speak to a bunch of big institutions over there. They dont want to be told how to run their country by either berlin or brussels, and theyve stood up in britain and said thats enough. Mark, can i ask you one question. You said that you have been advising people to hold onto their cash, have a pile of it for an opportunity like this. Are you telling them now this is the time to jump back in, or are you waiting for more carnage . Becky, there is going to be more carnage. There will be tremendous, in my opinion, opportunities forthcoming. Probably not today or friday and probably not next week. Look at people who owned american sovereign bonds or u. S. Treasuries, look at the profits they just made overnight. Then you have to look at the equity markets and look at the losses that took place overnight. But as we go through the next couple of weeks, there is going to be some great opportunities. One of them, by the way, i think probably a couple months out will be to invest in Great Britain after its gotten beat up its going to come back. I have great faith in that country and their economy. Who do you think had more influence . Trump saying its good to leave or obama telling president obama telling the english people how to vote . Who do you think influenced the election more . I cant answer the question that way, but i will tell you this, joe, a number of institutions in britain were very aggravated with president obamas comments and what was he coming trying to influence their election for. They were not happy about it. I know. Lecturer in chief. He was great in germany like eight years ago. The pillars and everything, that was good. But i dont know. Anyway, thank you. Mark grant. If we only had another grant. Wait ulysses. Thank you, joe. Horace grant. Jim grant is coming up in a second. Coverage of the United Kingdoms decision to leave the European Union and the Market Reaction. Well continue in just a moment. Youre watching squawk box, first in business worldwide. Bu. Every year, the amount of data your enterprise uses goes up. Smart devices are up. Cloud is up. Analytics is up. Seems like everything is up except your budget. Introducing comcast Business Enterprise solutions. With a different kind of network that delivers the bandwidth you need without the high cost. Because you cant build the business of tomorrow on the network of yesterday. Because you cant build the business of tomorrow dinner may i be excused . Get the new xfinity tv app and for the First Time Ever stream live tv, watch on demand, and download your dvr shows anywhere. Great britain voting for brexit. Out of the eu. Traders, investors, people watching, establishment types. State of shock. Pound plunging. Gold soaring. Bond yield dropping. Affecting just about every market. Well have the global Market Reaction covered from start to finish. And the other historic piece of this news, David Cameron, not a surprise, the brexit might be but not him stepping down. Uks Prime Minister says the country needs fresh leadership after british voters have had their say. So, if we have to get our animation in. There it is. I think we rushed that out. Anyway. Maybe we had both. If youre just joining us, welcome to squawk box on this historic day for Great Britain and for the world, really. I am joe kernen along with Rebecca Quick and Andrew Ross Sorkin. The futures there are the currencies. You can see that the one to look at is the pound and euro. The pound looks stable at 1. 37. Got as low as 1. 32. Remember that it was up near 1. 49 or so. So this is an 8 drop in the value of the pound. People are talking about a uk recession, but we know that cheap currencies sometimes might soften the blow. But no one knows how it will all play out at this point. In the european markets, somewhat interesting, maybe, that the uk is not down as much as some of the others. Germany down 7 . France down almost 9 . Ftse 100 down 4. Italy and spain down both double digi digits. We dont have a word for a spanish exit. We have an italleave. And a portugo. Spain exit wont work. Sprexit. People say watch what you say. You could be talking about a texit. I dont know. I think its possible. I know. The big, ugly sign in frankfurt. Its already gone. If that happens then the markets actually make a lot of sense if not i dont know. I know you you try to put all these disparate economies together under a single currency, not the pound obviously, and without a Financial Authority to coordinate things. This is what you get, this hodgepodge mess of multispeed economies and Interest Rates that are the same and all these imbalances. Well see. Dom chu has a rundown of market milestones and what this vote means. Its the definition of bureaucracy. I think thats what you guys were talking about right now, that many countries and banks and policymakers. When are bloated bureaucracies good . You know, one of my first jobs on wall street was during the preeuro era in currency trading. I remember when there were that many different currencies. Lets talk about milestones. I will admit for joe especially that the first thing i thought of with the brexit and the pound, sterling and euro rates going down that things would be cheaper for me to buy the services in europe. Check out whats happening with the pound. Dramatic weakening. As you can see. It costs as little as 1. 3227. We were well above the lows but lowest since 1985. The other currencies are feeling it as well. This is the biggest swing weve seen for euros ever on history here. One to watch. Euro has dropped as low as around 1. 0910. The lowest levels since march 10 this year. The japanese yen, the risk proxy everyone watches traded below 100 per dollar for the First Time Since november of 2013. That indicates strength in the yen, weakness in the dollar. Of course we now know whats happening with the european stocks all over the place. Our futures are off big but theyve recovered. As for whats rising, well keep track of a couple other things here. Treasury bonds for sure. Interest rates broadly lower. And the gold prices. One of the big movers premarket, new mont mining. Gold companies will be a big focus today. Back over to you. Dom, thank you. Were joined by jim grant the author of grants Interest Rate observer. You were saying yesterday you thought the markets looked pricey at these levels. How about this morning . This is a great ball and pool game. Theres its its a great day for humility. Its up with a limit. One has to be especially careful about dogmaitizing about the future. To me one of the sweet futures of this very interesting morning is the splattering of the certainty who were telling the world exactly what to think. I have thought for some time that markets were anesthetized by the Central Banks that that theyd lost some capacity to look into the future and dope it out. What was so striking about the events the past week is the markets just flat were wrong. I know this betting shock stuff is now big. But markets proverbially were able to see through things that individuals were not. Markets were actually wrong we called it the smart money. We had been calling it the smart money for a long time. The smart money, i think, has been overtaken by the central bank money. And, you know, we have medicated Interest Rates, weve manipulated and levitated asset markets. And i dont know. I think this is a day for among other things clarity. The people one of the shocks that the world is dealing with this morning is the is the is the things the seed is planted in the minds of the people concerning the disaster of a leave vote. And the people who were saying these things, oecd, the bank of this, the council of that, how many of these people had any clue what was happening in 2008, before it happened . So i mean, seems to me this is a great day the suggestion is not that we were all just simply wrong in terms of being smart or dumb about what how the people were going to vote. But that the fear that has been put out there about the economic shock that is going to result, youre suggesting, is wrong. I think the fear is absolutely wrong. I think that the remain people in britain were waging a campaign of fear. This talk about, you know, mass unemployment, of collapse in house prices. The collapse of western civilization. Then the question becomes, look at where the markets are this morning. You say to yourself this is one of the great buying opportunities of all time . There is a traders proverb. First way wrong way. I dont think this morning tells us anything except that people were badly positioned yesterday. We have not looked at domestic british equities. But were going to do that. Seems to me andrew, you can now afford a cab ride from heathrow to downtown london. Its a great day for some things. Christine lagarde was on with wolf . She was on with steve. I wish we could go back to sound bite. She actually listed a hundred different economists who said this would be a disaster. And then she said you dont get consensus like that without it being absolutely factual. I remember she is not a trainee. She has been around a while. She knows her bureaucracy. Were not going to know for several years. What we know in eight hours in the morning is not an answer. Its a great day for journalism. Thats what we know. In terms of the market. You see things like this, you think things are cheaper. Would you tell people to buy in here . The answer is yes. More turmoil to come probably, given the humility. Bargains are being surfaced. Must be domestic british equities that are down 12 that are fabulous before they were down 12 . Im going to try to find some. Spain, italy, is this the beginning theyre a little bit different. Sovereignty is great in theory. What is great is a sovereignty in favor of individual liberty and markets. We are not certain to get that in spain, for example. Will you hang out for just a little bit . Yeah. We can call is spaint. Czech out for czech and finnish. And byegium. This mornings breaking news if youre just waking up. Its a historic day in the uk and arnold the world. Britain votes to leave the European Union. British Prime Minister David Cameron is stepping down. Global market carnage this morning. A brexit bomb shell torpedoing stocks around the world. Lots of investors caught off guard. Full coverage continuing as the final hour of squawk box begins right now. Welcome back to squawk box here on cnbc, first in business worldwide. I am joe kernen along with Rebecca Quick and Andrew Ross Sorkin. Were continuing our breaking News Coverage of the uks decision to exit the eu. The futures in this country right now are indicated down 536 points. Would have been very scary if we were trading at 2500 because it would have been called the 87 crash. But at 18,000 or thereabouts. Its about 3 . We saw a 500drop last august followed a second day by 500. It you look at europe, if you put a spanish 13 drop on the dow, that would get certainly get your attention more than a 3 drop. That is significant, but you what see over there. Out of all the markets, the one in the oouk uk is down the leas. Less than 5 . Japan 8 . Hang seng, down 3. Shanghai down 1. 33. The currencies are where the action is today, especially in the pound. It was as high as 1. 50 to the dollar and went to 1. 32. Bounced around. You can see the euro down about 3 as well. Also the yen. The price of oil, you would imagine, would be affected, but look, its still at 48. Down 4 . Still not that far from 50. We did have a roll, though, in the contract earlier this week. Good old gold. Which was at about 1210 two weeks ago made a sharp move higher, up 65. Now back solidly at some new intermediate term highs at 13. 28. Were going to get to london in a moment to talk about the fallout there. Political news in the meantime here in the United States. Senator Bernie Sanders appearing on morning joe earlier this morning. He is now saying, that a long time coming, he is now saying he will vote for Hillary Clinton. Are you going to vote for Hillary Clinton in november . Yes. Yeah. I think the issue right here is i am going to do everything i can to defeat donald trump. Right now, though, back to our top story this morning. The british vote to leave the European Union. Wilfred frost has been standing by watching outline of this as its played out. He joins us right now from london. Wilf, whats happening . Becky, thanks very much. The overriding feeling still here is one of disbelief, of shock. This area, College Green its called, next to the houses of parliament, always where the press corps gathers for big political events. I dont know if you can see busy it is behind me. Twice the number of people here for last years general election. Its very busy, a lot of excitement and still quite an amount of surprise at the results. Not just because of the vote but also the reaction. David cameron, as you already discussed, forced to fall on his sword. He was the man who delivered the referendum. He took the risk. It did not pay off. Hes decided to resign. The bookmakers have installed Boris Johnson as the favorite to take over. He is favored. He is the leading voice of the leave campaign. Earlier he was speaking, and he echoed some of the reasons why he thought the vote went his way, focusing on sovereignty and democracy. Take a listen. I believe it was entirely right and inevitable and indeed that there is no way of dealing with a decision on this scale except by putting it to the people. Because in the end this question is about the people. Its about the right of the people of this country to settle their own destiny. Its about the very principles of our democracy. The rights of all of us to elect and remove the people who make the key decisions in their lives. Reporter so the british people have, of course, chosen to leave the European Union. Boris johnson upbeat. Leaders of europe coming out, and they are not so upbeat. Angela merkel, the german chancellor, often referred to as the mother of europe expressed great regret for the uks decision, saying it was, quote, a Decisive Point for europe. Moving forward she said we must never forget, especially in these hours, that the idea of european unity was an idea for peace. She said the eu needs to deal with the challenges of globalizations which people are clearly rising up against. Interestingly, its also been announced that she and the italian Prime Minister and donald tusk and Francois Hollande will meet in berlin monday to discuss implications. There is a European Council meeting on tuesday where David Cameron will be there. Negotiations for britains exit will not begin until a new leader is chosen. At the moment Boris Johnson the favorite but dont bet on betting markets just yet. You need a good nights sleep until it sinks in. You keep saying the same thing, that you just cant believe it that it happened. Because you have been up all night i think too. Reporter i dont think its because of lack of sleep, joe. I think thats what everyone here is feeling. Its the big surprise. When you sleep on it. It will sink in when you finally sleep on it. It happened, wilfred. Reporter it has sunk in. The feeling is such surprise. All right. You got your country back, my man. You go the t it back. Smile, my man. Lets get to julia chatterley. Joining us from the European Capital of brussels. And good day, julia. How are you . Im great, thank you. I am only going to echo what wilf was saying. I have lost count of the people telling me theyre shocked and traumatized by this. No one expected this vote. I have to say i feel exactly the same. Weve heard from Angela Merkel. I think the surprise and shock goes right to the head of the leadership in europe. She also said they need to analyze the situation carefully and not make hasty decisions. We have also heard from the head of the institutions. Jeanclaude juncker, he stuck to the line. Out is out. Listen to what he had to say. We stand ready to launch negotiations swiftly, swiftly, with the uk regarding the terms and conditions of its withdrawal from the European Union. So his suggestion there we need to move swiftly with negotiating the terms of the divorce. The opposite of the tone were getting from the British Government to maybe Jeanclaude Juncker here talking more to other european countries, to populist parties in those countries possibly flirting with a referendum in the future. Looking at the european markets and banks and what we know is still a fragile European Union in terms of the economics, have to wonder whether this Market Reaction doesnt give them pause for thought here. Back to you. We need some farage sound bites. I think jeanclaude junker might be the poster boy for the brexit vote. I couldnt agree more. Joining us to talk more about the fallout is the president of Argonaut Capital management and jim grant is still here with us. Some people think this is a great thing and others think its insane. What do you think . Half the people in britain are going to be very unhappy about this. This is an end to the beginning of the urpine projeeuropean pro will. Thats part of our collective security. I think there are certainly negative aspects to this that we ought to be discussing. When you think about the negative aspects, just to understand it. You walked through the permutations of what you think will happen next and what you think will happen to the European Union, what kind of deal theyre going to make with the uk, whether other people will leave. What do you think happens . I think the rise of populism will continue here. Were going to have tremendous uncertainty for a period of time. This is not going to be a rapid exit. These are Major Trading nations with Major Trading links. The trade between germany and britain is very substantial, and the idea that this will be an easy divorce i think is unreasonable. Are there going to be punitive measures that the eu now takes against the uk . And how do you game out how that plays out in terms of how it affects the economy . The smart thing to do, we have heard several people tell us, would be to say we respect your vote on this. Well figure out how to work as trade partners from here on out but thats not what weve heard from some eu voices this morning. I think they would be foolish to think in terms of retribution, again, given how significant the trade is between these countries. Because the risk to seeing a decline in Overall Economic activity is not insignificant. Jim, why are you convinced this is a good thing . I think its a good thing for choice. I think its a good thing concept actually a good thing for markets. If markets are allowed to fill a void that the european bureaucracy have filled. When Margaret Thatcher game in late 70s, early 80s. She was confronted with the charge that when she was going to undo incomes policies, there would be nothing left. People had to be told what wages to pay and what prices to charge. If she was going to go ahead with this reckless project of dismantling the controls, where would we be. She said, we dont know. Thats what markets are for. Freedom is always a little scary because you dont know what lies beyond the controls. But what usually lies beyond is something better. Maybe i am the conventional view here thats why youre here, buddy. The counter intuitive view thank you, joe is what youre saying is in a weird way maybe knoits not weird that markets ll work better this way as opposed to in what some people think of the eu as one being a better market. Huh . Andrew, i tried to say clearly that, to the extent that markets are now allowed to function, whereas, before they were constrained through the activities of the European Union, to that extent this is a good thing for markets and for individual liberty. Right. To the extent that the eu is supplanted by a nationalist regime of state control within britain, it would not be a good thing, but i think that the prospects are rather more hopeful than not. Seems that this is a great blow against the permanent government. And there are permanent governments in all quarters of the world. One of the most baleful is the permanent government in brussels. To the extent they got one in the eye i think thats a great thing. David, you wake up as an investor. I dont know where you were. But what do you do . I think you have to be careful in this sort of environment. Some things are fairly obvious. One, the pound is likely to stay under pressure in this scenario. Prolonged pressure . For several years . Are we talking about several months, hours . Lets worry about several months before we worry about several years. But, look, Economic Activity is almost certain to go down in britain relative to what we were anticipating previously. Why with a weaker currency . Because investment Spending Intentions decline, i think. Already pretty low. Yeah. The idea that uncertainty is positive for markets is unreasonable. The uncertainty was whether there would be a brexit or not. Now we know there is going to be a brexit. Now there is a new sense of uncertainty about how its going to play out. If youre a business, you are not going to do anything. We talk about uncertainty in the United States. This is this is at a magnitude jim would say the certainty that comes that maybe youre not going to always have a statused bureaucratic, unwieldy, juryrigged system, just that certainty is probably positive. There was uncertainty in this country from 1776 until 1783, and it worked out. This is a very big political event, and of course there is going to be shock waves. Of course. But people talk about uncertainty. When is there ever certainty except in retrospect . Right . Its not as if things were so certain yesterday. Things appeared to be certain. And events happened, right . The events are what the markets were not prepared for. You dont believe this sets up a whole new sense of uncertainties . It does. You dont think that type of uncertainty is considering paralyzing for some period of time . It sets up centrifugal forces within europe, of course. Seems that the world misjudged the leave remain vote as it did the raise of Bernie Sanders and donald trump. If youre a Multinational Company thinking of making investment in the uk or anywhere in europe and you were a month out from doing that or a quarter or two out from doing that, given what just happened in the past 24 hours, you dont think you sit on your hands . Depends on what kind of investor or capitalist you are. If youre a value seeking investor youll say, my goodness, its cheaper to get in the country. They are is a 10 off sale in britain. Thats not bad. There might be if the banks leave the city of london, there are trained, intelligent people who are out of a job. This is an opportunity. Nobody the reason why there are no takeovers when the markets are down is when they should be buying other companies when the markets are down but they never do because they dont have the confidence to do it. Thats why the value guys get rich. God bless. Its an unconventional thing to do but people do do it from time to time. Yeah. Jim, hopefully youll be able to stay with us. There are a lot of people hoping that, you know, romania stays because it would be remainia. I have gotten just about every country, i have got czechout. Hopefully remainia stays. Druckenmiller, stan, says this is in capitals, andrew, a great great day followed by a great exclamation point. He says dont believe the elitist davos men. Could be anybody. He is talking about markets too. Well done, stanley. He is negative on the feds effect on the markets. Thank you, david for being here. Thank you for your perspective. I want to remind joe he has now spent the past three years in davos. I have gotten that syndrome, whatever it is. Stockholm syndrome . When i come back here, i find myself feeling collective and proeu and things like hanging onto euros. I have never liked the euro symbol in frankfurt. It was a metaphor for what was a star fell off it. Markets on high alert after britain decides to can you believe this exit the eu. Futures in this country have been averaging down lets call it 3 on the dow. Maybe is that worse on the s p . The nasdaq. S p down 75. Nasdaq down 155. Well have a full rundown of all the different markets and the Market Movers right after the break. E break. The market has clearly moved towards the stay in camp will win. Welcome back to squawk box this morning right here on cnbc, first in business worldwide. Our top story this morning, the United Kingdom voting to leave the European Union. For more on Market Reaction, dom chu joins us. Dom. Were going to fire through some of these big movers. First of all, check out stock market volatility. The vix, a measure of the s p 500s volatility, up near 26 at this point. Some of the highest levels weve seen since february 12th, right offer the february bottom in stocks. Notable upside mover today, gold prices. That means gold mining stocks which are for levered to gold prices are on the move. In the premarket. This is up by 10 in early premarket trade. One of the big components, an s p 500 member, new mont mining. As we watch gold prices and the gold price, those are ones to watch. Another one is bondrelated etf especially for the longer end of the u. S. Treasury maturity curve. The 20plus, ticker tlt, up 3. 5 . Also want to show you a currency etf that tracks the movements of the british pound. It is up. Currency shares british pound down 7. 5 , mirroring whats happening with the overall Pound Movement in the currency markets. I also want to point out today is a big day for the movements in the markets. Its a rebalance day. A lot of the indices and funds tied to the russell 1,000 and 2,000 are reconstitute. Some experts believe this could be one of the highest volume trading days of the year. Add on to that the volatility with brexit and you could have fireworks throughout the day. We also want to show you the financials, down in a big way. Some of the bank stocks. We should point out that a lot of these companies are now talking more cautiously than they had been leading up to this. Morgan stanley saying this is a significant decision which will have considerable impact. The extent of which will not be known for some time. There will be at least a period of two years before an actual exit takes place. There will be time to implement changes required to adjust our business to the new environment. Jamie diamond from jpmorgan pointing out they have 16,000 employees there. He said potentially before the vote that potentially 1,000 to 4,000 jobs could be lost in london. He is saying theyll still have a significant presence in london for some time to come. No immediate change to the way we conduct our business. He said a process of negotiating the terms of the exit had been nl begin now. We have a strong team. Jamie diamond saying it will take time. The team will still be there and dealing with the clients the same. David vance is founder, manager director and c. I. O. Of bonsun group. What were you saying yesterday, and how does that play into what youre saying today. Yesterday i said the dow was up 500 points and today we open down 500 points. Thats whats interesting with the overnight action. It looks like we are basically going to open above where we were last thursday. Yesterday i was saying the same thing, that the betting markets were to be believed more than anything else. And thats the big surprise. I dont even understand why we used to believe that. The Financial Markets are so much bigger, though they were pointing to the same thing. Thats right. I understand that. But like in president ial races, we might be people are betting like 2,000, and we take that as betters are not always smart. The way we calculated it. There were these big dollars that too. I think the reason here in the u. S. The gamblers always lose money. Thats why the casinos are always so nice. I have never seen the betters wrong here in the u. S. Never. On a substantial race. That was the whole issue in 2012, that there was never a point at which romney you better factor differently now, because they had bookies in britain too. Anyone think the polls are run differently there . The betting was definitely done differently. Thats a big issue theyre talking about this morning. The size of the bets was different. Foreign currency traders are supposed to be the smartest people in the world. The foreign currency action was largely hedging driven. To the degree you see the unwinding, there are so many other technical factors at play. Youre right. The markets seem to have gotten it wrong. Obviously the betters did. Im not surprised at what the voters did. Jim, next time i hear like a chief bureaucrat, like Christine Lagarde, in the dictionary, bureau gra bureaucrat, picture of her. Next time i see her say a hundred economists have weighed in and they all say the same thing. That should have told me. I did laugh the other day when she said that. Said it on air. Yes. Consensus, really . That may be a better way to go. Thats the only thing that works in markets sometimes. Go against the crowd. There was a Great American Corporate Executive named Henry Singleton who ran teledyne in the 60s. He distinguished himself with the following. When his stock was down he would buy it with his own money sometimes. When it was up, he would issue it. And he would make acquisitions when his stock was cheap was rich. And this speaks to opportunities in britain after this vote. So i think you have to look at it two ways. One is a speculative way, which is all this drama and froth. And the second is the way of saying what is cheap and what are the longterm opportunities. To me britain is wide open. Down 7 is not down 70 . But my goodness one of the scare tactics for the remain people was that house prices may fall. Thats okay if you want to buy a house, right . Count me unscared. Fair enough. You said up 500, down 500. You dont sound like its necessarily time to go to all cash. No. Definitely not. Definitely not. I am completely on jims side here. I think there will be great value opportunities. The financials are get a lot cheaper. Weve got to see what happens throughout the day from the shortterm standpoint. There could be selling begetting more selling once they get going. Fundamentally i dont think that this is something to be afraid of at all. And in fact, i am very excited about it for britain. Do you think only a journalist would say, its either going to be lehman or ltcm. Which one do you would only a journalist come up with that. Christine lagarde might say it. Jillian is not here i didnt say who it was. She said it on the air an hour ago. When you heard it, did you not think i disagreed with her right there. On the specifics. But just on the severity of it. I mean, those were both i have heard other smart people say things like that. I dont agree with it. I am suggesting Lehman Brothers . I heard it from my hotel room this morning, and i thought it was a rather poor choice of words. Well say that. I dont know if it was the choice of words. Could have said it different ways, but just the idea. God forbid something happens now. That would be seems like a housing crisis seems, you know, cdos and all that stuff, might be more systemic than one country in the eu deciding now were into a political you dont know the second and third order effects. There are banks could be ripples. Could be people who are not set up for this. Could be waves. Hedge funds could go out of business on this, right . Could be some if you were on the wrong yes. Questions is are there operating businesses that go out of business as a function of this. Its a point of comparison there are banks in italy, for example, that are barely making it as is. And if there were to be the bad kind of ripple, we might see a severe banking crisis on the continent of europe. If you were to take one entity that would suffer the most it wouldnt be an operating business in uk. It would be the bureaucrats of brussels. Those are the ones i would short if i could. Excellent choice. David, thank you for joining us today. Jim, thank you. Been a pleasure. A few seconds away from the may goods numbers. The futures again, under pressure all morning long because of the surprise brexit vote. Certainly caught the markets flatfooted. Right now youll see the dow futures are down by about 484 points, below fair vaufl. S p down 68. Nasdaq off 148. Equity reaction in europe has been much, much steeper. Weve seen selloffs by as much as 12 in some of the markets there. Uk doing okay. Down 4. 5. Relatively speaking. Down to rick santelli. Take it away. The may preliminary read on durable goods. Down 2. 2 . Much worse than the slightly down number we were looking for. Last month we lost a ton from 3. 4 to 3 penalty. 3. Strip out transportation. Still down. 3. Ex aircraft, proxy for business investment. That actually was down way more than expected, down. 7. Dont like that on the shipment side. Down. 5 . These are not good numbers, but thats not the news today as we all know. Hello. It is big news. Big news today, tea time in london. Back to you. I wanted more from you on this. What are your thoughts . What are my thoughts . Any country, any bank, any anything that was on the take of easy money, Central Banks, central planner policy, beware. Because now were seeing the tide of free, easy money recede and were getting to see who is swimming fundamentally naked, okay . We want to watch the spreads between the italian rates and the german rates. The french rates and the german rates. My guess is thats going to widen out. And uk, my guess is their rates will keep going down a bit. It will be a rough ride for the uk. I cant tell you the time frame. But in the end, this is about gps. Its about reversing financial repression, and the gpss, they were going down the wrong road. Now theyre going down the right road. Takes them a while for the recalculating mode that we all hear in our cars. But this is a good move. Give the brits a credit. It took backbone to go against the tide. This is the spark. I tell you what, becky, i heard you earlier saying the fed was rate not to raise rates. Maybe we can concede that, but what it really shows is how wrong they all were by keeping crisis levels with no crisis. Now you have a mini crisis and there are no tools left in the tool box. When there isnt a crisis dont use Monetary Policy to implement activist Monetary Policy. Because in the end right always wins out no matter what. I think its a great day for the brits. We might get to actually check a counter factual for once too. Yes weve been told so many times the world would have ended if the fed didnt do this or if the fed didnt do that. Now the world is supposed to end according to most people now, with the brexit. If it doesnt, maybe the world doesnt always end. It can only end once, am i right on that . Yeah. The other thing it shows us, the betting websites. Why didnt they work . Two reasons i see. Because i have been saying forever, along with ira harris, theyve broken all the market signals. Thats why those things used to work. Were broke. Not only that, the money tried to influence more than bet on what was going on. Boy, you know what, these macro hedge funds that paid all that money for polls, theyre losing a boat load. You know what i say, areeve durche. The brexit vote shows us everything is fully packed because everybody thinks the status quo cant be challenged. Not enough courage. I bet the margin calls say differently. Well see more of you in a little bit. Youll hear a lot more too. Right now well get back to london. Michelle carusocabrera is standing by. She has been watching all this too. Michelle, the take that youre getting from london right now, what is it . First let me laugh at what rick was saying. Had me laughing out loud. There is a lot of talk here about the taking back of sovereignty. You highlighted, becky, earlier on how the european markets are getting hit hard. Germany in particular down 1. 7 . Were starting to see now reaction across the european continent throughout the morning. Angela merkel earlier today coming out and saying she deeply regrets the brexit vote that happened today. This is a bit of an underestimate, it is a setback for european integration. Here is whats news. Handles blatt German Media Group has gotten hold of an eightpage document titled the german strategy of a brexit done for the ministry of finance. It suggests the plan will be that they will offer the United Kingdom what is called associated Partnership Status within the eu. Its my understanding that normally this is a status that is a stepping stone to eventually joining the eu, offered as a carrot to countries that begin to make reforms. But this would be moving backwards but also handelsblatt reports the paper is keen to say this cannot be done automatically. If you give the United Kingdom access to the market without penalties, youll have issues with other countries like italy and france. So theyre very aware of the precedent that could be set as a result of how they do these negotiations with the United Kingdom. Germany drives the bus. So what the germans decide to do will be extremely important. Michelle, have you noticed i cant figure this out. I guess i do understand it. But the reaction is purely down just like everything nowadays is purely down political lines. I really dont understand why the People Choose to follow their own but the response ranges from abject depression about the fall of kind of a status bureaucracy. I dont know where the abject depression comes from. Versus absolute elation on the other side. It just runs right down political lines. Like with you or me or santelli, how does it always work out that way . I dont get it. I dont know. I was noticing that. Ill say this. Whats interesting here in the uk is all the major parties, with the exception of Nigel Farages ukip. They all pushed for the voters to vote for remain. They all got it from the voters. Labor didnt follow. The conservatives didnt follow. Scotland followed, but they didnt turn out they didnt do it emphatically. They didnt turn out enough to actually change this thing. So this was a big comeuppance to every member of the establishment here. They threw every threat in the book, every dire warning, every fearmongering tactic. Even our president was over there talking about standing in the back of the queue from now on. I think some of that was i think, joe i think youre right. I think the more people like barack obama talked. When Christine Lagarde said all economists agree, the piling on of, oh, of course, the smartest people in the world think you should stay, i think it reminded me of mitt romneys speech about donald trump. The more governor romney talked, the more i thought, this actually helps donald trump. And the more all these establishment types talk, i think, wow, i think it actually hurts their cause. I dont know if that was the right cause or if im right but thats certainly what it felt like. Thanks, michelle. Put me on the other side of the camp. I think the whole thing is insanity. Lets bring in steve liesman. Really . Yes. Breaking news from the imf. Christi Christine Lagarde urging the eu and uk to collaborate on the process of departure. Saying to try to make it smooth. She supports the liquidity provisions pledged to the Banking System this morning and the imf stands ready to support members. Let me talk about some of the commentary we have gotten. Carl weinberg from the what do you want to say alarmist camp says the two immediate areas to watch for Central Bank Action today are currency intervention and liquidity provisions. We have had some of that. He says the time has come to consider that a Financial Market crash today may push a World Economy teetering on the verge of contraction over the edge. Lets look now as andrew introduced me, potential fed Market Reactions. I didnt understand the numbers until i looked at the column to the left which i havent looked at for a while. Modest bets on a rate cut now being put on the different fed funds futures contracts. Certainly the rate hike chance is greatly reduced. Some people call off september. We kind of knew july would be off. Now september. Joe, you can smirk. I am just reporting. When you said we might get cut. I cant help it. Hold on. The fed will, if they come out with a statement in any event theyll emphasize the swap lines with england. They can borrow dollars if they need it for liquidity. The way the september meeting was trading early this morning. 17 chance of a rate cut. 83 chance of unchanged. No chance of a rate hike. What you see there, guys, you see the rate hike probability from tuesday. It was 33 . That has completely gone away. No statement from the Federal Reserve yet this morning. I think theyll wait and see just how really their first order of concern will be Systemic Risk and the provision of liquidity. Thats the first thing. Then they have to consider as to whether or not there is some new dynamic in the economy whereby Recession Risk is truly elevated. Okay. Thank you, steve. Thank you, steve. We do get some clever stuff comes in from twitter people. Richard says that were going to talk to richard haass. Penultimate country from the eu gets greece. Second prize. Two left. Richard haass president of the council on foreign relations. We know how you feel. Connect some dots. You said off camera it might not be the end of the world but it might be the end of the uk economically near term . No. Not the end of it. It will be the end of the uk politically. The United Kingdom. This is not Independence Day like mr. Farage said. This is dissolution day. It will light the fuse that will lead to scotland. I worry about them. What happens in northern ireland. You have the leadership saying lets have a border poll and unify with ireland. The unionists will oppose that. Youll noeni longer have Great Britain. It will be little britain. A much more smaller and inward looking country. You think ireland stays in the eu . They definitely stay in the eu. People were saying if they do so much trading with Great Britain and with euros too, if Great Britain ever left no. Connection between ireland and the e you i am not saying theyre connected to Great Britain. But there is still a Major Trading partner and ireland is a Major Trading partner with us. The dynamic will be in northern ireland. What about france, italy, portugal, spain . Youll have all sorts of movements whether from the far right in. Netherlands. France will be calling for frexit. The knockon effect is very real. This is its easy to sound melodramat melodramatic. But people take the peace and prosperity for granted. They focus on the bad things, the inefficiency, overregulation, democratic deficit. But this is playing with history. And people will look back on this and say this was a colossal mistake. People went to the polls without understanding the full consequences of what they were setting in motion. And a lot of history will be divided between before and after the brexit vote. It goes far beyond whatever gyrations happen in the market this week. Richard, this has to be seen as a vote against a lot of the institutions. Absolutely. This is against the status quo. When we hear things coming from Christine Lagarde, the imf. Similar statements from the wto. Weve heard statements from the bang of england. All these institutions that have been set up that are probably seen in a very similar light. How should people be reacting to whether or not they have control of the situation. This is like a democratic deficit. Theyre seen as inefficient. Unresponsive and remote. People dont see the good they accomplish. They more see the bad. Its important to look at this vote as to what it was. This came down the pike and gave people a chance to express and vent all their frustrations. They chose this. In some ways the eu was scape goaded. Its like in this country when we trash free trade. That becomes the vehicle. In this case tpp. To vent frustrations with globalization, job loss, with congress. You name it. But the problem here is that you dont go back six months from now and undo this. I dont know if you saw reports overnight, people leaving who had voted to leave saying it was a protest vote. Saying that they didnt think they were actually going to leave, just saying i wanted to be on record saying that i dont like whats going on. I tweeted a few minutes ago saying i hope there is a poll in a month asking the people who voted for brexit whether they regretted it. My guess is there will be serious voters remorse and a serious of people who voted for brexit wanted to send a message to the establishment. But theyre going to get a hell of a lot more than they bargained for. They had plenty of time to think of the ramifications. I wonder whether all the people who warned about this and that were wrong like, will you ever have remorse for just being on the wrong side of what happened here . I was on the right side intellectually. You can argue that what people youre always going to win if you can always say youre on the right side intellectually. Thats one of the rare occasions i think thats true. I dont think its rare with you. Richard didnt say i know but you know how many no. Im not saying hes thought one wayer o the other. I am saying if you had a preference, he was a hardcore remain. Now its sour grapes. Its not. You can argue the tactics about whether some of the arguing in public, about, you know, you mentioned Christine Lagarde. Cameron. Barack obama. Thats a tactical question. Whether that hurt or helped their own cause. Its tactical. Intellectually the people who said it would have adverse consequences for the uk, they were right. History will prove that. I dont think its debatable. Were bordering on opinion, not fact. A lot of people said that the eu, weve entered into this and therefore we need to stay. It hasnt worked properly. We should have had a central Financial Authority. None of these countries, their gdp arent where they they havent done the things necessary to stay in the eu, but we cant go back now. Even though its juryrigged, all these problems. I dont know whether thats true. This is a cure worse than the disease. Remains to be seen. This is analysis. Call it opinion, analysis. Thats what i am giving you. You are asking me as someone who looks at european history. My modest take which may be wrong, this will set in motion trends that people will come to see as significant and adverse. Is it possible that its not as bad, though, as we think . Meaning there is a larger benefit on a longer term scale . I am just raising the question almost on his behalf. Maybe there is uncertainty he needs your help . No. Maybe well be uncertain for several years look, thats not where i stand. You know that. Put aside the Market Reactions, which could be temporary. If youre asking what it could be for europe, the idea of knockon effects. Particularly germany, without the balancing wheel of britain, it puts into question this entire project thats gone on. Earlier i quoted dru druckenmiller. He said, a great day for the uk. Repeated it with a great. Dont believe the elitist, davos men. I wasnt looking at anyone in particular. Now im looking at someone in particular. I havent been to davos in several years. You dont have to be an its more of a description. Just because youre worth 6 billion does not mean youre right. I would hope he might know something about economics and he might. But britains economy will obviously take a nearterm hit. With a much cheaper currency . It will still take its not going to help its not going to help investment. It wont help london remain a center financially. There is more to this also than simply the financial side. There is the europe has been a tremendous source of strength to britain. Britain has grown over the last 60 years or so, at a faster clip than other members of the eu. Why are people to confident that britains relative advantage will remain now that its outside . I just see you can assume away the bad and assume into place all the good, but thats not analysis. I think the eu needed britain more than britain needed the eu. This is a highstakes experiment to see if youre right. Based on freedom and democracy and liberty. Maybe the intentions are at least noble. It shows the risk of being called a davos elitist. It shows the dangers of government by referendum. The Founding Fathers had a point. You have republican government, small r. Representative. You didnt want to necessarily have a major decision subject to the passions of people. What we see here is the danger of government by referendum. Fair enough. Richard, thank you. Well see. You need to live a long life because we have to see what happens and then you have to come back. I hope the golf both of us play means we hang around because hopefully golf is healthy. Well be able to play golf in britain for less money. Greens fees went down. The bright side. G7 issuing a statement. Sara eisen joins us with the details. Cant wait to hear this, sara. Hello. Hearing reaction from, of course, central bankers and finance chiefs around the world. Here is from the treasury on behalf of g7. Finance ministers and central bankers, respecting, they say, the intention expressed today by the people of the uk to exit from the eu, monitoring the market developments following the outcome of the referendum and affirming our assessment, they say, that the uk economy and Financial Sector remain resilient and are confident that uk authorities are well positioned to address the consequences of the referendum outcome. They also recognize that excessive volatility and disorderly currency movements can have adverse implications for economic and financial stabilities. Stability. They say the g7 finance ministers have taken necessary steps to ensure stability and liquidity. So just the latest to chime in here on the market developments and action. In regard to those adverse Foreign Exchange movements, the pound is off the session lows but still an extraordinary record breaking move lower for the british pound. All those people we were telling you guys about lining up to exchange pounds for euros actually made a good bet to hedge against their summer vacations. And all of the americans out there who were looking for somewhere to go, the pound just got a lot cheaper, which means that vacation here to the uk your golf trip, joe, also got a lot cheaper. Yeah. Dually noted. Thank you, sarah. I think pars no, that would be bad. Its a pretty big move. The nyse tweeting this morning that the premarket trading is orderly but heavier than usual. They say we are prepared for the market opening with all systems operating normally. Theyre saying this as the dow futures look like theyre down about 500 points, s p down by 70, nasdaq down 151 and these are off the worst levels of the session. Dow was down by 773 points at one moment earlier today. Jim cramer is standing by at the new york stock exchange. Jim, i saw a picture you tweeted earlier of all the trucks lined up outside wall street. Your point was you see these trucks, these television trucks, camera crews closer to the bottom than to the top, right . You really do now. These markets can shotgun very quickly. Its not like the old days where it would be multiple days that were down. One of the reasons that can happen is the public gets very aware very quickly, those trucks are usually a sign of panic. When panic subsides people go back and look at benchmarks. We have to think where were we february 11 during the decline that was so bad, translates to 1 1,129 on the s p. Utilities have been bad for a long time, what yields four five because we want to think treasuries may not stop here. I listen to the coverage and its very clear obviously people are angry, but remember that the uk was kind of passport light with the eu. There are many Different Things that the eu has control over that they didnt have in london. When i say control over meaning its not easy to leave the eu if youre anybody other than uk. I want to keep in mind at some point today and some point monday youre going to look at companies that you thought, wow, if i ever had a socalled market wide pullback and get a 4 yield, this is my chance. Guess what, the trucks are saying it may happen today. Jim, weve talked to a lot of investors today, jim grant and others have pointed out they think theres more carnage to come, that you could see this carry out over a period of weeks or even months. And then we talked to another investor who said, look, this is really just giving back the gains that we saw over the last week anyway. This is not a massive discount to where we were lets say just five days ago. Well, i think its somewhere between otherwise i wouldnt reference february 11, which was the low for this period. Right. Because i think thats where you have to look at. I have to go by yield, not stock. Remember theres only about five companies that have more than 20 of their earnings from london. Though actually the one the sixth one i spoke yesterday to mark fields ceo of ford, ford is the Largest Company in terms of having exposure just to uk. 16 of their business. So ford is not the first one youre going to reach for. Maybe the last one youre going to reach for. I will point out that i just dont think the carnage theme is been the carnage theme for many. Soros had a great call on the pound, we got to give him that. I just question the idea that United States should be down as much as they are. And i know we get trading halts down 7 , please at home dont panic, thats that halt that weve said for a long time would be in place. Were thinking about chinese halts and those are obviously devastating. This is our halts and thats a good chance to go over and say im not going to make any money on the tenyear treasury, maybe this is my chance to go find a stock that was yielding 3. 5, not that attractive, that suddenly yielding 4. 5, 5. And Something Like that that is not that uniquely levered to europe or certainly United Kingdom is what you have to buy today. Theres so much cash on the sidelines. That money never seems to come in when its most valuable. Maybe it puts some to work here if theres a trading halt and then you wait until monday because well be doing specials, the trucks that arent down here will be down here again on monday. But these are not moments that ive seen down here in 30 years they tend to be the moments where you just kind of say, wow, what was i thinking. Everyone was panicking instead of thinking ive made so little in my fixed income and its not going to help now, rates arent going to go any higher so this is my chance to sink my teeth into American Electric power. Which has been up so much. These are very boring stories. I think boring has a tremendous pull today as we know. We could talk about the breakup, but remember the eu kind of set up in a lot of ways we dont repeat world war ii, more of a cultural and political thing than financial. And i urge people not to panic. And dont be really nervous. If we hit down seven, i dont think we will, but if we do, that is not a sign of weakness, thats sign of opportunity. I dont want to be too positive because then you look like a poly anna, but were better than they are. Remember the bollinger bands . Oh, i love john. I saw a couple days ago pointing to a sharp rally to new highs in the markets and i was thinking i guess maybe after we get brexit out of the way and the uncertaintys gone maybe thats the impetus for the markets to go higher. Not crazy. Listened to the show this morning and one thing im thinking is like, oh, my, the eu euro, got to get out of the euro. Then think about european dissbi grating, then japan, latin america, doesnt even exist. Come to the United States, well, democracy could work, businesses are pretty good. Okay so maybe macys isnt doing that well. But we have some companies that are doing so well. And you just kept waiting for the stocks to come in. Remember we have to deal with the four walls of what happened february 11th, which was a bottom. And there will be a lot of people saying we got to wait until we hit some of those levels, but those waiting for the socalled market wide pullback, some come on and say i really love that amazon, and when we get a market wide pullback, and when they get it they sell amazon. What im urging people to do is do not sell down five, six, seven percent over something in the United Kingdom. In our country, look, am i worried about barclays, the stock is saying if youre not worried about me youre foolish. But maybe stocks are acting out of emotion too. Theres a lot of emotion going on and a lot of talk that sounds very much like 1938 in september. We are not there, guys, we are not 38 in september. We are going to see you in just a couple of minutes. Thank you. 247 tweet, becky, thats the best one ever. You win. Jim and i used to have these battles, he gets up earlier than i do. But im pregnant and im going to be nursing soon, so you look out. Well, asterisk, its 154 game, all right, fine. Real quick, rob here but news across the tape, ceo of double land capital telling people he didnt think remain would win apparently sold all of its European Equity positions before the market close on thursday. So jeffrey gunlack sold all of its european equities before the market close. So he knew something the rest of us didnt. Anyway, mr. Cox, youre here. What im trying to figure out is we did have jillian on she sort of mentioned Lehman Brothers, i dont think this is Lehman Brothers, but i do think to myself i remember what happened the day or two after Lehman Brothers and the reaction was bizarrely actually muted in a weird way. It took a few days. It took a few days to really set in. So im thinking a little more along those lines not to suggest that were, you know, going into some kind of cataclysmic situation, but when jim says, you know, buy on the dip here i wonder if this is the dip or if theres more to come. This is one of those days you really do say thank god its friday because we have the weekend to think this through. Lehman brothers happened on a sunday. Right. You has the morning monday all hell broke loose. By the way, this is completely completely different. If youre worried about the ability to think this thing through, to try to understand what the ramifications are, and i think, you know, we dont actually know them. Remember, this is not a binding decision. A lot is going to happen over the next three months as we figure out as the uk figures out a new government. Wait a second, its political suicide for them to not take a vote like this, a referendum that was put to the nation and then go ahead and say, yes, were going to listen to what the voters told us. Think about all those times weve written about or talked about companies where the shareholders say overwhelmingly they dont like the compensation agreement, right . Theres no way, rob, that they can politically that a leader would stand and win election if you said heres your vote thanks very much goodbye. I think theres a huge between now and the next two years a whole lot can happen. Angela merkel was very clear, i think, this morning saying we sort of drew our line in the sand. Its still there. It might be gone. But look everyone might be gone. But if shes gone and somebody else is there and they pull away, then what . And when the netherlands holds its netherxit or whatever you want to call it you know theres going to be romania. Romanias going to remain. Theyre going to stay. Romania remains. Can we book michelle dock ri with your help to talk about i will do my best, joe. Were both big fans. Talk to her i did ask her about this whole thing. How the will respond. Were out of time. Thank you for being here. Thank you for being here, richard. Were going to be of course following this all day long and probably into the night and possibly over the weekend. We. Yes, the network that is cnbc. In the meantime join us on monday, do think it over as mr. Cox said. Squawk on the street begins right now. Wall street about to reprice what it got very wrong, the uk votes to leave its membership in the European Union ushering in a new and uncertain era. Good friday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer, david faber at the new york stock exchange. The dow looks to open lower by about 500 points. Thatd be about the worst day since august on a closing basis. Tenyear hits 1. 4, the lowest since 2012. Europe unwinding the gains obviously that they put in over the past week. The pound which hit 1. 50 last night at a 30year