Dropping below the s p 500 dividend yield which is crazy. You can make more money on the yield on the s p 500 than on the 30 year. Unfortunately the algorithms are utilizing global yields as the correlation to equities and that seems to happen from time to time. Remember prior to that it was the chinese currency any time that traded above a 7 Point Equities move lower. So youre looking at global yields and youre basically understanding that protectionism doesnt exist in global asset pricing. What do you mean . Thats exactly what is going on right now so the United States is blessed with technology. The United States is blessed with low energy. Zero versus the rest of the world. Correct but why is that becky . Because we are seen as the best economy globally and thats where i see protectionism doesnt exist in asset pricing the rest of the world is just driving capital here. So you can see bond yields coming down precipitously but still see it being something that doesnt drag the stock market down even with this yield inversion at this point, stocks still look like a good place to be. Its technical in nature so you ask yourself a question, is it a looming Economic Contraction or is it just about Central Banks having to go extremely dovish whats the answer the answer to me when you look at the economic evidence certainly suggests its about central bank policy. Its about capital flows wanting to come here think about the entire this time its different. No. I wouldnt well, everyone is looking at the three month and ten year so lets talk about what insights a recession. The ten year and the two year today. What incites a recession if you go back to the last three recessions, 90, 91, 2000 to 2001 and 2007, Energy Prices were a critical component of each of the recessions what do they do . In the year prior, each one of those instances, Energy Prices doubled. Thats a drag on the consumer. Youre going to get personal consumption today. Its going to print above 4 the consumer is incredibly strong. Thats what we see. The question is can we talk ourselves into a recession soon. Or can you say its the act of the central bankers but if the central bankers are reacting to a looming slow down then its just one more step. Joe, the slow down the slow down is in the rest of the world. I understand that. What is the Biggest Technology company in europe sap. Think about it. You try to separate central bankers from whether theres a looming slow down and a global slow down, we may be immune but thats the point youre making i guess. Domestically we can stay strong while everyone else is slow but if china is slow and europe is slow and emerging markets are slow, i think well eventually import that slowness as well people are scared. No. I believe the evidence is there. Theres a way to defend against it listen, china has been slow since 2015. 6 slow. But okay, what is the shanghai done since 2015 its done nothing but gone down, okay europe has Financial Services and autos. To me, the real problem is the u. S. Dollar. So think about the gains from the day President Trump was elected until the market peaked in january of 2018 it correlated to the u. S. Dollar falling 13. 5 . Since then, the u. S. Dollar is given back about 10 but again that makes sense based on what our central bank is doing versus everybody else. Well, it makes sense from the standpoint of what the rest of the world is doing does it make sense are they doing enough . Should they actually whats the risk of giving the market another 25 basis point cut if you do nothing to joes point i dont think anybody thinks well get 25 basis points in september. There are people that are arguing that you should not give the market another 25 basis points or give them another 25 basis points in september. Whats the risk in doing nothing . The risk in doing nothing is to joes point you import the economic weakness. You continue to see asset pricing here in the u. S. Drive higher the u. S. Dollar continue to move higher now whats the risk on doing something . You stimulate inflation . Great thats a good thing. So you look at Credit Conditions the other thing to keep in mind when you look at high yield and Investment Grade credit spreads theyre half of what they were when we had the manufacturing recession in 2015 and 2016 so taxable fixed income, those credit spreads are not screaming looming recession. Lending standards for banks are still okay so youre not going to have defaults if lenders are willing to go out and extend maturities on loans so the Economic Conditions in the United States are incredibly strong in my viewpoint the consumer is incredibly strong the average price for gasoline over the last ten years is 2. 90. In the last year is 2. 59. The real issue is that we we have doubled our Oil Production in the United States. And thats the blessing that we have relative to the rest of the world. We have this technology which we export better than anyone in the world and we have got the increase in production of oil that no one in the world can compare with so the real challenge for me is understanding asset pricing and understanding you can make a strong argument, think about 2000, they supported the euro, right . You could make a strong argument that the needed action is that global Central Banks need to be coordinated and support the u. S. Dollar, make the u. S. Dollar lower. Lower the key is the dollar. Whenever trump talks about bashing the fed, it really has to do with currency. Well and its kind of out of the feds control. So the fed can give the market a 50 basis point cut but that doesnt mean the u. S. Dollar is going to go lower. So were still going to have that challenge. But what youre calling for is for other Central Banks to stop easing rather than ours to try to play catch up with them. You need global coordination to ensure that the u. S. Dollar does not continue to appreciate. But everybody is nobody wants to be the strong currency on any of these issues. No. But listen, i would argue a lot of these economies including china, are not happy about the capital outflows that theyre seeing because theyre understanding that their economies are so weak relative to the economies that the u. S. Is presented. See, japan passed china. In terms of ownership of u. S. Treasuries i guess that trump card is no pun intended, i guess the trump card that was last week or something, right but the idea that thats a weapon now and we own our own treasury owns twice as much as china. You know, sell a few, maybe wed invert the yield curve or deinvert the yield curve seeing a big move in the pound the british pound up this morning. U. K. Prime minister Boris Johnson suggested the queen suspend parliaments session for much of september and october. Its seen as a preemptive strike against lawmakers that are seeking to block a no deal a suspension would give them a shorter amount of time to block the prime ministers brexit push. So the queens actually getting involved. And when we say, we have to recalibrate all of our thoughts. And Purdue Pharma these are big numbers. The big number is settlement for 10 to 12 billion. Thats only 20 times what Johnson Johnson just settled with the state of oklahoma for this would be all the states and municipalities and they played a bigger role. They invented the stuff. But if you got 10 to 12 billion how much did they sell 35 billion worth of oxycontin basically. I looked at that and i thought wow thats a lot of oxycontin. But i looked at the deal. A lot of it made its way to the family theyre worth about 3. 5 billion so a lot of them left the company a long time ago. So where does i think once, if the company does go into bankruptcy i dont know. Its a lot of money the confidendeal was part of a discussion by purdues lawyers last thursday. They allege the companys sales practices were deceptive and partly responsible for the crisis much more coming up. Whats interesting is this settlement was talked about before you heard the oklahoma judge ruling against Johnson Johnson and deciding that half a billion dollars. Theres a lot of blame to go around too we can blame the financial crisis on the banks, but about ten other parties that you can throw in there and with this, the fdas guidelines were not stringent enough on this the doctors had to prescribe a lot of this and some of it is well intentioned, cancer pain is so horrific. You can look at this pharmacy that was responsible for handing out more drugs than there are i mean, like 30 drugs per person per day for some of these things if you look at that, there were ways to track where some of the worst actors were and thats what is such a shame is in hindsight. So much of this could have been stopped early on you say well this is the kind of corporate ceo behavior, or corporate behavior thats based on greed how are shareholders are going to fair in the end here . Well. It comes around it comes back. Bad behavior. Made the right decisions back then. Shareholders shouldnt profit from people making bad decisions. Thats the bottom line. But they didnt need to i dont know if guidelines would have helped there. J and j got off light the street expected a much bigger fine. Thats just oklahoma. Thats just the first. When we come back, two red flags for investors this morning. First from trade war to currency war. Chinas currency falling to new multiyear lows against the dollar and the deeper inversion, the yield curve which is a possible recession warning sign. Well tell you what it means for your money next. Right now as we head to a break, heres a look at the biggest premarket winners and losers in the dow. Who says our bank isnt tech enough . Everyone, look at your phones. The design thinking, the digital engineering, security, blockchain, and we will be first to market yes. When we do we launch . Unfortunately, in 2 or 3, hours. Why the delay . Cognizant is helping banks use Digital Technologies at scale to advance speed to market. Chinas currency hitting new multiyear lows you dont have that you dont have that word they use to describe president xi handy do you . I saw it on your tweet. Oh. Thats interesting. Yeah. Lin shu. Its somewhere between a pope and a its very. And a president. They dont use it for just anyone. So the background of this for anybody that did not look at twitter this morning is that they should but maybe theyre not because i dont know but anyway, state media just in the past couple of days its been interesting they have started to use a term that we havent seen used for president xi in quite sometime what is interesting here is the way people are talking about it is how is it going to be easy than for him to make concessions on a trade deal if he is now being elevated to have that level of authority here and this of course comes right before were going to have a really big holiday on october first and theres a building up of the personalities around him. Hes against the chosen one i hope he knows that its a clash of spiritual authorities. I think President Trump is kidding. I mean, i saw him. I did hear laughing. But this one, wow spiritual authority. I mean, the pope is even whats the term. Infallible. But he has to say im speaking with infallibility in which case hes speaking on behalf of god. Exactly i will not do it when i am going to youre not the chosen one. Theres a couple of other stories in here too. I think some of the producers wanted me to include some other stories. Lets talk trade. This is totally its totally different but its an update to the costco story so then we can show pictures of the crazy crowds we saw yesterday at costco costco opened the first store in shanghai yesterday and the crowds got so insane that there were lines of cars out the door. You know, about half a mile long, even more than that t. Store had to shutdown earlier than normal and the company has apologized for the crowds. It says that its going to allow 2,000 in the store at any one time i dont know if thats normal in the United States or not but also this, you know, in china, people get fascinated and crazy about any opening of a new store but people have been totally bizerk about costco. For example, they said that people are said that they have been waiting up to four hours in line to get into this store. They have been fascinated that you can buy luxury branded handbags like chanel and prada at the store that you cant buy at say a walmart here and the luxury liquor sold out in ten minutes. One guy was bragging online and its been reposted a bunch of times that he bought 18 bottles of luxury liquor and walked out the door and resold it all and he made a profit of 2,000 so people are talking about how the discounts are great there. Go costco we thought they had the American Consumer figured out but if this is something that can maybe bring both sides back together, discounts, luxury bags, and pastri pastries. Thats right. Everybody loves a discount. Thank you its great to see you. Lets talk trade talk and risk and the recession and the signals coming from the bond market and Global Investments and welcome to both of you lets talk about this. We have been trying to figure out if the inverted yield curve is something we need to worry about. You say at this point youre not worried. Why is that . Were not worried at this point. We dont think a recession is imminent yes we have this inversion of the yield curve. Thats more of a signal that investors think the fed is not acome day tif enough but theres a lot of stuff going into that mostly being the uncertainty this consumer is still strong. The fundamentals are good. Yes we had a slowing in manufacturing and we have seen that globally with the euro zone pmis and here domestically i dont think were on the verge of a recession i wouldnt trade on the headlines or trade on the inversion at this point in time. A big question is will we talk ourselves into a recession . Will we bring confidence down . And you do a lot of research where you talk to management teams across the country you have a real good feeling for what management teams are thinking right now are they starting to lose confidence based on what we see . No, theres a widespread between what we hear between ceo and cfo and what i hear in other publications im closer to the opinion that the underlying economy is strong im not going to put the other two. But the conflict between what i hear between ceo and cfo and what i read in the paper is dramatic i think the inverted yield curve is strictly phenomenal. What companies are we talking about. Are you talking small injuries everything from large cap names, the top 50 so i see the same trend in their rhetoric some are using the china trade as an excuse to say our earnings didnt meet expectations and we have a short fall but most are saying, we have to solve the supply chain dilemma Capital Investment has been a huge issue it hasnt been as strong as expected this year. I think that you see some caution there. Its just the m a trend that you thought might occur with Interest Rates this low, its easy to bolt on a new source of earnings that softened a little bit but i cant predict when that would retool its about manufacturing if you look back and think about, look at the Steel Industry and where it is and auto makers. The production cost for auto makers and production cost for the oil and gas industry and declining specifically in manufacturing and manufacturing you can argue in a technical recession some what similar to what we saw in 2015 to 2016 and it seems to be isolated right now to manufacturing in the Steel Industry for me is in a perilous condition and the elements of the economy are in a capacity that technology and the consumer looks phenomenal and on the other side of it, how do you heal the pain youre experiencing in the Manufacturing Sector theres got to be a form of relief we see a significant transition to new technologies whether its in automobiles or other machines that you might use, robotics, things of that nature but theres a gap right now, a transition that has to take place. Go ahead. I was just going to say in regards to the cap ex too, we have to look at where the fed is sitting. I dont think another 25 basis point cut is going to effect that i dont think theyre not investing because they think rates are too high theyre not investing because of the uncertainty going on it puts the fed in a more perilous position because they want to lower. Thats not the reason that corporations arent investing at this point. You dont think theyre reaching a recession point what stocks do you like. What sectors do you like thats more of a conservative play and we have been looking at that and looking at core names and value names to do. We also actually last week actually went into the Home Builders we have seen the home sector start to come back a little bit. I know that the monthly number mortgages. Exactly we have seen, the number was lower last month but there was a big revision to juneso i think the underlying strength was better than what people anticipated and its the lower end housing where were missing the supply so i think its a good play. Thank you for being with us today. My pleasure. Coming up, were on ipo watch. Peloton go public but revealing disappointing numbers. She will join us next right after the break. When i lost my sight, my biggest fear was losing my independence. Mmm. Good. So ive spent my life developing technology to help the visually impaired. We are so good. We built a guide that uses ibm watson. To help the blind. It is already working in cities like tokyo. My dream is to help millions more people like me. Introducing a razor that works differently. It is already working in cities like tokyo. The Gillette Skinguard has a guard between the blades that helps protect skin. The Gillette Skinguard. Go public on the nasdaq and lindsey joins us with more. Good m