Session lows, dow down 250, obviously yields a big part of the story. Were on pace for our first weekly drop in three weeks for all the major averages as a selloff steepens today thanks to weak pmi data nasdaq down another percent today. Where do you look for value now . Jake paulson and mark mahaney. Good to see you both good morning. Thanks, carl. Jim, what separates today from another gardenvariety growth scare and are bonds suggesting that were looking at a global recession . Yeah, i think this is less about the coronavirus today, carl thats the catalyst, but i think this is all about the bond market and are yields going to break to record lows in the united states. They already with the 30year. Well see if the 10year holds i think its creating fear what does the bond market know that the stock market doesnt . I would suggest that the bond markets message is not as bad as people think, because when you look at it, bond yield are back to where they were back in september, but credit spreads have tightened over that same period of time i think what the message of the bond market, that combination is yields are down because inflation is awol, but if it was of a growth story, youd expect credit spreads to be blown out they are not doing that. What we have today is almost recordlow bond yields with recordtype credit spreads thats a message of inflation is down but growth is okay. I think thats the same message the stock market is saying, carl 8 of the 11 sectors are up, suggesting healthy, real growth. The sectors that are down are in the inflation sector, energy and materials. I really think the message of the stock market is inflation is low gubut growth is okay i dont think its as detrimental a message as people think. Its challenging to put this into actionable ideas given the limited universe, but what ideas do you draw from a day like today . Lets see i think core internet fundamentals seem to be largely intact we look at the largest names that came out in the december quarter earnings we did see a little deceleration in the ad names like facebook and google but were going into a year, this is a very robust year for advertising because of the elections, the olympics, primarily because of those two factors. You want names you can buy that will give you exposure to that at a reasonable price. I continue to think that facebook and google offer you that youre paying 22, 23 times earnings for names that are growing earnings 20 , you know, plus clip. I think valuations are highly attractive if off big advertising year like this is. You want to be long with these stocks mark, the other side, a couple of surprises this week, zillow and dropbox anything to extrapolate from those . Theyre smaller stock, market cap around 10 billion for dropbox and a little bit more for zillow but they kind of outperformed in a way that saw them rise more than 20 on the week yeah. Zillow is were on the sidelines on zillow. Its had a wonderful move off the bottom we completely missed it. Its doubled i find this very interesting their core premier agent advertising business has started to reflect that always bodes well for stocks theres still this big bet however that companies are making on the ibuyer market we havent seen proof of profitability but theyre showing scale and you cant be profitable unless you scale. They have the first part of the thesis right if they can translate that into some sort of movements towards profitability in that market, theres substantial upside in the stock. Were waiting for that group point. Dropbox is a different story when they start announcing Share Buybacks they have the cash to do that. They show more movement on the free cash line thats starting to prove out as a modest grower but high potential Free Cash FlowGenerating Company thats an asset you want to be long your points about inflation being awol right now i wonder if that is going to continue to be the case. I mean, air freight rates poised for a major spike in the asiapacific region given whats going on with supply chains there. U. S. Is trying to source from other places other than china, leading to increases in things like components from u. S. Companies and the like are we potentially at risk of a big spike in inflation the longer this coronavirus situation persists i do think, morgan, were going to have Inflation Numbers start to rise in the balance of this year. I do think that growth is pretty good i know were going to take a onetime shot here from the coronavirus. Hopefully its not longer than that, and it will put a dent in First Quarter global growth, maybe second quarter, but i think well get that back later in the year. If we do, growth in the u. S. Is really strong. Were at 3. 5 unemployment i think thats going to eventually if theres an deceleration, getting to the other side of the coronavirus, i think inflation will become an issue in a hurry over en in the commodity market, morgan, theyre telling the same message. Most Commodity Prices are down except for one notable area, the industrial Commodity Prices. Thats the stuff thats most sensitive to Economic Growth its risen 5 to 6 off its december lows, its biggest upside move since it peaked in early 2018 so commodity market is also suggesting that inflation is weak but real growth is accelerating i think if real growth does come through, well have all commodities start to rise and youre going to see Wage Inflation and poor consumer inflation i think continue to climb higher while we have this story at the moment of lack of inflation, we might be in a very different situation by year end. Given the fact weve seen this flight to safe havens, this risk and sentiment in the market playing out again today, jim, you sound like a man who is risk on where would you be putting your money . Where are you putting your money . I think were going to have some of both leadership. It wont be value or growth the rest of this year. I think growth will continue to outperform and i would continue to own a core holding. I agree with mark. The tech stocks are getting a little overvalued but theyre also following fundamentals. Real sales growth of s p 500 companies continues to outperform the overall market. Real sale s growth of s p 600 ar outperforming and theyre following the performance up i think that continues but i also think if we agree at some point as a consensus that Economic Growth is having another upward tilt, kind of like we did in 1718, then i think youre going to see only of the cyclical sectors pick up as well, recovery in commodities stocks, recovery in industrials, and i think emerging markets also come back i would sprinkle my bets beyond just growth and keep my growth bet as well. All right jim, mark, thank you, guys have a good weekend. Thank you thank you and we just name dropped dropbox, the big earnings mover of the morning deirdre bosa is in San Francisco with more on that quarter. Deirdre . Good morning, jon shares are trading well above the ipo price. Things dont look so bad last night the Company Beat Expectations and showed investors it can return money with a 600 million Share Buyback while also hitting a key milestone. Take a listen. By the end of this year, our goal is to become a profitable business on a gap basis. This extend beyond 2020. Longer term, we plan to drive accelerated Margin Expansion as we continue to innovate and extend our platform into new markets. Yesterday we told you about short seller spruce point capital, which has called dropbox a melting ice cube but with shares up more than 20 today, this short seller is likely licking its wounds. Still, guys, i want to underline the questions that remain. Drew houston himself admitted there is still work to do. Over the longer term, Share Performance is ugly and the company is adding paid users at a slower pace. Theyve been plagued by worries over user conversion and competing in a very crowded cloud space as it tries to move up market and captures more of the behemoth space theres apple and amazon this quarter likely isnt enough to alleviate all of those concerns jeffries raising its price target but says the lack of growth catalyst keep them at hold bank of america maintained its buy and said dropbox is orienting investors towards a lower growth, faster Margin Expansion scenario back to you guys dreer dra, ive always got to look at dropbox next to box, which went public earlier, has a lot of similarities, moved into sper surprienterprise it seems like its based on the plan for profitability and the buyback, that disciplined play other than that, are there differences you see between dropbox and box, how theyre messaging to the streets and what their strategies are . Both companies would say theyre more of a collaboration tool this is the hot space to see you see zoom and slack operate and dropbox has a new desktop app partnering with zoom and slack. But theyre both trying to move more into the enterprise space whats interesting, too, is we talked about the short sellers looking at dropbox weve seen activist investors go after box. Clearly there are folks out there who think theres more value to capitalize on but when it comes to dropbox, slower growth, larger Margin Expansion makes you wonder if it deserves the premium valuation that some of the other companies in this very hot space are able to take. So far, sternly, it hasnt kept up with some of those p e ratios deirdre bosa, thank you still to come, inside facebooks secret project p and how it led conservatives to wield more power inside the social network. The reporter who broke that story joins us next. Stay wh itus at fidelity, online u. S. Stocks and etfs are commissionfree. And when you open a new brokerage account, your cash is automatically invested at a great rate. Thats why fidelity leads the industry in value while our competition continues to talk. Talk, talk while our competition continues to talk. Weveryone, looknk isntat 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. Which of your devices are protected by daily security updates . Daily security updates. Daily . I dont know. The only thing. Im struggling with this. Some providers you have to manually download updates to each device. Comcast business securityedge updates every 10 minutes to help keep your connected devices protected against new ransomware, malware and phishing threats. Every 10 minutes feels pretty good. Get secure, reliable internet and voice for an amazing price. Call today. Comcast business. Beyond fast. Welcome back to squawk alley. In the weeks following the 2016 president ial election, facebook discovered dozens of pages peddling fake news all nearly overseas with a distinct lean to the right. The social Media Network would only move a few and not all from the most senior republican who feared a backlash from conservatives who would feel ail yes nated on the platform. Thats the subject of a new report from the Washington Post giving us a look at project propaganda or the facebook machine they created shortly after Donald Trumps surprise victory craig timber, the reporter behind that story, joins us now. Good morning good morning. So what in your judgment is the big surprise here . As you state early on, the stated goal of facebook is to be neutral in these matters, but in trying to appeal, appease maybe conservatives, they ended up tilting to the right yeah. I mean, it was obvious to me from having covered the company, they kept making decisions that fundamentally fell in line with what republicans were pushing for. But it also became clear to me that the pressures were real the president s tweeting about the company and congressional hearings, being accused of bias, and the Justice Department and state attorney generals are investigating them they have real political issues and its not surprising thatve had to adapt to that what are the pressures inside facebook or the forces you would say are maybe pushing them in a different direction from this . Because while were in another election cycle right now and theyre bound to face questions and pressure from both sides about seeming bias, are they going to run the same playbook i think they are going to run the same playbook. They are very reluctant to, you know, attempt to judge whether something is true. They always say were not the arbiter of truth thats become a kind of mantra for the company. That comes from Mark Zuckerberg himself. Hes been very firm on that point. In addition to that, there are all of these political pressures. Theres now increasingly some republican voices inside the company. Theyve worked to rebalance that because coming into the 2016 election they had essentially one or two republicans in that company, so theres been a real effort to kind of rebalance the ranks, and that of course has had consequences in the way decisions get made so just walk me through this a little bit, because i think back to 2016, right, and there was everything that played out with russian accounts, Misinformation Campaigns, you saw that 37page indictment from Robert Mueller as well back in 2018 that also pointed to the fact it wasnt even just the Trump Campaign that was affected by this but also Bernie Sanders campaign at the time weved that company put in place many more employees, make changes, talk about a war room we went to the 2018 election it seem wes saw less abuses, ress less manipulation. To hear you say we could be poised for same type of situation in 2020, what do you mean by that facebook has staffed up come batting the kind of foreign interference that happened in 2016 unfortunately, they were not prepared and did a poor job combatting it. If the exact same thing came to pass in 2020 and they discovered it, i think they would act against it theyve been extremely reluctant to deal with other kinds of misinformation and disinformation, particularly when theyre from domestic actors they dont want to get involved in whether a politician is lying, dont want to get involved in whether any sort of Political Group is pushing the truth in a way that would mislead people they dont want to be in the business of saying something is true or is false that ties their hands because if theres outright falsehoods on their platform, Everybody Knows theyre not true and theyre not acting against it as it did with the nancy pelosi video that seemed to show her drunk. Where is the line bloomberg had a video this week in which he used selective editing to pair a moment when he was on camera and his debate partners were on camera. No deep fake but certainly changed the tone of the message in the video would facebook allow that video . Im sure they would your argument is exactly the argument they make to us all day long once we start saying no to the nancy pelosi video, where does that line end up its an authentically difficult place to find it where the right line is. Theres a couple of lines around hate speech and a few other thi things, but when it comes to truth and falsehood, they are not going to get in that business that distinguishes them from other social Media Companies in addition, they are absolutely not going to limit the ability for politicians to target in narrow ways, microtargeting, the decision with political consequences to it speak of, twitter is testing some new potential features to weed out information on its platform including a communitybased point system that would label false posts or misleading posts by politicians and public figures with a bright orange notification. So, i mean, i wonder how they could do this because political ads almost by nature, a lot of them, are kind of misleading and on twitter you have retweets that seems to be a strategy by some politicians to get a more outrageous message out there without saying they sent it themselves do you think this could work, craik . Is. Its great question credit to nbc for breaking that story. Its fascinating to me that twitter is willing to go into this territory that facebook has refused to go into twitter is preparing apparently to label some statements as not true or misleading and thats a line facebook has refused repeatedly to cross. In a way i think well get an experiment of these two giant and influential social Media Companies trying to wrestle with issues that are authentically really difficult i didnt write the story because i thought facebook was acting irresponsibly. I saw them wresting with real issues that were difficult and was being pushed around by Political Forces that we all are frankly aware are out there. So then what do you think they can do . Because if youre not relying on truth, if youre not really willing to define what that is, arent you ultimately swayed by Public Opinion one way or another . It seems like thats what happened to facebook if you dont want to define whats true or not, then you have to listen to the loudest or most popular voices. How do you think this plays out for twitter if they can color something orange someone will say then this should be orange or that shouldnt be orange at all and there we go. Ive been wondering the same thing. Theyve got a really big, difficult job in front of them, by which i mean twitter, in attempting to set up standards that are going to going to stand up to scrutiny and to operationalize a system of labeling things based on truth or falsehood this is precisely the game facebook didnt want to get into its interesting that twitter will try it will take some manpower and some resources, and they are absolutely going to come under fire when they do it in any way thats not perfect or frank plyi a way that disadvantages one side or the other. Were living an experiment crowdsourcing is interesting with twitter sometimes the crowd is a bunch of bots. I think its people with blue checks next to the