1 you see it there at. 89. An amazing day yes, it is. Thank you so much. Welcome to power lunch. We have all the angles of this historic sell off covered. Bob is watching stocks for us. Rick tracking the historic lows in bond yields all eyes are on the trump administrations response and stooefr steve is on the feds next move. Well start with bob were back at the lows for the day. That 7 level becoming important because of the Circuit Breakers. We had the halt at 9 33 eastern time lets review the Circuit Breakers because they were very important this morning these are long history but only used once. Level one down 7 . We saw that at 9 33. Theres no other halt if were down 7 . Next level is down 13 that would be another 15 minutes until 3 25 p. M. Eastern time and there would be no trading halt at all unless we went to level 3 down 20 that would halt trading for the rest of the day. These Circuit Breakers had a long history this goes back to 1987 remember that 22 drop everybody said we needed to do something after that and they did. Until 1997 we just used a point rule points in the Dow Jones Industrial we revived this several times revised it several times its only been used once way back in 1997 this is all new. We havent seen it with the revised Circuit Breakers you want to see a rough day, here is allow haliburton halted 5 9 33 and then halted again at 10 00 and halted again at 10 22. Three trading halts in one day thats a pretty rough day in one hour nobody knows how to price these Energy Companies because no one has any idea what the earnings will be so they are gyrating all over the place there you see the banks. All down here. The Dow Jones Industrial average down 2,000 points. Back to you. Robert, thank you very much 2,000 points 7. 8 on the dow jones. The entire yield curve below 1 the rick has been tracking the action for us from the cme rick its a wild session, no doubt. Ive heard many say theyve never seen mid offer spreadings this wide. I remember some wild night sessions all i can say is when you have machines, you have this thing called a plug and you can unplug many in the machines in future last night werent going to get involved thats one of the big issues with machines. Sometimes they are turned off. If you look at five year notes, i put a ten year chart to prove we have everything five year on. We have taken out all previous loans and moved into history one week of tens this is chart isnt exactly right. Im not being critical many charts connect the dots theres a gap. Fridays lowest yields was 65 for a ten year todays highest yield is 60 even with though the lowest yield is 31 most of the time you come and fill them. Thats good news if youre looking for yields that come up a bit. Hyg is a proxy for kwhast going whats going on in the credit markets you can see theres plenty of periods that were higher and 2018, let me think, early 2016, 2008, perspective. This narrowing may be a good thing. Maybe the Central Banks can al get together and figure something out. At 1 37 its the o closest kelly, back to you all right thanks lets look at the dow and s p which are headed right back to their lows they hit new session lows right now. The dow is down 2,061 points the s p is down 7. 5 today its down to 27. 44 the nasdaq just shy of hitting the 7 mark itself the white house considering options for a possible response as these markets continue to plummet. Reporter a couple of meetings on the schedule to keep you up to date one is later this afternoon were expected the president to meet with hiseconomic team to consider some options here to respond to this economic damage that we have seen. Were told hes going to be given a robust list of options of what to do. No indication theres going to be a decision to make but the president will be arriving here at the white house within the next hour or so. Hes been down in florida attending a fund raraiserfundr on wednesday with president will be meeting with wall street executives not sure what ceos will be here. Those invitations are going out as we speak. Well have more on that in the coming hours a couple of tweets from the president to give you a sense of what hes thinking today he says saudi arabia and russia are arguing over the price of oil. That and the fake news is the reason for the market drop the president sort of blaming the oil markets and blaming Media Coverage of coronavirus as part of the reason why were seeing this today. He says good for the consumer. Gasoline prices coming down. That also gives you sense of the white house thinking on the oil markets is complicated they feel its a boom for the economy in certain sectors if oil prices are low on the other hand they are aware of the damage to the fracking industry and others for those low prices they are trying to balance that. Not clear their thinking about taking any action in terms of the oil market, specifically we should have beater sense of things after this meeting at the white house once the president gets back to town. Okay. We appreciate it thanks. Traders are betting on another mass ifr rate cut from the Federal Reserve as early as next week take us closer to zero steve has more on that thanks. Concern about the way fixed income is trading had some Market Participants saying the Federal Reserve may do more than just cut Interest Rates. There are calls to break out some of their programs from the financial crisis to resoever liquidity problems kelly and i sat down with head of global fix income we asked about unusually large bid aspects in the treasury market here is what he said steve, ive been doing this 40 years, ive never seen that before last night i got a message from our london office. There was no offer on the 30year treasury futures we have never seen that before these are unchartered times for sure this morning the new york fed announced it was increasing size of its overnight repo operations it upped the amount of its twoweek repo from 45 billion to 20 billion that prompted former new york fed official to say quote, it is a baby step with only short term changes, limited term funding and no global reach. In our view much more will need to be forthcoming and very soon. Calling for the fed to cut basis points luckily the fed has to converted what were temporary into standing dollar swap lines with canada, ecbe england and japan and that should enable them to borrow dollars as needed that may come up. It just seems like its taken a step toward the worst today in terms of the interbank thing that seemd like it was okay last week im hearing more alarm now i think its worse than it was on friday. Despite all the kind of extraordinary central bank stuff were talking about that we said a big target fiscal stimulus plan came out tomorrow what would happen he said it would stop it in its tracks theres nobody who has not said the primary response here needs to be fiscal that includes four Federal Reserve officials. They were very strong in calling out and they normally dont do this from a fiscal stand point of addressing the economic fall out this needs to be a fiscal response as it will be more effective than what the fed can do from the Economic Growth point of view. From a liquidity point of view, i believe that response has to come from the Federal Reserve. Ten years back below half a percent now. Whats wrong with this market . Here is to explain fast trader guy. Ill try to explain it. I want to say quickly, ive been doing this, 13, 13. 5 years, i can speak for myself that none of this is fake news i think i can speak for the network, none of this is fake news were reporting whats going on. Some of us have opinions reporters report i want to put that out there because i think its important im also not an economist. I think i sort of understand whats going on. History is litterered with disasterous outcomes born with good intentions. I think in the 80s, mr. Greenspan said maybe we can take the recession out of the equation and they were able to do that for a period of time i happen to think recessions are a natural part of the cycle. Its like the forest old trees burn down, its devastating but its essential its the same thing with our economy. What does that mean . Ill tell you what it means. They put in place these things and people get lazy. How do they get lazy in many instances Corporate America got lazy give me an example, guy. Ill give you two. I think general e lek trlectric really lazy and ibm got lazy now everything is l coming home to a roost its making people focus on their businesses when they saw the market goes up every single day, they said why bother its a cost i dont need they stopped then they said, wait a second. Maybe we can sell options instead of buying these things, instead of not doing anything, we can sell options. The market is having to go down again. Well create this synthetic dividend and everything will be fine whether they realized it or not, the Federal Reserve and other Central Banks dampedened volatility to a point it was unnatur unnatural. The weekend apple came out and said things will be rough, thats fine. Thats absolutely fine this passive investing looks past the news. In terms of the option volatility, youre seeing whats happened when people have what i call what Market Participants call negative gamma. The lower the market goes, the more they have to sell which exacerbates the down side and the same things happens to the upside we have seen it a number of times over the last couple of weeks. The bad news is that doesnt get sorted out overnight unfortunately it doesnt happen. Im not here to call bottom. Im not here to stoke any investment fears im trying the explain to you wha going on. Look and see what happened when we went through 1. 4 see where we are now bond volatility is historic. Its been going on for years yet nobody talks about it and currency volatility is historic. Everybody is so equity centric i understand that. Its not healthy the last point, you tell me fo back to september, the fed rebow when they said this is normal business as usual. Theres absolutely nothing normal about what happened in september and were now in march, whats going on now they can say its normal thats fine. If you look under the hood, something is really very wrong and its manifesting itself now. Sorry to take the last five minute in just a quick word, you have managed money what do investors do all this being the case, its still the market we have its the market we have to live with what do we do . If my mast th is correct, wee down 19 from ahistoric high i the market we have seen that before the problem is, were seeing it in course of week and a half its freaking people out thats what happens when volatility gets tapered to the extent that it is. October 2018, 19, when Jerome Powell was saying were going to reduce this Balance Sheet, were raising rates. I happen to think he was doing the right thing. Why follow everybody else down the rabbit hole of negative rates when you dont have to if our economy is as strong as the administration said, theres no need to do that i think well be in a much better place now i totally get that and im not trying to. Its just my opinion what are they protecting us from in my opinion, the Federal Reserves job is not to make the stock market go higher its not i think its an overlay of the s p 500. Not to suggest that everybody own stocks thats not my point. When people see the stock market go up every day, year after year, they say to themselves, economy must be strong if the economy is strong, i can go on that trip. I can buy that starbucks coffee. Thats 73 of that economy is exactly that go back to october 18, and november of 19, when the market went down 19. 8 in are a month and a half Consumer Spending stopped o epea dime we cant normalize because it will upset the market. If it upsets the market, it will upset the consumer and we have a problem. Thats what youre seeing now. Im not suggesting im right, it happens to be my opinion do you want to jump in, stooefr. Do you have a thought here i just wonder the extent to which we can have one discussion about it being a buying opportunity or not when its a credit event i think discussing the sins of the past might be relevant at some future point. I think thats an interesting discussion i was with guy in the idea that i would have liked to. I was not a huge fan of the three rate cuts that came in response to the trade. Thats where we are. You go to war with the fed funds rate you got, not the fed funds rate you wish you had. Now the question is, getting the market through liquidity issues here so that you can have price discovery and get to that point where investors can have the discussion is this a buying opportunity. Everybody stay put. Scott wapner has joined us thank you i asked jeffrey if we could talk about some of these issues as steve was describing these dislocations between the bid and the ask spread on treasuries the movement is so big that one should expect an expansion he didnt come off as it being a liquidity. All that surprised, i would say. Not that hes not concerned but he wasnt all that surprise given what were seeing. Given that every Single Market is down big and the treasury market is up big given that context the credit market is more orderly than you might otherwise expect just because of what youre witnessing across the board in the markets. I say how bad could it get how concerned are you. He said im concerned. Things have to get worse you dont have a move like this end without disorder it just never happens. Thats what he said in terms of what the fed may do, he said these calls for more fed actions seem early to me the stock market isnt even down 20 from its high. Things with europe were like 5 or 10 and,0 now they are like 30 that was sort of met by that. You can tell jeff to rest easy i think the bottom line here is while hes concerned about some things hes seeing in the credit market, it hasnt reached defcon five or whatever the highest is its just a matter of what ultimately gets you there. Whether its the stock market which we sit here and we watch the market today in a 7 or 8 move feels like a whoosh thats not what he was talking about. Stocks falling, not really a big deal yields falling, not really a big deal they care about people leveraged in all of those trades and those people losing money is not really a big deal. I think their biggest concern is does it create Systemic Risk do we find out expost that its in the Banking System. Banks acting to preserve themselves makes the situation worse in the sense that they keep dollar funding from the market they husband those resources because they are regulatory reasons or own concerns and their own models tell them hold onto this stuff. Dont provide it thats how you get to the place where theres concern. I agree were not there. What i have heard is Market Participants telling me theres some indications of some of these things that we saw back it extent theres no information and i hope its not true that the risk will be found to be lying back in the regulated Banking System. Let me ask a final question here to go back to a lot of the points you were making and with the context from jeff about what he kind of is or isnt worried about out there. Is there anything somebody could step up and do or say that would make you feel like my concerns are being addressed. Were going back to the good old days, not the bad . Thats great question im 56 years old thats it thats it i appreciate that. If i dye my hair, ill look a lot younger. Theres a commercial, its not nice to fool with mother nature. Let the system run its course. Its painful i get it you dont need i dont think its about where rates are its about liquidity you can drop rates as much as you want but i dont think thats helping the problem to me its making it worse to steves point, to Balance Sheet of Central Banks that are totally inequipped to handle i dont think the fed thought this through as well theres no evidence of that how is it possible to say the problems from 08, to 09, got moved to central bank sheets where did they just vanish . I thaought you were going to say they got moved outside the ba Banking System into the shadow Banking System we got to go do commercial. Look at the expansion. Our Federal ReserveBalance Sheet expanded at a ridiculous pace i dont think thats any way healthy. These are just opinions. Im not trying to state fact other than the fact in terms of derivative books when you walk in one day and say some derivative book somewhere blue up. Then i think youll have a close to bottom. Until then, i think this thing continues. Were not going to any commercial break dont worry about that steve, we appreciate it. You asked me i wonder what hes thinking. Now we know. Stocks are hitting session lows in the last couple of minutes with an unprecedented drop and major averages are down 19 from their record highs last month. The question is whether this puts the end of the 11year bull market within reach. David, elet me start with you. What do you think the main problem is with the markets today . I think its uncertain pi about the economy which were not really talking enough about. What really happened is as these numbers. Referee cases have increased, people realize more and more companies, more and more individuals are changing their behavior thats causing social distancing i think thats really where the problem is for investors, just calm down. Markets are crazy in the short run. We may have a recession. We have seen a big fall in stock prices to date any way if we have a recession, the coronavirus, the effects will fade i think the effects will be very big around the world before were done they will fade then the economy will come back. I think people should look at valuations carefully and make sure they are appropriately diversified. Dont get too focused in the sh