Found. Youre watching Market Makers this friday morning. Im Erik Schatzker. Stephanie, good to see you again. Good to be back. I wasnt here all week but now know adam, former hockey superstar. Are you going to be skating with him outside the garden later . Probably not. Probably want to. Yes. Me, im we should say happy friday. Happy friday for sure. Lets begin with the top stories, the selloff in stocks hit markets overnight and half of the dow industrials fell almost 35 points posing the biggest drop since february. Here is where things stand right now. Youre well aware that concerns have been building about economic growth. Its slowing around the globe and the possibility of of course that the u. S. Recovery will fizzle. You can see here that the ask u to at if it drops below 16,596 the dow will erase its gains for the year. It looks as though the stocks in asia dropped and earnings are well off their morning lows. Turning its advisory business into a standalone boutique investment bank. The Blackstone Group will combine its unit with partners and spin it off taxfree to shareholders. The new boutique which does not yet have a name. Well call it spin crowe but its competing with the likes f mullets and co and raise is going one who left to be chairman and c. E. O. Of the new firm and free blackstone of conflicts between investing and advisory activities. Its the meeting of the mowing always. Getting together to join a form a joint venture. They will combine end model, shine group and core media. Core made iowns American Idol and big brother. The subject of endless speculation, tesla. Turned out to be an allwheel drive version of its model s electric car and has radar that can see through fog and comes with two engines giving the car enough power for accelerate from zero to 60 in just 3. 2 seconds. Tesla c. E. O. Elon musk talked about his baby with betty liu. You have two motors. You can optimize between them and actually have the motors operate in their more efficient regime more of the time. And the net result is that were able to get 10 miles more highway range just by going to dual motors to where as in every other fourwheel drive system you lose range. Here you gain it. Its asias favorite guessing game. Where in the world is their leader . He was at a noshow at ceremonies honoring his father and grandfather. He hasnt been seen in public for 37 days and earlier he was seen limping and late in the month the media made an admission that he had an unspecified disconfident and theres a report today that kim has a leg injury. If you were hoping to get a better sense of the markets, no luck. Were going to spend a lot of time on this global selloff that weve seen all week and the highest volatility we have had in months. Lets bring in scarlet fu. She is here to help us break it own along with alessio a macrostrategist at oppenheimer funds. Can you walk us through some of the Asset Classes . Because it seems at this point theres no correlation. If you look at the world index it tracks how stocks have performed. You can see the lower open in asia and when europe opened up for trading, then tough spike up or recovery when u. S. Markets bounce back at 9 30 a. M. Certainly thats the mood where we are kind of struggling for direction. When you look at how weve done for the week it looks like we are down for the week even longer when you worry about how small caps have favored. Small caps down 3 in the past five days and the vicks moving higher now at 19 for the week. And that of course is getting us ever closer to 41 which was the high so far this year. When was the last time we had a bona fide correction in u. S. Stocks . A bona fide correction . 10 would be the summer of 2011 right around the time when the s p downgraded. Some would say maybe we made a bear market at that time which was 20 . We been correction free for years now which is why a lot of people are saying were due for some kind of pull back. The catalyst could be anything that the point. Is this just another blip in there have been blips to other blips . I dont know if they feel if the Hedge Fund Managers feel its a blip. Im not worried about the Hedge Fund Managers. Im looking at the people who are long and strong and say do i insflest ok. Long and strong. What do you think . Ill take the compliment. The blip . What is the catalyst . As you guys mentioned, theres a jedgized slowdown which is being led clear by europe around japan. The u. S. Has been the only Global Engine of growth for the u. S. And that story now seems to be running out of steam. We expect 37 growth which is a high threshold to beat. You do classic Business Cycle development and entering a slowdown regime which could last six months, a year. What do you see in terms of major asset Class Performance in this environment . You end to see overall from the beginning to the end of this phase overall flat performance and risk of returns except for Treasury Bonds globally. So what does that mean . It doesnt necessarily mean you want to sell, because if you want to live through it, you live through it, however, this is a very important time in the market where you look at your strategy. If your strategy was i need to reduce risk for whatever reason, you might as well do it right now. But if your strategy was, i missed a big rally. I am comfortable with more risk. Im using the dips now to build those positions. Is the problem were facing that so many investors were facing are shortterm players and because we are, we are paralyzed in a market like this that only makes it worse . I think theres investors are big, sovereign wealth funds that are large. And the amount of money that has shifted over time into longer term focused investors on perspective basis its much bigger, so you have that buying power and the opportunity to support the market. In terms of what happened this week. We had fed minutes come out and different people and different markets interpreted it in different ways. The bond market reacted rather violently then the german Economic Data that reinforced a lot of concerns. What can you take away from what the fed said it can do about the local economy . I think the feds stated clearly that rates will go higher, but they continued to send clear messages that they are not precommitted to any pace and that most likely in my opinion were going to undershoot the current expectations if you extrapolate the dots. Ant will be data depend and if europe, asia, japan, if they are slowing down, they will factory that as a risk to they will forecast factor that as a risk to their forecast. 10year t 231 on the right now. Could we be back down to 2 . Well, when you look at risk of adjusted returns. 10year treasuries here over the next year. Not over the next 10 years but over the next year, your returns will look a lot more attractive. Closer to 4 . Because the curve is very steep and Holding Government bonds, its true in japan and europe so Holding Government bonds over the next 612 months may provide that unfortunately modest and but risk adjustment. It might look better than why . Because stocks are going you talked about stocks going sideways over time . But i wonder how you fold in all the cogs for the bonds bull market. Leon cooperman talked about how the bond market is ready for a crash any minute. The bond market has been ready for a crash for the past five years. But theres a different sense at work here. So when you look at the level of interest rates, we hit the peak already when treasury has bommed at 150 but going as we know going from 150 to 3 did not turn out into negative returns on a total return basis if you keep holding those positions. And similarly in japan they have been waiting for the crash for 20 . For 20 years. Alessio, the macrostrategist at on imer funds and our own chief market correspondent, scarlet fu. Thank you. Does teslas new car live up to the hype . We check out the new model. And break out the allyou caneat pasta. Its a big day at olive garden restaurants. Withll the you what the crucial vote may mean to the company. We all waited for it, and the kurtens have been officially lifted. Tesla unstrailed new car dubbed the d. Its an allwheel driver version of the s. The d is somewhat automated but not completely autonomous. Musk . Explain the difference. They have is what in airplanes. We use the same term where theres still an expectation that theres a pilot. So if the onus is on the pilot to make sure the autopilot is doing the right thing. Were not yet at the stage where you can go to sleep and wake up at your destination. We would have called it autonomous instead of autopilot if that was the case. Our betty liu sat down with mr. Musk and joins us now. Did elon deliver after all the hype . I know. And you can just see right there, steffey, as youre talking its at the low point of the session so far. This was by far one of the most important events for elon musk and tesla motors. Wearing his black velvetal jacket and there were about 4,000 people last night celebrating this new model, but look. It looks like its been kind of a disappointment for shareholders who were expecting a whole lot more. They were looking for an Autonomous Car and something bigger than just an allwheel drive. While thats exciting and it was very exciting for me to be sitting in his car going from zero to 60 in three seconds, it wasnt quite the show case that some people had expected. They were hoping for a little bit more than just allwheel drive, guys. Bedy, other companies have experimented with driverless technology, havent they . Yes, german competitors have been big on those autopilot features. Mercedes, b. M. W. The model s, it could read road signs and adjust your speed according to those signs. We took a ride in his car and i asked him a little bit about what his new technology was and heres what he had to say about that. Its a combination of radar, camera with Image Recognition and ultra sonic senses. So lane change just by indicating and thats integrated with maps and realtime traffic and really what enables the sint sis of all those four systems. Ok. So you said the car went zero to 06. Betty, why werent you driving it, girl . They wouldnt allow me behind the wheel. I might have crashed it on autopilot. But look for yourself what happened. Oh. Ha ha did you see that . That person jump aside. This thing, stephanie, was like a rocket ship. You know elon musk actually makes rocket ships on the side, and this felt like we were taking off in his car. He said basically he modeled the speed to the mclaren f one, one of the fastest cars in the world. So if you need some speed you might want to be in the market for one of them. Uber, thats all i need. Maybe a bicycle. Two wheels. Thank you so much bedy. We waited for the big d and you got it. Theres types and then theres cold hard reality as you saw investors are a bit bummed but were asking how important is the model d to tesla and the auto industry. To lorenz the contributor kelly blue book. Matt, people want a lot of things out of tesla but for a car that outperforms everything until you get to a car that is worth 300,000 is pretty impressive. Well, its impressive but a little anti intuitive in terms of what it presents. So from that perspective, yes, its a great piece of bragging rights, but in terms of moving the ball on the tech in a logical standpoint, no, it doesnt, really. So what is elon musk getting wrong here . Does he need to be making a cheaper car so more people can buy and enter the easy world . Well, that was his goal when he came out. He was going to revolution nies the industry and push the internal combustion off the stage with the ev. Hes announced the gigo factory which will produce 500,000 batteries per year but i would have liked to have seen an announcement where he addresses some of that and when that will happen and when he is going to get the Production Capacity to put those batteries in his car because at his plant right now at free monte i dont think he has the capacity just with that one facility to use all those batteries. Are consumers really buying into this electric car snaze on . Trend . At the top end he has made legitimate car. Its tech in a logically advanced. Its very expensive. And i think these kinds of features, he is catering to that market. The whole autopilot part of it. Those types of things he needs to do to keep pace with lexus and mercedes that have those features. Thats just to stay in the game that he is already in. So unfortunately i dont see his lane changer being a game changer for him. But matt, that makes me wonder whether were being a little unfair to elon music. The man has done some pretty extraordinary things on his own against what initially appeared to be all odds. Hes got a car. The model s is doing relatively well. His company isnt losing that much money. Appears to be on track to be cash flow positive and net profitability in the not too distant future and for the time being if he is competing against the b. M. W. s and porsches whats wrong with making a tech in a logically superior 100,000 car . Athletes nothing wrong with that and ill give him credit for it but if he sells 50,000 cars a year in a 17 million car a year market, its not going to change things. Thats the whole thing behind his philosophy is that he was going to be a change agent. And its not going to change things. And as he moves down into the lowerpriced ranges, he is going to find the competition a lot stiffer. And on top of it california is mandating that he has competition because of the zero emission mandate here in the state. So lets say the gig afactory. It appears it will become a reality in nevada producing many, many, many more batteries. Elon musk may have to open up another plant outside of the one he has in free monte. What can you envision tesla doing say three or four years from now . We mean, i think there are several scenarios that may play out. He could sell it to ooh larger manufacturer that have could use that. He could do a joint venture. He already has a relationship with daimler and toyota where he could become a battery supplier to either one of those manufacturers and he could open up a Second Assembly plant. But all these snare yost, fep he goes on it alone, he will need a tremendous amount of cash. Selling 50,000 cars a year even at that isnt going to fund what he needs. If 50 is not the number, how many duds he need to sell . He is going to have to build cars to match the number of batteries that he wants to make. You know . The gigafactory is going to make 5,000 batteries. He is going to have to have cars to take all those batteries to make the whole thing work. Thank you matt. Matt delorenzo is the kelly blue book manager. Market makers. Well be right back in a moment. Stay with us. Coming up here on market. Akers, an active investor well show you crucial vote. And more when we return. Its a friday here in new york city. Youre watching Market Makers im Erik Schatzker. And im stephanie rule. Lets do a quick market check. Take a look. You are looking at a market in search of direction. The dow and s p have been fluctuating between gains and losses and over in europe the major indices are at oneyear lows are headed for the biggest weekly drop in 10 months. Across the board, red, red, red. Well, what had happened around 10 p. M. There was a brief relief but the s p 500 and the dow had turned positive and european losses had become somewhat more moderated. The market had found its direction and now its back down. Its close to wiping out im going to check, because i want to know. No. The dow is still up. 2 for the year but close to wiping out its gains for the year. You have investors panicking right now where we are approaching a final corridor for the year and remember redefinitions come at the beginning of the year. People are going to look at what this year looks like. 220 for endowment pension funds. They are going to choke on this. Because its not just in stocks, right . Youre seeing the treasury trade. I wouldnt say reverse. But its dislocation across the board. Lets take a look at commodities heading towards a fiveyear low according to the bloomberg commodity, thats the next line on your table. Rude trading below 5. The spread between the two continues to shrink. Pretty dramatic moves in Financial Markets that we have not seen in some time. Without a doubt. Moving on. Lets bring on one of my favorite people talk about a tough subject. Its hard to describe the Ebola Outbreak as something over than horrible. But our own pim fox has his eye on it. First of all, pim. Absolutely awesome to have you on. Thank you for having me on. Welcome back from san francisco. Thank you. The story were going to describe has to do with a Company Called lakeland industries. To be clear, they are not doing anything out of the ordinary, because of the outbreak of the bola virus or evd 68 another intro virus but has to do with the protective clothing you see in all of the photographs of people dealing with this disease and the virus that is part of it and trying to protect themselves. This Company Makes has math mat suits so you can go on amazon and spend 85 and you get 25 hazmat suits sent to you, and the stock of the company was up 55 yesterday. Its up a little bit today. As well. But this and alpha pro tech. This is the classic example of take a look at whats going on in the news and then see how it ripals into the world of investments. How closely linked the two things are. And you have been covering the ebola Virus Outbreak so lakeland industries. Weve talked about the Biotech Companies that have been trying of they both have trials vaccines. But theres no known vaccine right now for ebola. So the best you can do is protect yourself if theres going to be greater demand at airports and Public Places of travel. It seems cold and heart less. But it intentionally comes across the people as crass but this is the beauty or genius, if you will, of Financial Markets. Identifying opportunity. Thats the thing. You look at people what maybe bought into the stock prior to the big move higher and maybe what they saw is a company that is producing suits and protective gear for all kinds of industries whether its the chemical business or suit