Thats the catalyst. Seems to be. This is fed fear front and center. Yes. I am very calmly panicking, scott, which i think is appropriate. No. Whats really going on, biggest decline for the tft going back to 2015. Not big. Less than 3 . Could be worse. Last night on the double line call probably were as widely heard and reported what he said, those who might have missed it. Im going to quote. Interest rates bottomed ebott. May not rightness near term as ive talked about for years, i think its the beginning of something and youre supposed to be defensive. Fine. You see this, people start to freak out or calling a growth scare, i find adorable. The reits will catch a cold. Utilities catch a cold. Thats a big area in the market. What happens if the overall market catch as cold . Tony dwyer suggested a correction. Could be 5 percent pr . I hope that happens. Let me finish my thought. Go back to prebrexit, june 2nd to fi june 22nd. You need fear in the market to work to the upside in the intermediate to longer term. This is perfectly healthy. Doc, will it get worse . Is this the start of something because of the fed what it could do . Start of much higher volatility, judge. What weve been told over and over from the fed the vix already. Did a little. Did a lot of hedging in there for clients and so forth. Like josh, i believe well see Something Like that happen. I mean, that being a selloff. Now, two to three or three to five, like tony dwyer said yesterday, speaking in percent terms, how much he thought the decline would be, thats if its relatively calm. The reaction. I think the fed is out there so aggressively now, for the first time this year steve weiss is right and the fed will move in september. Just on with santelli, in his words a vicious pullback. Yeah. I think you doubled up the size of the move. In other words, instead of three to five, i think six to ten could be the move that you see here. Just at 11 in february. Just did 11 in february. Did anyone lose your life over it . A lot of people are losing their stuff over it. More about yellen sticking the landing. Unorth dokz monetary policies have driven rates to zero and negative across the world, and now investors have reached for yield, moved out on the risk spectrum. We start normalizal Monetary Policy how well are central bankers going to stick that landing . This is about yellen and company even making a landing. Right . The planes come in several times and pulled up and gone back and circled around. And the markets gone up as result. Now, if the plane actually touched down, you could have a problem. One rate hike of 25 basis points a year is normal . What started rates to back up, even yesterday, draghis commentary. Much more hawkish than people expected. Right . People thinking do more. Actually, maybe wont do more. Thats a dove where hawks close. And then today, another new high in rates. Youre seeing a this big rotation into financials, into technology, away from defenses. Exactly what you expect to happen as rates start to back up and the yield curve steepens. Hang on. Liesman is in d. C. Senior economics reporter who did speak with Daniel Tarullo earlier today. A fed governor. Exclusive, but i know he has thoughts on the rosengren comments as well. Steve, wondering if this is the longawaited telegraph and finally clarity that its going to happen . You know, youve got to price it in, scott. Things are getting from confusing to different to understand. What you have is you have rosengren was definitively in favor of rate hikes saying low rates increase the chance of overheating the economy. He goes on to say that a gradual rise in rates is going to support full employment and that anything else could really delay or shorten the expansion here. Meanwhile, Robert Kaplan from dallas says the fed can afford be patient and deliver on raising rates and goes on to say the markets have gotten many notice saying the fact rates may go up. Tarullo you expect maybe more dovish. He was. Had a lot of questions about outlook of inflation, momentum of the economy and then very much in the middle whether or not rates should go up. Heres what he said while consumer spending, for example, has held up pretty well, and there are some indications that maybe Business Investment will finally pick up, at least a little bit, on the other hand, the labor market has basically been flat for a while. Weve had unemployment not going down for a year. Some of the indicators of underemployment have flattened out rather than continuing to improve. So i thought tarullo might have been more convincetive an concerns of raising rates. Did not. Said possibly rates would go up this year. I thought he leaned not september but our voices speaking and more, scott, on monday. Amazing. Maybe you then do have a schism of sorts weve talked about in the fed now, as result of those disappointing isms and now people are saying, well, we should. Then the economy is screaming at some levels, to whatever day of the week you want to pick, maybe he shouldnt. I wonder if youre going to get something in september and maybe you get a kaplan or whoever as a dissenter on the other side for the first time in a long time . You could. You know, its a very close call at this point. I think the markets, though, dont see it that way. Last i checked the chance of a september rate hike was quite low, although there is a substantial chance of a rate hike this year. Thats the better bet. What najarian is saying there, what josh is saying, i think you have to be on the edge of your seat on this one going in, and well wait to see. By the way, a Third Quarter cnbc rapid update runs 3 suggesting the economy is in the middle of receipt bound the 23ed was waiting for. Go to the airport. Got to catch a flight. Appreciate you doing this for us. Jim, so steve says we should be on the edge of our seat. We should. Were not supposed to be, because the fed is supposed to telegraph this enough that its not going to be a shock. Yeah. I mean, youve been saying that add nos yum ad nauseam but thats no were seeing. Rosengrens comments are effective because hes the first, in my opinion, made it clear its not data dependent. Hes worried about things unforeseen. What hes throwing a bone is those people, im one of them, who think the housing bubble of 0607 was created by a too easy, too laxed fed Monetary Policy nap to me is what hes saying but the first one to really leave out the data dependency here and thats why we should be on the edge of our seats. Rich sapperstein what do you tell your clients to do today . The fundamentals are weak. Weve had three years of no change in earnings per share. S p, ps, 118. Ebitda declining on the s p for three years also. Markets been going higher. Time to be cautious. What were doing now is moving capital. We moved it out of the equity markets, and we are moving into middle maturity corporate bonds, below Investment Grade. Getting out of stocks in a big way. Holding cash . Did that in q1. Reduced from 50 to 40 . Still 40 invested, but we think its time to be cautious. Even 50 below Investment Grade corporates are going to act like equities in a negative market environment. Are they not . Not where the theyre cash flow coverage. Interest rate high on buying short term. Go to a high yield. I dont suggest defaults but volatility. Id rather own the yield, get lets say the 2 to 3 yield on that capital versus exposing it right now with the uncertainty of elections, eps, ism, all the factor, occurring right now showing weakness to us. We want to protect capital. Remember, our clients dont need to get rich. They need to stay rich. Rich, on this just below Investment Grade and i inserted the word just below Investment Grade talking double bs, maybe triple bs. Low single as. Correct, and where the value is in the two to the seven yeear. Industrial companies . Oil, drillers, we like financials, by the way. We think inflation is underpriced in this market on the base effect of rising commodity prices. Lows were about december, january. So were going to see a base effect increase there. Were seeing wages starting to leech higher. So inflation is underpriced in the market now. Debt though, you dont want optionality of the bank et kw k equities . Banks, utilities, right. Discussed this previously. Sure. We like the banks, because the ten year is trading like it wants to go higher. Right. We added banks. Right. So the ten year is trading like it wants to go higher. Overall market trading like it wants to go lower. Banks could still get cheaper in an environment, guys where stocks pull back . Right . If theres a correction, its not like the markets going to correct. 9 banks stocks rip . Relative, outperform. I think. As a matter of fact, they are, as technology. As are the cyclicals versus defenses. Look at staples, utilities, telecom, hammered today, but a lot of green in the Financial Sector and makes sense. Again, the yield curve is steepening and obviously the ten year is backing up. To the point, i mean, nobody has been pricing in the possibility of a september rate hike. I think rosengren puts it on the table today. A lot of people saying maybe not this year for a rate hike. On the margins, the idea Interest Rate for banks pick up this year thats pushing them into the grave. Maybe 2. 5 , 3 gdp, loan growth, and margin and operating leverage. And the price target goes to 70 today from 72. Not surprising. Say its our valuation challenging rate environment remains even if rates go up a quarter point. Not like theyre going out of control unless the fed completely loses control of the curve. Its barely down on that news today and if the yield curve starts to go in favor of this group, then jpmorgan will participate. It will be more defensive versus say a bnk of america much more beta and more tied to rates. But i think this is a quality company. Quality Balance Sheet. Great yield. This is what you want in financials, and so i think if this pulls back you want to buy t. Charles schwab in that category . Etrade, schwab, all of them. You own wells. The stink on that one is fierce today, right . Selling is down. Still own it and our firm owns it. We like it long term but, yeah, thats not, obviously not good news and the stocks not cheap. Hard to defend it here but if it were to pull back along with the group, this is the group you want to be in. Every quarter we rebalance for that uit as well as etf work doing now, and we took out wells for this particular next quarter, and replaced it with jpmorgan. We thought that, you know, it made sense before having it the opposite way took jpmorgan out. Now putting them back in. What do i want to do with sectors like energy . Buy them. Yeah . I mean, if fed raises, dollar goes higher. Dont buy the ones you need to borrow. Oil lower. I think well, i think the dollar why would energy continue to perform in that environment . Oil could pull back if the dollar goes up materially dont you think it does if the fed raises. It might. Its in a trading range. Listen to what draghi said yesterday. Maybe growth will impreserve internationally, globally, not so bad for the demand side. Supply we know about. You dont think the European Market believes that today . We dont really know. I mean, rates look, our rates backed up when their rates started to. Jgb. Look at the global spectrum. On this energy thing, saying it all year. Youre right to bring up the dollar. Right to bring up the fed. What matters more than anything, how much is above ground . Still have the rig count increasing, Shale Oil Producers starting to pick it up again. Apaches big discovery in the west. Theres a lot of oil out there, and its just the fundamentals of supply and demand pushing the price lower. You think we get a sizable correction . Like tony dwyer says, maybe 5 . You think its bigger than that . You think were ripe for something to be worried about . I think the biggest risk for the market right now is continued weakness in ism and new orders. And that will lead to weaker eps, because the markets trading at levels where its expecting hire e eps. And if that occurs markets will go down. You think we have a recession on the horizon . No. But i think we are not growing as fast as the monetary authorities would have expected. And so theyre going to now start changing or tinkering with what theyre doing, and thats going to cause more vol and likely lower stock prices. If the market goes down say 5 , that correction. Do you take your 40 stock position and do you raise it . Are you a buyer in that environment or still remain on the sidelines . Depends on what causes it to go down. If its fundamental economic weakness, no. But if its just volatility based on fed changing fedinduced volatility . Im comfortable with the fed normalizing policy. The problem is they dont have policy normalized, penalizing savers and large parts of the economy now. You wanted to make a last point . The only things i wanted to say is, i know youve been in the world of investing a long time, rich. I think there are plenty of times i can remember at least where you have these punkish lousy ism surveys and theyre something to worry about with the economy but the market still rallies in the face of it. I think thats probably whats going to happen here. Uhhuh. Simp willy because were late in the year and a lot of Money Managers are chasing benchmarks buying in a dip. Not a fundamental call. Its a very technical call. Right. Unless theyre trying to preserve capital and not make it worse that it has been. I dont think youll see a correction. To answer directly. I dont see a correction happening in the next three months. The last word. Good to see you. Hightowers rich salverstein joining us. Next up, big name, on the Halftime Report, founder and chief Investment Officer of corvex, a Major Energy Company is live after the break. First, though, take you to the market picture on this friday. Not a pretty one. Its ugly on the street. Dow down 236. 1. 25. S p down nearly 1. 5 . Back after this. Ncial su rst pitch you investment opportunities. Ive got a fantastic deal for you gold with the right pool of investors, theres a lot of money to be made. But first, investors must ask the right questions and use the smartcheck challenge to make the right decisions. Youre not even registered; im done with you i can. I can. Savvy investors check their financial pros background by visiting smartcheck. Gov [phone buzzing] some things are simply impossible to ignore. The strikingly designed lexus nx turbo and hybrid. The suv that dares to go beyond utility. This is the pursuit of perfection. Were back on the Halftime Report. Stepping up a fights with Pipeline Company williams. Last night Enterprise Products withdrew a bid for williams saying the company failed to engage that news not sitting with with one of the largest shareholders and recently quit the board. Joining us live in a halftime exclusive. Nice to have you on. Thanks for having me. Enterprise tried to engage with williams. Williams gave the company the heisman. Williams says, no. Thats not true. We were considering actively considering the bid. Who do you believe today . Well, ive been one of the largest shareholders five years served on the board over a year and a half, resigned in late june with the view that i didnt think it was the right management of the company and right leadership of the board in that i could be more effective from outside the board. Im very skeptical of this board and said publicly i dont think its the right people, i dont think its the a team on the board and williams deserves to have an a team and im having a proxy fight about Good Governance and williams having the best nine, best 12, best 13, whatever the number is, the best people to represent shareholders, because things like enterprise will come up and you need to have a board thats qualified to respond. Are you saying, you sound skeptical that you believe that williams engaged in any way, shape or form with enterprise as it says it did . Look i dont know what happened. Im skeptical that there was constructive engagement, but the facts are its facts. Enterprise is a worldclass company with a pristine representation who put out a public press release saying malt moll postals, because of lack of engagement and no actionable path forward, denied a wonderful opportunity. It very well may be. This is an industry where scale, cost to capital, synergies, expertise makes tremendous sense. The combination of enterprise and williams a complementary as compared to competitor the assets. Look at success of another merger this week, these companies are building multibillion dollar needed Infrastructure Projects where you need an Investment GradeBalance Sheet and get rewarded for taking those cash flows and passing them on to shareholders or unit holders in the form of dividends. Enterprise has a strong Balance Sheet and in a healthy place. Williams because of strategic missteps over the past five years is off sides. They can get back to the right place. Maybe thats a path. Or get more value engaging with enterprise today and getting back on sides more quickly and having more opportunity to access for capital to invest in itself and grow. Are you concerned that enterprise was trying to get williams on the cheap . Reports trying to get a less than 10 premium . Does that jive with you . I mean you like those terms . So i dont know thinking about the specifics of the terms. To me its not about whos buying who and what the terms are. Look, the williams board should get the best deal possible for williams shareholders and im for that. Aye am not an enterprise shareholder, im a williams shareholder. Step back, combine a plus b, one and one, you get more than two. Ebitda, and williams has to rethain share of ebitda and pay down debt. Together they could pass the cash flows on as predictable, reliable dividends to shareholders. I think the world would like that. I suggest the company engage and figure whether its a merger of equals, whether its a purchase. Whatever the form, figure how to Work Together to get the best deal possible and have two options to present to shareholders. This deal or status quo. Am i surp