happy friday. it is august 21 and you are watching "market makers." i am olivia sterns with the man who shot a few inches. corey: by friday, i'm about five inches -- five feet and eight inches. i am not erik or stephanie. they are off this week. looking down on the wall street. the dow lost 358 points and s&p 500 tumbled the most. you investors who know these things. my call and caused this a pessimistic market in stocks and oil has the longest run that -- joins us aso launch what to talk about his target for crude. olivia: it will be a nice discussion with my colin, the perennial bowl and we will contrast him -- with mike holland, the perennial bull. you can play good cop and i will play bad cop.

olivia: i like that. newreece, may have elections to get rid of dissenting voices in his own party. alexis tsipras said he would quit and copper new elections. he has been in office eight months and he was elected on an anti-austerity platform but agreed to more tax hikes and spending cuts to get a badly needed a lot. greeks, women and men, i want to be absolutely honest with you. we did not achieve the deal we were hoping for before elections in january, but we did not face the reaction we expected. in this battle, we make concessions but we brought a deal that given the overwhelming negative correlation in europe and given what we inherited from the absolute binding of the country in terms of the memoranda austerity measures, that was the best one that could succeed. greece could hold an election as early as september 20. it received the first chunk of the $95 billion bailout this week which it used in part to

pay back the ecb. in turkey, the president is faring -- is hearing up to call for elections november 1. in an attempt to form a coalition government, it made political divisions worse. low fore, an all-time the currency against the dollar and debt has soared. corey: the world's largest maker of farm agreement is cutting their forecast. john deere hurt by lower crop rices that of preventing farmers from buying more equipment. their sales started falling in the americas last year. jeb bush taking the gloves off. for weeks, bush hasn't listened as donald trump mocked him repeatedly, but yesterday, bush fired back at the front runner. >> there is a big difference between donald trump enemy. i'm a proven conservative with the record, he is not. i cut taxes every it, he has proposed the largest tax increase in mankind's history, not just our country's history.

i have been consistently pro-life. he, until recently, was for partial-birth abortion. i have never actually met a person who thought that was a good idea. corey: bush says talk clearly has talent but pointed that he had been a democrat longer than a republican. this is why you hate the preseason games when a star player, robert griffin iii took a bunch of hard hits last night in the preseason game with a concussion against detroit redskins. they beat detroit, 70 -- 17, 21 but he is part again and no word on how long he will be out. those are -- ouch -- the top headlines. olivia: the nfl has got to sort it out. corey: that guy keeps getting hit. markets also got hit yesterday, so five things you need to know this morning. we've got to start with the global selloff. u.s. futures in the red sharply

this morning. s&p 500 index saw the worst drop in 18 months. you are looking at the move in the past since the droid 2014 which shows an increase. telling is thee global selloff, the s&p 500 down 4%. i want to bring in doug kast, he is called the generational -- he called the generational low and after closely examining the fundamental and technicals, he tells us the current selloff is nothing short of serious. doug kass is president of seabreeze partners and joins us on the phone -- corey: on the phone from -- olivia: east hampton. corey: thank you. we go way back. olivia: i appreciate the time you're taking. why is this selloff quite serious? doug: i think to figure out where we are going in the market, we have to understand where we came from. there are a number of conditions that have been developing for a

few months that have conspired and have formed a toxic cocktail that led to this week's risk aversion. risk, as we learned this week, happens fast. though the wealth engine in the world has been equities inflation provided by the liquidity essential bankers, this oil engine is being tested. corey: doug, what in particular do you see as sort of a broader systemic kind of risk in the market right now? doug: i think there have been a number of conditions, corey, that have evolved in the last six months which are much different than the past events. .e should be concerned technical deterioration's, the first one, we have to be mindful that there has been a narrowing of the market leadership and market emergences. it has been a consistent theme of mine and concern of mine.

transports have already fallen this fight lower oil prices and cyclicals, especially, of the energy kind have gone down. commodity-based companies and stocks at all entered their own bear markets. until this week, that was dismissed. the second thing is we have this increased role of momentum-based portfolio and trading strategies and etf's and these strategies and leverage etf a sickly tick the market -- basically took the market to new lows. they cannot about balance sheets or income statements. they are agnostic to her value lies. that alet me unpack little bit. so these leveraged ats, the ats that go up twice as fast and down twice as fast, you'd think that has been driving the markets? doug: i think that combined with high-frequency trading strategies, both of those strategies and the etf have sort theilled the vacuum where

retail investor has been consistently taking money out of the markets. this is one of 10 concerns i have. a more fundamental concern would be the widening credit spread, and as you know, spreads have widened dramatically. i talked to tom keene about this. in the last two months, high-yield has been from 225 to .ver 500 over treasuries we should not lose sight that investment grade and high-yield markets have had record issuances in the last two years and this substitution of debt for equity has been an important tool for corporate share buybacks. olivia: something we have been talking about on bloomberg television, credit fed widening, stocks are not commodity, currencies. the beach, where do you take shelter in these markets? doug: i have been emphasizing sectors like closed and leasable bond funds that benefit --

municipal bond fund's that benefit from these lower rate environments and that on the short side, i have a short life for theircompany reinvestment opportunities are greatly diminished companies like lincoln national, metropolitan life, and corey reassured berkshire hathaway. corey: let's talk about that. you said there are some things you can cap inked already -- eggs you think cap heat already and warren buffett is one. stocks, lawns, activism, warren buffett, housing, china -- we might as well start with warren buffett. how can he ensure berkshire hathaway? doug: moore used to buy gazelle and she priced companies that he price is whatys you pay, value is what you get. beginning about one decade ago, he began to change the nature of his portfolio, paid up for a

bunch of consumer brand companies, paid up recently for precision cash hearts and record high multiples to evita and earnings and customary. i did think that berkshire hathaway, which has a substantial premium to book value of about 40%, is basically evolving into the u.s. global gdp company. the biggest problem is the large numbers. it is just increasingly -- he is like apple. it is time for apple, subject you know a lot more about than i did, it is increasingly hard for apple and berkshire to move the needle because by nature of their share successes. olivia: we will leave it there. that kass, president of seabreeze partners joining us from tampa. thank you for joining us. corey: number two, we are watching oil slump.

heading for the longest run of weekly declines in almost 30 years. prolonged supply drives prices to a six year low. julie hyman has number three. not oil.ich is in some other selloffs around the globe, the chinese stock market, traders putting the government's market risk to the test. they have sent the shanghai index to in dekes -- its low. so much for measures taken there but there was something fundamental feeling that selling. the chinese manufacturing, factory activity dropping to its lowest in six years. we really see the selling spread across global. should mention that hong kong dropping bear market, 20 percent. also seeing selling in europe, european equities pending to more than a 4% drop in the week. that would be the biggest weekly drop since december. they were also heading for a

correction, a drop of at least 10%. the selling is definitely not limited and pretty rough. interesting that you are seeing a lot of the heaviest selling and some of the biggest growth stocks. facebook, apple, netflix, google, some of the biggest losers. corey: they were kind of the fab five but i think i like the fang better. olivia: biotech down 4% in volatility. corey: all the stock is the sending like crazy, whether chinese equities because china will be great, great or the highfliers like salesforce or tesla. good thing they have to defend, they love most. olivia: number four is tech, you got this on. corey: hewlett-packard down about 2% in the premarket. they reported declining sales across divisions but they say that they beat the number. number, salesthat

have been reported, but about beating that number, olivia, they pulled a fast one on me. i did not notice this last night. growthur worst revenue corridor is down in percent year over year but you beat on earnings per share -- olivia: that is the story of the past years, growth management. flatline growth. their if you look at restructuring cost, last night, they reported a 20 family and dollar restructuring cost in their income statement. -- reported a $25 million restructuring cost in the income statement and without that, they reported the average and they would not have read, so by lowering that restructuring cost last night, they were able to have a beat but the results in the way the companies managed may not reflect things being better. olivia: number five, friday, a fun one. deutsche bank is going after rbs's biggest customers using a traditional scottish dish.

the bank has formed a committee they are calling the haggis team to poach rbs's clients and edinburgh base. haggis, i do not know if you have ever lived over there, it is a savory ready-made of sheep's heart, liver and lungs encased in a sheep's stomach. corey: it is hard to get sheep's stomach. olivia: is it? corey: sheep's longest the difficult ingredient. there is a ban in the u.s. on importing sheep's lung. olivia: you don't have to import it. we have that here. corey: you cannot get real hike is from scotland because it is against the law. you can buy weed but you cannot get sheaves long. that is not right. operationsename for like stealing rbs clients. much more to come on "market makers." up next, our guest categorizes the market. michael holland has seen days

like this before and says this bull market still has room to run. mike holland joins us after the break. ♪

olivia: futures are firmly in the red. stresses have been building in global markets and have reached the u.s. s&p 500 index had been a source of stability despite the slow in china and the greek crisis, but 500 tumbledhe s&p the most in 18 months. michael holland joins us now on set. great to have you on. -- is the bull market over? michael: absolutely no. you had me going. history oft this august september -- august, september and followed by october is pretty clear. we have an amount of selloffs during these months over the 50, 100 years.

it is interesting. i just heard doug kass, a great friend, i always listen to him because i have a tennessee tort optimism and he keeps me -- i have a tendency toward optimism and the key sleep rushed to the dangers out there and they are all real. it is absolutely real. the fact is that the markets are not overpriced. they are not inexpensive as there were several years ago as we talked about but they are ok. there are some good values out there and i think the concerns that we have right now are not new concerns. china is not new. there is nothing new. we have been talking about the hard landing in china potential or the last eight years. corey: what is new is that we are seeing it. we are seeing a dramatic the climb. michael: and that is the hard landing. olivia: the manufacturing numbers that came out showed the biggest contraction since 2009. michael: we talk about this a

lot. i will be over there in three weeks in beijing and i talked to people yesterday about what is going on with companies. slow down has been going on at the continuous pace. corey: but there might be a fundamental change. we heard from glencore that they are having trouble because of corruption investigation and they cannot get programs off the ground because people cannot do business. we heard last week, on the radio, i heard from the ceo of mclaren. they say it is completely dried up and the culture of conspicuous consumption is gone from china because of this corruption investigation. combine that with what we are hearing of the slowdown of manufacturing and the consumption of raw goods is down substantially. michael: all of those are unassailable facts. it is not in the last month or the last week or the last three months. that has been going on. when mr. xi came into

government, he said they would crack down. if you are running the company right now, you do not know if you are being indicted. he is going after political enemies. everything has slowed down. conspicuous consumption, guess what? they had a huge amount of corruption and they were buying all kinds of crazy stuff. stopped. there is a major transition. the transition has been going on since this guy took over and that's in addition has gone to pace. everything will be slower as a result. it is not even 6% growth. more like 4% or 5% growth that it is growth. invest in companies over there have been telling us all the things you just said. there was no question if this is going on and it will continue as they move from a commodity driven country to consumption where the middle class euros. slower growth and manageable growth at the guys who run the country made mistakes in the past but they do not make as many as over here.

olivia: let's bring it back to u.s. equitys for portfolios. some of your biggest holdings, apple, google, they were some of the biggest losers in yesterday's session. to make conversation. michael: be nice. olivia: you'll get a hug after the segment if you answer questions honestly. are you worried? have a peeked? michael: i do not believe the divine relations. what is it? olivia: the multiple? corey: i don't know. michael: 12. olivia: 12.32. michael: i gave him the answer. i am current, but the answer is very low. stoppede company has all of the success today. olivia: we will have to cut you

off that hold you over. you will learn that hug. much more with michael holland after the break. ♪

it is friday and that means we are claimed the yearbook game on "market makers" and here he is. this young man. corey: i've already got it. olivia: spoiler alert. he's got a degree in geology and built a career well beyond that. he went to amarillo high school and texas, class of 1947. tweet us your guesses. i am at olivia sterns and -- cory -- michael: corey knows. olivia: we are back with michael

holland. he was just talking about apple and correction territory. you want to buy more? michael: sure. you are buying an option that will come up with good ideas in the future, a car, tv or something. the next generation of watch may make it, the iphone is spectacular in many of our lives. the option is at 12 times or 13 times earnings and a reasonable options price. about your curious thoughts because exxon mobil and chevron as well, the big oil companies, really falling off. stock isrgue the really getting pummeled. michael: great time, for the reason you just said, the stocks are getting, and. whenever we have had these in our cycles and you go through the long ways -- corey: you are calling the old.

michael: no, you used to follow the energy industry. we get to these cycles you talk about, and there were numbers this morning. we will have an opportunity with companies like exxon to buy at lifetime good prices because it can take advantage of these opportunities. they look 50 years out and invest and buy things cheaply and do well. some of the small companies, we -- small companies sell those. corey: but they have not done a great job of reserve replacement. i would thought there would have been in that already but they have not been out there. michael: it may be yet to come. olivia: jpmorgan -- why do you like it? michael: for some of the same reasons. under an incredible and not a pressure since 2008, the wind will shift over the next 10 years, we will get some interest rate relief, maybe even september 17 from the fed. when the interest rates change,

all banks led by jpmorgan will and talk flow waves about paddle boarding. we will end up with huge waves of cash coming in to these companies. olivia: you did say you are a perennial bull. corey: i would argue you have seen the companies and you have identified their problems to your credit. ibm, a company has problem's now, you think? michael: they may be getting over them. i think maybe she will get it right that i see no indications. corey: so far, no indications. michael: you know much more about this than i do. corey: i hear the cloud offering is really good but going against what they are trying to sell. sales numbers are down almost every quarter. olivia: a couple minutes ago, doug kass called warren buffett.

love listening to god because it is always checking my positions and my train of that. douglove listening to because it is always checking my positions and my train of thought. yes, he is right. he talks about 40% premium to book value and he is right, but underlined values are really good. the burlington acquisition was spectacular by itself. people say when you get that too big to succeed, braun. they said that about apple. people who lead companies, i think the key will be for successors to help it in how he does it. corey: you could make a good guy with intrinsic cory: great to see you. thank you very much.

olivia: the greek drama continues. the prime minister will step rebels haventh and split to form a new party. the greek people will head again to the ballot box again. is he so confident he can form a new unity government? tom: he is still very popular. legal -- most popular leader. he thinks he's got time on his side. he has the backing of the creditors who are pumping all of this money into greece. this is probably a good idea. the timing is important because his opposition parties new party needs time to get organized. september 13 could actually be the date of the election. we heard september 20th.

they are saying a september 13 could be at. it's by no mean certain. right now, they are trying to form a government and that looks unlikely. political campaigning will kickoff tuesday or wednesday next week. olivia: tell us how he is perceived. is he perceived as someone who saved greece or somebody who went against his word? agreed to anhe austerity package that was harsher than they rejected in the referendum that he called. tom: exactly. split opinions here. you've got the popular unity party and the anti-austerity party. not have rebels who did vote against the bailout. it's not universal.

saidnight in a speech he we tried to get the best a allowed deal. he talks about debt relief from the imf. we are the best people to take this forward. he said they will get the best kinds of reform. there are some tough reforms in the pipeline. it's tough. opinions are split. there is resignation on the streets. olivia: that was my feeling as well. thank you so much for joining us outside the parliament in athens. cory: it's time for our top stories. china's group will invest money uber. the rest they will put in the china business. midsized to go into 50 chinese cities. twitter shares dropped below the $26 price.

that's almost two thirds of its peak shortly after it started trading in november 2013. jack dorsey warned it would take a while to stop the slowdown. adidas is trying to regain his reputation for cool in the u.s.. the german shoemaker hopes kanye west will do the trick they are releasing a third version of its popular shoe. kanye west helped with the design and marketing. they have been losing market share to nike and under armour. i like it. those are your top headlines at this hour. cory: mark benioff made some foolish comments about revenue. is this country growing fast

enough? will that drive the stock up in the future?

cory: that is the view in york city this morning. it's a beautiful morning. olivia: it is indeed. i am glad to be here with you. cory: yesterday was a gnarly morning. salesforce reported quarterly results that were ahead of estimates. of 1.6 3are, revenue billion. it's the slowest growth they have seen except for one quarter in i've years rid mark benioff could not have been more bullish. >> as you can see from our results and the momentum we are having with our success platforms and sales and service and marketing, we are on a

trajectory to do $10 billion in revenue faster than any software company in history. it's been a phenomenal first half of the year. cory: that is mark benioff, always mark benioff. what was unique about this quarter? richard: the thing that surprised us was the cash flow. they did $1 billion of free cash flow. that is higher than we thought. the other kind of leading ,ndicator calculated billings that was higher than we expected at 20% versus 15. that is a good indicator for the short term. cory: that is not including acquisitions. i know that is the correct way to analyze cash flow. i don't agree with it. i think companies that are toial acquirers, you have

figure in the effect of these acquisitions. richard: you are right. we look at that way. part ofnteresting is this is the reason why the cash flow margins are moving up. committed to giving people 100 or 200 basis points. there is a trade-off in both of those things. that's a legitimate question. cory: is that enough for you? we have had some quarters where they did not keep up with recognition. that sounds like an accounting mystery. richard: that's a good question. there is some seasonality to their business. it does evan flow. our view is straightforward. we think this company can grow 20% a year for the next five years. their operating margins should double from 13% to maybe 25%.

in the long term they can get the 30. we think you can double the stock in five years. that's pretty good. olivia: how about the competition? mark benioff was very dismissive with oracle. they are spending big to compete in cloud. what is their confederate of advantage question -- competitive advantage? richard: they have more reference customers and they have been doing it longer. they have legitimate products. those guys are playing catch-up. if you add up is the revenues of all the cloud companies that are public, it's 25 billion. if you add up the non-cloud companies which would include oracle, it's 400 billion. it's 6% of the revenue of the industry in the cloud. they have a long way to go. cory: you talk to investors

about the stock, they call you with love when you get it right, what is the sentiment about this? you've got a growth rate of 20%. less than you saw a couple of years ago. -- thee momentum momentum investors say maybe it's not doing it for me anymore? richard: you are going from more crowdowd to a that cares about cash flow. the company is committed to growing that margin number in the cash flow number. you are in a transition. that's why the stock has been up a little bit this year. i think it's been somewhat of a grinder. i think it will start to work soon. cory: richard davis, we appreciate your time on this. come, theill to

company still has a sales problem. we will dig into the number by the discount dilemma.

cory: let's look at futures. look.hyman has a bring the pain. we can talk about whether we will see the pain. julie: the first indication is futures. we are still seeing declines in a futures that we saw across the globe sparked by feedback. we have the emerging market selloff and that continued to the u.s. on concerns of global growth. that continued back to some of

the global markets like china and then europe. that continues in the united states for the moment. a couple of things to note about yesterday. let's look at my bloomberg terminal. the s&p 500 bloke below the moving average. it also broke out of its trading range. not gonech, we have below 2040. we get that akin march. we approached it a few times and then yesterday, we broke below it. some traders are asking if this is now a new top for the market. are we going to continue to see some downside. i want to point out that we have seen the leadership of the year give up gains. this is a long-term chart. i looked in a long-term chart. 60% since hundred post financial crisis.

then if you zoom in on what's been happening this year, you see that it has dropped 20% just since early june. it has entered a bear market. this is indicative what we are seeing across the market. we saw biotech starks -- stocks fall percent. this is the start of leadership turnover we have seen over the past couple of ways. other signs for optimist him? technicians are looking at the strength index. this is one for the s&p 500. when it gets close to the green line, it could be due for a allen's. gets close to the red line it could be due for a decline. if you look at all the commentary out this morning on what could happen next, take your pick. of the going to go up or down from here? it's divided. chart, that's

interesting. olivia: we are seeing a big spike in the vicks yesterday. we want to change the conversation to retail. estimates, net sales were down 2%. the question now is can they reclaim the fame wants had. for her offices. dana: there was nothing new. it's all about spring 2016. the new product is going to be out there. it's about waiting for that time to get there. old navy, the most important division, maintains its consistent performance. that will be the case. if they maintain the 280

guidance, that was taken as a positive. with growth margins down, they are having to promote very aggressively. olivia: there does not appear to be a 2015 growth story and gap. i want to bring viewers to my terminal. you essentially see growth 2000 15.g expected for what do they need to do to start growing? julie: all about product. dana: you are going to embrace the core customer again. the fact that marketing spend isn't up, that's because they need to have the right product to sell. they need to get the right product in there and advertise it aggressively. it takes time to get the right product in there. it's banana republic also.

maybe holiday is when we should see some of that. cory: what do we know about discounting in gap stores? what is the status they are doing it? dana: discounting heavily. you will see discounts. that's denim included. banana republic also. --t's why the growth bargain margin is pressured. we will see hyper emotional levels at gap and banana republic because the product isn't what the consumers have wanted right now. olivia: i don't expect to pay full price it cap anymore. that's the last thing they want to hear. i had an interesting conversation with some ceos about millennial shopping habits. are they willing to pay full price? does everybody expect 30% off? speak their got to

language. the categories seem to be working these days, it's all about cosmetics. look at how estee lauder is coming out. they will be featured in some of the stores. look at what we are seeing with activewear. activewear is the new everyday wear. whether foot locker or under armour is in the conversation, you need some activewear. millennials are 25% of the population. millennials and mobile are the two key attributes that retail companies can be looking at for holiday 2015. olivia: we do like our leggings. we were just looking at the stats. gap is officially in a bear market. it's all about the bottoms. i thought it was all about the base. olivia: coming up, the worst day

months, should18 you get defensive? we've got a number of market strategist to walk you through.

cory: let's look at some of the best pictures of the day. one of their planes was struck by lightning. wow. olivia: that's terrifying. cory: this picture was snapped by the passenger in another grounded plane. no one got hurt. olivia: our number two video of sy is opening ank

theme park in england. of dark is full sculptures. there is a training camp for anarchist. i want to get a quick look at the sentiment on wall street. this is a live shot of the new york stock exchange. the bears are out today. those are real bears. bears in newily of jersey. that is the family in the house filming this. it is just one there. that family of tears said let's go to the miller's. cory: pool party at the miller's. the bears are out. olivia: look how much fun they are having. one is going down the slide. cory: they called 911 and the police could not do anything

because they are bears. olivia: the selloff continues. we we back with the market open.

>> this is "market makers." olivia: good morning. you are watching the second hour. happy friday. cory: i am cory johnson. the biggest after drop in the s&p yesterday in 18 months. we have a look at top stories. we are starting with markets. one of the stocks falling is the biggest maker of pharma credit. john deere is falling.

corn prices have fallen by 55%. jobs.eere cut hundreds of hewlett-packard is trading lower this morning. earnings were short of estimates. sales fell across divisions. meg whitman says they are in a difficult business environment. hp will split into two companies in november. cory: president obama is trying to keep democrats on his side. he made his strongest pitch in a letter. he urged congressman to back the plan. the u.s. would take steps, even military action, if you ran does not keep its promise not to build nuclear weapons. it was hot last month. july was the earth's warmest month ever.

average temperature was 62 degrees fahrenheit. scientists blame it on man-made climate change. a record el niño is in the pacific. that may bring rain to california this winter. those your top headlines. olivia: nervous investors are waiting for the markets to open this morning. this after markets plunged 2% yesterday. the s&p is negative for the year. it has broken out of its trading range to the downside. let's bring in bruce and robert. that, how important is it they broke through this level? bruce: i think it does technically. all areas of the market are in gear. it's on the downside it. have to be much more cautious. cory: what is going on in terms

of investor sentiment? did something change? do people feel that gotten all they can out of this market? bruce: i don't think sentiment has changed dramatically yet. it probably will going forward. collection in four years. that has led to a lot of complacency. you can see that in the six. -- fix. october, itk to soared to 27. we did not get close to that this year. i suspect for we see a lull of the market, we will see a 27 reading and perhaps even 30. olivia: you said if the s&p stated above 24 he there would be buying opportunities.

felt that if the market is able to stay in the trading range that the most attractive areas would be in the consumer area. they were showing best in our relative studies and more importantly the consumer is benefiting from this plunge and energy prices. it's estimated the average household has an extra $1000 to spend. businesses benefit. their costs dropped as well. 20% of the market is hurt, the other 80% of the market benefits. those the two areas we felt the market would behave and do best. cory: we haven't seen that in consumer spending. i know it's been predicted for since oil took a dive. it has not shown up. walmart had zero sales growth. olivia: that's true.

cory: the results were not strong. consumers have more in their pocket and it may be staying there. bruce: that's not necessarily a bad thing. the consumer doesn't have to leverage everything to help the economy. the consumer is in a more cautious motive. they are increasing their savings and that is bullish. it represents future consumption. a lot of economists will disagree with that. the only way you build a sustainable economy is in you encourage savings and investment. olivia: what you telling clients? is this a time to hang out in cash? bruce: it's a time to be cautious. we have not had a correction in four years. it's normal to have a 10% correction any given year. we are experiencing nothing out of the ordinary.

it feels that way. we don't think the economy is going to slip into recession. we don't think interest rates are in place that will ratchet ly.significant interest rates are near zero. there is not a lot of competition outside of socks. for now, we are cautious. we are not pessimistic. what do you see in terms of spending by those companies? been: capital spending has problematic over the last several years. it's led to problems in terms of her activity. intolt that as 2015 moved 2000 gain, we thought capital spending would improve. we think that will be likely.

is joining us from florida. thank you very much. come, the heado of global commodities at bank of america will join us. he is one of the top forecasters. we will get his take on this oil palm it. oil is down 30%.

cory: they are known as the fab five. they all tumbled yesterday. $49 billionl fallen in market value. paul sweeney was telling us something. paul: i was talking to a client of mine. he handles a hedge fund.

he said to dump netflix. cory: that was the biggest the kleiner in the s&p. we have not had a lot of market breadth. a few stocks of made it look like everybody was doing fine. these five own stocks. olivia: netflix has doubled. paul: technology is one of the areas where you really could find organic topline growth. they were getting a lot of investor attention. namesr it's the internet or some the cool sexy names like netflix, yesterday they got caught up in it as well. olivia: it seems curious that these growth stocks got caught in the crosshairs of a selloff. this was triggered by concerns of a slowdown in china. be a catalystt

for next flicks -- netflix westmark --? head held incks there. it is not just china. it's currencies and oil that came together yesterday. there was a very high-volume take yesterday. it held in their be well. they do have decent topline stories. when you think about the trends in the internet, those things would perform well, even in the beginning of a week market. yesterday, everything got caught up in it. cory: we talk about topline. in the bear market we talk about bottom line. we are talking about netflix and salesforce here it we will see what happy need -- happens today. olivia: they are growing their

top line. cory: amazon is another one. paul: amazon sacrifices often ability or topline growth. where can margins be in a market where you might not have top lines? cory: i wonder if those businesses could still work if they don't have that? you say that amazon a sacrifices profitability. if they raise prices, people won't shop there. paul: netflix is a great example. grow our let us subscribers and we will pay more or content. subscriber growth in revenue. back, it takesll a step back in the entire structure comes in to play for investors. we will focus on that more. olivia: thank you so much.

i learned something. that's interesting. i appreciate that. cory: no one needs and analyst enable market and no one listens to an analyst in a bear market. olivia: we need to have you in new york more often. don't go away. we are 15 minutes away from the opening. stay tuned. a man who knows what he's talking about will join us from bank of america. thinks tell us if he oil will the below $40. ♪

olivia: oil is resuming its slide today. this amid signs that the global supply glut that drove prices down will be prolonged, pushing oil lower. our next guest lowered his targets to $50 a barrel. why, he is head of global commodities and or evidence at bank of america. hitting 45? proposing: we've been a there is outlook. targeting 55ally and 50. we brought down our numbers a little bit. we are looking for a floor. we are still below earnings. we see the gasoline market and

the diesel market stabilizing. we areat a point where trading right now. the market does not want oil. it's not summer or winter. the market is weak area --. is this the floor? francisco:: that depends on happens to the emerging markets. seen a meaningful move in currencies. this is on the back of the chinese growth. it's hard to say. i would say that over the next three or four weeks, we should find the floor. phasel be in a rebound for the rest of the year into winter. in the next few weeks, that would be the right time to start expecting ait and

rally heading into the year-end. that is our expectation. cory: what does that mean for equities? have a huge selloff across the and the companies. exxon and chevron it, they are taking it on the chin. francisco:: the equities are in a bad shape. they've got a lot of leverage. there is a lot of that going on. the: i'm not talking about stocks, even the majors. problemo:: they face a that they have more expenditures than it revenues. thatwas one of the majors put it out on their earnings announcement. said thesechart that are our earnings and expenditures and there is a big gap between both. something has to give. we have seen them cut cap and growth projections.

they are potentially cutting dividends. that is where they are getting ahead. people want to know how they will maintain those yields that the havoc the moment. olivia: there is a definite of resin new -- revenue. he was saying the same thing yesterday. your analysis of the currency much do youl, how think is because of a stronger dollar? francisco: i think about 25% to be traced back. oil aroundlined in 50 -- $50 or so. i would say 25% that is oil related. the rest is related to supply and demand conditions. that has been our estimate. i think you could make a case for the run up about 25% was

related to dollar weakness. i think the reversal of that is about 25% as well. cory: i've been thinking a lot about the depletion rate of shale drilling and what that may mean for the long-term production. because theynotion have these great places putting off so much more oil we did not ago, with 10 years those rapid rates, could we be overestimating what we are capable of producing 10 or 20 years without? francisco: it's possible. it's hard to look at the future for a market like oil which adjusts every week. beexpect production to meaningful. we are penciling in a decline of 850,000 barrels per day.

prices have lowered in the past month and a half. we could see that pattern become even more pronounced. 1985, go back to production was in a rebound before the saudi's all the plug on the oil price. we saw a steep decline. i think it depends on where oil settles and if it rebounds. cost tell you the structure has been coming down. nobody makes any money at $40 a barrel. i don't see any reinvestment. running into a heartbreak. we appreciate your time. we will be right back. ♪ the only way to get better is to challenge yourself,

and that's what we're doing at xfinity. we are challenging ourselves to improve every aspect of your experience. and this includes our commitment to being on time. every time. that's why if we're ever late for an appointment, we'll credit your account $20.

it's our promise to you. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. ♪ ♪ ♪ get excited for the 1989 world tour with exclusive behind the scenes footage, all of taylor swift's music videos, interviews, and more. xfinity is the destination for all things taylor swift. cory: we are just a few minutes from the opening bell. we have three things to be looking at today. olivia: come on.

here right now. what do you got? >> we are starting off with china pmi. it is worse since the financial crisis. it seemed like for a little bit that china, everything seems to be going wrong. the stock market is back down to that ernie 500 area. they had a devaluation. it's a mess. not good. nothing is looking good. it's the lowest since 2009. >> this was well below 50. it is worse than estimates. olivia: there are a lot of inflation and -- indicators. it's basically saying this is the slower growth we expected. cory: are we seeing this across asia and other emerging markets weston mark >> absolutely.

emerging markets were already slowing. it's going to slow even more. the currencies were selling off the growth in china would slow. it's bad news. gb pe numbersese -- gdp numbers were fake to begin with rested mark -- question mark --? olivia: he looks at the power numbers that show growth. number two. countryt is a another that's a mess. it's highly indebted. it's not paying its workers in july. it's another ugly story. they have a corruption scandal. cory: not paying people will slow it down even more. debt.y have all this

the thing with the municipalities is they can't have a debt market. they rely on the government for money. 1997 when back to brazil was in crisis and they made a rule that you can't borrow abroad. it puts enormous pressure on them. they don't have the cash flow to pay their public servants. in july, they went unpaid. it's chaos. olivia: greece is the opposite. they were borrowing money from municipal coffers. are people talking about a default? they defaulted on the federal government and its spread. you have slowing growth throughout the region, throughout brazil. they are supposed to have

recession. it is the longest recession in brazil since 1931. olivia: that is crazy. >> all ugliness today. cutting outlook on weakness in agriculture. remember when agriculture was can't miss? olivia: oh yeah. >> they just keep going down the tubes. we know the weakness and agricultural commodity prices this year. olivia: these are big double-digit declines. i looked up at surveillance and saw sales down 24%? >> when you have commodities truly crashing, energy and .griculture cory: julie hyman is keeping an

eye on it for us. julie: let's take a look at the markets. i am setting up for the worst week since late january. today.other 123 points i will give you a measure of when we have seen another four-day selloff is bad. is getting the worst of it. what is so interesting is that it is now the u.s. markets playing catch-up in a way. take a look at the bloomberg terminal. we have seen this selloff everywhere beside the u.s. market. here is the s&p 500, which is been hanging out around the unchanged level until these past several days.

this accounts for the percentage differences in the various and these. -- indices. more of the to see selling. i did see one over from raymond nots where they said you do tend to see selling peak on a friday. i want to bring a couple quick movers to you. they were lower in the free -market.- pre they are higher, all right. the company numbers missed estimates. this is ahead of their split into a more consumer-facing company and a business-facing

company. i'm sure corey is going to be looking into this. salesforce.com. this is trading higher. earnings are relatively strong. the sales forecast was raised for 2016. they have been introducing new products to offset slowing growth at the core customer relationship management business. it is not doing very well at all. they are going to sell three units, including quicken. quickbooks is its best-known product. olivia: that looks a little bit more like we -- what we are seeing in the markets generally. this is the worst week for emerging-market stocks in two years.

the dow is down more than 300 points of the close and it looks like the emerging markets index is heading for its biggest weekly loss since 2013. , ay: let's bring in scott senior global equity strategist. missouri,is in actually. the cardinals just killed my san francisco giants on a little dredge. >> we have choked a little bit. cory: i'm hoping for the same. i'm sorry to tell you. i'm sorry for anyone who was long on these markets. does this mean something? we had seen a lot of noise. we are a little bit past the noise. it is a little bit of a nasty open. you have to put this in perspective. we are only down 5% from the record high.

we have not had a 10% pullback in more than three years. coryolivia: we might be only 5%f from the dow record, but if you look at the selloff globally, you are the global equities strategist. kong,es in hong indonesia, and taiwan entering bear market. the market in china approaching 3500. is this not, perhaps, a signal of further selling to come? >> a lot of fear out there, olivia. you could easily see more downside here. the big topic is global growth. when you look at some of the major developed economies, we are going to do better in the states. the eurozone is going to do better. japan is going to do better. china is dicey. the emerging world is pretty

dicey. i had a conversation this morning with our international strategists. they feel pretty good about our 6% -- 6.8% gdp for china. cory: really? >> we are seeing some panic selling. 8%, 10% pullback, that is a buying opportunity. the: you still stick with china number? closing, i would think that this would be a time to reevaluate such a bullish position. >> we are doing that all the time. the chinese government are not going to sit here and do nothing . they have a lot of firepower and a lot of leverage to pull. we have not even seen that really start to pull. we are going to see some downside.

i don't think we are going to see the follow-through. technology, consumer discretionary, industrials -- those are the sectors we want our clients stepping into because our outlook is positive over the next 12-18 months? olivia: are you telling them to buy now? for hang out a little bit longer? >> i can tell you right now, i will not be able to tell you where the bottom in this is going to be. we want our clients legging in on the downside. retail investors have not participated in the six-year rally we have had and it is really difficult for them to step ahead. we want them legging in on the way down.

we want them legging in on the way down. there are reasons to be optimistic, not wildly optimistic, but certainly optimistic. speaking of heading south, the s&p is heading toward 2000. the year-end target is toward 2200. see -- first will good gdpe will see revision. we will see better earnings growth for the rest of the year. we will see better news out of europe, better news out of japan. at some point in the second half, you are going to start to see some better things out of the emerging world.

we are in a modest growth, modest inflation environment. that train still has more room to run. valuations are pretty much in line with the long-term, historical median. we need earnings growth to push us forward from here toward that 2200, which is the midpoint of our target range. it is not going to be one catalyst. cory: do you feel like you need to have your investors focusing more on domestic? you have the slowing growth in china. you have the world's largest economy in brazil declining. so many big u.s. companies are focused internationally area do you need to circle the wagons in the u.s.? when you look at the performance over the next 12

months, you will see large-cap u.s. stocks do best, followed by developed international, followed by emerging. i think small and mid-cap's are going to underperform large-cap u.s. stocks. for us, we don't want our clients just focusing on those very domestically oriented becausees -- companies we think the international situation is going to improve. large-cap is the way we are leaning and that is the way we have been leaning and i don't think we are going to change the view anytime soon. cory: thank you very much. we appreciated. are the markets still selling off? a little bit of a recovery, but down 0.9%. olivia: the dow, we are hanging out down 150 points, but it is a global selloff. european benchmarks headed for a correction. away.go "market makers" will be right back. ♪

the global selloff picking up momentum. the dow down 175 points. we are going to pause to turn to politics. his auditis beating the fed drum a little louder. article, he writes that the fed is called the fourth branch of government, even though the constitution created only three branches. is complicit in this concentration of power and should take responsibility for helping the fed find constructive limits. does senator paul have a case? let's ask michael mckee. this is completely unrealistic, correct? the idea of bashing the

a lot of play on the campaign trail. some of it makes sense, some of it does not. he starts off by asking whether the fed's payments to banks are reasonable and necessary. congress authorized it in 2008. he could start with congress on the question of whether it should be done. reasonable and necessary gets at the idea of these excess reserves designed to take money out of the economy so we don't get too much in patient. callis a monetary policy that they are probably not qualified to answer. cory: do you think this is a principled call or a saber rattling to get votes in iowa? mike: it is probably a little bit of both.

originally, they were calling for audit the fed. the fed is audited. since the balance sheet has gone up so far, we are now around $4 trillion and the calls have gotten louder. the ideas that the fed is manipulating the economy is getting more entrenched. people are looking for somebody to blame. rand paul is saying, you can look at the fed to blame. the fed is pretty much the only game in town. olivia: that is why everybody is worried that if we were to have another crisis, there would be no more levers to pull because rates are already at record lows. can we talk about this selloff for just a second? in the broader macro picture, we are all bracing for tightening,

trying to figure out whether it is going to be september or december. to what extent do you think that the looming rate hike is the catalyst for some of the selling in the equity markets? mike: it plays into it. , itou raise interest rates attracts more money into the united states. it attracts hot money out of the emerging markets. exporters.m are oil the price of oil has fallen significantly. a lot of them do a lot of trade with china and china has revalued its currency. cory: it is also directional. mike: exactly. there is a momentum trade going on. we were talking from mickey leavy earlier. what markets do is panic first and think later. that is what we are seeing at the moment. scott was just saying that things will settle out in a couple of months. cory: ready, fire, aim. mike: exactly. the data from what is happening

on will not be reflected september 17. the fed will not be able to say, china is hurting the u.s. , they willoil is only be able to theorize. cory: they do the same in the minutes. they were waiting to see what the reaction would be in the chinese market. we have certainly seen that since those minutes. mike: the dollar get stronger, which it did up until about a week ago. the dollar is being diffused around the world. olivia: treasury yields are down. mike: if the dollar does get stronger, it pushes inflation yields lower around the world area it is hard to say what it is going to be like. olivia: thank you so much for your time. the dow is down 170 points. bring you aned to update. the selling is showing no sign of abating as we get into the early hours of the session.

it looks to be a broad-based selloff. take a look at my bloomberg terminal. the sectors that are in the s&p 500, they are pretty much all red. discretionary that is leading the decline, along with other cyclical groups , various other sectors that are most vulnerable to the economy. all of the staples are on there. i want to look at where we are on this correction track. how close are we to a 10% pullback? that is what we have not seen in about four years. we are down from 5.6% from the highs of the year. we are a little more than halfway to a correction if that is what people are looking for. cory: it is fast, though. julie: it has been very rapid. cory: it is time to reveal the winner of our yearbook game. who is that dude? olivia: i didn't guess it. cory got it right. it is t boone pickens!

to be honest, a lot of people tweeted in and got this right. a great week with you, olivia sterns. olivia: yes. bad week for most people on the , but great for me. we are going to cover this market selloff all day long. cory: i will be back next week. i'm going to bloomberg radio right now. olivia: don't go away, much more to come on the "bloomberg market day." julie will continue breaking selloff. global currencies, commodities, equities are all headed south. ♪

♪ >> we've got a market selloff going on. we can't forget about etf

friday, folks. let's talk about housing. the housing market is on fire. this is selling -- sending home-building etf's to their highest values in years. i would imagine the highest level in years is probably a couple days ago. now we are seeing a little bit of a pullback with the rest of the market. >> sure. we have seen about a 2% pullback. but etf's are up about 13% this year. this is an interesting industry. it has a lot of assets. there were two main ones. the assets are split. on difference really depends what your definition of homebuilder is. on one side, you have a conservative definition, which is the us home shares construction etf. play, ase of a pure

they say. this one is up 14% this year. it is a little more volatile because it is narrow. this one is taking $600 million. on the other side of the coin is xhb. it is a sypder etf. this one is much more liberal and how they view homebuilders. is purehe etf homebuilders. julie: isn't it bathroom fixtures and pretty diverse? >> they have la-z-boy, whirlpool, bed bath & beyond. they are taking the more liberal home building and building a nest, so to speak. xhb is going to be much more tied to the market. it is correlated to the s&p 500. with much more correlated a little less volatility. if you looked at the last 10 years, if you took the difference between the returns every year for the past 10

years, they averaging 9% difference. julie: wow. >> similar sounding names, but wildly different performance over the years. julie: interesting. we don't have much time left, but quickly, when you are looking at these, which one performs better in which environment? >> if the market is on fire like 2013, xhb is going to get swept away. julie: happy friday to you and to all of you. we will be right back with more "bloomberg market day." ♪

olivia: good morning, everybody. matt: welcome to the bloomberg market day. olivia: markets are dropping around the world.

with little relief in sight. the s&p sinks another 1% so far this morning. greece is set for a reckoning, with its own prime minister stepping down. could this have an impact on the country's bailout reforms? olivia: emerging markets and commodities could be in the beginning of a vicious tailspin. jeff curry ways in on just how bad the commodity rout will get. ♪ olivia: good morning, everybody. welcome to the bloomberg market day. i'm olivia sterns. matt: i'm matt miller. want to get to a market check. we are headed for the worst week since may 2012. the s