"squawk box." joe and becky aren't having a cruel summer. they are enjoying some good time off today. i'm joined on the set by brian sullivan and mandy drury of "street signs" fame. a baste takeover here. hopefully we still maintain a majority position. also three guest coast hosts with us. we've got a lot to discuss with all of them. but before we talk about a little business news we have the buzz story of the morning. if you didn't see it last night, check it out. nick wallenda is successfully completing a tightrope walk across the grand canyon last night. took him 22 minutes and 54 seconds to walk the 1400-foot wire. about 13 minutes in, though, he had to stop and sit on the wire to steady himself. a scary moment there. we're sure to talk more about the daredevil. he claims the thing he wants to do next is go between the

chrysler building and empire state building. i don't know about that one. but before we continue to talk about that and other news, let's get the round-up of today's business stories from mandy. >> unbelievable, right? he didn't even have a harness. i'm sure there's market metaphors in there somewhere. let's get you covered on top stories this morning. china's cash crunch appears to be easing just a bit today after the central bank moved to prevent the money market from seizing up. however, bank stocks still took a real big beating after the people's bank of china said banks need to do a better job of managing their cash and lending. goldman sachs became the latest bank to downgrade china's economic growth. the firm says tighter financial conditions and reforms are a down side risk for the world's second largest economy. more from our colleague eunice yun in beijing in just a moment's time. but in the meantime, the bank for international settlement says central banks should not allow fears of disrupting

markets to delay the timely withdrawal of cheap money. in its annual report the bis warns the exit will be more challenging, the longer expansive policy stays. with the bank for international settlements chief economist will be joining us to explain all of that at 7:40 eastern. so we'll get more on that later on. >> thank you very much. meantime, here's how things look for your global markets. by the way, you may want to roll over and go back to sleep because it is not pleasant on a monday morning. stock futures are down. you can see the s&p 500, dow jones and nasdaq all lower. dow off more than 100 because of asia. andrew mentioned it at the top. the chinese shenzhen a shares down about 5.3%. they had been down more than 6%. the nikkei had been higher. is now lower. it is not as bad in europe but still red across the board with the ftse, cac and dax down. same thing with oil. things slow down you use less of

something. brent crude off more than 1%. the ten-year note may be the single most important data point in the markets right now. the treasury note is down which means the yield is up. i checked the yield a moment ago. 2.6%. that's the highest level since august 2011. that impacts a lot. not the least of which are mortgage rates. let's check the currency markets, too. everybody is watching dollar/yen. 97.82. n finally on gold, let's continue our ugliness of the morning round-up. comex gold down and my ugliness comment by no means a reflection on this esteemed panel. >> just gold. just gold. >> usually something is up, right? you see bonds up. >> stocks are down. >> everything is down. >> it's kind of like diversification 101. if bonds are up, stocks should go down, but it seems everything is going down. all the asset classes are tanking at the same time. >> that's a genius insight. >> how often do we hear, you know, diversified portfolio is

the most important thing you can have. guess what? it's not working right now which is going to be a question later on for some of our guests. let's get to europe. early trading there. louisa bojesen is standing by. a messy week last week for the global markets, for europe as well. what's happening today so far? i can see a lot of red behind you. >> a lot. super messy week last week. just on your point, though, mandy, before i show you what's taking place in europe with the all asset classes are falling. i just spoke to someone who was saying that's precisely why you might want to think about going long the vix this week if you think we'll continue to see that trend escalating. we're seeing in europe quite a bit of red on your screens, yes. we saw a pretty poor week last week if you are long the market. that's a lot of selling taking place. this morning you'd see an accelerated pace of selling taking place. just within the first hour and a half of the markets having been open, some were saying it was down to the ifo print of the german business confidence

index, although current conditions are a little weaker than anticipated but the expectations going forward were still stronger and net/net a pretty good reading that came out of germany. but still a lot of cautiousness on top of that also we had the efsf, the financial stability mechanism here in europe indicating that they are extending their loan maturities for portugal and ireland by up to seven years. that could be one of the reasons why we saw another step lower. or it could simply be the jitters heading into the week. eight fed speakers speaking this week. that's taking place. and what we're seeing out of china as well. ftse off by 0.8%. the cac 40 off almost 1.5%. the xetra dax off almost 1%. with regards to the bond markets, we're seeing yields pushing higher across the board. a guest of mine just said this morning as well that the ten-year yield stateside, the ten-year treasury really is the tail that's wagging the dog this

week. and that's the one to really look out for. here in germany we're seeing the yield of 1.8%, almost 1.79%, pushing lower on the bund mark threat. you have the ten-year spanish paper and the ten-year greek paper off as well. with regards to some of the stock specifics. the telecom very much in focus. news that vodafone have upped their offer for kabel deutchland. it's an all-cash bid. we're looking at kabel deutchland higher by 1.7% and vodafone off by just a bit. >> thanks, louisa. we'll see you soon. joining us now to talk about -- to walk the tightrope given the tightrope before. rebecca patterson, ceo of patterson trust. bob and mike santoli, the senior columnist at yahoo! finance. rebecca, help us walk the tightrope. if you are walking up this morning. i can't tell you how many i saw

over the weekend who said, should i get out? should i get in? what should i do? i feel like everyone is trying to -- it's one of those moments where you are figuring out, do i call the broker whenever they are getting in this morning. you do, what do you tell them? >> if you call the broker you ask and to mandy's point earlier, make sure you're diversified. right now diversification feels like cash. stocks are going down and bonds are going down. that's something that doesn't usually happen frequently or for a sustained period. i don't think this trend is going to last very long but for the moment, one thing that's outperforming is the dollar. and it's cash. but you don't want to be in cash long term. it's the bearish bet you can have. is this a great opportunity? do wenk some kind of overreaction? is this what this is or is this the beginning of the end? i think we're going to have -- this will resolve and resolve in a positive way. right now two huge transitions going on. china transitioning. the market is not digesting that

fully yet. and a transition to a higher interest rate regime. we haven't had that in 30 years. no wonder we have a period of volatility. >> and you are confident that china will be able to manage this in a soft fashion because they have a credit crisis every five to ten years and this has the potential to be a big one. china has a lot of tools in its toolbox. it's not a democracy. that's the good news. the bad news is this is a live experiment. what china is trying do it hasn't done before. >> when you look at where the futures are right now. everything that happened last week, is that a function of china or of ben bernanke? >> i think both. >> i don't think it's close to being 50/50. i think it's like 90/10 because the -- >> these things always seem like they are compound problems. when there's one expected thing that happens, the market absorbs it. when the market reacts to it it seems like they're all coming at us at once. we don't know to what degree we owe central banks all this credit or blame for where the

markets are. as we have ebb tide maybe on the way, the question is how much do we have to give back. i don't necessarily think it's one or the other. >> can i remind everybody that the last four summers we've swooned 5% in stocks. more than 10% once. there was no ben bernanke then. we didn't think qe was going to end the last four years and yet the market fell 5% to 10%. we were panicking -- >> your suggestion -- >> that's why this is qe3. it ended twice. >> qe1, qe2, they didn't stop. >> qe is going to have to stop some time and they have to get prepared for this. the problem is that the fed sending qe at a time that seems -- you go to these fomc statements these last week and i think that the -- i think the dissent is key. this isn't jim bullard saying policy needs to be easier. this is a statement about fed credibility. we go from one communication crisis to the next from the fed.

why is that? it's not because the fed can't communicate. it's because the fed's policy is basically screwed up. the fed now has missing its inflation target by a lot. they want to end qe. doesn't make any sense. if a market is reacting because there's chaos out there. >> markets are reacting chaotically because we're talking about what language the federal reserve is using as to where stock prices go. stock prices are nothing more than a measure of future earnings. that's it. the only thing we need to frame the fed discussion in is whether or not what the fed is doing is going to damage the economy, impact consumer spending and lower corporate earnings and profits. that's it. >> no, we need also to discuss -- >> that's really buying equities. >> part of the issue is that the market used to be pricing in the idea that interest rates were going to -- forget about the $85 billion. the interest rates were going to be -- would finally go up in 2015. now they're going up at least the way the market is suspecting, at the end of 2014. >> they are going up now. >> and that's a whole other piece. >> has ben bernanke lost

control? it's hard to imagine he expected or wanted rates to go up as high and as fast as they did last week. >> i think the markets are questioning whether he's ceding some kind of control or they can't actually control those things we care most about. >> the fed hasn't lost control. it doesn't have control. the fed controls the funds rate, not the long end. it never controlled the long end. this is the problem. they act like they can control everything. all they control is this one little thing. >> i don't want to debate what they should do. what should we be doing as a result of what is happening. >> i think, look if you own stocks you want to focus on domestically oriented ous stocks that are going to benefit from lower commodity prices and benefit from a stronger dollar. >> do you hang out and do nothing on the assumption that you think it's fine? do you double down because you think this is a great little opportunity? or do you think it's going to get worse? >> i don't know if anybody knows the the answers to that. we've never lived through a

china transition or the end of qe. we've never seen this before. historical precedence, nice have but not that relevant today. >> it's called an experiment. >> i think you keep some very short duration bonds in a portfolio and some maybe even a little cash but stay in some equities because this can resolve positively. we're all forgetting that bernanke caveat labig time last week. >> just very quickly considering you are the currency queen, how do you play the stronger u.s. dollar and to which currency? >> i think you have lots of choices right now. but i do think the dollar is going to keep benefiting against the euro over the next year. we'll not see as much reserve diversification pushed into the euro and the ecb is biassed to ease while the fed is exiting. >> we're going to continue the conversation. we're going to beijing to have the china conversation with our morning's top global headline. continuing fears of this credit crunch in china. eunice joins us from beijing

with what's going on over there. >> hey, guys. over here we really saw a -- the central bank basically finally issued a statement and said that the liquidity levels are looking reasonable. they also had said that commercial banks should be doing their party in order to try to stabilize the market. so these comments really led people to believe that the government is still taking its very tough stance. very tough love stance when it comes to economic reforms and also not only that but with the way it views the financial sector. so overall, people, that's the -- the main takeaway people have. but the question that people are wondering is just how far the authorities are going to be willing to let things go before they can potentially risk a systemic threat. >> eunice, thank you for that. we will see you soon. >> before we go to break, we have a deal on this monday morning. not a -- >> good enough.

we'll take it. >> don't say little one on television. everything is the most gigantic -- >> did you just rain on his m&a parade. >> go for it. >> it's a gigantic earth-shattering deal. if you own vanguard health it's a big deal. stock at 12.87. it's for 21 bucks. that's a very nice premium. >> headline price? >> $1.2 billion. so not a big deal overall. if you own vanguard health systems, vhs, probably need a new ticker given this day and age. not a bad deal there. >> health care also, by the way, one of the picks in the cnbc stocks draft, i do believe. >> tenet health care? >> been watching very carefully. >> was that on your team? >> it was in my team. >> and we are whipping the other teams that shall not be named. >> they went long amd, which is -- had this huge run. and look at that pop in vanguard

health systems. maybe the acquirer shares will go down. coming up, a dollar, yen or euro for your thoughts. we'll talk more about currencies next. first, nothing for breakfast quite like a twinkie. you'll be able to get your fix again soon. the new owners plan to have them back on the shelves july 15th. the sweetest comeback in the history of ever. aw. [ male announcer ] we've been conditioned to accept less and less in the name of style and sophistication. but to us, less isn't more. more is more.

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welcome back to "squawk box." let's take a look at the u.s. equity futures to get an indication how we might open today. at this stage, the implied open is not looking good. the dow looks as if, according to the futures right now and they can change, and do change, we look like we'll have a triple-digit loss. elsewhere, gasoline prices dipping slightly during the past two weeks. the lundberg survey says the average cost of a gallon of regular unleaded it now $3.59. that's down about 4 cents from two weeks prior but it is still about 12 cents more than the same time a year ago. anyway, let's get the national forecast from the weather channel's alex wallace and find out what's happening on that front. alex? >> good morning to you. tracking some storms this early morning. here in the midwest, there's chicago. west of you you can see clusters of storms in place. heavy rain and a lot of lightning associated with this

activity. so that could make the morning commute a little tougher as that begins to slide through the area. the smeft where we'll be focusing on the threat for severe storms throughout the day. stretching from the northern rockies back through the plains and the rest of the midwest where we have that red area. that's the zone of severe threat. damaging winds and hail. that will be the main risk but can't rule out an isolated tornado or two. then the heat. and right now new york city just issued heat advisory. not just for today but for tomorrow. we're talking temperatures that will be in the 90s, plus humid which will make it feel hotter throughout for us. not just new york city. expect to see maybe even a few more advisories for east coast cities. this big area of high pressure off the coast around that high. the flow coming out of the south that's helping to bring in the warm and humid air mass in place. that's what we'll deal with for the day. 90s from boston toward d.c. and you combine that humidity which will make it feel closer to the upper 90s to nearly 100

out there for the day. we keep that going into tomorrow as well. so feeling like summer here for us this first full week of summer. certainly feels like it in the northeast. >> red on the screen for stocks. red on the screen for heat. a red kind of morning. let's get to the currency markets. joe is the chief market strategist at worldwide markets. welcome. your surprised by what the yen has done? >> not particularly. if you look over the past six months, the central banks have had a great run on job owning the markets. the ecb did it with the bonds and now the yen, the central bank of japan and the government has done it very well. i'm not really surprised. >> whenio look at the yen we ignored it for a couple of years. has the yen become the most important currency in the world? >> well, without being facetious to the japanese, it absolutely is. if they don't get the yen to a level that will support and allow their exporters to get some sort of traction -- >> every guest we've had on the

show, they say the yen, the yen, the yen and they are talking about u.s. corporate earnings. >> i don't think it's all that important to the u.s. the u.s. economy is not that export dominated the way the japanese is. for the japanese to get traction they need to move that yen and they understand that. whether that's going to increase and benefit their entire economy is another question entirely. but it's a place they have to start so they know they'll do that. right now the problem i think they are having is the dollar looks to get stronger for reasons that have nothing to do with japan and the japanese are going to have to prove their own determination to move the yen. so far they've only talked. the markets responded. we know how that works. they'll have to do something to make sure the markets understand they believe this and they'll back it up. they've not had a good record with that. >> is just sitting below 98 the dollar/yen levels. what are we looking at? >> i think in the short term just going below 100 and back to 95 we'll not get a lot of movement unless the dollar stras

substantially. that's the best ally the japanese have is the fed because the fed is -- has made -- the fed also hasn't done anything yet. they are just talking. but when they do move, and i think they will, then they have a good ally. i think they'd like it around 105. between 105 and 110. it will be very tough to get it there just on japanese intervention and talking to themselves. they need help. >> do you think that the boj meeting on july 11th, they increased purchases of etfs. that's one thing that's interesting in japan. the central banks in the stock market as well as the bond market. if they do that is that enough maybe to give the world a little deep breath? >> a little bit. we'd look at them and expect in the currency market to come in the currency markets. that's not had a good history in japan. it's difficult for a central bank once they get down to the market making them prove they'll do something rather than this talking that they need help from other central banks. so i think they will take sort of the cue from the fed that they are going to look into

other areas. as you say, to convince the market what they really want. >> i'm going to apologize in advance for a little home bias. but i want to talk about the australian dollar. i think it's really interesting as a proxy for what -- >> it's also going to be a great wallpaper soon. >> or toilet paper, even. >> that's now. >> that's now. so it's sitting, i think, at 91 cents. a 33-month low. how much lower does it go before it becomes a screaming buy? >> you can go down to 85. to the 80. 23 you look at the historical rates of the aussie you're not anywhere out of the ordinary. what was out of the ordinary was its huge rise. >> china shifted it seismically into a new category, right? >> absolutely. but it was there because it's a commodity exporter. >> which australia -- >> if you have a mortgage in australian dollars but get paid in u.s. dollars -- >> in theory. hypothetically. >> if your paid u.s. dollars, you are banking it. >> do you know anyone like that?

>> i still have a place in sydney and, of course, a hefty mortgage as well. so i'm pleased. every ticket goes down. >> you should be talking down the aussie dollar. >> instead of paying me to talk it down for you. >> australia, you have to be very careful because if china is comfortable with transitioning to a slower growth. best terms of trade they ever had in 100 years and that allowed the central bank to be comfortable with an australian dollar over parody to the u.s. dollar. that's disappearing. australia might get comfortable on the old regime where fair value for aussie dollar is closer to 60 or 70 secents. >> what the rupee. >> yes, because this is our em problem. you have countries with big account deficits and small liquidity windows. india, brazil, south africa, turkey. these are the em countries you want to stay away from right now.

>> they are all frantically, all these various central banks, russia, brazil, frantically trying to support their currencies from this incredible volatilit volatility. it's going to complicate their ability to maneuver on rates. >> the market is starting to price in they'll raise rates. have to raise rates to protect their currency. >> brazil is the country of the future. always has been. always will be. >> exactly. >> order and progress. isn't their motto? >> you see the front page of "the new york times" and how much he's lost? >> $7 billion. >> more? >> i believe so. >> batista was the richest man in brazil. he still may be. >> from the peak, mr. batista at $35.5 billion. how much does he have today? >> less than that? >> $4.8 billion. >> what? >> he went from $35 billion to $4 billion? >> yeah. >> 35 to 5. >> how is he eating? >> to your point --

>> with a "b." >> i think this is a good reminder how active management can work. you look at a market like brazil. it's just fallen off a cliff but then look at certain airline companies in brazil. the stocks are up huge over the last 12 months because they're global, based in brazil but nothing do with brazil. so there are opportunities out there. >> that's an excellent point. >> thanks, everybody. joe, thank you. coming up, we're going to get the latest word on edward snowden, the fugitive former u.s. spy agency contractor said to be seeking asylum now in ecuador. taking a route through russia. the u.s. state department issuing a warning to other countries about noden snowden's travel. monsters beating zombies and superman at the box office. "monsters university" debuting at the top spot.

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♪ good morning. welcome back to "squawk box."

i'm andrew ross sorkin. i'm joined by mandy drury and brian sullivan. we're calling it a little baste street signs takeover. i am told we still have majority position but that we're giving out minori itity shares. >> two-thirds is a quorum. >> i heard about that. >> all in favor of renaming the show "street signs morning edition" raise your hand. >> come on, guests, do what's best. >> oh, you've got the voting shares. we're the b class. >> thank you. nk that's how it comes out. i see how you roll, sorkin. >> thank you. three guest hosts, michael santoli, bob bruska and rebecca. let's talk about some of the headlines. there is heavy security this morning in moscow's airport today. national security agency leaker edward snowden, he's there. there is speculation he's

planning to fly to havana en route to ecuador. the government of ecuador has confirmed it is considering an asylum application for snowden. he faces american espionage charges now after he admitted to revealing classified documents. i got to say, this is -- i feel like, a, we've screwed this up to even let him get to russia. b, clearly the chinese hate us to even let him out of the country. that says something. russia hated us and we knew that beforehand but that's sort of -- and now, i don't know. and my second piece of this. i would arrest him and now i'd almost arrest glen greenwald, the journalist who seems to be out there, he wants to help him get to oak dor. it's almost like a whole -- >> and then the diplomatic issue as well. john kerry reportedly wanting both china and russia of severe consequences if indeed it turns out that they knew in advance of his arrival. obviously, the russian government is saying we didn't know he was going to be arri arriving. >> so what do we do?

>> this is cold war-esque. this is shades of the cold war. the plane landed in moscow from hong kong. did not go to the terminal. stopped on the tarmac. they did the stare thing where apparently snowden was whisked away in two russian government cars with tinted windows. so they are actively helping him now. right? the u.s. for some reason did not issue what's called a red alert which basically would signal a triggering at any airport or train station if the guy tried to use his passport. why didn't we issue that? there's a lot of different intrigue going on here. he may end up in cuba, not ecuador. >> when the news stories first started out, i don't want to say i thought he was a whistleblower. i wasn't totally unhappy about all of this. the farther it's just -- what was the article? jeff toobin called him a narcissist? i think that's what this is. when you go to another country the whole thing becomes -- >> he's basically betrayed his country. >> the u.s. government, are you

going to shoot down his plane in the air? going to go find him in ecuador at some point? five years from -- >> valuable to the russians and chinese to the extent we make a big deal out of it. that's the thing. >> every article you read says he's carrying four laptops with national security secrets on them. >> now he's in russian government hands. safe and sound with the russian government. >> with gerard depardieu. they can hang out. >> the russian part is almost expected. the hong kong part gets me anxious. >> hong kong probably just wanted him go. >> we told hong kong, hold on toing this guy -- >> we can't tell hong kong what to do. >> and then they let him go. >> even as captain america, i fully admit we cannot tell hong kong what to do. >> hold this other character, then things get more anxious over here. >> because our whole please stop manipulating your currency cry to hong kong has worked so well. >> even if hong kong held on to snowden, there were reports

saying from a legal perspective it could have taken years to extradite him. it wouldn't have been something they could have done quickly. >> i don't know why we didn't have two goons go and get him. >> this is a whole different side of you which i'm really enjoying. send the goons and arrest the journalists. >> ninja-style like kidnapping? >> i wasn't supportive of him, but i was supportive of the idea of transparency but the more the reports came out and the more i realized, a, that some of the stuff he was putting out there a, seemed wrong. the way he presented prism and the reality are two different things and some of the other issues, two totally different things. and then when he says he's doing this as an american patriot and then running to cuba -- >> his motives are under question. >> my sympathy gets a little -- >> to me, my father had top secret clearance in the 70s working for trw, a defense contractor. my dad would go to his grave with these things. and you also wonder why a guy like edward snowden, who was not

well educated, had major discrepancies on his resume, right, was given access to all this information. why aren't we talking more about that? why did this guy have this kind of power? anybody would lie on their resume, what does that say about what they may or may not do in terms of -- >> don't 80% of people supposedly lie on their resume or -- >> that's only in australia. >> we have to get to some other stuff. the idea is we use so many consultants that, frankly, i don't think we have enough control of what -- i don't think we even know enough about who has classified information. >> that's a very good point. we'll be doing more on this later in the show. in the meantime, let's get technical and find out what the markets are telling us. joini ining susjef ining us is .

>> good to see you. >> brian. >> what are the chats telling us? >> good to see you and i was just saying brian. can i move some of this fundamental data, please? >> that is "the new york times," the financial times and "the wall street journal" and you aren't considering that fundamental. >> he's getting the fundamentals out of the way so he can go technical. >> let's get technical. >> thank you for translating for andrew. >> we need a road map. give us a couple. >> a few weeks ago when we were on we featured a trend line and i thought we might revisit it on this morning's show, if someone wants to put it up. you'll see that from november of 2008 on a daily closing basis, the s&p as shown by those arrows and then recently near -- near the exact top in that 1680, 1690

area circled has trouble each and every time it's come up to that trend line. that trend line is now in the upper 1680s. but this is just a graphic showing that this has been a problem. news, no news, whatever news there is, this has been a problem on a supply/demand basis for the market. having said that and having formed a near term top and having had a negative reversal on may 22nd, we now have two key areas to look at for support. on which we'll decide whether the damage near term has infiltrated the intermediate term investment trend. >> you are teasing us. >> so far it has not. >> what is the single most important level on the market technically right now? >> let's go to the second chart and i'll show you, mr. sullivan. >> you're welcome back any time. >> thank you. that circle, friends, shows the large april weekly closing highs

of the s&p 500 in 2000. you'll notice in 2000 and in 2007, after making a new high in the first half of the month, the s&p made new highs in the second half of the month and got hit as well. and that's -- >> and this looks very much like a chart we put up on "street signs" not so long ago. >> 2:00 eastern. >> 2:00 eastern here on cnbc. >> are you taking my charts? >> let's spend the whole segment promoing other stuff. >> that chart shows 1580, 1590 on a weekly closing basis what to watch. on the third chart, on a monthly closing basis, you'll notice that, there we go, you'll notice that unlike the 2000 and 2007 periods where the s&p made new highs in the second half of the year as opposed to the first half, this time of year we took out those two lines.

the monthly closing area to watch, when i guess this friday is the last day of the month -- >> we want to hold the area above on the s&p. we want to hold above 1550. and if we can do that, this bowl is still basically intact because it wasn't like we had tremendous numbers of divergence. we saw a near term problem and now that we're near the levels we want to watch on a weekly close if we finish unchanged or up for the week, to me that's going to be a plus. in the meantime, we're going on the is sumption this is a bold trend with probably one of the more significant near term tops we've witnessed to date which is now approaching 150 days from its major reversal on november 16th and 19th of last year. >> we have been warned. thank you. >> thank you. coming up, fears of a credit crunch in china. comments from the central bank as well today and why the global markets are taking notice. china, folks is a huge deal

today. and if you are just waking up this morning, so is that. equity futures a big deal, too. and not in a good way big deal like andrew ross sorkin. this is a bad deal. the dow indicating a drop of 121. michael santoli quickly noting that's the low of the morning. we are back with more coming up. i want to make things more secure.

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welcome back to "squawk box." we're talking about china and credit fears this morning. gordon chang is the author of

the coming collapse of china and a columnist at forbes. good morning, gordon. >> good morning. >> so you say this is china's lehman moment was what i read. we are really there? that's a scary thought. >> yeah, everyone is saying this is reform. but there's no such thing as an engineered credit crunch. this is crisis management. and the crisis began in the first week of may when the state administration on foreign exchange issued that rule cracking down on fake export invoicing. that triggered $40 billion outflow from the banking system and since then, this month we have seen two failed central government bail auctions. two spikes in interbank rates. each crisis is getting worse than the previous one. so this is crisis management. >> but here's what i don't understand. when i think about china, and sorry to claim -- use the word manipulation, but the view has always been the government is there always. so how could you have -- how can you really have a lehman moment if you believe the whole system is rigged? >> of course in chinese

technokrats, these geniuses in beijing we all look to, of course they can rig the system because they have more control. but they've also got a semi -- only a semiopen, semireformed community which means you have all sorts of things occurring beyond their control. you have all of this enterprises lending money in basically financial engineering to other enterprises. all of this is just showing that there's a lack of control in the part of technocrats because all of these things are happening that shouldn't be. >> the new governments has made one of their priorities to crack down on this. it's still a problem but aren't they finally trying to get it under control? is your view they aren't trying to get it under control or they are going to fail? >> they're going to fail but what they sorry reacting to real incidents in the market. this is not like they've said, we're going to consciously reform by tightening credit. if we thought that they engineered this credit crunch when the central bank is

reckless because of what we have seen in june. and so the real problem here is that they've got an industrial economy that is contracting at the moment. there's no real use for credit but at the same time, increasing 15%, 16% every month and overall credit has gone up 52% this year. so you have all sorts of dislocations when you have money going into unproductive uses. and that's exactly what's occurring right now. this is not so much a liquidity crisis as a debt crisis. it's not so much a debt crisis as one of real problems in the fundamental chinese economy. >> obviously the pboc is going into damage control mode. they are saying there's reasonable liquid nit the financial system. nonetheless, what are the options the pboc has at this stage? >> it doesn't really have very many options because the table has been set a long time ago with these enormous increases in credit. so you have perhaps debt being now perhaps 200% of gdp and the other thing is that people, like

the economic czar, he doesn't have options either. >> when you say no options, what's the end game? full-blown credit crisis? >> a financial collapse in china. >> what will that mean for us here? >> we're going to panic because we don't understand what's going on. remember on april 15th when the national bureau of statistics issued its 1qgdp number? >> 7.7 instead of 8.0. the dow drops 266 points. we had a better understanding of what was going on in the chinese economy we would have shrugged it off because we would have known that's going on. the chinese economy is not growing at 7.7 but 3 and 4. you are down to about 0 when you take out economic production. this has enormous consequences. those consequences will happen and when they happen, we should be prepared. >> it is funny we drop whenever china blinks. i understand why we do. the reality is american companies make almost no money selling into china.

we rely on cheap chinese made goods. china stole mexico's jobs. jobs will be stolen from china as well. i think we overreact to the chinese influence just because there's 1.3 billion people we panic every time something happens. they're not benefitting our economy very much. >> the problem is that china can't have that support-led growth. europe is in too much debt. we're in too much debt. china has to exploit its own market. it's not a strong enough market to make up the average lost. >> 4,000 u.s. dollars a year. that's the average income of china. we often forget that when we talk about the rolexes and -- >> the real ones or fake ones? >> i have a rollex. >> i have a gucci bag with a prada lining. even when i was working at cnbc asia, they were desperately trying to diversify their economy. make it less export. more domestic economy driven. yet how have they -- they have but still very much export dependent.

>> agreed. but there's a gradual shift that's going on. i agree that there's a risk of a failure because you do have the -- always the risk of policy missteps. but i also think of one of my favorite clients who says at the end of the day, humans are not where would the losses of a financial crisis reside, exactly? you are talking about a lehman moment in china t. narrative is they are leading and letting the smaller banks fail, they will draw some kind of a line. >> there will be no winners in any of this. you will have catastrophic failure. it starts with the small banks as you point out, private enterprises will be hurt.

eventually, the state enterprises will be hurt as well. eventually, this rolls right up the chain. >> how many chinese will fail before this end? you have these small guys, they will be hurt. >> those are all gone, basically. >> you look at this. there is no reasonable scenario for them to get out of it. investment-led growth which has propelled the chinese economy isn't doing well. they now get 17 cents of output for every dollar of new credit. used to be 83 cents of output in 2007. >> just to put a point on it, the timing of your lehman moment meaning a lemman moment doesn't happen over a year or months. it happens within 48 hours. >> you are talking somewhere between three weeks from now an six months out. sometime in that time frame

china will fail. you are saying it will be bigger and bigger. >> he has convictions. thank you for coming in this morning. >> thank you. u.s. equity futures shot this morning. in fact, the last time we checked on them, they were down by triple digits. down 131 points. this will change over the past, over the next couple hours. in the meantime with le talk more about the story. then in the next hour the so-called central bank of central banks issuing a very stern warning and wacking its finger to all the worlds monetary policy makers. they have low interest rates and extra liquidity need to end. they will be joining us with all those details at 7:40. stick around. [ male announcer ] the mercedes-benz

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. >> we're approaching the top of the hour. it's time so say good-bye. mike santelli is sticking with us. plus, squawk market master bob dahl will join the conversation. a tough week last week. we got continuing coverage, stick around, we got a lot more coming up. is that we get to create our future. you get to take ownership of the choices you make.

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. >> the second hour of "squawk box" begins right n>> the secon box" begins right now. >> and good monday morning. you want to do it together, one, two, three, good monday morning, everybody. welcome to "squawk box." . >> i was looking. that's the problem.

>> you are all fired up about this green wall thing. >> no, it's snowden. snowden. more snowden than glen greenwald. >> we have brian sullivan here as well and andrew is here holding the fort for "squawk box." let's look at the futures. they have been looking very negative this morning. with relooking at triple digit losses for the dow. as for your morning headlines, goldman sachs has become the late toast downgrade growth and reforms add risks. they cut the gdp for the second quarter to 7.5% on the 84 from 7.8% previously. elsewhere the bank for settlements says central banks should not allow disrupting markets to delay the timely withdrawal of cheap money. they warn it will be challenging the longer it stays. the chief economist will be joining us at 7:40 eastern,

folks. stick around. we have a deal, shares of vanguard soaring premarket on that deal. can you see, look at that. 65% on the upside. the deal includes 2.5 billion in debt. another big story this morning, washington pressing moscow to expel spy contractor edward snowden before he gets on a flight to cuba to evade prosecution for espionage. right now the kremlin says it is not getting involved. cnn's eamon javers has more on how he may have gotten away. >> the extraordinary tale of edward snowden has become an international manhunt. yesterday, snowden boarded a flight from hong kong to moscow despite the u.s. request to the government of hong kong to detain mr. snowden. snowden was able to board that flight on a russian airline

landing in moscow last night. swarms of reporters meeting that airplane to try to see if the nsa leaker was on the flight. he was not spotted by the pedia there. there is some expectation snowden working with wikileaks attorneys may be mult ultimately in ecuador. in moscow, there is a question whether he is boarding a flight. just within the past couple minutes, guy, an nbc producer on a flight from moscow to havana now in cuba looking for snowden. that's one of the possible flights he might have taken t.nbc producer did not see him on that flight. she did e-mail colleagues from that plane stay saying there were armed guards the crew seemed stone faced. the passengers seemed agitated. so some question now where snowden actually is. now, here's a statement from the u.s. government look at the government of moscow and what

their responsibilities are. given our intensified cooperation and our history of working with russia on law enforcement matters, we expect the russian government to lock at all options available to expel mr. snowden back to the u.s. to face justice for the crimes with which he is charged. that's nfc spokesperson caitlin hayes in a statement last night. just this morning in india, the secretary of state john kerry also spoke about mr. snowden. take a listen. >> if mr. snowden chose china and russia as assistants in his, you know, in his flight from justice, because they're such powerful basstions of freedom. i wonder while he was in those countries if he raised the questions of freedom since that seems to be what he champions. >> a baffling situation for u.s. authorities here, trying to figure out where snowden is, how they might be able to get him back to the occupation.

the u.s. government says it wants snowden to face justice for the crimes he's allegedly committed. some question whether these governments will comply with u.s. wishes here. a very tricky, diplomatic and intelligence for the obama government, guys. >> let's walk through this we have an issue with china now. we have an issue with russia now. we had an issue with russia and chinese in some ways before. what happens now? what is the implication of this? what can the government do? >> well, it's a fascinating one. there is some request whether the united states legally bungled this request and by not stopping snowden's passport, avoiding it in time for him to avoid him getting on that flight out of hong kong, there is some question about whether the hong kong authorities should have responded more promptly to the u.s. requests. the hong kong authorities said, in fact, they were asking the u.s. for more information. because they didn't have legal authority to detain snowden at

the time he boarded the flight. they let him do that association john kerry said moments ago in india there could be consequences for the countries that aid and abetted mr. snowedp. what would be a proportional slight the u.s. government thinks it has received here. it's all very embarrassing. the question of the intelligence damage here is what does snowden have on him physically? what's in his laptop, his cell phone? what kind of information is he carrying with him and who is he sharing that with as we travels around the world now to some of the countries that have the united states' interest at heart. >> eamon, here's the legal question, i have been tweeting online in the last hour. i made a comment about his roam as a journalist in all this, positioning some of this. if you are an american, quickly, greenowald aside, an american, clearly, sfoeden had a lot of

help in terms of getting where he's moved to russia. people along the way, wikileaks and others that have helped him. i assume others that knew about his escape plan. what are the legal ramifications? >> that's a good question, i'm not a lawyer. i don't want to go out on a limb speculating. clearly, the united states government will be looking at everybody involved with snowden. in terms of mr. greenowald, he is the reporter for the guardian newspaper who broke this story. greenowald has been very outspoken on all of this. just remember, be every this story broke the obama administration was in hot water for investigating reporters, including a reporter over at fox news, the associated press bureau here in walk. the obama administration finished vows not to prosecute reporters for doing their job when this story burst onto the scene. clearly, they in a box whennist it comes to going after reporters.

who else is potentially involved here, those are open questions right now. we don't have enough information, by one report, snowden was flying with an attorney from wikileaks. we shouldn't confirm that. i don't know if nbc news has got than i don't know if we spotted him in moss course, of course, there was an nbc producer on that flight this morning from moscow to havana, that producer texted her bosses she did not see snowden on that flight. she was looking at everyone on that flight. >> eamon, javers, meantime, we're talk markets, the economy, the story last week as volatility returns to the markets. this week, we have more economic data, durable goods, real gdp and jobs data, adding anxieties, worries, what have you, we have bob dahl. the senior portfolio manager, mike santelli has been sticking

around, a and co foirnd at riverfront investment group and we have a lot of people around the table here. dave cox that keefe investment officer major asset advisers. good morning, gentlemen i will start with you, bob t. same question i ask at 6:00 a.m. you wake up this morning. you calm your broker at 8:00 after watching you, you tell them what? >> you them tell them we're in the pause that refreshes. this will last a few weeks, maybe a couple months. look, we got overbought, we got complacent. china is a problem and the oc economy is so-so. that's not a recipe for stocks going straight up. they have gone straight up. they need to pause. >> the question on the pause, do you say, okay, this is a great opportunity or do you say this thing has still got 5, 10% more to correct and i'll get out our hang around with a plan of buying in later? >> my view is we got a rick to the former highs of 2000 and

2007 which is around 15 50. i can't be that cute. i'm using opportunity to add as we go by. we have a dovish fed, a declining deficit, no signs of inflation. we still have an economy that's doing okay. corporate balance sheets in great shape. there is a litany of good things we can talk about despite the headlines that are legitimate about the pous u pause. >> how long is the pause going to last for? i think pause, i think, press the cassette player. a little pause there, yet to britain's point earlier, we had a number of summer swoons, which could last several months. >> i think it could last the summer. i i don't disagree. i think absent a bad economy, which we got of those earlier summers. i don't think that this client will be this big. look, pauses are normal. we got so used to the

stockmarket going up every day. it was a long period. we had two down days in a row. i think we got spoiled an complacent. it will take some time. >> people say bond yields are going up because the economy is in better shape. it's not so much better than it was 1.7 may 1st or whatever it was. to me thrngs orderly sell offis the thing that's wacking the rest of us. is that going to continue to give us pause. >> look. i agree with you. if we have woken up and said 2.50 on a ten-84 treasury. that itself not a problem. it's the rapidity of which we got there. swoon and the commodity prices. >> 2.65. >> we're up 100 basis points. >> the bond vigilantes have reared their ugly heads once again. we realize ben bernanke as powerful as he is is not any longer in control of the bond markets. >> i don't disagree. ma ib the positive side is to say, look, we were in a place

where we were concerned about the big black home. it's not happening. therefore, rates shouldn't be at 160. 260 is okay. >> doug what do you do? >> well, i think my call to mied a roar is we have a pullback. every client we talked to said give me a pullback. i like the economy. i want to stay out of bonds, i want to stay out of cash. i think you have that ton. i think bob is right on with that 1550 level. it's not that far away. i think you do have to start putting your toes in the water. the other call i'd have to my advisers is, hey, look, i want to make sure we're insulated from a rise in interest rates. you know, we set up the portfolio to be insulated. we've had a shot across the bow here with rates jumping from 160 to 266. our view is they could certainly go up to 2, 2-and-a-half, 4%. that's normal interest rates. if that happens, that's another

7, 8% loss. the shot across the bow. >> you are watching, waiting. let's get david katz in here. >> the narc has had a 5% correction. it's difficult to figure out how long this will go on. what we say from today's level is we think the market ends higher by year end. we think a lot of stocks have corrected 7, 10%. we wouldn't jump in with both feet right now, but worry very comfortable putting money to work into the weakness in the last few weeks. >> you were shaking your head a moment ago. >> you can't dismiss the way we are getting to the bond yields. the entire market was jumped you had bond-like stocks repriced upwards. now you have junk untethered to the upside. i'm not saying it's going crazy. i do think there is more of a risk of the keen of a pullback that doesn't accommodate dip buyers. >> in terms of those rates,

though, is it the ultimate pressure point? because a lot of people we speak to, you know some of yourselves included at 2 poeven 5% the economy can withstand it. >> when the treasury was at 7%. >> i'm much more concerned about the financial accident that might happen with sloppy fixed physical markets globally than the economic effects of more expensive mark. >> it's ha ready to disagree with that. we had a period of very calm markets in that sense. the financial accidents we have all been worried about since '08, '09, has not happened aside from problems in europe fripp a. quick move in rates could disrupt that. . >> quickly. you read my mind, bob. gordon chang. he said china is in the precipice truly of economic doom. water your take on that? >> there are the risks. first of all with edon't know chosen. that's a part of the problem.

we can speculate. we all can pretend we have the answers. we don't know. maybe china doesn't know, either. . >> you know, before lehman, nobody said a lemman moment is coming. we're all crunched up. we're looking for the next place. i feel that's a check mark on the positive side. >> on volatility, there is an unwind of kerry trade, it's huge. leveraged players that need for the get out at all costs. >> guy, thank you, david doug, i present you guys sticking around. topping. all right, comments? questions? about anything you see here, like why am i here? e-mail us at kewaukee.cnbc doevenlg follow us on 26th. meantime, umm next, investing is much like a river grasshopper. there are rapids, slow drifts,

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. >> welcome back to sidewalk box. you tell people to go to sleep. i'd wake up right now t. s&p 500 off close to 17 points. noxious 26, 27 points right about now. brian. >> why are mass amounts of investors becaming from bond funds and emerging market funds and more importantly, what are they doing with the cash now that they are. charles peterman is here from the flow tabs etf. by the way, charles, we will give you props. it is doing gone early in the mid-west the best performing managed etf. take a victory lap, my friends. >> you are, mr. sullivan. >> thank you. >> we, are we invest in the 100 companies that are shrinking. the number shares outstanding

the most have positive free cash flow. no increase in the debt equity ratio. companies that are shrinking the trading shares outstanding, there is a bid there. historically, they've outperformed in the past during down markets, hopefully, for everybody's taik sake, there won't be a major down market. we'll see. >> fund flows. we know everybody is dumping in record amounts, emerging markets in some record amounts. we're not seeing the ascent increase in u.s. equity funds. so where is that mystery money going? >> well, there has been an increase believe it or not, the last two weeks into mutual funds, first time, so it's sort of like the mark made an interim peak, shall we say the day before bernanke spoke, let's say on tuesday. we saw hefty inflows into u.s.

equities into monday. na is not a good sign. >> of course, a lot of retail investors out there who will look at their quarter end statements very shortly. when they see their bond funds have been delivering these losses, how will they feel when they are relatively safe? >> well, i don't think they will be relatively happy. the outflows are starting to impact bond prices t. flows are massive in some of these smaller areas. so the portfolio managers are being forced to sell bonds to meet redemption. that's not a good sign. you know, the thing that's scariest to me, though, is there has been hundreds of billions of dollars that's gone into emerging market funds by u.s. investors over the last few years, we're not starting to see outflows. if the emerging market continue to crack, there will be a lot more pain for u.s. investors,

yes, u.s. economy might be holding at 2%. you know the fed has been rorng on their politics a stronger half of the year each of the last three years. why is this year the record going to be better? i don't know. . >> let me jump in. i love that point you made. we stid did this on "street signs." i went back, because i'm boring, i looked at the fed statement in 1974, it was based on economic doom. stocks had their best year ever in 1985. in december of 1991 the fed up there talking down the economy, saying things are horrible. stocks began the biggest bull run in the history of the world in 19 yoochl the fed is composed of a bunch of smart people. but if we rely on them for where the stockmarket is going, history says we will probably miss a ton of opportunity. >> they have been wrong now. i don't think if you don't think now. where is housing going to go?

auto sales really doing well, there is free money out there. who know what is the problem is auto loans is going to be in the future. but anybody can get an auto loan now. without those two props to the economy, are we still going to grow 2%? >> how much of a tail wind will lower commodity prices be? >> not as much as less demand from merging markets. we might not be selling all that much directly to china. china supports a lot of economic activity globally and they buy from us. it's a global world out there. a major slow journgs emerging markets on top of europe you were as higher interest rates here in the u.s. it's not a pretty scenario. >> thank you very much. still to come this morning, inside boeing's dreamleaner command center. don't go away. oh, he's a fighter alright.

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. >> let's talk about the buzz story. nick wahlen dar successfully completing a tight rope walk against the grand canyon. it took him 22 minutes and 54 seconds. 23 minutes to walk across a 1,400-foot wire. at 13 minutes in, he had to stop and sit on the wire. he sat there to steady himself. we are sure to talk about more of this dare devil story throughout the morning. i could say, what does he want to do next? put a wire between the chrysler building and the empire state building to 34th street.

>> what would your plan be? it doesn't look look he has a harness. there was no plan b. if he fall, he falls. >> this is something. it's in his family, his great grandfather died doing this. when he got to the other side, he said he thought of him when he was walking. >> there it is, speaking of tight ropes, we will speak about commodities, u.s. oil and investors looking to balance their portfolio as everything this morning is down, future, gold, acia everything, plus, central banks of central banks saying that current monetary policy is not helping jobs and worse is a recipe for failure. we're going to speak to the economic adviser to the bank of international settlements about just that in just a bit. [ female announcer ] there's one thing

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. >> we have to show what you is happening with the futures, what we're seeing is a worsening pick. the dow jones has 145 points to the downside. the nasdaq off by 28 t. s&p off by 18. as for the ten year, this

morning, we have been sitting 2.6%. it is continuing to gain 2.63% here. remember last week, the market was up in arms. we are at 2.63. joining us now, sean hyman trader of money news, the global head of currency strategy brother harroman. sean, i want to start with you. i know that's basically your wheelhouse here. gold is already down 24% this year. i think it was off by 7% last week alone. what happens this week? >> i think gold goes down a bit further. the reason being is because, you know, you had gold go in a sideways range about a year-and-a-half, forming a rectangular pattern on the chart. it broke that. so there is a minimum price target that takes gold down about 1240. anywhere in that range is the

starting point with which somebody would want to invest again. then once the dust settles, things stabilize, i think we will see gold eventually head back to the 15, 16 level. >> what is the case for gold at this stage? there is no inflation. certainly, we're not seeing enough physical buying to support gold at these prices. >> in the near term catalyst. you will see the do you at the 15,000. money might get scared. also, you are starting to see the dollar deteriorate. it reached a --. >> hang on the dollar deteriorated? >> the dollar has been for the last four weeks in a row, except for the last so many days. from we got a balance in the

latter part of last week. it formed a new lower low in the month of june. it's broken the near term uptrend line. it's been in effect since 2005, so i think we could actually see the dollar roll over from here. if it goes lower, we see support for both the gold and silver. >> what do you reckon, mark? >> i don't know where it's coming from. there are three different forces at work here in the markets. first is a tapering talk. secondly, foreign assets, they've sold about $125 billion of foreign assets. the third factor, encouraging this global unweened is the fact that there is a liquidity squeeze in chosen. it's subject to a hairy trade as well. i think the dollar is on its way to new highs against the euro, swiss bank as well as the british pound. >> i don't understand the timing of this all i care about is what will happen this summer, meaning, are we going to get

worse? is it going to get better and when? >> what, the market drop? >> the last four years, 5 to 10% correction every summer. i have to say this time it feels a little weird because you got china with these issues going on, the qe off the table. it does feel different than it did. >> i want to know if this is cyclical or secular. >> i think this is the end of a four-year of trade a. four-84 trade has been shortening the dollar. long commodities. long goals. i think this is a multi-year trade that's being unwon here. i don't think it's the same thing as last summer. i think this is a new world. they talk about the end of the ge in the u.s. it's not yet. it will be coming. >> when the u.s. dollar strengthens, stocks can rise. >> it's the unwining of the kerry trade. >> stocks can rise because we have a manufacturing renaissance, worry heading towards energy independence, you've got the federal budget

deficit falling and so the debt to gdp ratio is not going up like people thought. the u.s. is doing good things despite the near term, which i'm not going to minimize. >> i wouldn't disagree. i think the conviction about them doesn't arrive by invitation. >> so, in other words, these ro takes happen, but they can be pesy. i feel like one of the reasons we reacted so strongly to bernanke, if he is signaling, by mid-next year, then we still have an economy not performing the way we feel like it should be, we still don't see the react sell racing in the second half, we don't have enough story line. >> agree. bernanke also talked about upgrading the u.s. economic assessment. the downsize reduced. for example, 1.7 million households have negative equity in houses. we will find out tomorrow, housing prices are up 10% in the past year.

this is important stuff. >> here on television, i think our viewers and listeners, you want to sound smart and say complex things and make people feel you are dialled in. all i care about is will the american consumer spend more or less money or the businesses spined less or more money. a stock is just certainings. it's supposed to be earnings. >> we are lost on all this other stuff. >> i understand durable goods are down from last 84. the economy seems to be slowing a bit. that to me seems to be the biggest this eng. >> i don't disagree. looking, the last 18 months, it's been mostly pes, not earnings. if pes are done, pes are done probably if the fed is done. >> what do you mean done? >> finished. >> multiple expansion is over. >> we have enjoyed. >> it's over, you need to see e. >> we need earnings. we need some revenues. the jury is out and that.

that's why this might take some time. >> if i take this one step further, if the fed stopped qe 2 and not been ahead with qe 3, where do you think the stockmarket would be today? >> not where it is. it would be lower than it is. >> a lot lower? >> i don't know it's a lot lower t. last leg was about the financial issues. it was still about the big black hole, qe 1, qe 2, qe 3, we have the risk of a black hole, that risk in the fed's mind, is lessening. therefore the pe run that has occurred as people have recognized the big black hole isn't going to happen is in its waning days. we need to move the e. >> i agree. the role was to wrestle volatility to the ground. that actually allowed you to have all these riskier assets to do better. maybe the trick is, just at the moment we thought a risk was gone, i don't think it's the big black hole. >> i like that analogy, central bank mma.

bernanke vs. bolard no holds barred cable match, who wins? . >> i actually think the interesting thing about the bullard. >> it hasn't been physically. cust of fists. >> fist of cuff, actually, right? what language do you speak, australian? >> the interesting thing about two dissent, one hawk, one dog, remember we were talking about the hindenberg omen, i think that's interesting sample let's go back to mark and get the play book for this week. give us your best trade, mark. it doesn't have to be the dollar the yen, can you go out of the box. for example, what's the best trade for an emerging market currency this week? >> i think we are best served, thinking the trends will continue this week. the stronger dollars against the

emerging market currency as well the unswind in its early stages. i like the $on a forward-looking basis. >> and sean, where do we go for gold this week? >> you know the marks are so ated. there is not a lot of marnlths trading at a value. right now, you good eli mining at single dinlt pes. it's trading a couple bucks above its value. it hats like a 4.7% dividend yield some that would be my play. >> thank you very much, mark. >> coming up after the break, powerful statements from one group saying effectively that current economic policy at central banks around the world is a recipe for failure an let's leave you going into the break with this general nastiness, futures at this hour indicating a big drop. it's getting worse every minute, right? dow jones implied open off 156 points. europe is down, gold is down, oil is down. butter with up. it's monday morning.

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. >> the bank for international settlements says current economic policies around the world are set up four failure. >> that's a big statement. >> strong words like bernanke an all these guys that go there every quarter or something like that to talk there and these words are made directly for them t. biggest economies in the world are living on borrowed time. it's time for banks to get tear policies back to normal. joining us is the man who writes a lot of these strong words from switzerland, stephen cechetti. good morning, stephen. >> well, good afternoon, steve, how are you? >> talk to me about what the message is from the bis to central banks specifically the federal reserve. >> well, i think the main message we have is that returning to strong sustainable growth is not the job of central

banks at this point because the problems of the economy faces globally and also in some different countries or different problems, it's not a monetary problem. the problem is that in some places you need balance sheet repair both in households as well as korpts and lampgs. other place you need to insure sustainable and get other places you need to insure that labor and product markets are sufficiently flexible. so what we're saying is that the balance between the benefits and the korss of further monetary accommodation are shifting. they're deteriorating. this isn't to say that what central banks have been doing for the last five or six years wasn't necessary. i mean, they surely kept the world from collapsing. the financial system and the global economy were on a precipice, but at this point i think there's reason to question further actions. >> i read the report as

suggesting maybe monetary policy right now is getting in the way of some of the other improvements that you guys say are necessary, for example, some of the structural reforms that are needed. some of the leveraging that's needed. are you saying that central banks policy right now is more hindrance than a help in. >> well, i think this some cases it may be. this is mostly what i would call a political issue where if somebody lets off the pressure that, others aren't going to do the job that they need to do. we have been concerned about this for a while. it's not as if we are seeing forebearance is supervisory of the banks, if somebody lets off the pressure, politicians and others won't act as rapidly. >> so are you saying that -- what is your sense of when central banks, pla particularly the federal reserve in the states should normalize interest

rates not just end qe? >> oh, i think that we're still a ways away from that and that's going to be a difficult thing. we haven't said anything really distinctly about the timebling of these things. we just said we're concerned of the further accommodation. i think unwinding the balance sheet position and bringing the interest rates back to normal. that will be a very difficult and long process at this point and as we have seen in the last week, it's going to be butchy. we said before this started to happen, in fact, that getting interest rates back to normal would not be a smooth process. so, i think that we're as i said i think we're in for a little of a bumpy ride and i think our hope is that people start to think about it and to think about how to do it fairly soon. >> i think one of the most interesting things about the report is your suggestion here that we're wasting time. we have a little bit of calm

right now and then, ply the fiscal authorities around the world haven't used this opportunity to really put in place important structural reforms as well as deficit reduction. talk about that idea for a bit. >> well, i think the issue there, steve, that what we're really saying is not that there needs sob immediate us a territory, but that the trajectories the long run health of the balance sheets of the governments in many of the advanced industrialized countries is pretty bad at this point that with aging populations and with commitments that have been made to the elderly and pension and health care that the debt that's created by governments is going to skyrocket an before it does that, they need to implement reforms. now, what this means is you have to worry about the long run. i mean, i think we're very

concerned that there has been much too much focus on short run deficit reduction and not enough focus on long run sustainability. that's certainly true in countries like the u.s. where you've seen very large sudden cuts in fiscal policy that have created a large drag on growth without any move to making a long-term budget situation a sustainable one. >> i just want to understand one thing. would you say it would be better policy for the federal reserve to ease back on accommodation right now, which would, i guess, in the terms that you put it in your report, it would prompt or force or motivate politicians in whaug to do more when it comes to a long-term fiscal problems out there. are you talking about banks using that leverage, specifically? >> i think that's a part of it. in the case of the federal reserve and others engaged in large scale unconventional

monetary policy, which is to say policies in in addition to their interest rate policy, our concern there is that these things have diminishing returns. i think it's important to keep in mind what monetary policy accommodation is supposed to do. the purpose of it is to get people to take risks they weren't taking and get people to borrow an consume today instead of in the future. now, if you coup doing that, that means you will get more and more ricky stuff and you will get more and more borrowing instead of, in order to support current consumption. and that is something that in our view looking at the history, at least, can be calamatous if you aren't careful. so we're concerned about that, and i would say that we're concernedant that outside of -- owe concerned about that outside

of single country. >> thank you for joining us from a beautiful location there in switzerland. brian, trivia. you know why the bis was started? >> because the federal reserve was a quasi-government shadow organization started in 19 noon and they need a counterweight to handle war reparations? germany. that's how started to hand him the finances of war reparations in germany. it became this big global bank for international bank. >> that's why you got the crown of king nertd in the states. in the markets, the futures are suggesting a top of 143 points on the dow. this hour is currently at 2.63%. we're going to bring you more obvious this morning's market sell-off in the next hour. plus, we will also be welcoming t.d. chairman joe moglia. coming up next, folks, inside

the dream liner's command center. phil lebeau is there. he joins us with the preview. phil. >> mandy, every minute there are thousands of pieces of data from dreamliners in flight. right now we have about a half doesn't flying over japan, what are they telling the people here in this command center? we'll tell you about that in a "squawk box" exclusive right after this. how we get there is not. we're americans. we work. we plan. .

. >> boeing 787 made an emergency landing over the weekend. phil lebeau has an exclusive inside boeing's 787 center in washington, where they monitor ever 787 flight that takes to the sky. phil. . >> and, brian, there are about 150 to 180 dreamliner flights every day. all of those flights, every single one is being monitored. here is a half doesn't about to be wrapped up in japan. on the world map, you can see all the flights back here. each of those flights, they call them up on this screen here. if there is nothing wrong with the flight, it's green. if there is something that alerting them, it goes to yellow to orange. then if there is a problem, it goes to red. since we have been here, we saw one floit that went red. they immediately contacted the airline. it find out they found out what the data point was.

no major alert. they're doing that with every single flight throughout the day. 150 to 180 flights are being monitored by boeing and the arlts every day. there are 63 dreamleeveners in operation around the world, sense the dreamliner has been cleared by the faa following the battery fix, there have been 4,500 flights. of those flights, only two have been diverted. those were the flights last week. for boeing right now, this is about making sure they are getting the maximum efficiency out of the dreamliner they have been promising their customers, they say so far it has been meeting its performance expectations when it comes to fuel efficient sichlt we want to show how they are monitoring things. this is oxygen pressure. one of a thousand data points they can call up and measure over time. this gives you some sense, andrew, how they are monitoring

constantly what the dreamliner is doing not only in flight but overtime. they can relay that. back to you. >> how many times have you been on the flight? >> wise. >> twice. >> twice. both times, uneventful. an enjoyable flight. uneventful. >> going to a quick brooke. the dow don't 122 points, more in the next hour. we'll be back after these couple of minutes. we went out and asked people a simple question:

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. >> a tough start for the summer for stocks. >> a makeover from microsoft? why top managers at the company are worried about an expected atownsment from the ceo. >> and disrupting the fashion industry as cnbc 50 disruptor changing the business one dress at a time t. final hour of squawk begins right now.

♪ . >> whole come back to "squawk box" this morning here on cnbc. first business worldwide. mandy and brian are sitting in for the vacationing joe and becky. we do have a little of a takeover, not a real takeover. we decided to discuss that. our chief equity status, chairman of t.d. american. were we supposed to do a promotion for what goes on at 2:00? >> we can rick it, i believe -- >> there is a lot of news. we'll get to it. 2:00 is when the magic happens. i think that sums it up. >> thank you. . >> by the way, at 2:00, the carolina football team is working out. >> our top story this morning the global markets umpbdz a lot of pressure t. dow looks like it opened off 133 points t. s&p

close to 17 points t. nasdaq off about 25 points. this comes as china's cash crunch appears to be eegz. they prevent the money market from easing up. the bank stocks took hit, said banks need to do a better job of managing tear cash. the deputy governor saying they have policy options and it is ready to act with an eye to the downside, upside risk to the economy and price, but in an interview with reuters, the deputy government, rather, ruling out using its policy ammunition to deal with temporary market listers, does that money they won't be stepping in? take a look at what's going on, overseas in asia, the shanghai, off 5%. the nikkei off 1.26%. let's check out what's happening in europe this morning. can you see red arrows there. the kak puts you up.

>> the footsy is well in corrections territory. i think it was already down 10% on friday. on top of that another 1.3% pushing towards bear market territory. >> let's check in on the broader markets on this sort of ugly monday. oil is a story, the economy is slowing down, shouldn't oil be used thes less than it is? oil is at 93.50. it's not $70 bucks. oil is down 13 cents. on the currency market as well, a little of a move in dollar yen the 10-84 treasury note seems what people are watching along with the five year. dan greenhouse, brought up this interesting point, the yield on the ten-84 treasury is up about 60% off its lows and it's the fastest run with that percentage move since 1962. >> listen, just to clarify, on a

percentage basis, 66%. everything is relative in life. we had people talk about how this used to go 300. >> i'm say anything real terms, this is not a huge out of -- i'm just --. >> as everybody has said, it's not the size. >> the movement. >> rapidity. we do like it. >> let's look at the dollar in the gold markets, the u.s. dollar, a dollar yen at 98.24. it's waenged. the gold market, not a huge move. we are down $8 bucks. >> let's get right to our market round table. david speaker joins us. i have mr. xo 'yoche. can i call you coche in.

>> that's fine. >> i had a meeting with my mother and friends who said what am i suppose food do monday morning as a horrific or ugly week last week, what do you do? >> i think i can appreciate, an drou the fact that your mom and i think many of our clients have some sort of anxiety because of what happened last week with ber passenger. then the corresponding meltdowns in the market thursday and friday, the reality i think, though, bernanke was clear. he said we will back off on our buying as long as the economy is looking goodment while you are backing off on your buying, you are doing that for a positive reason. the reason we are having a correction is because we have had a spectacular run. i think at the end of the die, worry in pretty god shape here, the economy is getting better. i don't think there is any question about. because you are right, you say buying opportunities, this gentleman, to your left, stage

right as they say, believes this has more to go, if not a lot, am i wrong? >> time-wise, i think it will last a while. price i don't think we have a risk. >> so hold on, you think it's a timing issue. you are not going to fall about 5%? >> 15.50 is the number i put on there. it's a couple percent away. there is some time. look, you don't take a ten-84 treasury with a one havenle on it and move it to mid-2s like that and say everything is fine. you don't watch japan, one of the largest equity markets in the world drop more than 20%. china approaching the '08 lows and say everything is fine. it will taim take some time to work this out. >> david, where are you in a relative basis to this table? is it an opportunity to boy or to wait? >> well, i think ultimately it's an opportunity to by. right now, there is a lot of volatility. i don't think i want to overreact either way. i don't think you want to panic

sell or dump all your.into the market right now t. most important thing to remember is the only thing the fed will end qe is if the economy can stand on its own. unemployment continues to move. the housing market continues to improve. fundamentally, as long as the market is growing, that's an opportunity to invest in stocks. the pe multiple is probably over. you need to focus on companies with physical an sustaining earnings growth, been forward, they will drive the mark. it's not going to be a rising tide, because the multiple continues to expand. >> david, what itself the chance bernanke is wrong about tear estimates where things are going, add on top of that, what we are seeing in china over the weekend? >> well, the fed doesn't have a particularly good track record on predicting theny, nor does anybody else, quite frankly. so, yes, they could be wrong, that's why they've given themselves the flexibility to be

data dependent. if rate of inflation in the economy is not a problem. so the fed has the flexibility to back off their claim to end qe and they continue to by bonds. they've also committed to coping fed bonds at 0 until unemployment hits 6.5%. at least. so even if they are wrong, they got the flexibility to manage. that i think that given bernanke's objective to eliminate deflationary prices, i think he'll be proactive in doing that. >> you need the mic. >> i think, actually, over time, bob dohle had some good quality with regards to the economy, number one, number two, we began talking about your mom and the individual investor. the prookmatic side is -- pragmatic side is you are not supposed to jump in hard. it's a wonderful opportunity after correction to put in some money. markets continue to waiver. you take advantage of that. >> what's the mindset of the

investor in at t.d. ameritrade. >> the main numbers were as good as we have seen in a long time. they were 13%. we were doing over 400,000 trades a day. we were 13% over where we were a year ago. 9% over the professor month. what happens with bernanke last week shook him up a bit. bernanke gets involved because the economy is doing better. that's almost a calming effect. >> i hate to be so blue collar. a coupu a year ago every person i knew was worried about losing their job. now they foley they can sell their home. bob and i live close to each other. people feel more confident. that's the key. we often forgot the fed is in its own bubble. >> yeah, they foley better.

that's because woem people are refinancing. that will go away. you talk about. >> it's not a refinance. >> i'm assuming, wooer five years in september lehman moment if you remember. >> i think people still are feeling the effect. what i would worry about is this last two weeks has taken people like my mother and others who have that lehman moment in their head. >> if you listen to the negative people in 2007, okay. which i was one, by the way. you sold, you saved a 50% loss, right. >> if you continued to listen to the same negative people, you missed 100% gains. >> hold on. you had to be right to get out. you had the right to get in. most people were either right once, not twois t. dow hit 6600, or 660. boy. >> consumer confidence is at a

five-84 high, they're feeling better about the ability to retain tore job an net worth thanks to housing and financial markets is at or near an all time high. when you look at the economy, maybe it's grown in the low 2s. if you take away the drag from the government, the federal government, the private economy is growing closer to 3. i think that's what the feds muster. >> david, thank you. joe, bob, you gis have been sticking with us the rest of the program. >> in corporate news, a whole lot of buzz about microsoft and restrurk. what are we hearing so far, john? >> hey, mavendy, yeah, it feels like afternoon, what am i doing here? yes, a change at microsoft, that's rumor, shift from software to devices an services focus. steve bolmer has been talking about this internally. it looks like he is perhaps going to do something structurally about it. he hasn't fully explained what

this will mean. maybe we'll get more flesh on the bones in terms of this strategy. microsoft has been up in hopes of some kind of a shakeup. i glean from recent kwfs the top leiutenants. he seems very engaged in the business. so the shakeup to me, it doesn't seem like he is planning to go anywhere. take a look at microsoft's business. it faces a declining pc market. down 14% in the first quarter. tablets are taking on more of the function that pcs used to. now, windows 8, itself, has not performed spectacularly, has lived up to some of the predictions he, himself made to me at the launch late last year. 8.1 is the new version set to make its day bow this week. it's got incremental changes, start menu coming back. maybe options for smaller tablets.

nothing expected to change the tra jekory. one thing we expect to get more detail on, today at 3:30, they are expected to announce a partnership with oracle, they last week hinted at this, look, this cloud area is particularly important. the legacy microsoft business, windows an office is made up of half of revenue and half of profit. server and tools are showing consistent growth. flex, windows phone is in the intertaenlt and devices business. that's one of the things we might expect to see them restructure. this new structure, likely to emphasize the cloud and you notice those separate mobile and pc based plampls, guys. >> talking about legacy, i sort of explore whatever restructure

will come out of microsoft, it has to be big, it has to make a big bang for steve bauman's legacy? >> if it's from the bronte he took over as ceo, 12, 13 years ago, sure, the stock price not pretty as many of the kind of legacy pre.com stocks aren't. on the other hand, on the other side, they've done well. the main thing is mobile. they node to get traction in small phones and tablets to look that great if you are judging it based on where they have gone with public opinion and usage. the pc is not what they used to be. >> hey, john, real quick a. curvebull, a different subject. a lot of chatter in the valley about it. the ftc reportedly locking at this ways deal, what that means for mapping, yahoo, facebook and

others, what's going to happen? >> you know, i'm not sure. we know the government has been poking around various groups of businesses talking about search and the way they folded and things there. it doesn't seem to me mapping is an area where golg has a ton of things to worry about. you have mooirk soft, now apple get nook the mapping business. there is a strong argument to be made that goggle isn't as dominant as in other yars. >> thank you for waking up early with us. >> you know how successful you are, the amount of scrutiny. >> a lot of maps out there, still. coming up, fierce of the fed coming back. a credit crunch. the economic stories driving a sell-off in storms today. [ mal] we've been conditioned to accept less and less in the name of style and sophistication. .

. >> welcome back, everybody t. market's sell-off, investors headed for the hills, is this a garden variety correction the likes we've seen the last four years or something a little more insidious? your s.a.t. word for the monk.

mark, reason to worry on a bigger scale or just kind of what we've seen the same thing the last four years? >> i think garden variety corrections, if i was answering andrew's question for his mom, i'd say, hang tough. this is garden variety. it feels like it's me. of course the fed gave the marks good reasons to correct what is going on in china. the rest of the emerging markets isn't helping. fundamentally, i think the marks is on solid ground. >> what would make it more than a garden variety, what would be the trigger? >> if investors lose faith, you go into the bond mark, interest rates spike. we are up 260, 265. i think we can digest that. if it goes over 33,.5, 4, over the next two, three, four months, that would be difficult. that would undermine the housing market. housing is key to everything

working out reasonably well. the darker scenario would be bond investors lose faith. >> it's joe mobley. if you think about, if the fed is going to back off in the next several quarters, are there certain sectors within the united states that's going to impact more than others? >> well, you know, it means higher interest rates, anything that is interest rate sensitive should feel it. if the fed is able to manage this i think they have all the tools and the will to do that, then the interest rate rise should be modest. it should be kent with the job market. it should trump the higher interest rates and their impact. housing, obviously, being the most obvious, anything mortgage related would be hit hard well. the auto industry financed would be hit. again it depends on whether the feds should be able manage.

they should be able do that. >> i agree with your conclusion, threw threw china in there, we talked earlier, we don't know enough about china, how much does that worry you? >> i think it's managable. i think this is by design right? i think the chinese authorities are nervous about the excessive credit growth. now it's crimping liquidity. this is construction by design, at the end of the day, that i have 3 trillion in reserves. boys you bull trends. so i don't think this is, i think this is managable as well. it's a tricky game what central banks are trying to do here. it will be hard to land this plane on the tarmac without a few bumps. >> one of the questions i asked i guess in the 6:00 or 7:00 hour is how much of the markets we

see in the ten year are a function of the fed vs. now adding china on to that? >> it's not what's moving in needle. >> i think everything up through friday whereas the fed. i think today it feels like china. it's not like china. it's what's going on in turkey, the brazil, the whole thesis in emerging markets is under question. i think the damage the fed did was last week, so far today, given what's been on, i think it's china and that's, we have to grapple with both going forward. you hurt me if i'm wrong, it was back 5% from the peak a month ago. the garden variety correction would be close to 10%. gives us other couple three weeks. >> i don't think we can encounter emerging market funds, thailand, chile, mexico, down 9,

10, 11%, just last week alone, how much worse does it get? >> well, you know, i don't know the answer to that, i do know they will be under pressure, because they've benefitted enormously from all the central bank easing, all the liquidity in the marketplace, that existed post-financial crisis and that's going to have to come unwound, you know, going forward as central banks are ultimately going to tighten monetary policy the other thing, the emerging economies, you know, they had a great run, to some degree, this is a part of their success is brick some problems, they now have a deep middle class, the class wants freedom. >> what they want and can do, mark, that's a great point what they can do is invest that money around the world. so isn't there an angle of thinking where the problems we are seeing while severe could in

some way benefit the united states as the money comes here? we've seen emerging market outflows. we've seen u.s. stockmarket inflows. it appears some people are already doing. yeah, on very short-term thinking. is absolutely great. in the long run at the end of the day, we want everyone move income the straight line north. i think that will happen. this is an ad judgment process. >> it's a computer process. >> mark, thank you very much, appreciate it. coming up, the dow is almost up 5% from its highs. [ kitt ] you know what's impressive?

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. >> the s&p is down. take a look at those red arrows. we got the pictures from the trading pits in chicago when we return in just a moment.

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. >> welcome back. the goebel market sell-off. we do have red arrows t. dow is off 146 points. s&p 500 off 17 points t. nasdaq off about 27 points as we had a pretty we're calling it ugly week last week. take a look at the major european index, officially down 10% from their may highs. you see there the kak off 1.35%. if asia, the shanghai composite

plunging. in the u.s., we're at 6%. is that the number officially from may to now? >> down 5% what for the dow? >> off the high. >> about 13% for the dow year-to-date. i would like to remind that. >> thank you, mr. optimism. >> we're not expecting 20% this year, all the sell-off, we are up 13% 84 to date. stocks have doubled off tear lows from march of 2009. not saying things are great. but a lot of people have done pretty well. >> they have done pretty well. joining the conversation, we have rick santelli, steve liesman, bob moglia. everybody has had a pooegs piece of the action. mr. rick santelli, we have been watching the ten year going higher and higher. it was 2.5 on friday. it's at 2.63.

how high does it go and how fast? >> it's impossible to say. this is one of the unintended consequences of management on the interest rate side. as a technician, i would say the momentum has been aggressive. there is many technical reasons to look for more peeling back of the onion, more structure of finance and varies positions and leverage to continue. china hassing a nojd, but they're big boys over there, whether you like their form of government or not. they've decide enough is enough. we need to turnspeck ought off. that's what -- turn the spit off. ty think they would be wise to protest very little going forward. i think this is about the healthiest thing i have seen in years. i think you will see a pause at 1.62 on a closing basis the way we saw a pause around 2.39 to

2.41 a. pause is not a break in momentum. >> i agree with rick it's healthy if the market is selling off and yields are rising for the right reason. >> right. >> i will go on a limb. i think the market has this wrong. i think what the market has done in reading the economic commentaries over the weekend, i think the market is confusing a more optimistic fred e fed with a more hawkish fed. within i look at what's happening to fed funds futures, they have increasing their percentage chance of a rate hike, which specifically bernanke did not do. okay. so what i think the market has done is said, you know what, because the fed is more optimistic, because that says they're going to be on this pathway for reducing quantitative easing, that means the fed is more hawkish, very, very different thing. >> yes. >> relative to the growth forecast, i don't think the fed has changed at all, they've

upped their growth aspect. what i want to do is ask bob all the following questions. when you factor in the new forecast, a 3.25% gdp growth. add to that a 170 inflation number, col up with 495 top line nominal growth. would you trade that in for what probably amounts to 50 or even 75 basis points higher corporate earnings, corporate borrowing costs? and what's the effect on the bottom lean of better growth or somewhat higher across the operations? >> it's an easy one, 20-1. a 5% nominal growth, i'm very happy. we have been concerned nominal growth was headed down towards 3, if you can give me 5, the stockmarket has gone up. >> we have 3, companies have done relatively well on 3 on cutting back on costs, which, but by the way, it creates what economists call corporate guys call operating leverage.

it means a dollar of new to be lying income comes in that becomes two, three, four, joe moglia what is oernth leverage right now? >> i'm not sure what the exact number is. i am aware we are overreacting to what is taking place here. bernanke went out of his way to make a point that he -- in fact he used an automobile analogy. he said, i will only take my foot off the pedal if the economy is doing better. >> he said multiple times, can i not stress enough. it is going to be data dependent. . >> right. so if the economy is doing better, the stocks will be doing better. we will see more jobs, interest rate inflation. >> this is all about the commitment you had it right. we are about to present second quarter gdp. it will probably be nominal 3.5. if you can give me 5, we are off to the races. >> rick, do you think the market

sees the fed? i don't disagree this would be healthy if it's for the right reason, do you believe the market believe what is we call the reaction market of the feds in. >> i think if you are asking me, do i think the market is doing something for the right reasons? you are venus, i'm mars. the market could care less and the market doesn't care about strategies. it is the only thing i can answer, fed funds, it's not like they're looking at it and thinking can i sell fed funds? here is a percent annual. this is a reaction. this is position liquidation. >> it doesn't make it radio it. >> it doesn't matter what's right. you know, just like when stocks went up, i didn't say it was right. >> that's rye true. >> this is not about the fed. i think those that argue this should have five of coursal questions, it's not the real world. >> my question is does the market see the feds as more hawkish or of the mick? >> i don't think anybody's

glasses at the switch of real tradeing is really even thinking about the fed one iota. at some point when the market comes down -- >> that's the discussion we're having here at some point. >> that's your discussion. my discussion is to try to see which fire and which bedrooms the biggest to report to viewers, which flames will continue to flame and which ones won't. >> that's different between trading and investing. >> this isn't socialism. these are free markets and capitalism. socialist say, what does the central banker thinks? we don't care what ben thinks. >> that's all they think about. it's amazing how you misread the very people who are behind you. that's what they think about. that's what they know about. that's the basis of the trade, rick, what ben thinks. >> it suddenly feels like we have -- i have a question for you for everybody up here for

the trading week. steve, if you want communication from the fed. we got communication, eight speakers lined up just this week alone. is communication going to be muddy? >> i think there is a difference between communication and talking. >> that's true. are we going to be more or less confused at the end of this week, though? >> i am confused after the end of this conversation. >> i think we will get some --. >> only fed watchers are confused. the market isn't confused at all. >> rick, it's hard to begin knowing you with that comment. if that's right what they're watching down there, that's the basis. >> they're not watching anything. they're reacting. do you think when a baseball player hits one out of the park, he thinks ability all the issues of his body? no, he just goes with it. that's the way real traders operate. they go with it. >> we have to wrap. i want to ask joe a question, break up the huddle. >> i'm here when your retail client. maybe he owns 70 shares of ibm.

they sell their t.d. ameritrade account. why are they doing it? >> they need cash for some reason or are going to use the money somewhere else. right now we have 20% of our assets in cash. again, i mentioned at the beginning of the program, we are seeing more buying today tan we have in a long time. in fact, that i are specifically buying financial services and they are sellers of metals and telecommunication. >> don't go airplane. steve, thank you, sir. rick, thank you. a quick note. they are saying they are considering snowden's asylum request. plaus plus, do you want to party like rockstar? yes. >> our next guest can help you do this, the ceo of rent a runway. the major index is officially in correction mode. we got a lot of continuing coverage on all this, done go

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. >> welcome back to "squawk box" t. dow is off 136 points. s&p 500 off 15 t. fax off 23. we brought the news to you right before the breakment let's bring it to you again. it's crossing the news wires,

ecuador is considering snowden's asigh lem request and is considering with russia, sfoeden argues he is being persecuted be i the u.s. and would not receive a fair trial. wee should also say there was news before he was on a flight to cuba. there were journalists on that flight. he is still in russia, which means the idea that it was going to be there. >> he got rooked, by the way. for this plane, he is flying to havana, now, they're stuck going to cuba. how do we know where he is going? >> it also changes the equation in that if he is in russia, he will not be there two or three hours. >> let us hold your laptops. >> now that he's there a little longer an maybe we don't know how long. >> he was whisinged away off a plane of two black cars of tinted windows. the plane did not go through the term fal like we do. everybody got off the steps, this is coordinated, obviously. >> even tow russia said it has

no prior knowledge of him arriving. >> here's the thing the guy in russia's hands, he has laptops with top u.s. secret data on it. >> done. >> the cell len says it will not intervene. it seems a bit of a diplomatic issue. meantime, rent the runway. they are shake up the mark place. it's a netflix of fashion, renting out dresses that could cost you otherwise thousands of dollars to buy. they even just partnered with beyonce. joining us from the new york city office is rent a runway co-founder and ceo, jennifer, you must be doing something right. >> that's so amazing to hear. >> how is business? >> business is booming. it's been fantastic. i think that, you know the first

step for us was really to normalize the behavior of renting clothing. because women, if are you not a celebrity, you haven't rented clothing before. unlike men have typically rented tuxedos in the past. >> how much bigger do you get from here then? what are your plans? . >> we rent hand back, we sell makeup and spanx. we are going to be expanding that as well. we want to be incliefs of all women. the goal is to democratize fashion. we will have sizes 0 to 16 on our site. >> jennifer, joe moglia, as you

grow it's a great idea. you are doing well. as you grow, are you going to have to have significantly more showrooms across the country? >> well, retail spaces are just kind of a failure outgrowth of what we're doing. we find that a physical location for us isn't traditional retail. what we do is we use it to catalyze loyalty and build a relationship between a customer an one of our stylists. so as part of our service, we not only rent you a dress, we offer you a free styling service, can you call our stylist and talk about fit. can you ask them how to put together a look. this was extremely important to us bus most of our customers are renting aspirational brands that they've never worn before. so having that extra advice was extremely important. so that's what they're getting in a physical location as well. >> jennifer, what about men? are we ever going to be beneficiaries of your concept?

>> i think that we will rent stuff for men. i'm not sure that it's about reventing clothing. part of what makes the runway so successful and has catalyzed our growth, renting an amazing direction feeling confident buffer go to an intervow or a wedding or a date is emotional for a woman. whereas, putting on a suit isn't as emotional for a man. >> what do you mean by stuff? qualify that. like spanx for men? what would you be renting out for men? >> we see ours going into all different luxury categories in the future. part of the idea of went renting is to simplify your life and to derive better utilization out of the things have you in your home. the other asset is to democratize luxury, be it electronic, fancy sports goer or ski goes, which are really limited to those that can afford to own it right now.

so given we built a process that will vertically integrate, it doesn't have to be a dress, it can be a pair of golf clubs in the future. >> interesting. we'll be pauch watching. thank you so much for joining us. >> we are pointing out the futures on wall street. we got red arrows. we will let down to the new york stock exchange. among jim's tweets this morning, he wrote the only bullish aspect of today no bull is bullish. we will see if we can elaborate after the break. just by talking to a helmet. it grabbed the patient's record before we even picked him up. it found out the doctor we needed was at st. anne's. wiggle your toes. [ driver ] and it got his okay on treatment from miles away. it even pulled strings with the stoplights. my ambulance talks with smoke alarms

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lit get down to the new york stock exchanging. jim cramer joins us now. i enjoyed many of your tweets especially your picture of what i believe to be mere cats laying together somewhat. what did you mean by that? there's always more than what you say behind it. >> the norwalk cats, it was funny to see them huddled together, hiding as if there was something bad coming. and i was thinking they were thinking the ten-year's coming

because i've got to tell you, the ten-year's total will in charge here. i thought they were the right symbol for the moment. >> if the ten-year is in charge, who is in charge of the ten-year? is it bernanke or the bond vigilantes that have risen from their slumber by a brad pitt zombie? >> i would love it to be the government, ben bernanke, i want to come back as the bond market you can intimidate everybody. i think people don't understand where this thing could go. i'm not saying i know where it could go. looks like it's headed to three instantly. there isn't a single country or big portfolio manager in the world set for three. that's why, i think we're in the wrong place at the wrong time. >> take a bear, take a bull, take mere cats, all of these things and like play it all out. on a serious note, what are the

traders are down there saying to you now about how they're feeling for this week ahead? >> i think the short-term oriented, what people are looking at is just if the bond market doesn't settle down, then we have to keep going lower. only thing that's great about that everybody in the world thinks that way. maybe there's some level before we get to three where people say, you know what? i figured this out i know where it's go, i'm going to buy utilities that yield five. i'm going to go in and start buying higher yielding tell cos which has been a horrendous group. i like the universality of negativity. >> i don't hear you saying take money off the table as we wait for the moment. >> reposition here. >> say again. >> you've got to get out of -- i think that the cloroxs and kimberlys, as much as i love those companies, have further to go. the microns, what i call the retro tech can go up. regional banks, because they're

not repricing any of the cds, the brokers are do great because they do fabulously on just the money they have in people's accounts. those work. but those are few and far between. >> would you run from anything related to house organiing or i priced? >> lennar reports this week. could go down 10%? easily. if we can get people out and back down 3% that would be terrific. i don't know anybody who's that good. i mentioned ibm, who is selling ibm? i think when i look at things i can't time it so exquisitely for people at home. hedge funds, yes, you should sell. when the dust settles, you've got to come back in. >> jim, it's joe. the -- if the fed does wind up backing off from their purchased down the road a little bit, are

there going to be some sectors that we should be paying more attention to and perhaps even ahead of time being buyers of? >> i think if you look -- we've been waiting for this margin to go up for the banks we haven't cared about lend organize fees, no services. the net interest margin, i'm look at cd rates. they've not repriced. five-year at .81. you can make a for opportunity on the five-year if you're a regional bank. like those and some of tech because i think tech is beaten down. western digital makes an acquisition to stay, it's good. but the fact is these don't represent majority of stocks and the majority of stocks i think are coming down. we've got plenty of time to wait because we don't have earnings for a couple of weeks. >> jim, thanks very much, pal. see you in a few minutes. take care. >> the last word on the trading day ahead from bob and joe. i want to make things more secure.

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welcome back to "squawk box." let's get to our guest hosts. joe, you were talking about coaching, playing, how you've got to think about the world. >> talking about june's

graduation for everybody. one of the things we try emphasize for guys stand on your own two feet and take responsibility for yourself, especially when football was over a big piece of the responsibility is financial, making shore you understand what you need to do from a financial perspective to take care of your family, career path as you grow. typical family plans a family vacation than that. that's something we need to teach our kids in general. >> have the pros make enough money during their career to take -- to last them a lifetime? >> average do not. average play -- average guy plays two years, done make that much especially on an aftertax basis and don't know what to do with it. >> bob, the real last word. >> we're in the pause that refreshes. markets don't like change. fed is preparing us for change. ten year treasury, stuff going on in china, showing us change is difficult and disruptive. it's going to take time to sort

out. key for equities earnings. i'm optimistic but the jury's out. >> thank you. >> you've got him all week. >> street signs at 2:00 p.m. promo, join us tomorrow. >> that's where the magic happens. >> it's a great show if you back out the anchors. >> join us tomorrow. "squawk on the street" begins right now. ♪ good monday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer david faber. the new week kicking off like last week, dramatic downside action overnight in asia, shanghai composite posts its biggest one-day sell-off in nearly four years as worries about a credit crunch dominate the head lieds. u.s. futures dropping in response after the worst week for the s&p in april. q2 ends this week. a ton of data and fed