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tv   Squawk on the Street  CNBC  August 24, 2015 9:00am-11:01am EDT

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week, that would be a decline of 11 % of the year to date. >> what is china's next move? >> is that what we're waiting for. >> are we waiting for that in new york. that's crazy. the world is crazy. join us tomorrow. we'll talk more about it "squawk on the street" is coming up next. >> stocks up for an risk sell off at the open. the biggest gap down in seven years. good monday morning. i'm carl quintanilla with jim cramer and david faber. this would be one for the record books pushing the s&p into correction territory. europe is down 3% to 5%. china falls 8% overnight. and the ten-year yield down and oil is down almost 4 %. after a week in which the s&p
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lost more than $1 trillion in market value. and an 8 .5% drop in shanghai last night. wiping out chinese gains for the year. jim, what is the story today? >> i think it is china. what i'd like to do because it's a terrible market. it reads something that is in keeping with that. i sent tim cook an e-mail trying to understand covering apple because that is a crucial part of it. and tim sent me this this morning right before the show. i'll read it. as you know, we don't give mid quarter updates, and he rarely comment on losing apple stock but i know your question is on the minds of many investors. i get updates on china today including thing and we have continued to experience strong growth for our business in china through july and august. growth in iphone has dproen and we've had the best performance
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in the app store over the last few weeks. i can't predict the future but our prediction is reassuring. china presents an opportunity over the long term and the growth of the middle class over the next several years will be huge. signed tim. i think it's a great jumping off point for where we have to start. i think people fear the largest stock in history doing poorly because the largest company is affected by the chinese market. so i thought it might be a good place to jump offer. >> i think it's great. and that is news that we get from mr. cook in terms of what they saw for july and august so far. of course, that is a concern. the overall chinese economy is a huge concern. the impact of the stock market now actually not even up for the year and the losses that have been taken flowing through to the ability to the chinese consumer to spend things on money like iphone activation has been a key question.
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>> but, we have to bow down to the declines in the stocks. obviously apple is not the only -- this stock is just the largest. we have circuit breakers in place. there's no benefit to being old other than the fact that i've been trading for 36 years. this is my eighth crash. >> is it a crash? >> well, i'm going to call it that because people like that. a chinese crash. >> china, yes. people seem to act as though this is a crash here when it really snisn't. we're talking about a correction for the first time in a long time. when people look at the underlying mehealth of the u.s. economy, some things could be positive, whether it's the drop in oil or the broad commodity complex, and the ten-year yield below constructive case.
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i'm not saying we're going to bounce today. >> the dollar is weaker, the euro is breaking out to the new up side. this is a new ratio that's higher. commodities were a country that is a taker, not a producer of commodities with the exception of north dakota, texas, alaska and oklahoma, perhaps louisiana. those are our oil-based state. i don't mean to be sanguine. i do think that we have to go to a 1997 scenario. 19% decline in '98. that's another one that was imported. i think it's realistic to talk about what happens in situation like 2011. we were imported from india, greece and spain.
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all those are on the table because they're important. crash in china, correction here. >> you've been compariing shanghai to the nasdaq for a long time. but when it came to tim cook's e-mail, does that help you handicap the chinese economy or help you understand the data from them. no one believes the numbers. >> i believe tim cook's numbers. i think china is in a contraction. >> contraction? >> when you have a 46 factory order -- >> good-bye sevens. >> my belief is that they are experiencing a literal stoppage of their economy. >> i don't know about that. i don't know about -- listen, you and i can argue all we want, and the fact is neither one of us will ever fully know, and that is part of the problem. >> let me finish. we don't know, and i think we're going to think -- >> iphone activations? >> i believe coming in until i
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read tim cook's statement which made me think that perhaps not that we're overduing it but maybe it's 3%. >> it's not a consumer-led economy. it's a mirror of ours. >> let's look at china as nasdaq. we started this week last year was the beginning of the run. we were 2200. we then go to plus 5,000 in the june time frame. only 30 % from where we would be if we wiped out the whole move. i think that you were to say that there is some correlation with the stock market in china. you understand from the from what most people are saying. i'm saying most people believe there must be something really horrible in china, some are going to say after today there's a contraction. i'm going to take it off the table. again, i get updated on reading tim cook's performance. i get upkates every day.
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that means including this morning. we have this weekend's apple numbers. it's better than the chinese communist party numbs. chinese communist party numbers, versus tim cook, cook says he's experiencing strong growth. he said it's accelerated in the last two weeks. accelerated. >> right. >> so, i mean, we may think that china is terrible, but these numbers say that one aspect of china which is perhaps the most important when we get to what's happening in our country because we're not a big seller of iron oar is that this consumer company is experiencing acceleration in its business in china. we have to compute that in along with the trading halt in the s&p level 3. let's say it's not our country. it's their country, but we've had spill overs. we're going to here stories
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about firms that are poorly positioned. >> sure we will. and there's selling going on simply because there's selling going on, and i'm sure there are risk managers saying your value at risk is too high. take stuff off the table. that is happening. i'm sure there are funds and various things. moving the euro versus the dollar last week was odd but maybe it's connected to overall trades taking place. i happened to speak to any number of market participants this morning, those who run big hedge funds. august has been a bad month. there's no doubt about it. that said, i did not here anybody really questioning the underlying undermefundamentals economy at this point. simply saying the multiple is down a number of points here. we've got the ten-year below 10% which would argue you could have a higher multiple than you previously did, and they're still talking about the s&p trading at 15.6 times expected
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eps. >> dow would be at 14,000. 2.75% dividend yield with a two-point ten-year. i know this is going to sound insane. you're going to do what i'm going to do at the end of the way, which is put some of my retirement money to work. i did that on friday too. i don't know where the bottom is. in the end, i have retirement money, and am i going to say i'm waiting for the big one? i'm not putting it all to work, but i have no choice. sometimes when you're all cash, you can say i'm going to stay all cash because my principle is that the fed has to raise but i can't go there. >> speaking of the fed, here's summers today in the washington post saying what he's been saying far while. no time for a rate hike saying there may have been a period six to nine months ago where it made sense but it's now moot. people are saying this would be
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the time where you would say they know nothing only they have nothing this time. >> i think -- there are always things that they have. it's interesting. the chinese are able to sell every single bond they want if they wanted to come in. i think that mr. buller used the term sanguine about china. i find that to be counter intuitive. i believe they have to decline if only because i lived through '97 and '98 and i made a strong point in '98 that we should not be impacted by this. >> but there's no way they can raise in september. >> well, you know what? don't you think it would be great to hear them say that they agree with the imf? the treasury secretary came out to talk about monitoring things. i would put it in the reassuring
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category. >> if they say we're not concerned and we're going 25 basis points, that would do what? >> destroy it. there's no question. >> there's deflation. how can you raise rates in the face of that and what's going on -- >> because they know nothing. at 17 rate increases going into great recession. that was the second worst downturn in our country, and it was obviously bad to do it. and mr. bernanke was a good fed chair. yellen, it would be helpful if she came out -- >> this is not that. >> no. but i am saying it would be. how about these use october 5th of 1998 when greenspan felt -- >> cut us 50 basis points that day. >> you can say i know all the gray beards are saying they can't do that because they've
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cut to 0. >> we'll start to hear quantitative easing. it won't be long. >> and, again, no reason to be sanguine because we're down a lot. if you earn the largest stock in the kworld, apple, and i read you this statement from tim cook and you still want to sell it aggressively at 98, i say be my guest. ten times, nine times without cash. >> right? >> the last i looked, that's what you would get from a classic heavy clickly cal. >> you said last week you wake you up when ge started to yield 4. i assume you're looking at those today? >> i'm not napping but i think you would wake me from my nap. ge is one of the situations where you actually have chinese exposure. 27 out of 30 dow stocks have overseas exposure but largely europe. most of the companies that
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reported this quarter were using 110 on the fse and we're now below that in terms of the euro being stronger. i could tell you, i know this is odd. you would raise numbers for most of the s&p right now. >> you think about all the things done at ge. they've been focussed on trying to get the stock price up. huge move to basically divest ge capital and he's got a 23 stock price. that has to be an enduring frustration. obviously, this is a broad sell-off. ge is caught up in it because of parts of the business but wow, given what they did this year and his focus because he's got a few more years and that's it. it's got to be frustrating. >> neither china or oil that leaves one fifth of the company to be china and oil. that's too much. >> you say we don't know where the bottom is. we had e-mails this morning, and aair yan talking about the wedge between confidence in central
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banks and fundamentals and how the wedge is being removed. why would you not wait to see something more dramatic than what we're seeing this morning. >> i'm not talked about committing all your cash. i think if you're in margin, you'll be taken care of by a 2:00 margin clerk who's not going to assess your relative worth and just decide you're out. but i think that you kind of fall back on the idea that this is still a collateral, not systemic risk. systemic risk meaning that those of us who work for a company at the time are concerned about a paycheck or worried about atms. >> everybody wants to relive the last time that we had this kind of a move, but it's so different from '08, '07. >> so different. >> the credit markets were the real story. >> and cash levels were nowhere near where they are or household balance sheets. >> and there was a seizing up in this country. there's nothing comparable going
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on right now other than the sizable correction. >> i think that's right. >> although you always have to wonder and be concerned that they there may be something we're unaware of, but i have seen no sign of it. certainly high yield has been hit on energy, spreads have opened up there. we know that. we've been watching that for some time. >> these s&p futures down almost 100. jim mentioned the circuit breakers. we'll watch at the hope. the first circuit breaker is 7%. that's 138 points on the s&p. that triggers a 15-minute halt. level one. level two is 13% which would take you to 17.14. level three, 20% would be 15.75. so that's where, and the nyc invoking rule 48. that allows the designated market makers not to have to disimnate markers before the bell. >> i think these are all important.
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i'll echo what david said. theoretically if you were to just land from mars, i know because stan drugger her used that example. you would be thrilled is going to hit a low. you would be happy if you're pepsico where you have most of your raw ingredients coming down. you'd be happy the jeuro is lower. downturn is broken but emotions are taking hold. obviously people are thinking panic is a terrific strategy. >> here we're talking about the futures. we're talking about hedge funds and others who play in the premarket. fundamental buyers don't typically show up in the s&p minis. >> not the first day. they come up in the second day. >> i'm trying to get a gauge into how much that decline in the s&p 500 premarket can become self-reflective. clearly it already has given what's gone on this morning as
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we worsen as we get toward the opening bell. >> i think we have to wrestle with the idea that not all stocks should be down equally. if you're sitting there and running kroger in cincinnati, you're not sitting there as you would in 2007. i'm concerned about our consumer. i'm not saying kroeger -- they're smart people. they sell on a supermarket and that's similar today as it was thursday. >> if i own hmos, why do i care? >> you care because your stock is a financial decline. >> only because of the impact of selling as opposed to any fundamental hit to the business. >> housing starts decline given the fact that there's a demographic change. people aren't going to stop having children. they did in 2007. >> of course not. >> again, we're all cognizant of what we see on the screen. if we just take counsel from our screen, where's the value added? i think you have to think about
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i know this is extremely short-term in itself. wednesday, thursday, friday. let's say we call warren buffett. we're not. but do you think he would say my core businesses are all down this month? >> do you think we would have sent $30 billion a few weeks ago if he thought things weren't going well at all? >> no. >> in the deal with precision cast parts. we questioned it at the time. maybe not so much now. >> boeing is, precision cast parts a major player. they are levered to china. now, obviously -- >> and also maybe the fuel efficient planes. >> very true. but, remember, i come back to here. let's look at a home depot. home depot started the -- if you go back year over year which i
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think is important to recognize. you're talking about a year ago at 86. should we repeal all of home depot's points? if we went to the 52 -week lows of every stock, we would be at 14,750 on the dow. there are a couple of stocks to worry about in terms of the dividend. caterpill caterpill caterpillar? chevron? probably. chevron is committed to the dividend. exxon? no. they were set up for this. >> now you're getting to some of the bright spots that some of the desks have tried to put out. jpmorgan calling it a reality check. they say a number of important variables are not confirming the new variables. the latest earnings dynamic are not the reason for the market fall. commodity prices are not far from '08. china short is a crowded trade. is that what you're getting to?
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>> yeah. i think they're all second-day things. emotions are riding high. you know, i wish my emotions were riding higher. then it would be more in keeping. >> well, let's fast forward a bit into the trading day today. is there a point at which there's something you see that you say i want to start picking some things up? >> i think that's a great point. >> if i'm going to own them for a while, and what kind of names are you looking for? is it purely defensive? they've been shooting the generals. that's apple, facebook, i mean, you name it last week and what we may see today. it's easy to do that. >> why don't we extrapolate. look at the numbers now. if verizon opened at a 5.3 yield, that seems attractive. procter, i don't like the quarter. intel, i don't know, it seems solid enough. mcdonald's was in the 80s before but that will yield 4%. that's intriguing.
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coca-cola will yield 4%. >> especially with the ten-year below 2 %. >> no one is going to look at these now. we trade as an equity class. people feel it's damaged. when the smoke clears, we're still stuck with the idea of what do we do with our cash? what do i do with my cash in my 401 k? do i wait until it's really down? do i wait until i see a 2009 scenario? i can't do that and i don't think i'm hay loan. i think a lot of people are waiting. we had a huge amount of money pulled out of this market this year. we do not make that much money in bonds. again, if the country that's the epicenter of this decline is china, i would have thought that they would have seen a dramatic deacceleration in apple iphones. that's a good enough indicator to refresh. tim cook saying it's accelerated. >> although the bounce we got out of the e-mail lasted about
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eight minutes. >> that's typical. i say you sell the dream and buy the truth. to me the truth is apple is doing better. do i like ten times earning stock in some will say that's as of this morning. how about tomorrow? is tim cook going to issue -- no. >> what would you look for as a sign of a bottom from this correction that is now, what are we down about 9%, maybe, a little over? >> how about don't you think we can extrapolate to the worst of the situations which would be 2011 when we thought italy at 7% was going to go bust in stl there there was a 17% decline. >> and that was every day coming in and then, of course, draugma draug gi. >> we traded during 2011. china is -- i know it's hard to
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say that the second largest economy is a contained economy, but they are exportered of things we tend not to be buyers. there's a lot of companies that sell a lot to china. one of them being apple, but i'm struggling with this up to date information, i guess is what i'm saying. >> any number of things we discuss here, that always get impacted. activism, carl icahn is getting on a board that he filed on not that long ago. >> on june 24th th, he said i think the market is extremely overheated. >> he's been in energy which is the most beaten up and his portfolio has suffered. it's a high-class problem when you have over $20 billion. >> activism strategy doesn't matter right now. bill ackman moving in on on the leez. >> mondelez sales are probably flat but the raw costs are lower if the commodity decline
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continues. >> merge if you continue to havs like this for any number of more di days, you don't know when it is, things will calm. the pipeline, it's true. it's been poised for a great deal of activity even before labor day. people were saying are you in? make sure you're in. >> is this preseason and after labor day the actual playing starts? i mean, a lot of people are off, obviously they're coming back to work today. >> you don't think that's a major part? >> no. i think you're scrambling to find senior people at martha's vineyard. i look at what david is saying about the decline in mergers. to me the decline is the 140 plus companies that were valued at a billion dollars in this market, this waiting in the cue to the ipo market. those i think are going to be revalued as much as the people
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who are involved in venture capital. they tend to try to be oh blif vous. they put up a good face. >> you have to go off public market values. this will be interesting to watch. >> if you're just joining us this morning. you're looking at what will be an historic sell off in about five minutes. s&p is poised for the biggest drop at the open since september of 200 8. it will push us into correction territory. it's coming after the dow lost almost 6% last week. it's only done that 17 times since 1979. weeks like last week where you lose 1,000 points in a week does not happen a lot. >> no. remember, the week before the crash in 1987 was one of the worst weeks in history. i remember coming in and it being on that friday ahead of the crash and saying we've already declined a huge amount.
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it was one of the worst weeks ever. it didn't matter. nothing matters today, because panic mode is in. now, i hate to fall back to a traditional what i've used for the last 20 years which is bristol meyers. do you think it's impacted? it could go down more. we're taking out the october lows convincingly. do we wipe ourselves back to 2011. i find that hard. our employment wasn't that good. there was weakness in the consumer that we don't have right now. the consumer is strong. >> should get stronger given the strong dollar and weak oil and low interest rates. >> toll brothers, will they have a worse quarter because of this? they serve properties over and maybe there are people on wall street who fear their jobs. >> you've said housing punching above its weight is not enough. 10% of the economy is not enough. >> we need more.
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i still believe it would be helpful for yellen to come out. maybe the fed is irrelevant at this point. people like to talk about it because it's easy to talk about. i'm trying to compute where the dow is and i do not come up with these numbers, dow down 800. it's very hard for me to think that a verizon is going to trade to a 6% yield. i just find that hard. >> caterpillar maybe because it's linked to china. >> it doesn't make sense to you. it does make sense to people who believe that this entire period of growth has been an illusion through the prim of kqe, and tht prism is being taken away. >> they should tell everything they bought, but they didn't buy anything. the problem is that 403 out of 500 s&p stocks on friday were still above where they were. you'd say that these people who sat it out, well, they missed the rally in 403 of the s&p stocks. hindsight is 20 /20.
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and everyone who has been disciplined has to call into question what discipline meant which means i think points were gettable. i stopped liking the setup a little bit. do i like a setup when the market goes down? mark laihains, at one point he d maybe this is overdone. there's a level where it's over done. >> easy to see in hindsight. i don't know if that's '97 and the s&p. >> we don't need the old, the fed chief to come on 60 minutes and say we're done with the bank failures. we spent a tremendous amount of time and money rebuilding the balance sheets. >> it's far better than it was five or six years ago. >> i did the unfortunate thing this weekend of looking at the chinese, at what's in the chinese index. >> who knows? >> you know, the one that's l r their nasdaq. >> it would go down another 8%
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in china. the fact is by doing the things they have and not engendering confidence, they've actually killed more confidence. >> yeah. >> and they clearly are not in control of a market they wanted to be in control of. >> there you go. the chinese are revealed as a government who can't stop a decline. i'm using a 2200 price target for those shanghai index. that's 1,000 points from here. you could get that tonight. if you get that, what are we looking for tomorrow when we come in? wow. china is giving up the whole game. now they're going down? i don't know. if you have all cash, why wouldn't you put something to work unless you're really fea fearful of systemic risk in our country. i'm not. at tend of the day, apple is down 10% knowing they're doing well in china, i don't know what to say. am i waiting for apple to yield 4? i don't know. i'm not waiting. >> you're not waiting?
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>> i guess -- i don't know. i mean, tim cook's information as of last night. maybe it's changed. it's 9:29. do they buy a lot of phones at midnight? >> there's the opening bell. and the s&p at the bottom of your screen. we'll watch the circuit breakers again. look for the s&p. if it falls 138 points, you'll get that 15-minute halt. there have been 19 s&p corrections since world war ii. the average decline is 14%, and the average time it took to bottom, five months via s&p capital iq. that is what some are fearful of is it's not about today or this week or about going into labor day but even if we get a bounce in the next few days or weeks that september and october will be tough. >> in 1987 we weren't able to recover for many months because we felt there had to be have
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been something hidden. it turns out it wasn't. how bad is credit right now? you have always taught me to look at credit. >> i don't think it's that bad. spreads have widened in energy names as they have the funds that were set up to buy a lot of energy debt earlier this year. you know they've had their faces ripped up, so to speak, but beyond that, nothing i've heard indicates the credit is that bad. what is bad are some of the high multiple high fliers. i'm looking at celgene down 21%. netflix, down 17.5 %. >> celgene has a lot of cash. i don't think the forecast they put out is based on melanoma is unreasonable given the fact that unfortunately disease does not -- is not cured by decline. i don't mean to make light of that. i'm saying it's hard for me to
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say that you don't buy it down that much. what are you waiting for tomorrow? does it drop as much tomorrow? >> you've got facebook down 14%. apple down over 11%. the generals and the highest multiple. well, apple isn't a high multiple name, but some of the high fliers are really, celgene and biotech, are getting absolutely annihilated. >> i have to tell you. remember, there's dreams, and then there's reality. do i think that the numbers that the ceo of celgene put out are wrong do we decide the whole p/e is lower? yes. do i want to buy at interest rates where they are and a dividend yield of 3%? i can't say no to that. >> if you're wondering what the biggest point loss for the dow
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ever was, a point basis, september 29th of 2008, down 777. this is, obviously, well below that. more a minute we were down almost 1,000 points. >> i think that's an interesting figure. what was going on in the country that that was the center whole 1933, 1934 conceivable situation. it's very interesting. tomorrow we'll come in and we'll look at these prices, and there are some people who are negative who are going to go positive, and there are some people who will have to be changed. nothing will change. >> i don't understand some of these moves. why is verizon down 13%? >> because it's a machine. it's a machine. it's an algorithmic machine. hey, it is. and verizon, i mean, we go back. let's look at verizon's low. you're at it.
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>> the dow is down 1,000 points. and the losses on some of these names, unh, verizon, ge down 13%. >> i don't -- this is, i have to make some phone calls. these are -- >> you have to find out -- >> these are enormous moves, and when you see these kinds of moves, people it becomes self-fulfilling and then everybody is like all right. even though i see real value, i'm not going to take a shot. >> how about -- >> verizon has backed off a bit. it's down only 9.8% but some of the moves are dramatic and enormous. >> jim, comparisons to 1987, today and then. >> in '87, we were very unprepared. we did not have circuit breakers. we had a fed that wasn't that focussed in terms of the day today. we have that now. and in '87 we were up to 29
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times earnings going into the week before the crash. 29 times earning was expensive. we're not that expensive now. what i'm bringing up is clinical and nonemotional. i think clinical comes into play a day or two from now. people say i got a chance, i've waited and waited, and i feel like i have a chance to be able to buy. my father passed away in november, and he left some money for my kids, and i've been waiting for the big one. is this the big one? i don't know. it's certainly noticeable. what am i going to do? i'm going to wait for the super big one? that's hard for me. >> black monday, october 1987, the dow closed down 2 2%. it was only 500 points at the time, but it was 22%. this is 6.5%. you're nowhere near that. from a color standpoint, you might ask what's the mood like on the floor? there's more traffic in terms of market makers making their way
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from post to post but the open was kind of like the open we see every day. >> let's go back to 1987. that was not the monday that monday. the bottom was tuesday when there was a plunge protection that came in. then we stayed at that level for a long time because we had to believe something was lurking. turned out nothing was lurking. i think there are per ma bears e-mailing me saying i'm too sanguine, this is something we could go down 25%. >> i should point out. those moves in the first minute were so dramatic and we're well off the lows now. verizon, which had been done, i saw it down over 12 %. it's now down 4%. celgene was down 21%. it's now down 10%. the volatility is extraordinary. >> like i said, that was that preseason versus keeping the regulars in. >> some of those moves, i haven't seen moves like that since real crashes. but we're coming back fast.
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not to say that we aren't down dramatically still with an almost 5% decline in the s&p. apple down 6%. it was done 11% at the open. >> tim cook sent me an e-mail this morning. i regard it as reassuring. look, when you have these situations, you have a lot of younger people who didn't trade through the crash. you have other people who think the only time you get the declines is when you have genuine systemic risk. i'm not asking you if i should put my money in jpmorgan or treasuries. i did put some money in treasuries in 2008. >> i remember you getting on the phone with us one morning and you were a fan of going to the atm.
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>> yeah. on nightly news saying, i don't know if my atm is going to work, and that was after the tarp was rejected. that was poorly received. >> i could imagine. but there are some questions being asked then. we can all remember those conversations. am i better off? what's the value of paper? what should i bury in my backyard? nobody is talking about that or questioning if we're having a down gdp. >> cvs down 20%? will they do what's necessary will their numbers do down because people are healthier and stop brushing their teeth? >> a lot of these are strongly performing names through the year. there's one name on there that you could argue, all right, it all lines up for that to be sold. >> you're going to giver me free
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port. >> i am. >> sold to you. >> again, not making light of it. it is so easy -- if i were younger and had not traded through '87 and some of these other crashes, i would say i have no idea what's going on. i am telling you the machines can do these kinds of things. jpmorgan, let's use that. it traded at 54 within the last year. is it right that it is trading to the 52 -week low. i could make the case selling it down to 54. but it's stronger than it was a year ago, and i do not think they are levered to chinese banks. >> i'm going to make a couple of phone calls. i think i should do that. >> i think you should. >> you are clearly not in the camp that says a recession in emerging markets makes its way here? that's the one thing the bulls cannot answer yet. >> i think -- >> if a recession hits. >> it's funny. there's a company that reports this week.
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i think it's emblemmatic. ulta was at 120 today. it's at 150. i would have liked to have gotten those 30 points for a company that is a beauty parlor where i predict that people will still get their hair done. they report this week. a bear would say jim, that 120 to 150 move, you shouldn't have taken it. but if you put an order in at the opening, you would have gotten that. >> how much of your mind is funds starting to fail and orders in big liquid names not going through. >> that's possible which is why i said tomorrow might be better than today. the chinese government, they have to sell $1 trillion in treasuries, and they have to stop doing whatever they're doing. and start facing reality. if they do that, their equivalent of the s&p goes down and we'll come in and say why didn't you tell people to sell
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apple at 95. what were you saying? i say if i bought it at the opening, i'm up nicely, but i recognize that if you are margined, you got a bounce and you'd better use it. >> the brief conversation i was able to have, a lot of stocks were not open at 9:31, and so when we were at celgene down sharply or verizon or apple, they were not open. they were not really -- that was still -- the indication, so to speak, but a lot of things have not been opened. or are just getting really started. >> okay. let's use celgene as an example. >> throughout. those were not representative of real trades. >> but let's say celgene is selling at 10 times the 2020 number. it's not that bad. that is not -- i'm looking for dividend yield. >> it was down 21%.
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>> but -- >> down 15%. that's a great opportunity to sell. i think that's an opportunity to sell. >> ge's yield 405. cat, 402. the move in corporate yields -- >> verizon doesn't do a lot of china in china, i don't believe. >> when you were in china, i called you with verizon. >> you do have to bring your own special phone to china, because you bring your actual phone, they'll take everything from you. >> there are a couple of companies who will do anything in china. but i look at some of the dow stocks down, and i think could they be down tomorrow? absolutely. would you like to buy something like i want to put 401 k money to work? i don't know. i mean, if i'm waiting for the big one, did we revisit what we had at the opening? >> i think a lot of the stocks were not open. they were not really lining up,
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the actual level of buyers and sellers to indicate trades taking place, but looking at it was frightening and now looking at a market that is still down almost 4 %, a dramatic decline, nonetheless, feels a lot better than it did only moments ago when you had certain companies that appeared to have their stocks down as much as 20 %. >> i was out with ere inburn et and said i thought it was ridiculous. that was a break down of machines. they break down all the time. they could do it later today. it's a long day. it's a long day, and it's early. >> what do you make of the idea that mutual funds have historically low levels of cash on hand and as redemptions come can in today, they're going to have to close positions? >> that's why tomorrow is probably a more thoughtful today to put money to work or maybe at the end of the day, i think they use futures to recognize that
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they're going to have redemptions. but the dow down 3% does not fit my theory of total downside. it should be down more than that. because that's equivalent to the 1997, 1998, 2001. we should be down more. i think 15,900 is a little too high. >> i haven't seen this much activity in a long time. i'd love to see what's getting open and what's not. bob is out there. >> buybacks come in. >> they will start to come in. >> down 3. this is not that bad. 550 after 500 is not that bad. if you have margin, this is a nice opportunity to take some gains. you're up a huge amount on tesla. tesla is not bristol meyers. shocker. now, how about an snl those guys who got the price, the ones who
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sold at 92, how are they feeling? they feel like geniuses? and now, by the way, you can say i'm back to 100. i can ignore what tim cook says and blow it out. what does tim cook know is the information is only last night. today could be a weak apple signup today. today may be a day where activations aren't as strong as friday. do you want to play that game? >> dow is down 534. for a minute, we were down almost 1100 points close to the open. >> would you be willing to work with me tonight at 7:00 p.m. i have a feeling that might happen, yeah. >> let's get to bob and see what's moving on the floor. >> it's been an interesting morning. we moved 500 points on the dow from the lows to where we are right now. they did invoke rule 48. rule 48 allows the designated market makers to essentially
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wave price indications, and that basically makes it easier to open stocks. a lot of designated market makers are opening their stocks manually. it's a little unusual, and some of them still have an open. the gray ones have an opening, the yellow ones and green ones have open. not everything is open. quite a move at the open. this is a good time to review the circuit breakers that we put in place back in 2012 after the flash crash. let me point out what is going on here. so you'll have individual stock circuit breaker halts when the s&p drops 7% and 13% before 3:25 p.m., so between 9:30 to 9:35 a.m., you'll see the same thing that's been happening here. so a 7% drop would be 1832. we're a long way from that. and a 13% drop would be 1714. after that if the s&p drops 20%,
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trading halted for the day. by the way, after 3:25, no halt in trading in a 7 and 13% drop. between 9:45 and 3:45, there are individual stock circuit breakers. no you get a halt for five minutes when there's a price decline of 5% or more over the five-minute period. this has been a successful way to deal with market gyrations in individual stocks. there have been some dramatic moves this morning. my understanding, and i'm not at the ford post. ford was halted on the up side. the stock rallied suddenly off of the bottom. we're getting some circuit br k breakbrea breaker kicking in. these work on the up and the downside. elsewhere, there's ford. you can see that move there. now just still down 5 .6%, but it was halted and coming back on the up side. not just on the downside.
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right now all the big market leaders are on the downside. it's really sort of pointless to put them all up, but netflix, amazon, go pro, down. these were much weaker about ten minutes ago. the banks have been a subject of interest. they have been weaker for a while now. they are down as well. we were down notably more than that. i think question for today is if we're going to get more follow through. there was anticipated attempt to buy on the dip because the feeling was there were a lot of panic sellers coming in from europe right at the open. obviously some people saw this and bought very heavily. so far that has been a good bet. everybody has anticipated a midday rally. the question is how we do at the close. if we close around these levels. i think a lot of traders will consider that a victory and some of them will be making money. we're starting to see stocks open. there's a lot of the market open
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now. now down 621 points in the dow jones industrial average. >> thank you, bob. do you agree with bob's point that a close around here is considered a success? >> i think that's a call good. i always caution people that there are margin calls that are one and two, and there's always people who got the wrong side. there was a lot of margin get. maybe if you want to put some money to work here, today is the day that you want to -- you should wait until 3:40 when the buybacks aren't there. >> it's about the time laockhar speaks. >> he could probably call for tightening. how timely were the comments at 3:00? am i making fun of those people? you bet i am. they are of no help of the situation whatsoever. >> for were some of those things that were making my eyes pop out of my head when i was watching some of the quotes here at 9:30. none of which i think are going
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to end up even being real trades. celgene was never down 2 1 %. verizon down 12 %. that was scary, to say the least, but all of the stocks are dramatically higher now that they seem to have found sellers and buyers. netflix, and others down dramatically. it's down over 10%. i don't want to make too much of this. the s&p is down over 4%. certainly a significant correction taking place. but when we looked and saw ge down 11 %, verizon down 12 %, apple down 11%, celgene down 21%, that does not appear to have really been the case. >> and netflix is back to where they were before they reported the spectacular quarter. no one is going to care about it tonight. i would sell any oil stock today. we had a statement from iran
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that said we're going to pump at all cost. we have a president that's pro getting iran back on the grid. i would sell those. if i were heavy in stocks, i would probably sell, try to lock in some gains. i don't think that's wrong. >> meanwhile, we're keeping our eye on the bond market. it's been hanging onto a one-handle all morning long. let's get to rick santelli in chicago. >> reporter: good morning. how do you spell disproportion gnat? that's what's going on. consider. maybe it has a capitulation feel at the low. down here, here's how you define that. at noon eastern, they look at a range like today, and let's say the dow has a 1,000 point range. if it's less than ten away, they look at that as a capitulation
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trade. okay, the dow is down 709. what are ten-year note yields down? about nine basis points in tens. five bay si points in 30s? i think the best way is reconcile it is three weeks. it's about three weeks from this week that the fed is going to make its move. and, obviously, there's a good helping of adjustment in recalibration going on, add in china, add in foreign exchange. the dollar value is changing quick. let's start at the clues. if you take a chart ten-year minus bundle back to february, notice how many times we've talked. if you start to read 60, meaning ten-year rates drop. that's important. it's linked at the hip in the 150s for months. second clue, when we talked about settlement of 30s at 275, we said when we close under 275 is when this thing gets momentum. that happened on the thursday. the dow was at 15,550.
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how would you like to sell those prices? let's look at charts along the yield curve. april for fives and tens as you see on the following chart, foreign exchange, the great leveller, even though it's managed as well, all those countries in emerging markets that have all the liquidity splashing on their shores and games being played by the communists, wouldn't you love to be a fly on the wall trying to decide what levers they pulled that they shouldn't have, or a fly on the wall in januaret yel. that's some of the most serious conversations of the day. but back to the euro versus the dollar. haven't been there since january. what do you think on the dollar index? when was the last time it was down here? january. there is no alternative. there's also no alternative to how emotion treats equities. back to you. >> we'll talk to you in a few
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minutes in. we'll keep our eye on oil now close to 38. jackie is here. >> we're down 2 $.18 on wti. trading at $38.33. the session low this morning was $37.75. this is one of the slides that comes as a result of the die ma'am ma'amics that we' -- dyna we're seeing. traders are concerned about global growth and demand. they've also been telling me expect to see choppy movements. we bounced off the session low. some people will come in to make a short trade. directionally speaking, we think on the floor, the sentiment is that prices are going lower. if we close below the dollar level, it's the first time we've seen a close at the 3 handle. it is significant. at this point traders are starting to talk about a two handle. something that was in the cards
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but nobody was really looking at realistically. when the slides happen, they tend to come quickly, at least in the oil trade. a lot of this will depend on what happens in stocks today as well. >> jackie, thank you very much. jim, your thoughts. >> do not use market orders, people at home. the market is not -- you're not getting reports. when you're not getting them, that means you're picked off. do not be picked off. everything must be limit ordered. do not issue a market order. second, obviously i would devote my entire to show. i'm going to talk about the idea. i'm going to pick a stock and do dream versus truth, hope versus truth. i want to point out that once again if you look at stocks and try to figure out which ones are domestic and have the least exposure to china and are down big, those are opportunity. if it's oil, no, no opportunity. we don't know where oil is going
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to symptom. n -- stop. you do want to take your queue from some situations. i want to default the apple only because we have some current information there. if i could buy apple at 95, 100, betting that tomorrow will be a down day, i'd buy a little more. >> you would? >> yeah. >> and you wouldn't consider it granular, that e-mail from tim zmo cook? >> nine times earnings is not granular. i remember in 1997 i was interviewed by charlie gibson, and i had to stop him in order to be able to put in an order for my 401 k. killed it. i cleaned up. we could still go double. in collateral damage we were down 12 % from the high. in 199 8, that was bad, reflected a big hedge fund blowing up. we were down 17% in october of
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2011. all those in r in play because they're all collateral damage. not systemic risk. use limited orders. you're going to end up buying some stock basically flat because you got picked off. >> sure. >> do not get picked off, people at home. >> what's on mad tonight? >> okay. we're going to look at, i was going back over with my head writer, we're ripping everything up. it's going to be $1010 -- 100 devoted on what to do. it's a long day and there will be people who need to sell between 12 and 1. there are mechanics broken down. >> the mechanics of our market now is so different than five years ago. whether it's driven by the algorithms or the etfs. it's hard to quantify. >> it's a stock market gone mad
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but not an economy gone mad. in 1987, i remember thinking, okay, what is happening in the u.s. economy that we could be down 50 points on a monday -- 508 points. it was nothing. >> we'll see you tonight if not before. mad money. let's get to bob who can recap the last 20 minutes. >> reporter: it's been an interesting morning. a lot of people running around. a lot of traders standing here. a numb of stocks that still haven't opened. they invoked rule 48 prior of the open. that allows the designated market makers to open the stocks without desim nating price indications. they normally do that. this enables them to open the stocks a lot quicker. some of these traders are opening these manually. they don't normally do so because they've seen some
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strange and interesting price dislocations. some soof the stocks are still t open. i'd say the majority have. we've had a 500-point swing from the highs to the lows in the dow jones industrial average. i want to point out we've talked about these circumoit breakers this morning. there were buying opportunities. i don't know if you can put up ford intraday. ford dropped at the open, and then there was massive amounts of buying as ford hit lows, and, actually, triggered a circuit breaker on the up side. there are individual stock circuit breakers that will hold trading on the up or downside. you can see it on ford. it plunged after the hope. people rushed to buy it and it halted on the up side because there was so much buying activity that occurred, and it looks like that's probably now open again. the indication of how crazy things are.
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what we saw at the open was a lot of panic selling, some people watched this very carefully and stepped in to buy. a lot of them have recovered modestly. if you put up citi group, a number of the banks dropped and have recovered. this is not true of everyone. you see citi group coming back. that was a dramatic decline five minutes after the open. some of them came down, then rallied back, and then kind of came down again. i think maybe google, it might be a good indication of that. we're getting a lot of rather dramatic moves. you can see google down, then up, then down rather dramatically. the oil stocks also all over. eog, for example, plunged at the open and also in an attempt to come back there. we're getting a lot of unusual price dislocations. you seat it up and down and down again. you want to watch the high yield
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market. jnk, plunge dramatically and came back. i can show you these kinds of charts all day. i think you get the idea. big declines and a rally back. still down. the question is how do we come out of this in the long run. i hope these charts indicate there are people who are buying aggressively with numbers down this much. that's the good news here. the question is whether there's enough buy-side interest to maintain the, i call it modest but it is a modest rally, off of the lows we've seen later in the day. it's going to be a long day and there are traders trying to get stocks that are open. i'll be down here all morning watching things. back to you. >> all right. bob. thank you very much. we do want to welcome sara eisen, simon hobbs to post nine of the new york stock exchange and welcome you to the markets on what is an historic sell off. dow at session lows.
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dow down almost 1,500 points. off the levels and hanging off the levels of last october. you're looking at yields on corporate names like ge close to 4%. ten-year with a 1.94. >> can i mention the euro is spiking dramatically. this may be part of the story as we work our way through the day. the euro is a major funding currency. if you're borrowing cheaply in euro and trading around the world, it's a sign of distress in the markets. it's rising itself in a funding currency, it may pomt the closing of other positions that are closing in the euro. the euro is up 7% or 8% so far this month. that's a major currency move and may lie at the heart partly of what's going on. >> above 1.15. that takes you back to february.
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>> bob was mentioning this and we talked about it while it was happening. some of the severe price dislocations. i have a feeling bob is going to be looking closely into that. while we are down 3.5% on the s&p, at the very open, some stocks showed, at least, huge declines the likes of 12 % or 13% for verizon or ge, even apple. it does not appear they were real trades taking place as those levels and those stocks had been fully opened. i have a feeling weev'll be looking more closely at what was going on. it set some panic, if i can use that word. when you look at celgene down 21% or appearing so. or many of those names have come back dramatically from what don't appear to have been real trades, not to say that we aren't seeing significant dislocation with the s&p. down perhaps more than some people believed it would be but
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3% looks better than it did at 9:30 when we were down 1100 on the dow. >> let's bring in tom mclennan, the editor of the mclennan market report. if people aren't familiar with you're work, they're becoming familiar quickly. you do tech analysis that has essentially called for a serious correction now. for months and even though i think you're looking for a short-term bounce, you said there's more pain to come in september. am i correct? >> that's what we're showing, and, yes, i think there's going to be a big bounce when you see the vix index go way above all the futures contracts. that always produces a bounce, maybe not to the second. we're getting a little bit of overthrow today on monday. everybody has had a whole weekend to start worrying about it. that's a great tell that a bounce is due. now, a bounce is different from a bull market. and we do still see a general down trend lasting until about
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april of next year. >> walk us through what led you to the call for this selloff, and what's leading you to think that the fall is going to be even worse. >> well, we have a great leading indicator that i discovered five years ago. it looks at data that the cftc publishes. it looks at the euro dollar contract. that's not currencies with the euro and the dollar. it's euro dollars which is an interest rate contract. when you look at the commercial trader's net position in euro dollar futures, that tells you about a year ahead of time what the movements of the stock market are going to look like, not perfectly just like a road map doesn't perfectly electric li -- look like the road. but it lets you know what you're going to see. i think a lot of the reaction last week was people trying to front run that big selloff that we've been looking for for almost a year now. >> i wonder if we should have paid closer attention to the dow
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transports, the hardest hit group. they've been showing pain for a while. that group, that includes airlines and railroads, is now down 19% from the high. it is almost in bear market territory which would be down 20 %. what does that tell you? the transports are leading us lower. what does it tell you about where we go. >> the transports topped out last year. the dow transports topped in late 1999 and they were in a down trend by the time the rest of the markets started to figure out there was a problem. i want to correct something you said. you guys, all of cnbc need to get a correction in your vocabulary. you've come to this belief that 10% have a correction and 20% is a bear market. a correction is any movement that's contrary to the direction of the prevailing trend.
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so you can be in an up trending market and have a correction that goes down. you can be in a down trending market and have a correction that goes up. a bull or bear market is when the trend is down or up. forget about percentage points as your guide post of whether it's a correction or a bull market. that doesn't help you know what to do next. you need other tools for that. i want to encourage everyone at cnbc to let that go. you should have a fine jar that everybody puts money in when somebody says officially in bear market territory. it's not a helpful comment. >> if there's a fine jar, there's a lot of things we could say to fill it up. september, how bad do you think it's going to be and why? >> well, september is an accelerated phase of what's going to be a long-term down trend that will last between now and april. it won't be a straight-line down trend. it'll have a lot of texture. this sell off in august is over
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duing the pace of what it's supposed to be doing. we need to bounce back up. we should have a hard day right after the fomc meeting. really, it's all about what i call the real fundamentals of what matters. there's only two of them when it comes to the oil stock market. and those two fundamentals is how much money are there and how much does the money want to be invested in this past week we saw a big change in number two when money didn't want to be invested but the overall fundamental factor that's going to lead us into the down trend is about the how much money is there part. generally with the euro dollar commitment did is saying there's a global liquidity crunch that's going to take prices down. the risk factor in that analysis, though, is if the fed does what they did in 2013 and starts at another qe program that pumps money in.
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that could ruin my expectations. >> very quickly, tom, do you have a level you're watching on the ten-year treasury note yield as we broke down as far as the bottom? >> we like to watch bond yields at the 30-year level and we like to compare it to crude oil. crude oil leads the bond market. at the point you see a bottom in crude oil, three weeks later you'll have the bottom in yields. i don't know the level, but i know you can't really get a bottom in yields until after you've got a bottom in crude oil prices. >> i don't know if people like your analysis or the way you schooled us on live television. we'll see you again. tom mcclenen joining us. >> and the words are always a little bit debatable. china is at the heart of the sell off.
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8.5% plunge in china leading us lower. joining us j stephen roach, and now with yale university. it's great to have you on here with shades of 1987 and 1997 and 1998. the world is looking toward beijing for a policy response. do they have the tools? >> well, sara, they have plenty of tools. they've been ineffective in arresting the market decline which is just overwhelming their capacity to understand the markets, let alone, put in the downside. their tools are better, i think aimed at focusing on the economy. they've made much better progress than most people think in rebalancing the economy away from a manufacturing toward more of a services economy, and beginning to get some payback in the long-awaited emergence of
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the chinese consumer. the market that ran up 145% and is now unwound 40 % or 39% from its peak since june 8th is clearly, has the head lealines. >> it's erased all of its gains, the chinese equity market. why unlike the federal reserve or the european central bank can't the pobc come in and shore it up and stop is bleeding? >> it's still up 40% year on year, only about 12% of the urban population owns stocks in china, and this is a fairly compressed bubble that did not really allow the broader share holding public consumers to adjust their lifestyle
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expectations commensurate with the inflated equity values. we're making a lot out of it because the spillover affects on us but in terms of the agenda of chinese authority, this is not the most important thing on their plate. >> is the chinese situation, stephen, the biggest thing on our plate? you know, only 2% of s&p revenues are made in china. these moves on the markets worldwide seem very big if it really is about china here. is it? >> i don't know, simon. that's a great question. i mean, you know, the markets have been elevated a lot by central banks around the world. there's something of a house of cards that's been in place since the crisis. we all know that. i mean, you know, we've had the weakest recoveries post any recession all over the world, whether it's the u.s., europe, of course, and japan, and the
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developing world is heavilily dependent on our weak recoveries. these markets have been inflated by quantitative -- they're taking the medicine away, and the markets are imploding, and maybe china is the excuse. >> for many people watching, this is agonizing. which the experience that you have, what do you tell people to do here? how long does this last, do you feel? >> hard to say. i mean, i say focus on fundamentals. ultimately markets will find their level as dictated by the fundamentals of the underlying economies they're trying to approximate. china is not as bad as the screen indicates today. the u.s. was probably not as good as it appears in the six-year run up after the crisis. there's truth in fundamentals. it just takes a long time to show up. >> on the fundamentals, stephen,
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obviously the u.s. is many way the best house in a bad neighborhood. an important thing to remember as we watch our stock market plummet today. the question is when do the stock declines impact the real economy? is there a fear that the magnitude of these declines could spill over to the real economy and actually drag down what has been a very fragile recovery? >> in the u.s., you're talking about? >> in the u.s. >> yes. it's a fair point. keep in mind, the consumer growth rate, growth rate consumer demand has been pathetic. we've been growing about a 1.4% average annual rate for 7.5 years. 1.4. it's a fragile consumer recovery. the balance sheet repair we needed after the crisis, we've made progress but we have more
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to go in terms of paying down debt and rebuilding savings. consumers are, obviously, vulnerable to a negative well shock if this continues to intensify, and that's been a weak link in this recovery. >> we'll see what happens much. thank you, stephen roach, the former chairman of morgan stayly ash. >> up next, the stocks that investors are buying today. markets clearly in negative territory, though off the lows. we opened down over 1,000 points on the dow industrials average less than an hour ago. ♪ ♪ if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for
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one of the worst dow opens in the history of the index. we were down 1100 points at the open. now down 362. one question is what are retail investors buying today? >> good morning. so our colleagues at cnbc.com look a survey, an unscientific one, but, still, wanted to take a look at what readers and viewers thought of the current market and the conditions. we took the survey over the course of this past weekend given the market turmoil. here's how these thousands of requests have been boiled down. 16% are not buying anything today. they're just going to hold and
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wait and see what happens. we're down about 375 points. down about 1,000 earlier. 37% said they're selling nothing on monday. and then 4% of them said sell everything. the other 40% of people said they're going to do a combination of buying and selling. here's what's on the shopping list. first up on the buy side, what are people looking at? the buy list favorites, apple, number one on the list far buy to dip type of situation. facebook, disney, and netflix. those are the tops. the sell list favorites? apple, number one again on the sell list, interestingly. oil related products are second. and then bonds and netflix. netflix and apple both made appearances in the buy list and
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sell list favorites. it goes to show you these two stocks have become one of many lightning rods in the overall markets were where the bulls and bears are fighting things out. >> the good gauge of retail there. thanks very much. >> when we come back, art cashin joins us to help make sense of this selloff. the dow is now down less than 400 points. 388 points. that is still over 2%. the s&p 500 down almost 3 and the nasdaq getting hit the hardest. pain across europe as well. we want to show you what's happening across the atlantic where they're down more than 4 % plus declines across the region. a new season brings a new look. a chance to try something different. this summer, challenge your preconceptions and experience a cadillac for yourself. ♪
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we are retracing a lot of the losses. thankfully down just 300 points on the dow. let's bring in art cashin. i think the opening print on the dow is a lot of over 1,000 points. this has been an extraordinary hour. >> it has been. there was close to $4 billion to sell on balance within that, and
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that's a rather market-moving thing. although 1,000 points and 4 billion don't sound like they fit together. there were a couple of things going on here. in other markets, europe, in particular, where prices were down and couldn't raise cash. came here to raise cash. another factor, that on this program, a week and a half go q we talked about mutual funds having the smallest amount of cash in the history of mutual funds. i said the risk was if you began a bit of a selling spell and then people would start redechlgss, and they start redemptio redemptions. if you don't have cash to pay for it, you have to sell more stock, so then it's a self-feeding process. i think that's what we saw. >> to pick up the idea of international markets forcing selling here. the top 50 blue chips in europe were down over 7%. they are extraordinarily losses.
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not so much in london or germany but in the other markets. not just the your is spiking but the yen is spiking. both of which are major funding currencies and an indication if they're higher, of market distressed. and people being forced sellers. >> exactly. there's a lot of what we call the carry trade going on there. funding in tokyo and funding with the ecb is actually cheaper than here even though we're at a 0% rate. >> isn't what's going on here, they're pricing out the odds of a september rate hike. you don't expect it this year, and it looks like the currency market is catching up with you. >> i think that's about 30% of the currency move. the other is the relationship of the euro and the yen. >> when you were defiant and said there will be no hike in
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2015, did china occur to you? >> not so much china alone, but i thought the international markets were destabilized, and what i think we're seeing again and again is the emerging markets and their currency are borderline freightening. we look like we did in '97 in several cases. i go back to my old argument. the imf and the world bank told them no. if they went ahead and something like this resulted, they would lose credibility. people would say you were warned. why did you do it anyway? it's a scary move for them. >> i guess what do they do if it starts to inflict pain on the u.s. economy further when they don't have the tools? >> you heard me before. qe 4. >> when does that really become something we have to contemplate? >> if the economy begins to destabilize. >> isn't the underlying debate about the power of central banks and if they can do anymore?
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i mean, it's not a monetary phenomenon. money is cheap around the world and we're heading in the low direction. how much do you want to force feed when it doesn't have the affect you expect it to have. >> you're being logical. if you're the fed and you have a v no other tools, you repeat it one other time. >> we see the dow only down 1 .8%. the s&p has come back. when i was looking at 30 seconds after the open, did somebody sell verizon at 38.50. ge at $20 and a little more. we know the power of the quantitative funds. the algorithm says sell enanne you do, but people will say the dow was down over 1,000 points. was it real? >> my old saying is when you can't sell what you want to sell, you sell whatever you can,
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including your grandma's necklace? it looks like grandma's necklace ended up in a hock shop today. >> good to see you. thank you. >> you know it's a different kind of day when the dow is down almost 3 00 and that sales good. we were down almost 1100. we'll talk about where we're headed later after a quick break. it took serena williams years to master the two handed backhand. but only one shot to master the chase mobile app. technology designed for you. so you can easily master the way you bank.
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market is beginning to head into negative territory again. take a look at earlier this morning the dow was down more than 1,000 points at the open. we had cut the losses to less than 3 00 but we're beginning to accelerate in the other direction. a chief investment strategist with raymond jam and a senior economist with wells fargo are both joining us. >> we were at cnbc in the beginning of july saying our models suggested that the equity markets were going into a period of contractions. they targeted a plus or minus three-day session margin for error. the d the new york stock exchange is more oversold than after at the march '09 low.
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it's at the same thing we saw at the march '09 low. we're making a low. the question is if you get a v-type bottom or a sharp throw back rally and a retest. >> but this is a bottom? we're wnitnessing it now. >> today or tomorrow, and then a throwback rally. the only question is if it goes straight up or comes back down and retests the low today or tomorrow. >> you blinded us with a lot of statistics coming into that. what's your judgment on the nature of the trade after that bottom? >> i think we're still in a secular bull market. i've been in this business almost 45 years. i've seen this act before. this should not have surprised people. anybody that listens to the message of the market knew we were vulnerable. what is surprising is we're only 10% off the highs, not 20% off the highs. >> what is your take as an economist here? obviously everybody is very mindful not just of china but
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that the fed is apparently willing to move possibly in september and we have fischer going to talk to that over the weekend in jackson hall. from your aspect, are what are you selling clients? >> you hit it. the markets seem to be starved for economic data or some fed communication as to how they will look at financial market volatility, and what global developments will look like. of course, we do get that speech from fischer on saturday on inflation and monetary policy. but, of course, it's important to keep in mind that the underlying economic data in the u.s. is still improving on a cumulative basis, and we continue to see that overall inflation an inflation expectations are still very available. it's important to see how the fed will look at that, and we expect that the fed will give
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some indication if we continue to see markets sell off. >> we're back down over 500 points on the dow. down 3%, heading south again. you hear the talk that we need to see a healthy correction and pullback. that's normal in a bull market. it doesn't feel healthy when you have 500 to 1,000 point moves lower on the dow. how should investors feel about the fact that it's so sharp and violent in. >> it's sharp in terms of points. when you look at it in terms of percentages, you can go back to the 1930s and find similar type moves. i would point out that every 3% or higher gap down since 2001 like we saw this morning as led to higher prices, one month later. i think this is part of a bottoming process. you tend to get these wild swings at market lows.
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i think that's what's happening. >> how do you break it down further than that. coming in you had one-third of the s&p 500 in bear market territory down 20%. you had another third in correction territory down 10%. it's a different market depending on how you slice it. what's the play book for the second half of the year now given that? >> i think you have to take out a rifle approach, and i think you look at special situations. you can look at companies that have the highest sustainable free cash flows like i put in the letter this morning. we queried our analysts looking for such companies. there's a list of eight companies with high sustainable free cash flows. we think that's the way to look at things going forward. we do not think this is a crash. we think this is a normal 12% correction here. >> and you're drawing people's attention to the free cash flow as a dividend opportunity or because you're worried about
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stress and the ability to survive through that? >> companies that have strong free cash flow and, therefore, high free cash flow yields ten to do well in secular bull markets. that's what we're in. this is what you see at the tail end of a decline, not at the start of a whole new fresh decline unless we're in a crash, and i don't think we're in a crash. >> let's zoom out to the rest of the world and talk about what this means for global growth. when you see 30% and 40 % moves in a matter of months, stocks and bonds selling out, how do you recalibrate what happens with world economic growth? >> well, looking at the trade that's occurring right now, this is a flight to quality with the intention of preserving capital, and so when you put it to global growth, it really begs the question of what capital inflows will look like. if the trade is a flight to
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quality, we should see more capital inflows into the u.s. >> okay. we'll leave it there. thank you both for your time. >> you bet. >> up next, former fed governor, robert helder. much more on today's action and where we go from here when "squawk on the street" comes right back. (vo) me? i don't just wait for a moment. i watch for the perfect moment. the one nobody else sees. and when i find it- i go for it. (announcer) at scottrade, we share your passion for trading. that's why we give you the edge, with innovative charting and trading features, plus, powerful mobile apps so you're always connected, wherever you are. because at scottrade, our passion is to power yours.
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>> after a bruising week for stocks, where are experts finding value in this wild market? find out at trading nation. more "squawk on the street" coming up next.
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the worst day on several years on friday. the s&p is down 2.5%. selling the u.s. dollar with dollar yen above 118. crazy moves across assets. let's go to chicago with rick santelli. good morning, rick. >> reporter: good morning, sara. i have a special guest because whether anybody acknowledges it or not, we all know what this morning felt like. kind of '87ish. i was in this pit right here when it was the 30 of year bond pit, and robert heller said i could call him bob. thank you for taking the time today, and is there anything about today's action that reminds you of that fateful october day in '87 when you were a fed governor? >> well, it's certainly that breathless feeling when the markets started to open down 1,000 points, i think that takes
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your breath away. just like it did in '87 when it was down 500 points. in percentage terms, that was higher than today. >> absolutely. i'm going to hit you with something that's been a common refrain in the circle of my discussions. all we needed to do over the last several years was contemplate japan. very low pricing pressures but look at their economy. is there a lesson to be learned here that was missed by europe and the united states, bob? >> well, i think japan is a special case. japan has a very old population. japan, you know, it was not in the economy ready to move quickly. the u.s. has a lot more innovation. a lot more energy, and, therefore, the u.s. economy, i think is basically a lot stronger. japan had its great day at the
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end of the last century when they were catching up to modern technology. china did it in the early part of this century, catching up to modern technology and eventually both of them will slow down. japan slowed down first. china is slowing down now. >> bob, when i look at the comments i hear from many guests and traders today, it's about trickle down. there wasn't a whole lot of growth at trickle down when stocks were propped up to many different policies. certainly not the fundamentals at 100% continuity on fundments and now many are worried the crash in stocks will have an impact. why should it be different on the way down than it was on the way up? >> well, first of all, there wasn't much trickle down on the way up. the basic problem with the u.s. economy is really there's overregulation. new rules every day. banks are not hiring loan
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officers. banks are hiring compliance officers. >> let me stop you right there. i love this line of thought. let me interrupt you a second. okay. so when we listen to janet yellen and company, they always talk about things. they'll talk about biotech stock. she weighs in on whether the stock market was rich or cheap. she says they had to do something because congress didn't. after your comment, i think it is a naughty thing that the federal reserve didn't focus completely on congress and say, listen, you shouldn't be doing this, because we can't stop it through our indirect tools. your thoughts? >> i agree with you, rick. you said it very well. i can't say it any better. congress and the administration, the regulations that we are experiencing, that's the problem lies with the u.s. economy. we can't get to growth by just stopping what we're doing. >> and that is the cleanest
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shirt in the dirty hamper truth story. start telling it like it is, fed. bob heller, you're the man. thanks for being on the show. >> down 391 on the dow. want to zero in on the consumer discretionary sector. kourtney reagan has more on that. >> consumer discretion sector is one worth focusing on. especially in times of uncertain economic growth coupled with the biggest part of the year still to come with the holiday season. when it comes to the entire discretionary consumer sector, the s&p is down about 10.5% from the high. if we drill down to the three retail dow components, walmart, nike, and home depot. rl ma walmart has seen the shares drop 30%. nike down 13% from the its
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52-week high but still largely liked. even home depot, a retailer which turned in strong quarter after quarter, the last several, at least, almost in correction territory as well. a number of retail shares are off sharply from 52 -week highs but it didn't all happen over the last several days. the stronger dollar is playing a part too. retailers that sell internationally seem to be hit the worst. even those skews toward the high end. in the case of michael kors, the shares have been declining shedding more than 54% from the most recent high but down 5 % in the last two sessions. fossil shares also down 2.5% in the last two sessions but 50% since the most recent report. coach down 33% from 5 2-week high. not everyone is in correction territory. among the better performers if
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we can call it that, dollar general, tjx and game stop. as we've been talking about for some time, retail has been and continues to be a stock picker's mark market. not every stock is down as its neighbor but there are some commonalities you can find when you dig into the details. >> enand it looks like consumer discretionary barely positive. we'll have much more on that market selloff with the dow down 377 points. is s&p down 2.5%. the nasdaq down 2b .4 %.
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we are in the middle of a global market sell-off. the dow is down 354 points. at one point early this morning right after the open, we were down almost 1,100 points. let's bring in dan greenhaus. dan, you sit on the trading floor. what was the open like and how
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are we recovering down 343 points? we're seeing 100-point moves here by the minute. >> yeah, i think when you see a market open up down 100 points as the s&p did or 1,000 points as the dow did it's inevitably going to bring in some bottom feeders, so to speak, some bottom pickers. moves like that are really rare even in bear markets let alone bull markets, and so looking at the screen we have up now, it's no surprise the losses have been cut, the fact they've been cut by more than in half is a legitimate conversation. the fact we're not off nearly as much as we were at the lows is not surprising at all. >> are we looking at a good buying industry with all the major industry groups in the red and a broad market sell-off? >> i'll say this. the open was a really good buying opportunity. i think to the extent that you think earnings and economic projections haven't meaningfully changed in the wake of insert anything that's happened the last couple of weeks then, yes, it becomes a buying opportunity. i think the question now becomes how does the fed respond to this
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because as important as the micro has been, the focus right now is certainly on the macro and whether they go ahead and hike and, if they do, what is the language around that hike? i think to the extent this has reduced the odds of hikes not just in september but going forward then, yes, this becomes a buying opportunity. >> don, do you accept this is mainly about china? is this really the root cause of what's going on here? >> it's hard to deny that china certainly didn't spark this latest round of weakness but i would remind everybody of something that we all know and that's broadly speaking the s&p 500 hasn't gone anywhere in several quarters now. and so clearly china's devaluation, one's interpretation of the move, has been the reason why this last move lower has occurred. it's come in the context of an overvalued market and one that's facing the prospect of higher fed interest rates. you can certainly blame it on china, so to speak, but it didn't happen in a vacuum and that's the important point. >> dan, i don't know if you've
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had a chance to talk to your trading desk today, but you have a decent line into a lot of funds out there. i'm just curious as to what you may be hearing, a market like this selling can beget selling although, again, we're well off the lows, and i don't even count the open given how crazy that was. what's the chatter out there? >> well, i'll say this. first, let me say at the risk of propping up our own firm, we have better than a decent contact, but besides that -- >> really? you had to do that, dan? >> i would not be allowed back in the room. >> shameless. >> listen, it's still early. everybody was very busy on the open. i've had a decent number of conversations this morning. there's a lot of interest in the perspective, what were the macro conditions, what were credit spreads and financial conditions doing around those periods of time? people want to get a handle, and i would say, what i've been telling clients is really very simple. in the last 50 years or so outside of bear markets, the
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type of decline that you'd see culminating in this morning's open, so to speak, has only been seen three other times in the last 50 years, that was 1987. that was the 2011 debt ceiling crisis and one other one i'm blanking on at this point. it was more rapid than 2008 which, of course, doesn't count because of the bear market. >> i think the inevitable question we're going to head towards is given those very sharp moves and given what has happened with the japanese yen and the euro and whether that's at the heart of many of the foreselling whether or not inevitably someone's got into trouble here. >> someone very well may be in trouble. i have no insight into that and even if i did, i wouldn't announce it on tv. but, listen again, this is still a relatively modest decline, so to speak. the last letdown has been quite rapid and quite deep and certainly broad, but the fact of the matter is that these broad indices, whether the dow or the s&p, are still roughly, for lack of a better word, only 10% off
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their highs. i don't want to go into sort of the historical points about how often these things occur, but we're sort of of the belief nothing really has changed yet in terms of the economic or earnings projections and someone might run into trouble here, someone might have been too over levered. but for the average person watching your show and listening to me right now, all you really need to ask are self is where do i think the stock market will be in six months' time not six minutes or six hours. >> dan, i'll push back against you. what's fundamentally changed, china's economy has slowed severely and they don't have a grip on it from a policy perspective. there's a crisis of confidence that's spilling over to the emerging markets which is showing 10% to 20% moves in currencies without any coordinated policy response coming from there. given how much of a threat it is to this market, how can we see a bottom? >> well, listen, i don't know whether this morning is a bottom or this afternoon. i agree with you there, sarah, what this has done is reinforced
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the view in our view at least that china's policy response to what was going on in the stock market was haphazard. it's no surprise to see their response to what's going on economically is haphazard. in terms of the economy, though, several weeks ago we put out our quarterly conference call report. we listened to a lot of conference calls from industrial companies, finance, restaurants and the like and for the most part companies that were operating in china said weeks ago there was something going on there that wasn't right. it wasn't -- it was worse than you had seen in the last couple of quarters. i don't think the devaluation, so to speak, tells us anything that we didn't already know if you had paid attention to what a number of those industrial companies had told us a few weeks ago. as for whether this is a bottom or not, that's a much larger conversation we don't have time for. >> dan, thanks for weighing in, of course, on the sell-off. valuable perspective. with the dow down now 362 points, let's send it over to jon ford with a look at what's
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coming up. morning, we're going to continue to talk about these markets. all the major indices down just over 2% now but, boy, where we've come from not just friday down 500 points on the dow but earlier today that open was crazy. how much does china play into this and what does one big-time tech ceo have to say about china? more on that and these markets at large when we start "squawk alley."
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on wall street although we're still seeing big losses we are clearly off of the session lows this morning that had the dow down almost 1,100 points. right now the dow is down 349 points. s&p is off about 45. some of the big dow laggards, dupont, cisco, jpmorgan, travelers, exxon actually got down to $66 today. over at the nasdaq names down over 3%, netflix, yahoo! amazon, facebook, tesla. for a moment netflix was down 16%. and your biggest loser is baidu down close to 6%. the next thing we'll watch is the you'european close in about minutes from now. could we be in for round

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