11:00 on wall street and "squawk alley" is live. ♪ ♪ ♪ ♪ welcome to "squawk alley" for a tuesday, joining us today, kevin o'leary, chairman of o'leary funds, investor on shark tank and in houston, mark stoelt, a chief market strategist with oppenheimer we start with the markets, major averages rebounding, the dow up 325. not far from session highs after yesterday's dow drop of more than 1,000 points in the morning to close with a loss of nearly 600 points, it was the dow's biggest three-day point loss in

history. kevin, i don't know if we've taken your temperature on the last three or four days here. >> here's my thesis, we were comfortable paying 19, 20 times for this market with the sums that 47% of our company's sales were happening in asia where growth was 8% to 11% in various markets. all of a sudden somebody decides about eight days ago that those asian markets, those indian markets, those taiwanese and korean markets aren't going to give us any more than 6% and all of those sales that we're optimistic for next year are trading at a ridiculous 20 multiple. which should be 15. i don't know what it's going to be. to me this correction is very simple. two reasons. haven't had one in four yaf years, we're due. but really, when you buy a stock here in this hallowed place, the nyse, you're buying the future free cash flow earnings of that company based on the assumption that 47% of their sales were happening in asia at 11 growth percent in gdp then you thought

it was going to be 9%, 6% and then you say i'm paying too much for the stock, bring it down darlene and the whole market crashes and that's my theory and as usual inch ri'm right. >> there are people who are shocked by the magnitude of what we saw. china, which was driving the action here, only closed at an oat-month low, today. what do you make of that? >> well, what i make of it, sarah, is what we had here, is we had the chinese cut their benchmark rate. and they reduced reserve requirements, and that really ignited the markets into this rally that we're seeing. we got to think that you just had an overreaction to the devaluation in china. negative extrapolation as to what was going to occur. and we got what everybody wanted, we got a near-correction. i don't think we went quite as

deep from the high it 0 where we got it in 2012. but we got a 9.4, 9.5% sell-off and now we're rallying. >> john, a lot of people argue it's more than just a slowdown in china. more than just a growth scare. whether it's bridgewater, whoever, the argument is out that this is a process of pulling yourself away from the reliance on central banks. which is separated, valuations from fundamentals and that will play out over months, maybe years. and will lead to us levels that are lower than where we are. >> well, we don't really see that. what we've got to say is we think the central banks are responding. carl, primarily to what they see is you can't get any wage inflation on a global basis. it reduces the, the momentum or the trajectory of a recovery process in terms of wages. so the the qe in europe, the qe

in japan will continue. now china is doing its own version of it. with that said, housing, look a the housing numbers today. consumer confidence, the industrial production. numbers from earlier in august. all in all, there's a lot of fundamentals that are solidly improving. particularly in the u.s., but you're getting positive developments in, in europe, this looks like this is a longer-term story. but with a positive ending. >> do we even know what fundamentals are any more, kevin? >> i like the theme that you're going to get government support. because i've seen it work now. since 2008. and if the chinese are doing their version. the way i want to end my portfolio at the end of the year is 50% invested and you know i only buy dividend-paying stocks. i'm changing my exposure to asia. i find some very compelling 6

and 7 pe, dividend-paying asian stocks in australia and japan on the shanghai and even in hong kong. and then of course europe looks interesting. because there's some huge companies that have the living you know what beaten out of them this year. and particularly this week. i'm a buyer, i'm going to be 25% europe, 25% asia. 50% u.s. >> you told us that a couple of weeks ago. you're standing by that? >> i was yesterday at 926 starting to nibble on the stocks. >> i was looking at ge, because it's got so much exposure to asia. there was no people buying that stock. it was a computer buying 1406 shares. there's something very weird about that 1,000 points, i'm sure you guys have noticed that. >> that story is going to live on. >> john thanks. moving on to a couple of other topics. shares rallying after getting upgraded to outperform at wells. the firm says the correction is overdone says tim cook's email

to cramer provides some comfort for the september quarter. and b of a says worst-case scenario, trough earnings on trough vauluations, apple would fall to 84, but they maintain a price target of $130, they're talking $9 and change on apple. if you were to believe that the worst case would happen. >> something else is happening to apple, an i'm a shareholder. all of a sudden it's impervious to the theory that apple is turning into consumer electronics until last month. and now, watch sales were a little disappointing, even though i bought one. and the music thing came out and it was terrible. and all of a sudden apple wasn't a perfect company any more. and institutional investors started saying well maybe it is consumer electronics, maybe there is a risk of a nokia, a motorola, a sony in the earl will i days. and i'm going to tick it down a whole bunch.

and then it really started to break down. i like this company, i think the ecosystem is intact. but when i saw the music product and i tried it on a family of my kids, who are hard-core users of pandora and spotify and they naturally assumed apple would be better, they dumped it after two weeks. that did not make me feel good. if i'm going to write a letter to cook, it's going to be about hire somebody who can do a better job when you put your brand on a service like that they screwed that up and that hurt that stock. >> we're going to look forward to the day you tell him how you really feel. but when you think about the upgrade today, the floor that was put under the stock yesterday by the comments from tim cook. wells fargo says we're upgrading apple because we have more visibility into this company than we do other companies in this space. is there, is there this idea that if you're a company and you are subject to unfair weakness, that you need to come out and set the market straight? skyworks, for instance, its ceo saying we don't have 80% of our

revenues coming from china. it's actually 20%. how much clarity do we need coming from ceos? >> i didn't feel good about cook's cramer letter. it sounded to me that he was worried about his stock. i don't want a ceo worried about his stock. i don't want him worrying that his employees don't like their option package any more. it shows you what an axe on apple cramer has become. people really care, even the ceo is begging for mercy from him. that's probably a weird dynamic. but at the same time, it happened and it may have helped the stock. >> at this desk we would argue cramer asked for some, any visibility, any comment on, what he would ask any ceo about what's going on in china and he happened to write back. >> i'm a huge fan, i love what he did. but a ceo frea, it freaks me out a ceo is worried about a stock price. my view su step back, you let the market do what it's going to do. you don't try to buoy it up when

everything else is selling, anyway. app sl a good name. people are going to own it because it's a good name over a period of time. i love what happened yesterday, it made me feel more warm and fuzzy. that's like a baby peeing in their diaper, they feel great until it gets cold. >> just saying. >> at this point does apple become a canary in china for you? or too granular? >> to me, the only thing that worries me is whey said about how concentrated the business has become in the iphone and the iphone upsale. give me diversification on revenue. whatever it is, it's no going to be music, it doesn't matter. >> you said you're a shareholder in apple since the dividend that becomes a very popular trade during times of volatility. how crowded is your lay ground right now? >> yesterday because i only own dividend-paying stocks, let me give you my two-cent on why you should do it. it mattered to me yesterday when things were melting to look at

my portfolio and realize that the dividend cushioned it. that's what happen aid crossal of those names. i own 142 names. that's why i bought o shares in the first place. was to bask in the first place. >> you're a friend of ours, the latest o'shares card. >> i've done the same for europe and asia. i've i'm doing it with o-usa and o-eur. >> the man in black, kevin o'leary. good to see you as always. when we come back this morning, stocks hanging onto the rally mode up 355. tech helping to lead the way. take a look at netflix, amazon, facebook and yahoo. nice gains today. on days like this -- the european close, major catalyst for the rest of the trading day. it's a moment you don't want to miss and it's coming up in just under 20 minutes. my name is anne. i'm one of the real live attorneys you can talk to through legalzoom. don't let unanswered legal questions hold you up, because we're here, we're here, and we've got your back. legalzoom.

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oil bouncing back, but still trading below $40 a barrel crude. a rise of about 3.a %, but still close to the 6 1/2-year low. francisco, do we need oil to get back above $40 a barrel before the stability can be talked about? >> well i think so. oil obviously is at the very, at the very end of the shoulder season. remember we're pricing in today, refinery maintenance, lack of demand in september, october.

but soon over the next couple of weeks. we're going to start looking at the winter. so i think that will provide some stability to oil prices. i also think the moves by the, by the chinese central bank overnight are going to help a lit bit. and then let's see what the fed does in september. all the factors, policy factors, seasonals and the impending decline in shale production in the u.s. i think is going to take us higher into year end. so you know we've been bearish the whole time. we think the next two, three four weeks, we'll find the floor and trend higher into the year end, that's our view. >> a lot of people still looking for sub 30, sub 20. some calling for high teens. because of the saudis' resolve and because in their view the iran deal gets done and they're able to turn on the spigot, why is that wrong? >> we're experiencing right now

an air pocket in terms of demand. there's low demand in september, okay. but we'll in a more balanced market by year end. our numbers suggest that we'll have limited inventory bills, we might have a global draw in er/december. so i don't see, i don't see a continuation of the fast build-up we've had in the last few quarters, i also think that monetary stimulus is obviously on the way. the fete fed could delay the hike in september. we could see a fiscal package from china. there's a lot of things that they are getting into motion and remember, u.s. production is going to decline. we've seen a massive drop in cap x and as we drop into september/october we're going see a determination for a lot of names which are highly levered. the equity markets, the lever names, frankly at these levels i think we're going to see the cap x being cut further so i don't see oil getting that low.

i think demand globally is not terrible. if you tell me china goes into recession here at this point for sure, emerging markets. we've seen already a big adjustment. that's my view. >> how do you position for a surprise in that case? because these charts show staggering declines and even if you think the data are going in a certain direction, we've become accustomed to being surprised by inventories, surprised by more rigs coming online, each week with a baker hughes number. how do you hedge knowing this is a binary market that people are trying to trade at this point? >> that's what a lot of our clients have been trying to do a lot of companies that will hedge their production have stopped doing so at these levels. the reason is it's not economic. many companies are trying to live within the cash flow which will drain capital expenditures.

a lot of our clients on the corporate side will be looking at levels from a hedging perspective, in the high 50s and mid 60s. and frankly, if you look at 2016 prices, we're $10 away from that. so i don't think 10, 15 away from that. i don't think we're going to see a lot of hedging activities at these levels. the market has come down very hard and not many companies can survive at these levels. which is why we think the rout will last not that long over the next few weeks. >> it's something every company, every trading desk is trying to get a handle on. so we appreciate your time. francisco blanche from bank of america. we were up 400 points a moment ago, close to session highs. but china still a major headache for the global economy, our susan lee is live in hong kong with the latest. >> the market was calling for china had to step up tonight. with some fiscal help. so they cut interest rates and

bank reserves for the fifth and third time since november of last year. on top of injecting massive amounts of liquiddy into the markets, they've been using the reverse repo operations, today we saw $23 billion being filtered through the system. that's the biggest single-day injection in about a year's time. i guess in some ways china's hand was forced here. because the shanghai composite broke through 3,000 today, a psychologically important level. after some headlines this morning really shook investors' confidence suggesting that beijing might be weakening the yuan currency further by another 10% to 7 to the dollar. that was not a great way to start off the session. we did see encouraging signs throughout and some markets rallied at the end. we saw big gains in australia and taiwan. malaysia, indonesia. but i guess the most encouraging market was hong kong. because we did end up, up by the way .75%.

and hong kong is important, because this is how foreign investors buy into china. we're seeing maybe a floor being set. bargain hunters going in. there might have been a bit of a short squeeze as well. short covering rally. and ten cents, i know you like technology. names that goldman sachs advises people buy into, the quality names like 10 cent, aia and the like which they say is cheaper on a valuation basis. so there are some encouraging signs and maybe the markets have been a bit oversold lately. back to you in new york. >> some of those names down a quarter from their high. stunning losses, but susan lee burning the candle at both ends in hong kong, we appreciate it. up next, stocks in full rally mode a day after the dow closed down nearly 600 points, roo it now all major averages up better than 2%. the nasdaq up by about 3.33%. and up next, a big catalyst for today's market, for the market of late, the european close in just about ten minutes' time

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a tale of two markets, you're looking at a time lapse of the dow at yesterday's open. remember this. on the left versus today's open on the right side of the screen. yesterday the dow plunged lower for the first few moments, dow down 1,000 before settling down about 600. huge swings throughout the day. the today the dow opened at 300 and we are now up 436. s&p up almost 55. which art cashin would put us in the top ten point gains of all time. it's really been quite spectacular, but the interesting thing is that the s&p hasn't gotten back to yesterday's intraday high. you know 1:00 when we were trying to raly. we made it to 1965. we're not quite up there yet and the interesting other part is

that they have been following the trading in crude. when crude came off its high. the stock rally came off its high. the crude is back rallying again. we're at new highs for the day. so it's quite interesting. the only unfortunate thing stls no comparison in the volume. much lighter trading today. >> people are talking about the so-called waterfall decline. you have three days and you go like this. it's, being argued whether that happens closer to the end or the beginning of these things. >> there were certain aspects of yesterday that did look a little climactic, a tremendous number of new 52-week lows. very big, the percentage of volume that was on the down side. but it didn't quite feel fully climactic. think at any rate you will see markets trading around up and down for several days.

these things are rarely resolved on a single day. >> we have larry somers calling on the fed not to hike, we have read dalio saying the next move we'll see from the fed is easing, not tightening. is there more pressure ramping up on the fed to wait beyond 2015? >> well i believe so. that's been my course of action. i use the phrase qe 4 several days ago and i'm glad to see somebody with a brain power of mr. dalio sees the logic of that. yeah, i think the fed is under pressure. global markets were destabilized, the we're not out of the woods yet. it looks like china no longer wants to support its equity market. but he does want to try to get its economy moving and we'll see if the interest rates are effective. it has not worked before. so not unlike our own federal reserve with, all the different

qes, so the game is still on the table, we'll have to wait and see how it pans out. the china rate cut. the normal tactical signals we have, we would have been talking about today. housing, confidence, best buy earnings. net positive? by and large, not overwhelming. you've got the toll brothers thing undercutting the housing look. so we'll, we'll -- i think we'll let them proceed. you know things, think are going to close reasonably well in europe. and we've got china tomorrow, we'll see where that comes in. >> is this the outcome you would have picked for today? >> i actually was doing reversal yesterday. that came through, i would have thought maybe not the 400 we would have had, but maybe a 150-point to 200-point rallies. >> we haven't seen recalibration

of a year-end target so far. 2100 seems to be roughly the floor. do you think we'll get adjustments or do you think the majority of the people think the market will keep climbing? >> i think the majority feel that way. you have 25% feel that they'll move in september on rates, that's hard for me to believe. i think everybody thinks it was an ex-oj nous event and we'll get straightened out and move on from here. >> we're going to get the europe close in a few moments. simon hobbs is bucking a trend, a red trend in asia. and you can see, really west european stock markets are behaving more like emerging markets. in sort of price action we've got. germany, one of the two biggest in europe is up over 5%, bouncing back fromhe losses yesterday. the data from germany, the survey of business sentiment looked really strong. the question is the degree it

feeds into the financial market gyrations we have feed into business confidence in germany or the high euro. the bounce-back from germany does mean we have now bounced out of bear territory. the german dax is only down 17% as you can see. running through some of the sectors, it's a very broad-based rally. you have mining stocks bouncing back quite strongly. the automotive stocks, big exporters to china are doing well on rate cut and the reserve requirement shift as well. as the rate cut came through, some sectors in europe added to their gains, that was true of the banks around europe and there you see some of those coming through. invest-tech upgrading barclays and lloyd's. and morgan stanley has shifted the technology sector in europe. it believes that a.r.m. is too

cheap. given their structural growth as morgan stanley puts it i should mention that david faber has confirmed that monsanto is sweetening its offer for syngenta, $48 million and a larger break-up fee as well. syngenta is one of the biggest gainers on the market today. this is how we've, this is the chart i want to you take away, this is how we've traded in august for the broader index. the stock 600 in europe and you will see we are still down the best part of 10%. remember where we've come from those people that are invested. should mention that goldman lowered a little bit, pulled down some of its year-end targets, three-month targets as well for the major pan-european stock indices. >> still looking for 2100 year-end. simon thanks. when we come back, tech leading as we see the best rally

of the year continue into the midday session. tech sector up 3.5%. some winners, apple, adobe, facebook and yahoo. amid volatility. is now the time to buy or lighten up on some of the names? but what if you could see more of what you wanted to know? with fidelity's new active trader pro investing platform, the information that's important to you is all in one place, so finding more insight is easier. it's your idea powered by active trader pro. another way fidelity gives you a more powerful investing experience. call our specialists today to get up and running. having a perfectly nice day, when out of nowhere a pick-up truck slams into your brand new car. one second it wasn't there and the next second...boom,

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hello, i'm sue herera and here's your cnbc news update.

spain says its security forces arrested 14 people who were part of a network recruiting fighters for isis. part of a joint operation with moroccan security. 13 were taken into custody. 11 people were killed, mostly children after a truck transporting gas cannisters exploded in western afghanistan. 18 others were injured. the blast was so powerful that the burning truck was flung across the street. a u.s. court of appeals panel in philadelphia has ruled against sports gambling in new jersey. last year the state of new jersey voted to repeal its prohibition of sports gambling in the state. the ncaa and four major professional sports leagues sued to prevent the law from taking effect. and police in utah arresting a woman they say was high on drugs and driving the wrong way on the interstate. the high-speed chase and crash were caught on tape. she was apprehended and

arrested. that's your cnbc news update at this hour. back to "squawk alley." a lot of green on the screen, but we're off of the session highs. the best gainer is the nasdaq, up over 3%. our courtney reagan is there with some winners. >> the composite is slightly off the highs, a mirror image from yesterday at the nasdaq, only stock tampa bay raysing lower in the nasdaq 100, the tech sector in general on track for best day since december. beijing-based online direct seller of electronic sellers and appliances, is rebounding. baidu, the chinese search firm also among the top performers, up 5%. the buyers are back for netflix. this after we saw shares sink more than 7% monday. netflix still down about 25% for the week so there's ground to

make up. apple, the largest impact driving the shares up 5%. still down 7% for the week. and while best buy shares don't trade here, i had a chance to speak to the ceo on the phone after ethe retailer reporting a quarter that beat expectations. he said there's no measurable impact from yesterday's turmoil on the business. adding we had a management meeting yesterday. we felt we had everything in line to manage the business. saying further knee-jerk reactions are not productive and can cause unnecessary chaos. jules described strong response to the apple watch. saying the two companies have decided to expand the locations it's sold to all 1,050 big-box stores by the end of september. a big increase from the 300 stores originally planned for the holidays. remember best buy is the only u.s. retailer besides apple to

sell the watch in stores. kayla, back to you. courtney reagan from the nasdaq, we appreciate it. let's bring in aaron rakers, a tech analyst with stiefel. aaron, great to have you. >> i think for the rest of our coverage universe, i think the china story will continue to be an apple story. as far as other names that we do like. we continue to like the proliferation of digital content. driving the hard disk drive names, we like western digital, wdc. we would point out that some currency moves could be a positive for those. our disk drive vendors given their expenses largely dominated

by the asia currencies. we do emc, more of a catalyst-driven story as we move through the year. >> it's interesting you bring up emc, because that's one company that was a big eventor for the chinese government, for chinese state-owned enterprises, ba year ago the government started paring back if these foreign-owned companies. i'm wondering that we're seeing so much volatility in china, if the fact that ibm, oracle, emc, do a little bit less business there. facebook, netflix, goog the don't operate there. will that end up being a blessing in disguise for some of the companies. >> for emc they don't have a huge china exposure. for the storage industry overall it's still largely europe and the u.s. we think that the pc market will continue to be somewhat driven by the overall chinese market. which we heard from last week that hp continues to see overall broad weakness in the pc market. that shouldn't be a surprise at this point.

but as relates to the emc, we don't think china is a big change factor for that company. >> broadly, erin, the companies that do a little more business in china, of course apple. how do you model for where the r&b will be three, six, 12 months from now? >> we don't model down to the currency level. what i would say for apple, if you look at 4g penetration, we had incremental data points that showed that the penetration was less than 20%. they added about 25.1 million new 4 g customers or subscribers in the month of july. the strongest monthly add we've seen since tracking the data for over a year. we don't model down to the currency level. we think that the underlying drivers is the proliferation of 4g that tim cook pointed out yesterday. >> aaron, some of your colleagues on the sell side are looking at the worst case. b of a it's $9.28. does that seem like it's in the

universe of possibility? >> when we look at our estimates for apple, we're sitting at around $9.08 or $9.86 for 2016. we had a stock trading less than ten times x catsh. it's also a very attractive free cash flow yield trading at north of 10% as well. so we think that the down side scenario is fair. we actually think that it's an attractive buying opportunity here in shares of apple. >> you have a $150 price target on apple shares, aaron. i'm wondering how you think the rest of the year plays out? given what we've seen with the shares up 7% in the last year, do you think it plateaus here until we get the new model of iphone in september? and how does the rest of the product cycle follow? >> i think that's important. obviously product cycle continues to be a key driver.

as we've continued to report in our various different reports is that proliferation of 4 g within china continues to be an important driver. through the course of the year it's going to continue to be china. it's going to be product cycles on the heels of that. we think a lot of investors are focused on the year-over-year trend. particularly into the december quarter for the iphone. a lot of assumptions are baked in that it could be baked down in a year-over-year basis. >> we're seeing a reversal in apple shares. aaron rakers from stifel, we appreciate it. let's get a quick market flash here. dominick chu is at hq. a big move lower, in shares of pepco holdings, a utility company in the mid-atlantic region, delaware, maryland, virginia, the delmarva area and washington, d.c. as well. those shares down on a "reuters" report that said the public service commission regulators

within the district of columbia have declined to approve e exelon's purchase of pepco. it looks like d.c. regulators per a "reuters" report, saying that they have declined to approve this particular merger. start pepco shares down by about 17% on more than double normal trading volume. back to you. dominick chu. when we come back plenty of green on your screen, all the major averages up more than 1%. rick santelli, what are you looking at going into the afternoon? >> i'm looking at the board for one thing, up 363 doesn't negate all of yesterday. that's why i love the two-day charts, looking at the difference between 10-year note rates and bund rates, something important going on there you should be aware of. and we're going to talk risk/reward after the break. i'm only in my 60's.

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>> i know which one, but i'm not going to spoil your tease. michelle, thanks so much. we'll get to the cme group and rick santelli. >> as i'm talking i want you to look at a variety of charts that measure the distance, the amount of basis points in between a 10-year note yield and a 10-year bund yield. as you look at the one and two-day charts you can see it was a rather dramatic shrinkage of that spread. if you look at how constant it's been really since the beginning of summer, hovering in the 150s, this is something to pay attention to. when was the last time it was in the low 130s in terms of the differential? january 30th. so the last chart starts several sessions before that there's a lot of asterisks here. yesterday's market volatility played havoc with many different sectors and relationships within the markets so we want to give this a couple of days to simmer in the pot. at the very least it beckons a second look for the following

reasons. let's keep things super simple. i call this the fed spread. some people call it the growth spread. many investors don't call it anything. i think it's important to pay attention to, generically, the rates go up and economy is doing better. generically rates go down, the economic kme is usually down. there's a lot of ways for this relationship to move. you can have a stagnant market like we did when it was steady in the 150s, can you have both rates go up in varying degrees, both rates go down in varying degrees and all of them will alter the spread. a fed spread is that as we get closer and closer to fed normalization something important is going to happen with risk reward. i think it was a goldman paper i read overnight. they say this is so easy, don't get nervous, we're repricing risk. i have no problem with that except for one thing, it takes two to tango, okay?

if we're repricing risk, we're going to reprice reward. and that's what it comes down to, it comes down to reward. so to watch the spread, there's a couple of things, normalization of the fed is altering the dynamics, between two large economies, whether it's a growth dynamic, a debt dynamic, a stimulus dynamic. it's important to pay attention to. in the end, i said this yesterday and i'll say it again -- i don't know how it's going to turn out. maybe stocks do better after normalization. we're all better off knowing the true value of stocks based on economic underpinnings, the only way we're going to get that is to have a true read on the level of interest rates. kayla, back to you. >> important point, thanks so much, rick santelli. up next, all volatility having a major impact on start-ups and venture capitalists. the tech sector is down 5% this year although it's up 3% today.

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the tech sector tracking its best day since december, looking to end the losing streak after five tough days. what's the impact of the recent volatility for the silicon valley start-ups and the investor who is back them? joining us angel investor jason

calacanis joins us. you wrote back in march, a post about what would happen to funding if the market itself lost 50% of its value. are any of the lessons you wrote back then applicable today? >> absolutely. what happens when the market goes down is that angel investors and even venture capitalists, even though they have a fixed funding amount. they raise the fund for seven years, they get a little conservative, they feel less rich. they feel like placing less bets and the hurdle goes up. when things are optimistic and the a market is going up 10, 20% a year you get a loose type of investment straemg. which is i like this person, i like this idea and people don't do as much due diligence. and over the last week i've seen a lot of deals go into essentially hibernation and a pause. let's re-evaluate the deal. let's look at the valuation,

let's take a look at the burn of the company and let's take a look ultimately at can this company be profitable. >> we're straight out of the gurley school of economics, here, right? all of those worries about cash flow, cash burn that gate is now closing in your view? >> i think the day of reckoning, bill and i and a bunch of other folks have talked about this a whole bunch at our poker game. we know the day of reckoning is coming because we lived through the dot-com bust and we lived through the financial crisis and great recession, we've seen this movie before. and what happens is you have a web van or a bunch of these type of companies, which they can't slow the spending down when the market corrects. entrepreneurs are a savvy group, if you give them low-cost free capital and you tell them going big is a great idea. they're going to do it they're going to take the opportunity and rightfully so. so they've been taking that opportunity, cashing up and going big. that's why we these amazing businesses which are doing

extraordinary. but you have to be able to change gears and when you see that the funding environment is going to change, which bill, myself, chamat, all of us have seen that this is going to change. we have to be able to take what resources you have now and plan out a strategy to get to profitability. >> we've been seeing a lot of start-ups, building up as much dry powder as is humanly available to them. some of these companies have more than $1 billion, sitting in the bank, waiting for a rainy day, because they knew that a market turn would be around the corner. i guess the more disciplined approach would be to make sure you don't burn through all of that money. have you seen companies that haven't been doing that? spending too hastily even with all the dry powder they said they were saving for the darker days? >> absolutely. i see it in a lot of young companies. who look and they say companies like uber, or airbnb, companies

that are raising larger parts of capit capital. and what the young entrepreneurs don't know is there's a real business that's working so they emulate half the picture. and that's huge mistake. the very savvy entrepreneurs are raising a ton of capital now and they're putting it in the dry powder room. because when this market corrects, those dollars become worth two, three, four times as much. right now, hiring people is hard. real estate is hard and customer acquisition costs, when you're buying ads on facebook and google and twitter to get people to download your app, those are very expensive. when the market corrects, had it seems to be doing and adjusting, whether it's going to be a flat or slow or a huge one is going to be awesome for those companies that have built up those reserves because they all double and trip until value. >> or more. and for those who aren't so lucky. should we be looking for

headlines like we've seen a couple of over the past couple weeks. start-ups closing their doors? >> yeah, there's a lot of it going on right now. i'm involved in a lot of discussions, i'm seeing a lot of people come to me and say hey i've got six weeks, i've got eight weeks, and nobody is reupping. what you're going to see is a shake-out of the small companies, it wouldn't be surprising if we're sitting here a year from now and the 25% of the start-ups are gone. we invest over $10 billion a quarter in seed-stage investing. it's a small amount relative to the overall economy. it's not like it's going cause some bloodshedding like we had in 1999 when retail investors bought into all of this. we don't have that dangerous component. it's going to be bunch of 7 and 17 and 70-person start-ups, goes at a business and they'll all go to work at facebook, google.

>> it will be painful. >> thanks for your time as always, jason calacanis. up next, stocks in rally mode. some of the biggest winners in ra moment. can a business have a mind? a subconscious. a knack for predicting the future. reflexes faster than the speed of thought. can a business have a spirit? can a business have a soul? can a business be...alive?

taking a look at the markets with about 1:15 before we get to the half, china is the story regardless of all the other upgrades in earnings we talk about today, kayla. >> baidu, weibo, alibaba, weibo, all the names are still down 20-35% year to date. >> that's obviously going to, that story is nowhere near being done. despite the fact, i think it's a report out of credit suisse, something about home being where the heart is trying to find stocks that have a high concentration of exposure to the united states. best buy the biggest gainer, up 14%. even netflix is largely a u.s. story. there's another list with crmex. macy's, whole foods, discover. some railroads, paychecks,

that's what investors are trying to stick close to home. >> branching out the verizons, wells fargos, on any other day we would be talking about new home sales, case-shiller, consumer confidence, all very positive at home. >> we'll see if the rally can hold, let's get to mcc back at hq. thank you. welcome to the "halftime report." let's meet joe terranova, steven weiss. jon najarian. michael block and chief strategist at rhino trading partners. eddie perkins, chief equity investment officer. our game plan looks like this. kim jamesing, one analyst has a bold stock. he calls the stock the lebron james of