>> we're out of time. thank you for being here. thank you for being here, richard. we're going to be of course following this all day long and probably into the night and possibly over the weekend. we. yes, the network that is cnbc. in the meantime join us on monday, do think it over as mr. cox said. "squawk on the street" begins right now. wall street about to reprice what it got very wrong, the uk votes to leave its membership in the european union ushering in a new and uncertain era. good friday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. the dow looks to open lower by about 500 points. that'd be about the worst day since august on a closing basis. ten-year hits 1.4, the lowest since 2012. europe unwinding the gains obviously that they put in over the past week. the pound which hit $1.50 last night at a 30-year low.

that final tally 52% votes to leave, 48% to stay. david cameron was on the wrong side of that outcome and he announced he'll step down as prime minister by october. >> the british people have made a very clear decision to take a different path. and as such, i think the country requires fresh leadership to take it in this direction. i will do everything i can as prime minister to steady the ship over the coming weeks and months, but i do not think it would be right for me to try to be the captain that steers our country to its next destination. >> on the flip side uk independent leader nigel farag jubilant. >> dare to dream that the dawn is breaking on independented united kingdom. let june 23rd go down in our

history as our independence day! [ cheers and applause ] >> obviously very big questions, jim, being asked about globalism and nationalism, but on a short-term basis, on a today basis, do you go shopping? >> well, look, there's a couple things we have to keep track of down 7%, we get the trading halt 15 minutes, that could scare people given the fact we think of trading halts in the face of china. >> that would be about 1965. >> okay. remember we were down on february 11th. we hit the low of these could be in play. the way i look at these things and i know it's characterized buy on a dip, completely wrong. i'm not saying buy on a dip. i'm saying there's a hunt for yield that will go on and the market will be bifurcated. the companies that yield 3.5 right now that yield 4.5 that have been unattractive and these are typically dominion power kind of thing suddenly come in to play is where you might want

to be. we still have to compare bonds to stocks. we have to believe that we are in an even lower permanent yield given our currency is going to be a bit of a magnet. stop thinking about the yen as some sort of safe haven. we're the best house in a really bad neighborhood. do you want to occupy that house day one? maybe a little. maybe move into the living room. >> maybe a tiny bit. by the way, on market conditions i can tell you having spoken with many people this morning, liquidity's been fine, it was fine overnight. in europe it's been okay on the credit side, so that's important. we're going to obviously start off here in the equities with large volume but liquidity expected to be strong there. the bigger issues are the ones you sort of touched on there, jim, which are longer -- lower for longer on rates. the stronger dollar, what is going to be the impact on our companies here and macro level what is it going to mean for the likes of china if it continues

for some time? will they be forced to devalue down the road? will capital flight begin again in that country? seemingly it had abated over the last few months. questions of course about the european banks are key. their market caps are so small but balance sheets very large. most people i'm speaking to do not believe there's going to be any sort of contagion that the ecb will handle it. they're going to be out there buying all sorts of stuff including a lot of corporate bonds. >> right. >> but that is a concern right now. of course the idea of a recession in the uk and the slow growth that we've become so accustom to overall in europe certainly expected to continue if not get worse. what's that going to mean for the banks? you've seen their stocks right now. that's got to be one part of this story. i'm talking deutsche bank, barclays, lloyd's. >> as we're speaking the bbc reports that morgan stanley has begun the process of moving 2,000 investment bankers and banking staff to dublin or frankfurt. >> well, you have to. anyone who's ever tried to do

business overseas it's almost like, listen, if you're in a country where they don't have reciprocation, you have nothing. put it like this, i try to buy some property in mexico, city is really huge in mexico, one of its divisions. you cannot use city to buy anything in mexico. >> right. >> so think of it like that. say you think i see a citi office in cairo or -- these are very different institutions. >> yeah. >> it makes sense for morgan stanley to do that if only just because if you were buying property in europe and you had a morgan stanley, you may not be able to do it any more than we can use citi to buy something overseas where it looks like citi but it isn't. >> when it comes to the banks here you can see all down sharply as we haven't started trading yet. of course the rate environment is not good for them at all. 1.5 on the ten-year, not to mention they're still enemy number one. >> even after the -- >> yeah, it does seem to be the case, certainly over there and over here to a certain extent.

but, guys, the idea of uncertainty being introduced for a longer period of time, i mean, there may be short-term responses, morgan stanley may be moving some people now. but figuring this out is going to take quite some time. the concern about the eu and whether it's going to be able to continue in its current form or some way, the euro, the idea all of it is coming into question. those are questions that are not going to be answered day one, day two, week one, week two, not to mention it's going to take the uk two years just to disentangle itself. >> article 50 is not even launched. johnson this morning trying to like calm everybody down. >> well, i saw where the euro was, and i say, guys -- i mean, we're not -- most of our viewers aren't sitting here trading currencies. sarah will be talking currency, but i think that the euro is still way too high versus where it could be. >> you do? >> just because, i mean, if you're going to talk about the idea like i've heard many people talk about this morning who's

next. i'm not going to play the who's next game because i don't know and there's a lot of consequences to leaving the eu for the countries in europe. but if you're going to play that game, do you want to be long euro while you're playing it? >> that brings to mind scotland for instance, which voted to remain 62/38. and now they're saying, look, the fact we have to leave the eu against our will is unacceptable. and we may try for a second independence vote. there's like -- there's chapter one. >> eu, i mean, there are things about -- they're a la carte. they do have their own currency to begin with. it's a lot more difficult to disentang disentangle, remember talking about the drachma and the problems of the drachma? it's just not that easy. european justice can't overturn british laws. can't forget that. britain always had that. so britain, it always had one foot out the door to begin with.

so it was easier for that second foot to come out. >> yeah. >> but there are other signs when i look at barclays, lloyd's, look at these stocks they take your breath away because that remind you of another era in our country. but are the stocks representative? well, that has to do, david, with the balance sheets. >> well, their balance sheets are huge but market caps are tiny, which is interesting. >> yes. >> i want to get some specific stats on that, but this doesn't help them, jim. they're going to certainly have to try to figure out what their business looks like in this new world and it's going to take quite some time to do that. i haven't spoken to anybody who seems particularly concerned at this point about contagion, but at the same time when you see stocks down 20%, and when you have the worries about a recession, it's concerning. >> oh, no, look, i'm not -- look, there's two ways to approach it. there's the way to say, look, there's guys, trucks outside right now from all the major media operations. it must be scary. but when you see those it tends to be closer to a bottom. though they're reacting very quickly.

>> and also we have to differentiate between here and there. >> yes. because look, do i want to pull the trigger this morning on buying j.p. morgan? he bought it -- where did jamie dimon buy, low 50s, maybe i wait. >> what about a drug stock though? something with a nice 3% or 4% yield. by the way uk stocks are many up this morning. >> unilever. >> in part because of their yields and earnings are going to look good because they're in pounds. though of course if you own them in dollars you're going to get hurt on the conversion. >> trust glaxo more than astrazeneca. inbev had a good quarter. i think one of the big problems we have -- you know, i was out west, the rally we had this week was so humongous in all the stocks that we just talked about. it was a monster rally in the face of reporting an okay quarter, red hat okay quarter, lennar quarter people didn't really care that much.

if you take a look at the weak at what reported, we didn't have anybody that was good other than kb homes. you know, i just think we have to remember that the earnings backdrop this week was subpar to begin with. the idea the combination of don't buy any of the bookie stocks by the way in europe, 7-1 last night. >> oh, man. >> you take a look at what went up this week versus the earnings that we've had this week and you look at a ford motor, 16% uk, spent a lot of time with mark field talking about a driverless car, i don't want to be in a driverless stock. but penske motors, then utility, pra health and then you get to ford. we don't have a lot in the uk. but i know when i look at the stocks bcs of -- you know, royal bank. >> right. >> i look at those stocks and say can a stock price cause something that's an event? and i would point out that do

you think that the central bankers haven't thought about it this time? i'm not going to say they're going to prop it up. i'm going to say they can provide liquidity. liquidity at home by the way is a core four. >> there is plenty of liquidity. ecb is buying bonds of all kinds most likely. and corporate borrowing rates by the way are getting even lower than they were given how rates are moving. >> how about individual borrowing rates? >> that's the question, is anybody going to be able to borrow at all? >> see the problem is i think you're going to see another cessation in their growth. they were just starting to get going. >> recession you mean. >> banks unwillingness to lend to people. >> yes. and open up that balance sheet for germany. the german government right now. they say we need to do $100 billion public works right now to put these people to work because this was a societal decision by the uk. they didn't want these people coming. and we've got them, and let's just make it so it's not -- it's more palatable to those who were not migrants. >> of course.

>> not that had big turkish migrants when they didn't have enough workers before and that worked in germany, but just be aware there's societal things at play here. >> the boe saying it has 250 billion pounds in liquidity ready to go. the fed has a statement out now saying they're carefully monitoring developments in global markets in cooperation with other banks. they say they're prepared to provide dollar liquidity through existing swap lines. the nyse says the premarket trading has been higher than usual, but all systems operating normally and that they're prepared for the market open. >> here's the kind of thing i'm talking about, home depot, which is all domestic. i'm using that add a paradigm. home depot at 113 on february 11th, it's at 128. i can't tell you, carl, i want you to buy home depot at the opening because it was at 113 back then. >> the dax is only back to last tuesday. that's how much we've added in the ten sessions or so. >> i just look at where things

were when i left to go out west. say you can't go buy them when we thought it was 50/50. >> yes. let's get to london and see what the picture looks like from there. sarah eisen of course has been covering this story from the beginning. good morning, sarah. >> reporter: good morning, carl, jim and david. just wanted to offer a little color about what a dramatic 24 hours it has been in the markets. currency traders, you heard all the reports, were ready for action, they were fully staffed overnight here in london. and, boy, was that a good thing. because before some of the british voters went to bed, the british pound was all the way up to 1.50 making new highs for the year against the u.s. dollar, and then after the results started coming out showing that it was looking like britain would vote out of the eu, it plunged all the way down to just above 1.32. this is a move like we have never seen. it is a record move lower for the british pound, even bigger than black wednesday which some may remember that was back in 1992 when george soros and other

speculators sold the pound. soros made $1 billion known as breaking the bank of england. he had weighed in before this vote saying if britain does vote to leave the pound could fall as much as 20%. haven't quite gotten there, but we did reach levels we hadn't seen since 1985. they've rebounded and the word from the trading desk as david sort of alluded to, no liquidity problems, everything was orderly. it was more seen as just a readjustment because it was totally not priced in. and now the readjustment on the british economy that it could get ugly, potentially even drop into recession this year that the bank of england will not be raising interest rates to fight higher inflation and could make its job a little bit harder. just another sense of the craziness overnight, carl, we did see the swiss national bank intervene, step in to sell its currency because that is a classic safe haven. the swiss franc, japanese yen and gold also soaring overnight back to 2014 levels.

david blum told us he's going with gold because you can't fight a central bank, you can't intervene in gold if you want a little safety today. >> gold at a two-year high, the biggest rally for gold, sarah, since the financial crisis. and those miners, jim -- >> rand gold is the fastest grower for those who want to play that game. buy the ones that are most levered. but if you want to buy growth gold it's rainbow. >> you've said this how many times? >> 50 times because it's up 50 points, is that what you're saying? i happen to love mine where the gold is and that's been the right one. six firms have downgraded in the last six weeks. rand gold. >> i know a number of hedge funds that own gold and now finally looking to exit because it was the hedge to a certain extent. >> my only problem with exiting is worldwide gold has much more value than it does here. i mean, to michael eisner, if i were to sell gold and buy a

steady yielder, you know, you take a look at -- look just go down. take a look at a cisco, which you're going to be talking to tonight because they won a very big verdict against them. that's better than owning gold with one of the biggest cash positions. so those interest me. >> yep. >> i'm interested in 4.5%, 5% yield. i'm doing a run right now. this is when you have to be more clinical and less emotional. because the fact is the companies that i am looking at at amazon still going to have great growth and i'm going to say it for the sake of having to say it, bristol-myers which indeed up 13% since the low, they have actually solved another form of cancer, at least gotten since february 11 and that is something you might want to look at on a big discount because there have been many crashes in my lifetime, 530 by the way on the dow versus 508 at

2,300. we need perspective. i hate to say this because i sound like my late father, but i'm old enough to have perspective. >> yes, but you are. >> i am. oh, my god, i have five guests on this week said i remember watching you when i was little. i said what am i carson? >> i've had a lot of people say i watched you when i was in high school. it's depressing. >> no, i'm talking elementary school. >> well, that's even worse. well, you're older than i am. you know, when it comes to logic or a lack of emotion, it's interesting i know we're probably going to be looking oh hedge funds have been hurt. first of all i've heard a number of hedge funds had taken down their exposure pretty significantly, so i don't know we'll see the carnage there, but secondarily i've heard the algorithms we talk about so often got this right, not wrong. why? because they're not emotional. and apparently those numbers and whatever they were working with in terms of input and output was a lot truer than what may have persuaded some to take different

moves on where they thought a brexit was going to end up. >> nate silver today saying the market took polls that were not decisive by any means and ran with them. people say the polls are wrong. polls weren't that wrong. investors' interpretation of them were. >> i love nate silver. little wrong about the presidential thing. we haven't even mentioned that yet whether people are going to say, listen, all polling is out the window. this is obviously a flawed process. but i like the fact the hedge funds, the algos control the opening. remember, down seven, market halts. we got to keep that in mind. >> i know. >> but what i'm saying it's very thin, there's a very thin book. don't be surprised we have more of auger -- remember back in august -- >> the 2020 on s&p. >> 2020? that's kind of a down. >> i know. >> that's not a dip, david. >> well, we did start at 2113. >> i'm just saying.

>> that's a dip. >> i just think -- by the way, if oil's back to where it was last week, but oil is just as important to a lot of the algos as distressing as that is and oil's down big. exxon and chevron broke down yesterday. >> you know what i don't hear you saying is the brexit sentiment will come to the u.s. in a new and different way and will introduce new forms of instability here. >> well, i just can't say that because the american companies that i deal with are just -- many of them were other than the financial companies in 2008, 2009. i've got to run what's down 5%, i'm getting some runs about what can yield 5% when it comes down. those are benchmarks, touchstones. you have to look at bonds versus stocks. a lot of the hedge funds don't think like that, but a person at home is thinking should i buy verizon at 53, and you got to remember verizon was at 50 not

that long ago. buy att at 40, it was at 36, maybe you get that opportunity. >> right. >> that's the kind of opportunity i'm talking about. not necessarily tesla. >> but don't you believe that decision making to a certain extent will be put off now if you're looking to make, even when we're talking about sort of industrial data points, which have not been great, are you going to have a pause on big ticket items if you're a corporation? is this new layer of uncertainty as we work through the implications of this exit by the uk from the eurozone, is it going to prevent people or corporations from doing things they might otherwise do? m&a obviously an area i tend to focus on. >> right. >> are we going to see it -- first of all you got to wait to see how the market shakes out. that could take a while. >> right. >> yeah, things are going to be on hold there. i don't know how long it's going to be, but this is going to take a long time to figure this out. we're not going to figure this out in a day. you can talk about buying verizon, that's fine -- >> but that's what i do.

morgan stanley already we get a denial of the story of the 2000. i mean, there's a fog of war going on. >> yeah. >> big fog of war. but people are still going to eat cereal. i know it's bad to reduce it to what we have reduced it to, but do i want to buy caterpillar down three thinking credit could be not as available in europe? you know, there's other things to buy. >> yeah. >> do i want to buy any of the big banks? i was with dick kovasovic, i had the pleasure to be with him, former ceo, they're bankers, u.s. bankers, warren buffett bank -- >> domestic companies, a company like our own, comcast, has no operations anywhere but in the u.s. >> an interesting level only gotten better. >> right. >> by the way, we mentioned that bbc report about moving investment bankers. a morgan stanley spokesperson in london says the story is completely not true. >> there you go. >> it did seem a little quick.

you have to wonder. >> think about that. think about what happens is you get someone coming out like that and suddenly everyone's shorting morgan stanley -- i don't know. i think the essence is to be calm as opposed to be opportunistic. there's lots of time. it's a long day. will people at the end of day on a friday, it could be thin but i know there's some sort of expiration, but at the end of the day on friday we're all so conditioned to not wanting to come in long on mondays on days we've been down badly friday because there happen to be some very big down fridays. 1987 down bad friday didn't want to come in long. 1989 u-haul didn't want to come in long. some of the older memory people who are still non-algo recall it was not a great buying opportunity traditionally. friday evening rather monday. >> jim, let's talk briefly about the stronger dollar and implications there. we have had that conversation many times when the dollar has been on the uprise. it hasn't been lately, today of course it is. if that persists, what is the

impact there on multinationals? and i might add a lot of people continue to be focused on china and the question is will there be a lot more pressure on that country down the road to devalue if the dollar strength persists for some time. do we start to see capital -- that's my point in saying the longer term implications of this are yet to be defined. >> again, that's why i'm talking -- well, campbell soup didn't have that good a quarter, i'm talking about general mills -- >> but what about the dollar? >> i think the dollar should soar here and that means numbers have to come down. year over year we were finally -- this was the quarter where the dollar was flat versus the euro. so anyone who blamed the euro, i'm thinking about a tiffany here, it was just no good. that's a faulty explanation. but when it comes to the next quarter we're about to hear reporting, does a jnj have to say once again currency's back in play? jnj moved from 116 all the way down from low hundreds, so that is something you're going to hear. we can't raise numbers like we

thought we could. >> we are getting a statement from president obama on the uk referendum. i think for that we're going to go to eamon javers in washington. >> we are getting our first reaction here from the president of the united states saying the people of the united kingdom have spoken and we respect their opinion. the relationship is enduring, the united kingdom's membership in nato remains a vital cornerstone of u.s. foreign security and economic policies, so too is our relationship with the european union which has done so much to promote stability, stimulate economic growth and foster the spread of democratic values and ideals across the continent and beyond. that's the statement from the president today. he'll be in palo alto meeting with technology executives later today. we expect to hear from him, see him on camera at about 1:00 eastern time, so we'll wait and see if the president adds to this statement. but this is the first written statement now from the white house on brexit, guys. >> thank you very much for that. so we sort of know the setup for now. let's get to bob pisani on the floor and see what we can expect

in about five and a half minutes, bob. >> well, the important thing is this is the russell reconstitution. i just want to reiterate the statement from the new york stock exchange. premarket trading orderly but heavier than usual. we are prepared for the market operating with all systems operating normally. nasdaq also issuing statement, we are closely monitoring the gloeblt marvegts reaction to the results of the uk referendum vote. we will act accordingly. maintaining resiliency and partners is at the absolute forefront. the pornpt important thing is ta russell rebalancing day. this is the once a year reconstitution of the russell. the big cap one is $10 trillion index to the russell 2000. the important thing is they've been testing systems all week nasdaq and they do regular testing and also one-off testing

for big days like this. the point is there's a lot of preparation for a lot of big volume and big volatility. we do not know how it's going to interact with the russell reconstitution at the close. obviously there's going to be big, big volume, much, much bigger than even having with the russell reconstitution. it's not clear how the orders to buy and sell at the close for the russell will interact with the close orders for around the brexit overall. it's useful to review the market circuit breakers right now. we don't anticipate they'll be used. s&p only down 3%, but there is a circuit breaker exists if the s&p declines 7% in the first 15 minutes here. s&p level to do that would be 1965. obviously we're a long, long way from that, but we'll review that again after the open. back to you. >> bob pisani, bob, don't go too far. art cashin yesterday, jim, said a lot of people didn't get in front of this rebalancing because they knew today could be a little tumultuous.

>> i look back yesterday was really just this giant squeeze in the last half hour but very little volume in part because of what you just said. i keep coming back to the fact this week was just the wrong-way week. anyone looking at this market and saying i just seen deago only down, ford, johnny walker, people going to drink their heads off, the stock at 100 the other day. remember where things were the beginning of this week when we started getting inklings that it was going to be a layup, i'm not going to say no-brainer, but a layup that it was going to pass. >> s&p began the week around 2070 with an indication of 2040ish. it's not a huge drop on the week. are you worried at all about a lack of surprise or panic? >> yes, i do because i always think about how these trading halts and what bob pisani just said some really good things. people are not used to the

trading halts. whether it be the people behind us or the people at home or even the hedge funds. and if they aren't sure if there's no natural bid and hopefully it would emerge down 7, down 7 is a little dire. i admit that. again, february 11 that is when we had huge credit risk. a lot of the credit risk has come off as people liquefy. think about pioneer, natural doing two offerings since the year began. >> we're going to be awash in liquidity. central banks are going to make sure of that. looking at that ten-year is amazing, not to mention the dollar and loss in the pound. but the bigger picture here, guys, i mean who's this good for? >> united states. >> is it really good -- why is it good for the united states? it weakens europe. we had our strongest alliances with europe. doesn't it strengthen russia and potentially china on a geopolitical level? why is that good for the u.s.? >> i'm thinking u.s. domestic stocks. >> i'm trying to take it beyond that.

>> you're right. >> before we get started with trading. >> i remember november 2011 another great place to look at. looking at october of 2011 when we were down 19% at the low. and people were saying europe is never going to come back. so they should have been buying verizon. they didn't necessarily want to go make the big bet on ibm, gigantic european exposure. watch an intel. watch a microsoft. they've got huge european exposure. all i'm saying, david, i totally agree with you. ge geopolitically i have to go back to november of 2011 when you're interviewing the candidates from the republican party at our debate, and the italian bond market was at 7. okay. well, david, you used to talk to me about failed bond auctions. >> yeah. >> isn't that right up there? >> yeah. those were scary moments. >> thank you. >> this is not a lehman moment either. >> thank you for saying that. because i've heard about a dozen people call it as a lehman moment, including some of those people who remember me when they

were in kindergarten. >> we aren't going to pull back in that way, but we don't know the answers. >> last 100-point drop was august 21st, last 600-point drop was august of 2011 when we had that ult um oil regarding that aaa rating. [ bell ringing ] that's the opening bell. quarum health celebrating its recent listing. at the nasdaq amc networks doing the honors today. >> i like to use verizon because it's plain vanilla as you can get. you come in, you find this dramatic change so different from what you thought. and verizon's down 25 cents. now, the problem is it's down 25 cents on 300,000 shares. so if i am a fund and i need money, i'm going to drill that thing down to 53. what i'm saying first bite maybe

wait a little. >> maybe wait a little. >> verizon 54 to me is not the greatest buy in the world. again, i'm using a big cap stock with a good yield. that's a paradigm as opposed to the exempt. >> right. financials around the world is where the pain is going to be felt most decidedly in the equity markets. here we open, bank of america down 7%, citi down 9%, goldman sachs, morgan stanley all of them down dramatically. not nearly as much as their brother over in europe where the numbers are closer to 19, 20, 25%, but that's where the pain is. i don't know when you step in to buy those, jim. >> we're not them. should we be down 7%? would you give me we should be down less than they are? >> of course we should. >> by the way, vix which hit 27,

we're now looking at the highs -- >> that's very interesting that would fall. i just wish the prices were a little lower for heaven sake. i'm looking at prices that were tuesday's prices. i just want them lower. i did a piece on western digital how great that acquisition was and if you could get the stock in 47, here it is 45, now do i feel the same way? no big international company to have this freeze you're talking about and so therefore why be a hero and buy something that yields 5% that's an industrial, that you've been waiting because your bank account is not going up at all because you get no interest and it ain't going to get better. >> german ten-year yields now are negative 0.86 i think is where we started the morning. >> earlier in the week got to 12. >> we got to 12 basis points. >> my mattress yields much more

than that. i have a higher end bed. >> when it comes to people wondering a bayer for example, b-a-y-e-r, which still wants to buy, b-u-y, monsanto, we're going to go to eamon javers i think with more breaking news. >> we've gotten statements from the fed, boe, the president and i think we might be getting treasury. eamon javers in washington. >> yeah, carl, that's right. we now have a statement from jack lew. we're hearing from all u.s. officials now on brexit. treasury secretary saying the people of the united kingdom have spoken and we respect their decision. we will work closely with both london and brussels and our international partners to ensure continued economic stability, security and prosperity in europe and beyond. he also says we continue to monitor developments in financial markets. i have been in regular contact in recent weeks with my counterpart and financial market participants in the uk, eu and globally, and we are continuing to consult closely the uk and other policymakers have the tools necessary to support

financial stability which is key to economic growth. that's the statement from the u.s. treasury department. >> eamon javers, thank you very much for that. we're going to hear from lagarde, i believe, around 10:30 a.m. eastern time. as far as gap opens go, this is the worst for the s&p since 1986. >> that's helpful. that's very helpful. that's a good stat because if that includes some of the utilities that have gotten too high, that's intriguing. amazon, do i want to buy amazon down -- i'm going to have to couch it because i don't want to be too bullish because that is obviously not in sync because amazon's got a big european operation. but there have been people waiting to get in amazon for a long time say this is my opportunity. i'm saying there may be an opportunity at some point today. 9:34 still early. >> yes.

although point this morning was a lot of leveraged accounts hadn't covered and thought better opportunities come in the coming days or weeks. >> i rarely agree, i'm not going to give him coming weeks because the market works much faster than that. i want to keep talking about oil because a lot of things key off of oil. if oil comes back in the nutty world that we are in, we will be a little bit higher than we are now. it just works like that. oil's at 47. i think the dollar is very strong. >> up 3% at the session high. >> not enough. how about 5% on the dollar. >> what? >> the dollar should go up 5%. >> really? >> in one day? >> it can't move that much. 5% would be nice. i mean, in terms of like european suits. but i just think you're going to cut -- i say 5% because that's the level where you're going to start seeing number cuts again. we just gotd over the number cut

theory for the fiezepfizers of world, hps. >> hp is a great example. >> have the bulk majority more than 50% of rove knew from overseas some of these. >> microsoft at 49 when they bought linkedin. a lot of people felt microsoft was challenged for growth so it was worth doing, again, that seems early for me. this is where apple has held before. you know what maybe you just let them come in a little. you got to let things come in a little. am i going to regret down 500 and didn't tell people this is the moment. don't we have to reverse what we had yesterday where we had this really big rally? >> just got to feel like we keep our eye more on europe still and make sure -- there's just so little we can fully understand about what's going to happen here. i continue to wonder about the european banks. i've made that point earlier. i mean, deutsche bank is now a $24 billion market value versus a $1.8 trillion balance sheet. i've never seen discrepancy --

it's a tiny little bank in the sense of its market value. it's the big german champion on its balance sheet of $1.779 trillion as of the end of last year. >> it's got a very big bank behind it. the germans just don't let this stuff happen. but it is interesting back to 2009 level, deutsche bank. >> yeah. >> now, when the world was coming to an end. >> by the way they have big operations. it's -- credit suisse previously, so many of them. >> these banks are a little -- the italian bank, there are five italian banks that should not exist and they're out there doing business because the government doesn't let them fail. >> what about the bigger question of the eu of who's next? does france try to do something now? do they have a vote? would italy ever consider -- >> a lot of that's going to depend on whether it looks like this was a good idea or no. >> it's pretty interesting.

>> i think it's going to take a long time to figure out. >> we will be able to evaluate the situation the uk finds itself in over the next six months, i don't know, year. >> so you think perhaps there are people who are angry enough to pull the lever and now already remorseful? >> i don't think they're remo e remorseful now. do they own a lot of assets? >> richard haas this morning wrote he would like to see a poll in a month of voters who chose to leave about whether or not they're remorseful. >> becomes more about employment in the uk than anything else, right? if they were to rise, have a recession, it's not clear to me all the people who pulled the lever for leave are necessarily going to be hurt today because the stock market's down or the pound is weaker. >> london was booming 46 cranes that my wife counted in march. couldn't believe it. went to the tallest building. >> a lot of real estate there has become cheaper today if you're buying with dollars. >> place in brooklyn for $3 million is $5 million over there. did a little house hunting realized it was completely fool

hearty, came right back home. rather be in queens. i'm not kidding. >> you can do well in queens. >> eft today, it was the working classes who voted for us to leave because they were economically disregarded and it is they who will suffer the most in the short-term from the dearth of jobs and investment. >> wow. >> boy. >> we'll see if that turns out to be true. >> is it a warning sign to those who consider it? i don't know. the whole eu project is under question right now. there's no doubt about that. >> yes, it is. but remember a lot of this was to make it so there would be war no more. >> right. >> and britain, again had a different menu. it was a la carte menu versus eu. i'm looking at some numbers about the amount of business done in europe. do you want to be in united technologies when they have european exposure.

tyco down 21%, honeywell down 20%, so it's case by case, but those are not the first ones i want to read. particularly because they were all going up as we thought that the dollar was finished its big move higher. >> goldman, boeing, ibm, 3m. >> best performer. >> verizon. >> right. >> look, 3m is huge international but the stock was hitting all-time highs last week. you want to reach for that first. goldman does have book value, but i think people are starting to realize the model challenge, the model challenge, the model challenge. there are so many tech companies that have a gigantic book in europe and so many of them are saying things are better. the privilege of pulling up with actually literally 40 cfos, i know, david, that doesn't sound like a party to you, but for me

it was. it was like at the metropolitan museum and they do the gala, it was my gala. and a lot of people were excited about the dollar not being that strong. if we reverse the tape we probably would have talked more about the warriors losing. >> the state of play right now when you think about it, the dollar is where we are, the ten-year is 1.5, 6, probably going to stay there. the fed is out of the equation now until. >> you know what's interesting -- >> trading rates will be lower for a long time. >> play with me on this. >> i always play with you. >> how could our ten-year maybe go to one, maybe our ten-year goes to one. >> one? >> just give me some crazy german ten-year, that happened. >> it's true. i know we're still positive. >> why is att own 4 million

shares only down 30 cents because people are saying oh i can get 4.62, wow, that's versus the ten-year. someone in there with a bid because he or she wants 4.62. >> the icing on this cake was durables, may durables. >> it was a really bad month. resale value of cars is going down. people did not like lennar. people didn't really like that. it was not a good week except we were so excited that brexit was going to be defeated. so now we go back and look what we heard this week and we didn't hear anyone other than kb homes say things aren't quite right. you mentioned boeing.

now boeing, iran, where does iran get its credit? they go to a french bank? you have to have credit. you have to have a line of credit to buy planes. interesting, huh? >> typically not cash deals. >> no. those planes are expensive and i think boeing is one i would not reach for immediately. i think it's interesting to think what companies are going to be in there buying their stock back? apple has a big buyback. >> they do. down 1.8%? frankly the losses right now apple's down 1.8%, facebook down 2%, amazon, it's down 1. 9%, this is your great opportunity? >> no, it's back to where it was wednesday. but between wednesday and today didn't the world change? no, i'm not -- >> yes, the world did change. >> i'm saying it's not enough of a discount and i'm saying it's a long day. maybe if it keeps coming down, people have to sell their stock that's on margin. there's a series of things that make me think there may be better prices ahead but you

should get ready for them. you should be doing your screenings on what are the really good real estate investment trust to yield more than 5 that don't have a lot of risk. doing screenings on utilitys that are so uniquely domestic and doing quite well. i'm not doing a screen on tesla and solarcity because those are the ones that are going to double down. >> down little less today. >> that's a little bullish for me. that's bullish. being too aggressive on buying tesla given the hoopla about that. don't want to emphasize tesla too much because it's an aberration. but i'm looking at companies that do a lot of business in europe and is this the level i want to commit to granger? >> i don't know how you can commit to anything day one, hour five or whatever it is where we are. >> because we've had some

reversals. >> yeah. >> what if it's up today? that would be too much, right? >> s&p began the week we're now down 12 points on the week. >> that's it? people want to be -- money wants to be here so badly. maybe money should take a breather. you know, money does sleep. >> it does? >> it can. >> despite what oliver stone -- session low on the dow down 538. you see we've erased quite a bit of that. let's get to bob pisani on the floor. >> the important thing not a bad day but we are well off of the lows and the open was extremely orderly. this was not like august 24th when it was fairly chaotic, a lot of stocks delayed on the open. that didn't happen. it's been pretty orderly. barclays is right behind me, can you put up barclays on an intraday because it was $8.17, it's now down more than 20%, it's a terrible day but it was as low as $8.17 and as i've been standing here it's gone to

$8.64. you could see come well off of its lows here. the important thing here take a look at the sector, obviously banks are the weakest group we're seeing today. but even there off of their lows right now, techs, retail, everything down 2%, citi group, morgan stanley, comerica and regions financial all on the weak side. you can see the effect on the dow movers here if you take a look at them. so goldman sachs and the banks are all weak here, but even some of the big multiindustrial nationals, the consumer oriented name, verizon unchange d, tell come, utilities in general not doing as bad. one on the upside are gold mining stocks, gold shot up all throughout the morning, all the gold stocks on the upside. tom farley standing here on my

right, head of the new york stock exchange. let's talk about the volatility today. tom, the opening and your thoughts on trading today? >> the opening very orderly, very smooth. obviously the markets are down significantly. perhaps obscured by all the action behind us in the colorful jackets is the very efficient process for opening stocks everyone on a frankly terribly volatile day like today. >> we have a russell reconstitution today, traditionally this is the heaviest volume day of the year. are the systems prepared? has there been testing going on? tell us what you've been doing to prepare for this day traditionally the biggest volume day of the year? >> we always test for big days but this day to some extent was telegraphed. you could see a potential of a big day, but russell rebalance is typically the largest day of the year volume wise but it tends to come at the end of the day. today we've already seen the biggest volume day of the year in the premarket coming out of the brexit, but that tends to be as you would imagine the beginning of the day. so we are prepared, tested, it's

going to be a big day volume wise. >> in terms of volume twice normal volume on a typical reconstitution. any sense of what the volume might look like at the close today? >> i don't want to project. in the premarket volume was running around double the average day. the number of deals however was running around five times the average day and was the very highest of the year. >> now, can you give us some sense of how all of the concerns about brexit and trading and volume we're seeing around the brexit is going to interact with the ofrders of the close? there's going to be a lot ofrders to buy stocks as well as sell stocks at the close. how is that going to interact with everything that's going on with the activity around the brexit today? >> first of all you know this, bob, but our job is to be open for customers to transfer, to manage risk on a day like this. it's not for example stocks trade down. our open with the close specifically what you asked about is to have a smooth open or smooth close as possible.

and in order to do that we have sophisticated technology of course, but we also have human judgment and oversight. many of those humans are represented here in this camera shot. >> i walked around right at the open looking for trading halts, delays like we might have seen august 24th. i didn't see them. tell us how the open looked to you. >> very, very good. the open looked very good, substantially all of our stocks are open, trading normally. and those that aren't it's because we're it rating on the price to make sure when we open that stock it's going to trade smoothly, that there's not a significant imbalance or disruption in the trading of that stock. but from my perspective much like any other day very orderly open, trading is going very smoothly. >> you anticipate right now we're here on the floor over 200 million shares, that's well north of twice normal. would you say we'll probably see three times normal volume here at the close? >> i don't want to project. like i said the russell rebalance is typically the biggest trading day of the year,

and brexit was causing the biggest premarket of the year. this will be a very big volume day. >> okay. tom farley, thank you for joining us. if we can call on you later in the day, we'd appreciate that. thanks for making yourself available. tom farlrksz ey, the head of the new york stock exchange. systems open as normal and of course we'll check around here but we're well off of our lows. back to you. >> i find that reassuring. people were concerned in early morning i came down here and people were concerned it might be -- >> we've definitely seen what the alternative looks like. >> yeah, we didn't know. as we said liquidity seems good, you heard him talking about everything's been orderly. not hearing of anything in any markets frankly where there's huge gaps. >> you know, 490 stocks in the s&p yield less than 5. i was hoping for more of a bargain than that. only ten stocks get more than 5 and of those i would say six of them i don't trust the dividends. i was hoping for a better opportunity. maybe you have to go into the highest growth tech that may not be that affected and bet those

could be at some point today opportunities or pure domestic stocks like a cable stock. i want them lower, but the sellers are -- i guess what i'm saying is the sellers are not materializing. they're not materializing as i would have expected. >> did you expect to see a halt today? were you really looking for 7%? >> no, i talked to tom beforehand when i came in early today and i was saying, you know, 5 maybe, but 7 i don't think. then we discuss 7, 13, 20, so everything's always on the table. but i didn't -- i said i don't think we're going to get there but i think the orderly nature should be commented on because we have seen it the other way, as youfr said. i find it a little calming. maybe it's a complacency. i think calm is calm. you can have calming down, as he said they're not trying to guarantee prices, is this a complacent opening? i think people are hard put to say that we should be as bad as they are over there, but i still think we should give up

yesterday's gains big. yesterday's gains were really big. >> what are the potential scenarios here? what are the positives the dollar doesn't maintain its current strength, things calm down for a while as we try to figure out what this means and we know the path but don't know where it leads. is there a recession in the uk? does it spread to europe? do we get a full recession in the former eurozone? well, i guess the uk is still a part of it for quite a while now. >> i think the positive always comes back to the yield. i know that -- i overemphasized yield certainly but i do that just because we always hear about how often income is scarce from fixed income. okay. so i look at that. and i say that our companies that suddenly kimberly, which i didn't know what they pay for here might be a little better, you could say europe's a little weaker. you've seen what happens with europe and certain countries -- certain companies that do a lot of business in europe. yes, better for companies that

yield more. i believe that. it's better because of comparative. if you can find companies in the united states that you couldn't buy before that yield 5 where the dividend safe. and by the way there are not enough of them yet, which makes me say this is too garden variety for me. >> do you worry about -- when do margin calls start coming in? >> we're not low enough. unless there were people who in the last hour yesterday just levered up because they were so confident. >> they were betting with the bookies over in the uk. >> you don't want to buy one of those publicly traded bookies? >> i don't think so. >> no more than the day the giants beat the pats. remember the next day? double whammy, a lot of them didn't pay and the fbi investigated them. that was a day for infamy for the better. >> keep an eye on the markets, everything fine right now. back in '08 it was a credit crisis, '07 really into '08 that

preceded the crisis overall. and that had been churning through for a long time. we're nowhere near anything like that right now with all the incredible liquidity being thrown into the market by most of the central banks, but i want to keep a close eye on the european banks because they're the key here i think in so many ways, again, we don't know the answers. barclays coming off lows down only about 18%. many of the european banks off the lows, but their balance sheets were enormous, derivative portfolios are fairly large. too early to have any answers at all. >> in the meantime we're gelting some statements from various companies. pfizer for instance out saying we recognize and respect the vote of the british people. too early to speculate on the impact of this decision on our business. i think bhp also had a statement a few moments ago saying not yet clear how long the formal withdraw will take and what the new settlement will be, we expect a period of certain

volatility, have the mix to withstand. >> interesting. i was looking at companies to see the poexposure. valeant doesn't have that much exposure. what are you looking? >> it doesn't. >> i thought it could be a win for the valeant shareholders. don't want to say turns out -- >> eli lily is up. >> it is up. that's people saying, listen, i can't wait any longer. impatient. geez, can't they wait? i mean bristol-myers down. >> kroger, verizon -- >> kroger's quarter wasn't even that good now it's back to where it was. i don't know. is it a little too bullish for me? it's a long day. it's 9:55. i don't think the cannon ball, the 1:00 cannon ball.

>> may not be crowded. >> i think those guys have to be at their desk but if they foolishly leave, you might get a better chance when they head out on blade -- blade? blade's operating today full. >> yes. >> do we have blade's statement? operating full capacity. >> but we do have a statement from hillary clinton. eamon javers has that in washington. >> yeah, carl, that's right. that word respect you just read in some of those other statements seems to be the common theme today. here's the statement from hillary clinton out just a few minutes ago. she says we respect the choice the people of the united kingdom have made. our first task has to be to make sure that the economic uncertainty created by these events does not hurt working families here in america. we also have to make clear america's steadfast commitment to the special relationship with britain and the transatlantic alliance with europe. that's a statement from hillary clinton as this brexit vote now sort of roils american politics and we start to see all of the reaction. we obviously saw reaction from donald trump speaking in scotland earlier today saying that he loves it when people

take their country back. so that's the political divide here in the united states, guys. >> thank you very much, we'll come back to you as we await further statements. what'd you make of the political -- the u.s. political fallout from all of this? >> one of my first thoughts this morning was, okay, this is going to make people feel like if you have a poll that counts out trump because we've seen some, well, i don't want to necessarily trust that poll. if you think the people are so angry that they're willing to cut their nose off to spite their face, again, voting for a pay cut basically, then there's resonance. there's resonance to that. then i turn around and say people are just kind of blindly too positive. should con-ed be breaking out to new highs here today? is it really hot here? i mean, honestly. but this is the day -- do i come in and say, carl, market's down 500, i'm going to take con ed.

wait. but, yeah, when i listen to trump and i think, geez, that could resonate midday. is this going to be a good day for stocks? >> i don't know. i have no idea. but the level of uncertainty overall has increased. and you mentioned the election that's not going to help clarify anything over the next few months. >> no. but i just -- and i read -- when i read the papers today and i said, okay, how bad is kcostco going to be because of this problem with visa, down 5, down 3, how about down a dollar? it's not even down for the week. but it's surprisingly -- i'm willing to say it's too complacent. >> i can see where you're coming from. how are you going to handle this tonight on mad? >> well, geez, we have cisco tonight, which got this huge ruling last night. and we have red hat, which is the highest multiple stock that reported some people a disappointing quarter, i didn't think so. but those are two examples -- these are big international companies in tech that cisco should be up today. it's a very big win in court

that they had. it's down 82 cents. kind of an interesting place to go. we're going to do business as usual. the market's forcing us to do business as usual. and sunday night we have a special, which my wife will be so thrilled about. because she likes me out of the house. no. this is one we like to watch things on sunday night. >> it's the jim cramer household in turmoil. >> i've been away for the week and she says we've been ships passing in the night because she's going away. and you know what, there's always a price to pay. i was debating sleeping this weekend. i don't know, that's probably out. >> maybe next weekend, jim, we're glad you made it back. see you tonight on "mad money" 6:00 p.m. eastern time. let's get to the bond pits as well and check in with rick santelli at the cme. good morning, rick. >> good morning, carl. let's put a little reaction to

this rally. the reason we're doing all of this is because of brexit. so we want to look at last week's close, 69 basis points. as the crow flies it's only down 5. if you look at a 111 close last week in 5s, we're only down 4. if we look at a 161 in tens, we're also down 4. follow up with 30-year bonds at 242 last week, they're up one basis point. though i could hear somebody out there, look at all this volatility. hey, ever go online and see ticket to fly us to some city $25? it's good for what an hour and then it's gone. exactly like an intraday trade. the fact we move intraday is because this is one of the most giant margin calls of macro hedge funds in the entire world. so of course you're going to see market movement, but it doesn't stay at the extremes long. it's where it closes that counts. i heard somebody earlier saying maybe there would be a margin call. this is what a margin call looks

like live. now, let's look at the charts, one-year and two-year, doesn't look so bad when you take a step back. let's look at five-year charts of tens, been there, done that. let's look at 30s. 30s we could see the long end really not playing this game whatsoever. now let's get to some on the money trade, shall we? let's take a 15-year chart for the pound versus the dollar. obviously it isn't terrific, but we didn't expect it to be. but maybe the better chart to look at is the pound versus the euro. not nearly as dire on the right side of the chart. let me tell you something, if there's any adjustments to be had here because the emotion pounded the pound, it's how the reality might hurt the euro ultimately. now let's get to the real money trade. before brexit i did a probe and i couldn't guess what the vote is, but i said if they do brexit, what i would be paying attention to were the credit spreads. that's the money trade in the credit markets. so let's look at the bund. the highest quality credit in

the eurozone against the uk gilt. that spread has tightened, not really a surprise. but here's where it gets interesting. all the countries and all the countries' banks and all the institutions that are kind of sucking up some of this free stuff or on the better end of quantitative easing or on managed rates, that's who's going to have a problem. you see the financials. now let's look at the bund versus spain, widening, bund versus france, widening. bund versus italy, widening. this is what we want to pay attention to. very quickly 93.5 is the final read on michigan for june. it follows a mid market read mid month at 94.3. it's a little less than expected, but in the grand scheme of things the big bounce because fear was overrated, that's the story of the day. back to you. >> thank you very much, rick. it is clearly a very big day for everybody concerned. let's get back to the streets of london on a view of what's next

in europe. >> absolutely right, simon. lots of confusion of course as to what's the process from here because nobody's left the european union before. let's break down what can be expected. the uk can choose to invoke article 50 which would begin negotiations of its departure. it is important to note during those negotiations nothing actually changes, all existing treaties and laws remain in place. but reaching an agreement could be pretty tricky. if something is agreed in principle, it still then requires 72% of the 27 states -- remaining states of europe to agree and by population needs 65% of those states to agree to it. it also needs to get a simple majority in the european parliament. then reading from the european commission released today they say if no agreement is reached within two years of the uk activating article 50, the uk would leave the eu without any agreement being in place.

that would be a pretty bad outcome, of course no new treaties negotiated. what about the very immediate future? well, on monday the 27th of june, merkel, hollande, renz meeting. david cameron will go but will not start negotiations. so how might article 50 then be invoked? the question is when might it be invoked. david cameron said it will be after the new british prime minister is chosen. comments this morning seems to suggest it would be much sooner than that. it's also possible it wouldn't be invoked at all because these negotiations could take place more amicably and slowly. lots of uncertainty around this. immediate focus will be on the european commission meeting next week. >> wilfred, thank you so much.

joining us. >> obviously the levels we're looking at obviously not what we might see when the initial shock hit last night. how would you characterize the way global markets are taking the news? >> yeah, looked a lot worse in the middle of the night. of course a lot of things do. that's when you see goblins and that's when there's ill liquidity. markets have recovered, there's no doubt however risk markets are at risk and this brexit, this successful brexit is a danger to risk assets if only because it endangered established politics and established, you know, economic policies. those that voted to leave are basically voting for a rather pop -- i'm talking about trade

and even taxes. these are deflationary nongrowth enhancing policies that will roil markets for some time to come as they adjust. >> bill, people who are there and who did vote to leave argue that the uk can stand on its own with some period of adjustment. why is that wrong? >> i don't think it is wrong. i think it can stand on its own. the question is whether it stands taller with the eu or whether it stands as tall or perhaps even taller on its own. you know, those that voted to leave suggest that they'll be much better off, that they won't be subject to the dictates of brussels and that they can mandate their own policies. and so there's a certain legitimate argument to that. the problem becomes if the leaving, if the divorce leads to a moment or a movement going forward of other countries such

that free trade is at the margin jeopardized and if immigration at the margin is restricted, then, you know, established policies of the past 20, 30, 40 years which have been successful to date but not so successful in the last few years, you know, may all of a sudden start to move in reverse as opposed to forward. >> bill, love to get your take there on what you think the european central bank is likely to do, which of course is already on full throttle as things stand. i mean, you were on the network must be almost a year ago now when we had that low on ten-year yields and you suggested it was the short of a lifetime. wow. and then there was that huge recovery, the bonds sold off. now of course we are at negative yields on the ten-year again today. fresh record lows. below the level of which you said they were the short of a lifetime. what happens from here? >> well, the lesson i guess, and it was my suggestion at the time

was inaccurate to the day's suggestion at least for the next three months so let's put trading into the perspective. but, yes, you don't want to fight a central bank and your question basically is how powerful and what policies do the ecb have going forward that could stabilize and that could promote growth forward and could influence interest rates. i have a sense that the ecb is going about as far as it can in terms of negative interest rates. as you know it creates problems in terms of banking, it creates problems in terms of deposits from regular citizens. and to think that they could go to minus one, minus two, minus three in order to elevate asset prices over the long-term, to me there are limits. and we're seen as well, simon, the negative aspects already of zero or negative interest rates. insurance companies are husrtin. pension funds are hurting.

the average saver is hurting and that's one of the reasons really for this minirevolt here in terms of brexit last night. >> bill, let me bring in my colleague sarah eisen who is on the streets of london. sarah. >> simon, thank you. bill, you know that i watch the currency market very carefully after what was a rocky, crazy and historic night in that market. i'm wondering what you do with the euro right now. it's not down nearly as sharply as the british pound. is there a risk of a domino effect here politically? euro skeptic parties rising up emboldened by this vote? and are you betting against the euro? >> well, i'm surprised by that too, sarah. to my way of thinking overnight hedges basically that, you know, were hedged with the pound versus the euro or the euro versus the pound, you know, we're seeing some rebalancing there and those hedges taken often. so that leads to temporary euro strength, not that it's going up but it's not going down very

much. i think that's the explanation. yeah, i think ultimately if the eu is at risk, and i won't go that far, but to the extent that marginal countries all of a sudden put in their bid to leave the eu, then the potential for the eu in terms of its grand plan is certainly at risk. and that includes the euro. so, yeah, the euro going forward to my way of thinking shouldn't be strengthening. if anything because of draghi and if anything because of the dysfunctional nature of the eu family before brexit. and now even worse afterwards the euro is not a strong currency. >> bill, real quickly, what is your overall outlook for rates in the u.s.? and are you concerned at all sbr separately about the state of the european banking system and credit? >> no, i think the banks are covered. i know draghi has made it obvious he will be buying

corporate bonds and he hasn't extended that to corporate banks, but if italian banks are in trouble, then that would be the next step. so i don't think there's a solvency question there. but i do think risk assets and spreads in europe, corporate bonds despite the buying of the ecb are definitely a risk because as growth slows down as you have uncertainty and dysfunction within an economic unit, then corporate spreads, nonsovereign spreads should widen to some extent. they've done that today, i would expect them to stay wide over the next three to six months. >> bill gross at janus, bill, we always look to you for advice in moments like this one. we appreciate your time as always, bill, thanks. >> thank you. >> let's get to sarah. >> all right, we're talking to the biggest names, guys, this hour in the markets and on the economy. and who do you want to hear from on what is next for the british economy and the world economy? i'd like to welcome now allen

greenspan with us, the former federal reserve chairman of the united states. governor greenspan, thank you so much. >> my pleasure to be with you. >> so i'm in london where i can tell you that more than half of the country is now in a very celebratory mood over the results, calling yesterday an independence day. and yet there is fear in the markets and what is next for the economy. what is your reaction as to this spillover effect from this brexit vote? >> i think this is a much more difficult problem than is being visualized by most people. there's a lot of follow-ons that go on, such as scottish national party is almost surely going to try to resurrect scottish independence. and there's a lot of problems with the breakdown here in a

sense that for example northern ireland can no longer easily move back and forth into southern ireland. and i think this is just the tip of the iceberg. and the reason i say that is that this problem that's causing the british problem is a far more widespread. fundamentally what we are looking at is a massive slowing in the rate of real incomes across the whole european spectrum. it's caused essentially by output per hour in virtually every country slowing to a halt. that's not the case only in the united states where it's obviously extreme, but pretty much around the oecd. now, the result of this is that real incomes are not going anywhere. and that is creating a serious

political problem, which is not easy to resolve. and i'll get to that momentarily. >> well, chairman greenspan, when you say this is the tip of the iceberg, are you saying that this vote is the beginning of what could be the unraveling of the european union? and one step further, the eurozone, the countries that share the common currency? >> well, i think the euro currency is the immediate problem. the euro currency remember occurs in history as a bridge to go from essentially where we were in the early world war ii post period to a political merging of europe. the obvious problem that everyone has had with france and germany is they went to war with each other several times. and it's been a major problem in europe. the result is that starting

right from the iron steel agreement there's this whole movement towards european political integration. the euro area, i should say, was a major step in that direction. and it's failing. it's failing in the sense that for example we can't have -- greece is in real serious trouble. it is not going to continue in the euro for very much longer irrespective of what's going on currently. >> so the question, chairman greenspan, what does all of this mean for the u.s. economy, for the u.s. markets, u.s. dollar and u.s. treasuries which are being bid up but not as extreme as the shock we saw overnight. how should we think about this as an american investor and the american economy?

>> well, basically the forces that are drive iing both the und states and europe are very similar. if you desegregate the gdp data, what you find in the united states, and it's been going on since 1965, is that the sum of gross domestic savings plus entitlements as a percent of gdp has been relatively constant over the half century. that means that the significant mandated rise in entitlements has dollar for dollar offset gross domestic savings. which in turn after adjusting for current account balance gives us a huge contraction in capital investment which in turn is the key element in output per hour. and that is what's killing us.

>> i know you've been looking for political solution on entitlements and to some of these bigger picture issues. but just in the immediate term here we've heard from global central banks, they are monitoring the market reaction. they stand ready to provide liquidity. what is happening behind the scenes and the federal reserve right now as britain takes a step into uncharted territory and investors wonder around the world what to make of it? >> if i knew, i couldn't tell you. >> what would you do if you were in charge still? >> well, i would worry. because there's a certain amount that monetary policy can do, but our problem is fundamentally fiscal. it's a problem fiscally in the united states and every major country in europe and indeed around the world. and the reason for that is that the developed countries are all

aging very rapidly. so you would find very interestingly that take a look at the average amount let's say the average proportion of people over age 65, and you take that ratio and you find that it correlates very closely with the ratio of entitlements to gdp in that country. japan for example being way out on the extreme. the united states being sort of closer to the bottom. but in all cases it's creating a degree of mandated expenditures, which have nothing to do with the rate of growth in the economy or the level of the economy or the ability to fund it. going on and on at 9% a year.

>> all of these sort of economic factors have added up to a real rise in anti-establishment feeling on both sides of the atlantic. that's been a pervasive theme during this referendum i can tell you. and we're feeling it in the united states as well. do you think this increases the chances that donald trump is elected president in the u.s.? >> well, as you know, my wife handles the politics in our family. i don't want to tread on that particular ground. but it's obvious that, i mean, as bernie sanders said today that the weakness in the whole european structure sort of verifies his view that the global economy is in real serious trouble. everybody knows that the global economy is in serious trouble. >> do you see the global economy going back into recession as a result of this?

>> strangely enough recession is not my concern. i'm worried basically about stagnation. that is getting virtually zero growth in incomes, you're getting entitlements which basically are fitted originally for a 4% annual rate of income growth to fund the entitlements. so what we have is the entitlements coming forth as people age, that in turn creates a huge government deficit. and our debt is now finally beginning to move significantly on the upside. that worries me materially because i don't think it's easy to get around this. this is not the end -- brexit is not the end of this set of problems, which i always felt were going to start with the euro. because the euro is in very serious problem in that the

southern part of the eurozone is being funded by the northern part and the european central ba bank. there's a limit to how far the european central bank can go here. remember, they had a massive contraction in the balance sheet, the ecb, two, three, four years ago. >> yeah. >> but it's now come all the way back. and what worries me is that if the federal rezerserve were in trouble, there's always sovereign rights of the united states government which can stand behind this. it's not clear if the ecb runs into trouble who stands behind them. >> it's an interesting question. chairman greenspan, i want to bring in my colleague david in new york. go ahead, david. >> thank you, sarah. chairman greenspan, having just listened to you talk about these various things, i haven't heard

you say anything positive. you're talking about the potential, i guess, breakup of the euro to a certain extent. you're talking about unsustainable debt levels of a sovereign nature in many of these countries and the inability of the fed to come to the ecb's rescue. can you give me anything here to grab hold of to make me feel better about the current environment? >> i'd be delighted to do so, david, if i could do it for myself first. this is the worst period i recall since i've been in public service. there's nothing like it including the crisis -- remember october 19th, 1987, when the dow went down by a record amount 23%? that i thought was the bottom of all potential problems. this has a corrosive effect that will not go away. i'd love to find something positive to say.

and indeed there are elements involved, but the major thing driving us are the entitlements program. it's very simple if we would all get together and reduce the -- not reduce them but reduce the rate of growth to a rate we can fund. the facts are irresistible. i don't know what you're going to do about it unless the political parties come together in the united states. >> right. >> and agree to a cut in the growth rate of entitlements, which we can no longer afford. >> but you seem to be prestaging that decline in the standard of living for people in order to get a readjustment that is needed in terms of debt levels overall being more sustainable. >> standard of living has already slowed down its rate of growth significantly. cutting the benefits is a way to get us back to a stable growth rate which means that productivity is back to the growth rate of 2% per year.

at 2% a year productivity growth rate, which is what it was, we did very well. as far as i'm concerned what we need to do is find a way back to a growth rate of productivity which sustains the economy and temporarily -- we may temporarily slow down the benefits, but they can rise again only if the productivity is there. we're fooling ourselves. there is a thing called double entry bookkeeping. >> chairman greenspan, thank you so much for joining us this morning. valuable insight as always. that is alan greenspan, the former chairman of the federal reserve. a very worried former chairman of the federal reserve, simon, back to you. >> thank you very much. volatility on the market obviously we opened down over 500 points just under an hour ago. we had a recovery, but then

while mr. greenspan was speaking we plunged lower down 400 points and we continue to bounce. let's get more on the markets from kayla, again, live from london. kayla. >> well, simon, i just got off the phone with j.p. morgan chase's ceo of the corporate investment bankings based here in london. and we talked about sofrt of the scope of the market activity today and exactly how much volume these banks are having to handle. of course j.p. morgan one of the largest global market makers. he said in asia overnight for clients they did $60 billion in spot fx trades, that is four times the normal volume. and he said they saw half the normal liquidity. that gives you a sense of exactly how many orders are coming in and exactly what these banks are able to execute. he said liquidity in fx has improved as each subsequent geographic market has opened. i schedules asked him about central bank intervention and if

he's seen anything out of the swiss international bank, he said they have seen no bank of england nor ecb intervention so far in the market today, but he does support the decision of the bank of england to pledge that 250 billion pound sterling in support of whatever market liquidity might be needed. he's seen no problems with access to liquidity for european banks and j.p. morgan chase continues to trade normally with all of its counter parties at this hour. as far as all of the counterparties and their businesses here in london, he said that j.p. morgan currently has no plans to move to paris. that they have not initiated layoffs unlike some of the reports that have come out in the markets. that it will take a lot of time to figure out the implications of how this market looks going forward and where this market will shift to geographically given the implications of last night's referendum. we also spoke to morgan stanley spokesperson who also denied a bbc report that that bank is laying off 2,000 people

immediately. so certainly these banks are coming out to say they are open, that clients are trading, and that so far this does not look anything like a lehman moment or any other sort of crisis type of trading environment that they have seen so far. so perhaps that puts today's activity in some perspective. we are seeing declines across the board for the european banks flooding into safe havens as well, but that they are saying is just normal course market activity. guys, back to you. >> although jamie dimon did warn the british people it could be 2,000, 3,000, 4,000 jobs in the event they vote to leave. thank you, kayla. ahead on the show we'll show you some price action in london and why that might offer a buying opportunity. stay with us. stay with us. one of millions of orders on this company's servers. accessible by thousands of suppliers and employees globally. but with cyber threats on the rise, mary's data could be under attack. with the help of at&t, and security that senses and mitigates cyber threats,

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markets have stabilized. for more on where investors should potentially be putting their money, let's bring in chief global investment strategist at charles schwab and

steve liesman. jeff, what is your reaction here? what are you now telling investors? >> we don't think investors should be doing anything this morning. hopefully they own some of those safe havens that buffer portfolios in times of stress like cash or gold. instead i think investors have to look at this as a shock. i don't mean as a surprise but a shock to the economic and financial system. akin to what maybe we saw in 2011 with the earthquake in japan and ensuing nuclear disaster and recession there, we saw sharp decline on the first day, ultimately double digit declines but the market came back three or four months later. again 2012 debt crisis in europe, very similar. another double digit decline, but ultimately a recovery that took months and not years. i think that might be what we're seeing here with this brexit shock to the market. >> i'm looking at big banks in

europe, some big property companies down a similar amount, the question becomes in this environment, jeff, where there has been such a sudden pricing whether you buy now and big fund managers have 6% cash at the moment or whether this is the beginning of something for serious and whether the eurozone project is going to unravel. can you make a judgment there for us? >> well, in terms of the judgment of whether things unravel or not, it's very difficult to say obviously. there are plenty of stresses and i don't think anyone knows for sure certainly it will take time to tell. >> but hang on, jeff, that's what people are getting paid for. if they take that risk today. do you go for those huge companies that are down 25%, 30%? >> simon, what i was going to say is i think as a result the uncertainty lingers and there's more downside to the markets here. i'm not saying dramatic bear market downside, but certainly the 11% to 16% declines we've seen in the past during similar shocks, maybe in store here. it's not a one-day rip off the band-aid type of event. so i think you might see

opportunities but they might be more attractive opportunities perhaps you way a little longer. >> got it. steve, pile in here. >> well, you know, i think one of the things that influences how investors position themselves is the outlook for the economy. i think you're starting to think about how brexit can effect the u.s. economy. jeff said it, he talked about a confident shock. that's a key thing. but now you have to talk about the stronger dollar, which has two effects. one is it hurts exports, the other thing is it depresses inflation. financial commissions are going to be tighter, interest rates will be down but equity funding is actually higher. then you have to think about the fed being on hold. the fed is going to look at all of that. when i think about how the fed reacts here, simon, i think i could see a federal reserve that is waiting months for clarity. if you think the idea we're going to wait for july to see what the june jobs report was, that's now off the table here. what we're talking about september maybe where the fed might take a look at how some of the businesses that jeff was talking about how do they react to this, do they reduce investment, do they reduce

employment? these are some of the questions out there. when you talk about the returns that are going to be had by people, it's amid that uncertainty. you need to be paid for that uncertainty of how the u.s. economy's going to be effected. some of the numbers i saw this morning people were shaving 0.2, 0.3 off the gdp outlook for the u.s. from last night's vote. >> jeff, what about the inaction of the central bank? can that boost the stock market? >> no, i think we've moved into a post central bank environment. for the last five to ten years we've looked to central bankers to guide us out of these shocks. i think this time the focus moves to politicians. that may not make you feel comfortab comfortable, but politicians have greater flexibility in their mandates about how they can respond to the demands of a populous. certainly they can respond around immigration, they can respond about a number of other concerns that have fractured europe and increasingly fracturing the u.s. and creating greater political and potentially economic uncertainty as well. so i think that we've actually shifted in the focus of the markets much more attention going to be paid on upcoming votes. we've got a spanish election this weekend, which will

certainly be to watch. italy coming up, key referendum in october. and france and germany of general elections next year, i think that will be focus and less on what central banks do. >> what about gold, jeff? gold miners and gold traders worked very, very well this year. if you're suggesting we're in a post central bank world and relying on the politicians, many people might want to pull the trigger to a greater extent perhaps on that buying. >> well, perhaps. as we got as steve pointed out maybe a dollar rebounded a little here. we'll have to see how far it goes if the fed doesn't take any action. we've seen a powerful rally, already quite a flight to safety there. i think investors probably better to stay focused on -- the sidelines and look for opportunities. >> okay, jeff, we have to leave you now because we're losing your satellite. it's good to see you, thank you. steve, you want to add something in there? >> just quickly, interest rates will be lower. that will help. the problem is the confidence issue. if ceos and consumers don't have the confidence to borrow, then the effect of the lower rates

which include lower mortgage rates that could help consumers, those will be muted by the lack of confidence. we have to watch that very carefully. >> okay. we'll leave it there for the moment. the dow currently down 403 points. we'll be right back. became a stay over. and a parade rained on the sales team's parade. and they still made the meeting, without actually going to the meeting. before any of this, cdw orchestrated a mobility solution, using the hp elite x2 1012 with intel core m vpro processors. mobility by hp. orchestration by cdw. with usaa is awesome. homeowners insurance life insurance automobile insurance i spent 20 years active duty they still refer to me as "gunnery sergeant" when i call being a usaa member because of my service in the military to pass that on to my kids something that makes me happy my name is roger zapata and i'm a usaa member for life.

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for a check on u.s. markets, art cashin joins us here at post nine, director of floor operations at ubs and also here as he normally is on friday, pulitzer prize winning columnist who says to understand why british decide to leave eu, look to switzerland. you want to delve into that, jim? >> absolutely. switzerland is the non-eu poster child for how great it can be if you are not in the eu. switzerland has the second highest gdp per capita in the world. it has -- it's very tolerant, it's very calm. there's a very low crime rate. there are no terrorist attacks. a lot of people in britain looking to switzerland saying let's sign on, let's do the swiss thing. well, there's one big problem with that, which is switzerland

for all practical purposes is a de facto member of the eu. they negotiated unilateral trade agreements with everybody in there. they're heavily dependent on eu exports. and in return the eu made them agree to virtually every important policy that the eu passes. the difference is the swiss have no role in making those policies. now, right now switzerland is trying to rebel. they're trying to assert this sovereignty that the british claim they want by, you know, changing the immigration rules. and the u.s. saying, oh, no, you don't get to pick which of these policies you want. >> it's not a la carte. >> no. and that's been frozen for the british thing is. but now that britain has voted to leave, you can assume eu is going to take a tough line on switzerland and i bet they're going to take a tough line on the uk as well. >> let me point something out as far as banking is concerned for the uk economy now whether the bank is offshore, rules will be set by the european union if britain wants to play a passport in them, but the uk will have no

say. >> absolutely. >> that's the new reality of where we are. >> that is the new reality and i think it's going to be quite a shock to policymakers and financial people in london. that's one of the reasons london is now certainly under threat for losing its status. because it was a participant in this before. now it's an outsider. now, switzerland has a thriving financial sector, but it's not london. it is not a world financial capital. it's a haven country. and even that is now in question that the swiss have been having to give up a lot of their secrecy laws. >> do you believe the uk can negotiate some of these things, art? >> i think they can try. it's a great push and pull. i think what we saw yesterday was that this rebellion against the ruling class is becoming a global event. and it may in fact be the first wedge in maybe not blocking but certainly slowing down the sense of globalization that we've had. i think people say enough, i

want my own little space here. and i want to be able to make my own decisions. i think we're seeing some of that with the rise of trump and bernie sanders here. i think it's a global event. >> we just had greenspan on, said brexit is the tip of the iceberg. said it's the most worrying period he's seen, even worse than '87 because of debt and entitlements. >> i know, i thought you were going to have to take away his belt and shoe laces. >> he was very negative. >> said what would you do if you were in charge, he said i'd worry. you've been resolute, no hikes this year and your call just got a lot better. >> yeah, i still think there will be no hikes this year. you saw the conversion of bullard. that's why i want to wait until next week. i think we're going to hear from yellen and several others and we'll find out that they'll probably take a bow for saying we were smart to wait on brexit. but there's more stuff to come here. it is somewhat worrisome. >> you know, jim, it's quite rare that people wake up and are

genuinely shocked by election results. i think that's the attitude of a lot of people around us today. >> right. >> the question becomes to the point that everybody is making, is this a buying opportunity or is it the unraveling of the european project to a greater extent and therefore a type of systemic risk? what are you hearing? where do you think we are on that? >> the short answer is we do not know at all. i think at that point it's too early to call this a buying opportunity. there's so many uncertainties here. markets hate uncertainty. but i think it's worth keeping in mind this is a fundamentally political and not an economic event. it does have enormous economic consequences, but this isn't a lehman brothers, this isn't even a terrorist attack. the uk is paying its bills, people are still going to work, the trade is still going on. there's not going to be a massive disruption overnight. i think a lot of things will settle out in the next few weeks and months as we see what happens here. but i do think it is worrisome because, you know, i think one of the reasons it's such a shock is people who really thought

this through said the reasonable -- you know, the sensible thing is to stay. people are not voting for the sensible thing. they are voting their emotions. they are voting their frustrations. it is the trump te no, ma'am -- phenomenon at large. they're saying i don't care what happens to the pound tomorrow. i don't care what happens to the stock market. >> the same discussion earlier about anti-intellectualism, not responding to economic arguments, but these people are voting from their living room feeling their daily lies, right? the pound has nothing to do with how their -- >> it's an immigration phenomenon. >> but this is not going to solve the immigration problem for the british. i mean, half of the british immigration does not come from the eu. >> that's not what they've been told, jim. >> you have to look at the numbers. nobody wants to look at the facts, which again that worries me people don't look at the facts, but half of the immigration comes from outsided eu and the form of letting in

british commonwealth countries are creating a lot of the problems they don't like. they could do something about that. i don't know why they haven't if it's such a big issue. >> really quickly, art, dow back to intraday level we saw last friday. is this muted response relatively speaking going to last? >> i think it may. the russell rebalancing today will kind of distort things a little bit. but i think this is a certainly multiday if not a multiweek thing to be thrush through. i want to see how the fed reacts to this. we'll get some other policy moves here. >> art cashin, jim stewart, thank you very much, guys. >> good to be here. let's get to chicago. rick santelli, get the santelli exchange. >> good morning, carl. we're going to get right into it with jim bianco, my guest today. we don't agree on everything, but let's start with betting markets getting it wrong. i had three reasons, you agreed, but why don't you tell it. >> i think the first reason is that the betting markets might have been trying to influence the outcome of the election. >> you mean try to make a little

extra money on the freedom vote? i got ya. >> yeah, try to influence the freedom vote. i think the other one is something we've talked a long time about, market signals are just flat grobroken as well. i think the third one is they're somewhat out of touch and somewhat not realizing that they had the polls. one thing no one's noticed here the polls were pretty much correct, but the betting markets and the financial markets decided the polls were wrong and they priced it out even though the polls said this was a 50/50 outcome and just 50/50 the other way. so they outsmarted themselves in that respect when they weren't trying to manipulate the outcome or trying to make themselves some money. so i think there's going to have to be a rethink here. you're supposed to reflect the consensus on what you think it's going to be, not drive it. they did a lot of that with this. >> when it comes to what's going on in the credit markets, i find it so fascinating. we're within five basis points of unchanged on all maturities on the curve and 30-year bond's actually lower in price, higher in yield on the week. where the real smart action if you really want to figure out

what's going on look at the credit spreads against the bund throughout europe. what are your thoughts on the uk you set aside, the flight to safety with the nervousness i understand, but the widening spreads. even in france, i believe it was 8 to 10, here in the 20s, italy, spain, this is simply the most important aspect of all. if mario draghi thinks he has enough fingers to stem the dike because he can buy, what about the speculators that go in front? are they going to have second thoughts these days? >> you're right about this. i think if you want to sum this up, what is really worrisome is showing up in the credit markets right now is this is the end of globalization as we know it. there might be a new form -- >> but see the problem with it is this is like when people blame capitalism for the credit crisis. it's not real capitalism. it wasn't real globalism. it was the kind of globalism that went from the market and trade being important to the politics controlling it being important. that globalization isn't good. >> that's true.

we're going to push back against that. as far as financial markets dow only being down 350 and the rest -- >> listen, we're out of time. but we are going to go to cnbc pro, and we're going to tell you what we each think the fed should do. and if you think you know the answer, you will be surprised. simon hobbs, back to you. >> thank you, rick. >> rick, thank you so much. rick santelli. when we come back we're counting down to the european close, about 43 minutes away. and then the european commissioner for economic and financial affairs, taxation and a lot more will talk to us about the vote and what the markets are responding to today. back in a minute. ck in a minute♪ there's a lot of places you never want to see "$7.95." [ beep ] but you'll be glad to see it here. fidelity -- where smarter investors will always be. if only the signs were as obvious when you trade. fidelity's active trader pro can help you find smarter entry and exit points and can help protect your potential profits.

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dow down 390 point ashs sond it is a rekov ri in the course of the last 1:20, and some of the backs are hit hard, and morgan stanley is down 8%, and the big question, david, the degree to whether this is a one-off shock that you reprice for and inarguably come in to buy the market or whether the european project is under a difficulty, and clearly it is because the uk is leaving the european union, and to point out that everybody, uk is not in the eurozone, and not using the

single currency. >> and it is important to to use the right language to describe the relationship, and so it is time to be until it actually exits as wilfred frost said. it could be as much as a two-year period, and the european banks have caught my attention, and the loss of the market value from so many of the banks and the uncertainty it brings into the marketplace overall, and this is day one, simon, of what is a long process and questions for a long time and not the least of which is what is next. some people brought up the possibility that scotland who vote ared to stay may try to exercise independence again. that and many things that we have to consider as we figure tout fallout from the vote. >> can i show you the trades in europe, and we le go through it in greater detail at the europe close at 11:30 eastern, but al e though it is going to take some time for the uk to leave the european union, you will see the markets move in anticipation of that result, and whether or not

you are will see importantly some of the u.s. banks, japanese bank, and international banks in london leave the uk, and therefore, you will see a lot of the office property stocks today, and those that are the land owners in london are hurting badly, and the question then becomes, are those the likes of the land securities a buying opportunity? you will also see the uk housing stocks down heavily in a similar vein, because maybe there is a slowdown within the housing market today or over the coming time, and those stocks are moving in anticipation of what may be. >> yes, the uk real are estate is cheaper for anybody payinging in dollars. sara is listening in as well, and of course, our local after fish onado on all things currency-relate and what a day for somebody who loves those markets, sarah, but i am curious to get your opinion on the longer term move of the dollar, and whether sit is going to

sustain the upward move and what that means n. terms of the multi nationals based here in the united states what it means potentially, but what about the likes of china and the implications of a much stronger dollar? >> well, is it is a good question, because we did see the ripple effects immediately in the overnight session, david in the foreign exchange market where the safe havens like the japanese yen and the german francs surged so that the swiss international bang had to intervene, and when something like this happens, a shock, it brings to the surface, the problems facing the global economy in china, and we will be watching that as well. a big move in the dollar versus the chinese yuan overnight, and what we are hearing is that the move of the british pound gai against the u.s. dollar could be sustained. if you are going back to for instance 1992 which is when the pound had another famous shock, it plunged 4% when george soros made $1 billion, and the following few days, it went on

to continue weakening, and that is something that we have heard. we have talked to mark asley of millennium global, and he said he would short the pound even with the move overnight, because they continue and it is a complete reassessment of the british economy which is set to weaken on this vote. it was weakening, remember, until this vote based on the uncertainty leading to hold back the investment, and the business decisions, and that is set to continue, and why a lot of the businesses are coming out here today to say that they are hoping that the divorce negotiations can go quickly. the only other point i wanted to make is that as we were voting scotland going pro-eu, the only other area that did so is london, and we have been out on the streets to get reaction, and especially from those who have been voting to reremain, and they are shocked first, as you might expect, and then also very worried about what the future is going to look like, and what the british economy is going to be

looking lieke. and while there is celebration here in the majority of the country, there are some britons who are stun and loss and feel a loss in their eye den tis as europeans. >> and in is what the currency should do, and this is one environment where the central banks for a while at least should look at what is happening, and a rereprice, sarah, it is highly appropriate in the environment, and the repricing of the euro probably appropriate as well, if you think that the growth is going to be hit there, and that is the concern, and the question is, i guess, whether the fed stands by and says, okay, look n that environment, we accept that the dollar strengthens, and we are, you know, the strongest economy around at the moment, and that is just one of the things that we have to live with as our partners work through their issue issues, and of course, they in turn welcome the lower currency, and arguably, sarah are, take some pressure off of the ecb to act further. >> absolutely, but the key is

going to be that if you see the dollar move extend for longer, and bigger against the other currencies beyond the british pound. the euro economy is clearly much bigger deal, and it is really the euros fall against the dollar that wreaked the havoc on the corporate earnings. in fact, a good note out of piper jeffrey this morning on the retailers that are exposed to the uk in terms of the sales exposure, and they mention eed junesco and ot another company that makes boots that is going to be held on the foreign exchange side, but you have to see the euro which earlier did dip below 110 and the biggest move ever for the ur e row, and it has come back, and that is going to be the key to see how strong the dollar is and how much it hurts corporate america, and hurt the exports and prompt any response from the fed. >> and sarah, the weak british pound is going to help the

manufacturers in the uk and seen as one positive, but i come back to china again, because i do wonder with the capital flows there, and the outflows or what we call the capital flight calmed down for a while, and it had been as much as 100 billion for a month for a brief time, and down to 28 billion and less, and you have to wonder, and you know, if they are going to have to devalue if this continues, and the ramifications of that are significant of course, as you might expect, and again, back to the point that i have been making all morning, we have no real sense at this point as to the implications of the vote that took place. >> absolutely. and we got a preview of what happens when the chinese current is si weakens earlier in the year, and remember that the markets started off with the worst start ever for u.s. stocks largely pointed to the chinese devaluation of the currency, and, so yes, the dollar broadly moving up, you have to watch china, and albert edwards who is a widely followed strategist writing this morning who is always bearish and we should

couch the statement, but he is writing that he sees china, david, as a bigger deal and worry right now watching those capital flows and the banking system than the reresult o br brexit, but clearly, there are a lot of risks to worry about right now, and they are all tangled up as alan greenspan reminded us at the top of the show. >> and speaking of alan greenspan and, sarah, maybe you are more familiar with the resent statements, but he was very, very negative, and making the correlation of worse than in 1987 when he was chairman of the fed and we had that correlation with the stock exchange and also the chairman leading up to the credit crisis and perhaps, he did not see that impactful then, but i have rarely heard anybody be as negative as he was, and were you surprised at all? >> well, he has been hammering the two points on the problems with the entitlements in the

u.s. and how it is pressuring incomes and this need for the political change, and he has been also for a long time warning about some of the problems with the euro, single currency and single monetary union and the eu at large, but it was a little surprised that he didn't inject any calm. he said that if he were still the fed chairman he would be worried and a spillover effect in the u.s. economy, because he knows as a former fed chair that it certainly carries weight, and so the issue s ths that he has talking about for a long time, and clearly feels that are not resonating, and so he wanted to make the point clear after what we saw last night with the british vote. >> yes, the unsustainable growth with entitlement. and wilfred frost, you are on the streets of london somewhere, and i want to get to him. wilfred? >> yes, thank you very much. i'm not quite on the streets of london, david, but setback from the parliament on what is called the college green where of course all of the media gathers. something earlier, i have never seen so many people set up here,

and this is a massive story, and way bigger than any uk general election. i want to transition to talk about perhaps a new way that we have not discussed so much that it could impact the u.s. we have seen it impact the u.s. financial markets already, and those moves have been significant and we have discussed a little bit how this is going to affect the u.s. economy if we see a broader recession across other european economi economies, but the geopolitics globally and how the u.s. expresses middle east issues or the russian issues or whatever the threat of the day is, and earlier i caught up with the uk foreign secretary philip hammond and asked him if he thought that the u.s. administration, president obama included, to be upset by britain's leaving the european union. >> the united states regards the eu as an important partner, and it is the only block that is larger than the united states,