good morning, welcome to "squawk alley. i'm jon fortt. with me at post nine, david faber. >> we're closely tracking this market of course this morning given the major volatility we've seen the dow and s&p 500 trying to bounce back from the worst day we had seen since 2011 and we've been all over the map this morning s&p 500 had been up more than 1% at one point but backing off of those highs of course, we came into the morning with the dow futures down as much as over 500 points. but that was quickly erased in the very first minutes of trading. let's get to our bob pisani on the floor for what is behind the wild swings and what we may expect the rest of the day >> it's been a wild, even today, just the last couple hours, let's take a look at the s&p 500. we moved in a 55 point range in

the s&p 500. you don't see that veven very often if you're looking for a trend, forget about it. the volume is titanic. we rarely see this kind of moves. just look at the major etfs, the big three, 130% at 11:00 a.m. after an hour and a half it's 130% of the full day volume we'll do 400, 500% of the normal volume a lot of people are moving a lot of money around quickly. we had a rash of new lows this morning. a lot of this is in consumer and defensive names, hersheys and philip morris, kraft, heinz, a lot of reets are at new lows the vix has been all over the place. it is still elevated this morning, trading around 45 or so again, that is a big notable move to the upside remember, nobody owned any protection this far down when you started going from 2700, 2650, 2600 in the s&p 500,

nobody owned protection that low. when you get that low and everybody goes and says we need protection, well, the options, the market makers charge you a lot of money that's why the vix went through the roof you see it at 34 right now one other side infect here, take a look at the cpoe which, of course, controls and owns options products that's down 16%. not clear why. there was a note out by kpw that noted 25% of their revenues come from vix products. from options, futures related to vix. that may be an issue there i did contact cboe and ask for a comment. i haven't heard back from them in the meantime, if you're looking for a bright side, markets are getting cheaper. we kept complaining one of the risks we had is the expenses of the market it's pricey. about a week ago waits 18.5 times 2018 earnings. historically, 15 or 16 is the a average. yesterday it opened at 17.9. and today we opened at 17.2. so the good news is the market is getting cheaper

and right now, the dow jones industrial average down 66 points guys, back to you. >> bob, what are we to make of wild swings in the vix that's not volatility, is it >> no. what's happened, the vix measures the cost of buying protection in near terms -- near term puts and calls. and if wh you get a sudden drop in the market, when you top 100, 150 points in the s&p 500 in a short period of time, that's going drive up options prices. also, nobody owned any protection one of the reasons the vix was so small, so low priced is people stopped buying protection, particularly way out of the money so if you're in 2750 in the vix, nobody owned protection further down at 2700 or 2650 suddenly the market drops 100 points and everybody says, you no he what i need protection and they go to the market makers and say do you buy me -- sell me some puts and they say sure. you're going to pay a the love money because you want it now and because the markets dropped

quickly. that's what happened that's why the vix went up quickly. nobody had any protection this far down >> all right bob, thank you we'll be talking more about that, of course, as this day goes on. for more now, we're joined by scott minerd he joins us on the phone always a pleasure. i think you wrote recently notes for this very interview, the tug of war between stocks and bonds is just getting under way. what do you mean when you say that >> well, you know, as interest rates are rising, one of the concerns people have had is that, you know, it's going to make stocks look more expensive. and we're starting to see that the market doesn't really have the stomach to see an increase in rates as we approach 3% on the ten year note and concerns about the federal reserve last week were increasing that maybe we weren't going to see three rate increases but maybe we were

going to see four or potentially more, i think stock investors began to consider whether, you know, it was time to take money off the table and reallocate the fixed income >> history would show tlus are certainly been times, scott, where both the equity markets can move up while yields are also moving up would you expect the same in this current period ahead for us >> i think that rising interest rates are generally something that would be good and associated with a rising stock market because the economy is doing so well i think the reason it's baa bit different this time is two factors, one, as the economy improves, there's the uncertainty about quantiun ta q easing around the world and how

japan and the world would unwind their programs which would take out major support for rates. and, two, in the face of the trump stimulus plan, the supply of bonds is going to increase fairly significantly and so i think the market is having questions about the ability to digest all this it's interesting because this really reminds me a lot of the period back in 1987 when we had a new fed chairman alan greenspan come in and the economy was gaining momentum after there had been a lull in economic activity a year or so before because of the decline in energy prices. and as it became clear that economy was strengthening and inflationary pressures were taking off in part because energy prices were rising, the fed had started to slip behind the curve and needed to raise

rates faster of course, this new fed chairman was challenged with rising stock prices back in '87 and ultimately, as he tried to keep up with inflationary expectations, it tricked the bubble i think the story we're seeing today is because of the new fed chairman came in the market decided they better challenge him on thefirst day on the job i think we're going to have a real tug of war here to see can the fed stay on path with the rate increases and at the same time continue to support higher equity prices? >> scott, so the suggestion here is that we've seen a movie like this before. haven't we been speeding it up this time around ten year yields in 1987 were going from 7% to 10% the stock market ignored it most of the time. did they not and here we are this year where we're talking about either three or four rate hikes on the short end and the ten year yield goeg

from 245 to 285. so is it an excessive pan nick the stock mark -- panic in the stock market or is it really fragile at these levels >> i think the reality is that romp we had in january of about 70% was just an unsustainable pace and as rates began to rise, i think it just caused people to reconsider their positions and it took the marginal buyer out for stocks out to go back to that 1987 period, we had a similar event occur back in march and april of '87 where stocks run up and about 20% and then was a 10% correction everybody was question bl whether the bull market was over and then by october -- sorry, by august of that year, we were making record highs. so i think that the market is

more sensitized this time around to rates also, an important factor here is that given the high debt load on corporate america, once we get short term rates up around 3%, our work shows that it starts to impinge on free cash flow to what is similar in recession airy conditions. i think there is a lot more concern in the market today about the level of debt on corporate balance sheets as opposed to where we were in 1987 and that probably is making people more sensitive and putting us more on a hair trigger to change the rates and fed policy >> so, scott, to simplify for the folks at home, what is the lesson of the past couple days, the fact that the market can drop this much in a short period of time? what should people be tweaking if they just sort of been on

autopilot for the past several quarters >> well, i think now is the moment not to panic. i believe that the high spike in volatility, the big surge in the vix we were talking about with bob, the big drop in prices suddenly is telling us that we're reaching a climatic selloff. we got the vix up around this level back late in 2015 just before stocks began to bottom and we started to make a new advance. the economy is strong. i think people should stick with their positions for the moment but when we start to see an increase in prices again, i think the lesson or the moral of the story is start to rebalance your portfolio systematically so that you don't find yourself in a situation of being overweight equities just because you had a big runup in your stock

portfolio. >> scott, finally, i mean, you know, there's a few things you said here that kind of don't scare me but certainly might be concerning i would point out to people you have one of the best performing bond funds over the last five years in any way people want to measure your performance you have gotten it right more often than almost anybody. you're talking about a new fed chair being tested you're talking about trillion dollar deficits. the fed no longer there in terms of qe. i mean you said a number of things that i don't know would make me want to run for the hills to a certain extent. are you changing the way you're positioning the fund in terms of expectations in the bond market? >> well, let me make one comment here in passing. i often remind investors never hire an optimistic bond manager. you only get back par at the end. but i think the key here is that the fed is going to continue to raise rates. the yield curve is going to

continue to flatten. and you're not being compensated to take on credit risk in your bond portfolio so get out of high yield get out of bank loans. get out of corporate credit. and move into places which have less credit risk like u.s. governments and agencies >> scott, always a pleasure. appreciate your insights always happy to you have join us thank you, scott minerd from guggenheim. >> thank you when we come back, f.a.n.g. stocks trying to make a comeback today. are they still a buying opportunity? plus, red ais kro tcross eue the great emperor penguin migration. trekking a hundred miles inland to their breeding grounds. except for these two fellows. this time next year, we're gonna be sitting on an egg. i think we're getting close! make a u-turn... u-turn? recalculating... man, we are never gonna breed. just give it a second.

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the nasdaq participating in the big twiswings this week for now, hanging on to gains for the year bertha coombs has a look at the nasdaq >> gains for the year but not exactly gains for the day here we're just slipping into negative territory as far as the nasdaq composite the nasdaq 100 has really been what's leading things this morning. you know, and that is really being driven by apple. when selling intensified yesterday, we saw apple breakthrough its support level, the 200-day moving average and that's when things really started to move to the down side

today the story has been whether apple can push back above that 200-day moving average it is serving as resistance right now. you can see, apple is negative for the year so much of the gains that we saw in january and the nasdaq happened without apple but today it's clearly having a big impact one of the things that apple impacted has been chips. the semiconductor index fell 10% correction that level from all time highs yesterday it was one of the biggest losers today it is holding up and again we're off of the highs apple suppliers reporting strong earnings sky works reporting strong earnings even though the outlook is a little shy of expectations, it still getting the benefit of the doubt today and we're seeing that stock higher. micron reporting good pricing for memory chips it is higher and that is what is helping to move things. health care is interesting and has been on a downward trend for a week now remember, it was one week ago

that we got that bombshell from amazon, j.p. morgan and berkshire hathaway saying that they were going to start a new initiative to try to get lower health care prices that really sent the entire sector lower biotech now is fighting a five-day losing streak down 10% from the most recent 52-week high but about 19% from all time highs that were more than a year ago. and overall today, we're seeing mixed trade in biotech we're seeing a few stocks that are bouncing back. endo pharma and teva getting a boost from securities which says the threat from nonprofit generic drug manufacturers saying they're going to do their own generics is overdone the stocks today getting a little bit of a bounce but lots of things going on in health care, jon, that are just related to this sort of momentum trade to the down side

>> let's bring in the head of internet research. good morning to both of you. i look at these big tech names i know you don't cover apple apple is trading at around october levels right now facebook just saw these current levels i think about two weeks ago. amazon doesn't seem to have been much affected at all by the market moves now normally with volatility you'd expect some of the, i don't know, richer valuations perhaps to feel it first what is your sense of what is going on say with amazon and facebook >> thanks, jon i think what we have is we have the advantage of having these companies just reporting q-4 earnings just last week. and by and large, what those numbers show you is that demand fundamentals remain extremely strong, particularly for somebody like an amazon. but even a facebook and even for a google or an alphabet. i think there is any push back potentially to be had is on the

margin for all the guys to continue to grow at that level, they need to continue to invest and there is a potential for margin contraction over the next year or two. but relative to the stock price, you have to go back over the last couple years and in fact even relative to the average for last five years, whether it's amazon, whether it's facebook, there is still trading within the same range on an eb to cash flow or eb to cash flow basis. yes, they're expensive relative to on an absolute dollars. they're relative to where they were a year ago. but they're still trading within relatively same range we've seen >> and ross, i know you're a believer when it comes to apple. when it comes to disney. it's potentially a big year for both but we've had some choppiness in the trade earlier this year. you shrugging that off you are buying here? just holding on to what you got? >> well, we're always somewhat buyers and we love these opportunities to buy especially with the vix spiking so much you know, nothing's changes from

a few weeks ago other to an adjustment the fact is that market got way ahead of itself and come back to a valuation that supports i think the current pricing. so we look at a stock like apple and are just amazed that it trades at a discount to the market multiple. they have $160 billion of free cash they're going to put to work and what i'm hoping is that a tender up to $200 a share. but when you look at when are the safest things i could buy in a choppy market, it goes back to the f.a.n.g.s. these are monopolies in our society that are not going away. they're widely profitable and growing and enormous influence in power i was buying apple and that's what we saw when things get bad, people buy apple >> it's interesting. it's being presented here. it does seem as if the f.a.n.g. type stocks, the mega cap growth stocks are where people hide

right now. i wonder if you think that creates a different kind of investor base there or if in fact people are less folk uscusn the fundamentals they were all about the innovation and what is coming next >> if you adjust them for growth, most of these stocks are actually really not that expensive. take a google and facebook, for instance, they're trading at a pe to growth of about one time which as russ says, for companies that dominate space is attractive the other thing is if you're looking -- if you're a growth oriented large cap portfolio manager, there just aren't that many names to choose from. and so there is scarcity of value which definitely benefits this group but to us, not all f.a.n.g.s are created equal. we think amazon and facebook are much more attractive the group remains pretty attractive even on that basis.

>> ross, we're going to be getting disney reporting after the bell you've talked about you're a fan of that. but there is some over the top questions about exactly how they're going to manage this service coming through we saw apple had a rough trade after it reporting earnings. what do you think investors need to hear from disney. >> i think what we're waiting for is to hear what is going to happen with espn we've seen hbo and a company like wwe prove that the ott model with cable works but there has to be a product for people to buy there isn't one. and with the power of sports after just anamazing super bow and i'm a big eagles fan, congratulations jim cramer, you have to understand how powerful sports are i don't think the ratings reflect the power in society they need a great app. that's what we're all waiting to hear we know the movies are doing well they have an amazing slate for this year. we know pe performed well last year overall but it is all about the ott over the next year and how they're going to take on netflix

of course, the fox merger. so disney has a huge year in front of them. >> infinity war, solo, a lot going on thank you both still to come, bob doll is going to join us on why he expects market sloppiness to continue plus, global markets are selling off. we'll take a closer look at europe as you can see that has been a down day there. "squawk alley" is back after this hi i'm joan lunden.

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dow traded in a 900 point range today much it's coming under reneweded pressure here. down 117 points. s&p 500 down almost .6%. so the market continues to gyrate and try to find footing after that volatility shock yesterday. we'll be right back.

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let's back to seema plomody >> today's losses, the european stock 600 index is down 7% from the recent high. trading below the 50 and 200-day moving average the psychological levels that traders watch were down just about 2.3% but let's break down the individual markets and you'll see that germany, france, spain, and the uk all down around 2% to

3% on the day. but off the lows and that is a key thing to point out here on the year, european stocks are falling deeper into negative territory after posting gains of as much as 4%. take a look at germany now the reverse. it is down 4% in 2018. the key lagger led by deutsche bank which continues to trade lower now down 16% in 2018 the worst performing stock on the german dax here is something that traders continue to watch. it's the earnings story in europe the average earnings growth rate in europe for the fourth quarter is actually at 11% fueled by the consumer discretionary sector. but the financial profits, that continues to disappoint. that's one reason that you're seeing deutsche bank shares continuing to sell off what is also interesting in this market setup is that some of the initial directional drivers that sent stocks low rer startier ar to reverse the currency is lower against the dollar, 1.23 against the green back the bonds story is also starting

to cool off. the yield on the german bund now at a one week low. mike, sending it back to you >> seema, thank you very much. let's keep it over at hq >> good morning, everyone. here's what's happening at this hour some people on the east coast getting a push alert on their phones about a tsunami warning but the national weather service said it was just a test. it is trying to sort out exactly what happened. defense secretary james mattis accusing congress of failing in the basic constitutional responsibilities to fund the military said the impasse was hurting troops' morale >> no strategy can survive without the necessary stable predictable funding. failure to modernize our military risk leaving us with a force that can dominate the last war but be irrelevant to tomorrow's security. >> and police are investigating

a robbery at the foxboro, massachusetts, home of new england patriots tight end rob gronkowski it happened during the super bowl police are refusing to release any more information at this time that's the news update this hour poor guy they lose the game and his house gets burglarized i'm going to send it back down to you >> yeah, certainly not a pleasant outcome there thank you, sue wild day for the markets after the dow's biggest one day point decline ever the percentage decline wasn't anywhere in the record books for more, let's send it over to dom chu. >> jon, let's take a look at the drivers behind things and where the battle grounds are really playing out now to for the stock market earlier on in the last hour, we talked there was a 50, 100, 200 day moving average trend lines that markets were trying to find support at seema mentioned some of the trend lines as well in the european stocks. we decided to take a look at where those trend lines play out specifically the 50-day moving average or shorter to medium term trend line for the overall

s&p 500 and the stocks within it it turns out that 117 members of the s&p 500 are trading within 1% of that 50-day average price for each of the stocks 117 of them. among them, some notable ones to watch here first of all, check out shares of alphabet, the parent company of google. you can see there, a trend up but the latest pull back over the last few days now puts it within striking distance of its 50-day average price support there of battle developing on that front also, one of the biggest retailers out there, the biggest brick-and-mortar, private employer, walmart. take a look the athose shares here down about 1.3%. it's now if an uptrend looking to find support hopefully at the 50-day moving average for the bullish investors there as well. and then one more, a dow component as well, we'll check out shares of giant nike this one also near term uptrends and fallen right down enough to where we are seeing a battle ground right around the 50-day

average price. david, as we talk about where the levels are traders are watching that 50-day may be one that a lot of traders keep their eyes on. back over to you >> okay. thank you, dom yeah and, of course, we're keeping our eyes closely on the markets themselves the s&p 500 falling yet again. down almost .9% right now. for more, we're joined by bob doll and our own steve liesman bob, let me start with you i think you written recently stocks appear fairly valued but we expect market sloppiness to continue what do you mean >> so we expected the follow-through from t fundamentally selloff related to interest rates and the worry about inflation from the jobs report to lead to more sloppiness i'm talking about panic selling, margin calls, rewind of the low volatility products, structural issues inside of the market. and that's what we've seen in the last 48 hours in my view

and i think we're in the process of putting a bottom in doesn't mean we're going straight back up but the volatility will start calming soon because the fundamentals remain good >> however, when it come to stocks appearing fairly valued, give me your sense why that is the case >> we simply use 20 times this year's earnings before the tax bill at 19 times this year's earnings post the tax bill and 18 times our guess next year and we get a number between 2800 and 2900 >> so, bob -- >> and as you know, fair value is a notion where markets tend to spend 50% of their time above and 50% of their time below. so it doesn't mean they can't go higher we identify that as fair value >> yeah, bob, that actually gets to what i was going to ask there's really not much disagreement about the underlying corporate fundamentals here or the fact there is no recession in sight and the economy seems like it's

on good footing. it's really about what the market is willing to pay for those earnings in an environment where obviously the fed might get more hostile and inflation might pinch and things like that what are the wild card variables that are going to really infeaft the market variables >> how fast will interest rates go up? that's the fed and the curve as well and inflation, is the wage number we got on friday a flash in the pan that's going to show more issues in inflation or was that -- we know that's a volatile series. does it get revised in some way? they're the things we have to watch carefully to figure out the right multiple is on the earnings >> steve liesman -- >> one more point. our view is that after six straight years of pes expanding, more than earnings, our guess is the pe will be less on the december 31st than it was on

january 1st. earnings are probably going to be up 15 plus this year,thank you good operating environment and a good tax bill. but we think the pe will make the stock market go up less than the 15 to 20 in earnings >> steve liesman, it seems like we've gone through several quarters of the market shrugging off any number of potential shocks, things that in previous cycles we might have seen have an impact one way or the other and then yesterday we get this steep drop when you look at everything, consumer sentment, the macro environment, is there anything that explains this or is it looking like an anomaly right now? >> i think there are questions the underlying fundamentals of the economy are abogood there are questions that have to do, i think bob mentioned one, what is the right outlook for inflation and wages? i don't see a lot of data pointing to it but the market did get spooked when you saw that wage number on friday and part of that is the

combination of what is happening with the tax cuts. you have a pretty big blowup in the deficit coming along with that now the administration would argue several economists would argue that the supply side impact from the tax cut. but it may just as well be a demand driven one at least early on when you have a lot of people with a tax cutten that c and thd to full employment second of all, i want to see some of the deficit numbers from the government in the first order i want to hear jay powell talking how he is processing this coming stimulus and the outlook for the fed rate hikes >> steve, is it that shocking we should get upward pressure on wages after waiting for it for so long? is that something likely to have a prolonged infect or is that just perhaps a momentary rethinking of what this is going to look like >> again, i don't think on its own the wage pressure would be that big a deal. but i think when you combine it with the tax cut and you say, you know what, how much growth

is there going to be what is the real potential of the economy? you could use the economy for a year or two. there is concern about inflation. there hasn't been a lot of inflation. it may be that the next couple numbers come out and they're benign and the market backs off. we very to know how to process the new incoming situation >> bob, finally, you expect the sloppiness to continue for a bit. when are we going to know? what are the signs you're looking for that indicate a return to less volatile markets? >> whether we see the vix going through the roof like it did, when we see interest rates, the ten year treasury going from 285 down to below 280. these are the things that are relieving the market going down. when the vix is the highest, that's when there is the most fear and that's when you want to buy. i'm encouraged that those things have come pretty quickly and we'll obviously see that coming back down at the point in time when markets have improved.

you know, we saw that big selloff in the afternoon yesterday. overnight we saw a big selloff and then we have seen rallies and backing and filling. we're in the process of trying to find that bottom in my view >> yeah. we have seen some rather extraordinary moves certainly when it comes to volatility and volatility related derivatives and the like thanks to you both >> yeah. in account fact, the vix poppedo this move. coming up, much more on how to protect your portfolio amid this volatility what are you watching, vick santelli >> i'm watching all the stock indices. listen, if there is any bottoming going on, and i'm not saying there is, it is a process. it's never a binary type scenario in the markets. but we're really going to discuss liquidity and volatility they're cousins and they can be dangerous. we'll talk about that after the break. and the wolf huffed and puffed...

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but to us, it's the pace of tomorrow. with ingenuity, technologies, and markets expertise we create the possible. and when you do that, you don't chase the pace of tomorrow. you set it. nasdaq. rewrite tomorrow. we'll have an interview with carl icahn as the market is hit with massive volatility. we'll find out what he sees going forward. plus, two of country's top market watchers square on on whether it is time to buy stocks jeremy siegel and robert shiller are with us and they're on opposite sides of that coin. and one of the men caught in the middle of the storm of volatility, doug sifu is with us as well. it's a big hour of big names and

we'll see you in about 15 minutes, jon >> sounds great. looking forward it to. thanks, scott. i want to hear more about the kissing cousins liquidity and volatility let's get to rick santelli >> back in '87, i guess my biggest memories are very appropriate today. now granted you didn't have some of the fancier contracts but in the end, the first recognizable issue, the first thing you notice is the fragility of the bid offer spread you saw it yesterday after we really started to escalate down in the down side of the dow jones industrial average, saw that instead of having 10, 15 point bid offer spreads which is in itself a little bit wide, all of a sudden it starts moving in 50 then 100 and 150 point increments very normal. that is the cousin, as i said, of liquidity what normally happens -- excuse me, volatility what normally happens when the

volatility picks up, traders, of course, aren't going to deal they want to deal in the emotional side so i guess the great analogy would be in people on cnbc said it yesterday, you never want to sell in an motional time you're going to be one of those extensions that occur. but here's the problem here's where you compete with when that volatility increases and the bid offer spread widens. you're competing with the if then people. back in my day, it was portfolio insurance. so you had a certain product and in order to diminish the risks of that, they all had to sell stocks about the same time volatility and some of the etms that have volatility issues have the same problem what happens is they have an etf or a position. it doesn't accomplish or give them the right to do what they do what do they do? they go to other things and go in the vix and sell. it's a lot like what happened with regard to the issues of the

credit crash when you looked at the portfolios of some of these toxic mortgages, we focused on the very weak ones and everything priced to that. having everything priced to volatility in the marketplace is dangerous. because it's one point everything graph tats it to. real quickly on the dow jones industrial average, when you get crazy markets, line charts aren't as good as bart charts. you have the open high low close. basically i'm trying to say here is that the key level in my opinion is yesterday's low that was 23,923. even though we have a lower low today, how we close in defrns to that low is going to be instrumental so you want to pay close attention to it. i always urge bar charts the other thing that is interesting about yesterday's low, of course, is how closely it aligns with the 100-day moving average a bit over 24,000 so remember, etf rz, the problem with them is they're like antique car funds. everybody can have a funneled on the value an antique car but they don't sell quickly. if you want to get out of it,

what's going to happen is the actual cars are going to get sold and distort the market. things like high yield and volatility, they're esoteric be careful of esoteric products bundled in neat packages back to you. >> all right rick, yes, liquidity mismatches. thank you for. that we appreciate it. still to come, why our next guest is calling the past two days a trump tumble. "squawk alley" back with that after this why are you so good at this? had a coach in high school. really helped me up my game. i had a coach. math. ooh. so, why don't traders have coaches? who says they don't? coach mcadoo! you know, at td ameritrade, we offer free access to coaches and a full education curriculum -- just to help you improve your skills. boom! that's lesson one. education to take your trading to the next level. only with td ameritrade.

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we are continuing to track the wild market swings joining us now is an investment strategist and larry glazer, mayflower's managing partner thank you for joining us so the vix, it's around 38 right now. now. previous guest said when the vix spikes, it's time to buy you agree. >> you know what i think the vix spiking is a natural reaction to what's going on here. we had nearly two years of no volatility. we were coming into the year with trifecta of sprent, earnings, economics and then rates were actually pretty low with the rise in rates, you know, equity markets got spooked and markets don't go up in a straight line forever. so this rise is actually something we talked about late last year with our clients we don't see this as a buying signal yet we're about eight and a half down in the markets. we could see a 5 to 10% correction easily. giving what we've talked about

the trading, we think about 2% downside probably in the cards, but we are still calling for a year end mid single digit returns in the s&p so at some point, you get your wish list ready and make those buys >> larry, you've called this a trump tumble it's not still exactly tumbling. so to whom do you give credit for that >> no doubt it was too much too soon in the rar rally and the te comes on the heels of an exuberant market so fundamentals have been there all along. this was very much a behavioral and emotionally driven market. that's why the vix has been is such a terrific barometer. again, given the low levels of volatility, but when you see th vix go up like fireworks on the

fourth of july, you're going to get people's attention and that's where we are right now. but look, i think the last guest makes a great point. you talk about volatility in the market i tell my 10-year-old kids on the way to school today that when the vix is low, you got to go slow. but when it's high, it's time to buy. we saw that this morning we saw the market blow up at the open everyone's become an expert on volatility and it's being driven by irrational indes creme nat indexing most investors have never seen a bear market and they're getting one on volatility now. >> that's what you told your 10-year-old this morning >> it was in between the reagan speech and freeman conversation. even a 10-year-old can figure out low volatility is is a concerning indicator >> what does it say that this sort of subtle shift in expectations about interest rates and maybe this big hint of inflation is good for 8 or 9%

pullback are we wound that tight? that far above fair value? >> i think the markets came into this year with no wall of worry to decline sentiment was bullish. volatility was low so really where is that worry? and now we have reset and now there's a wall of worry to climb. that's inflation and the fed the question you ask yourself is is does the fed get through this without causing disruption or more pullbacks we're not seeing run away inflation here we think they will kind of continue on the three rate hike path, but with that said, we see volatility, rates going up towards the 3% level so you have to look out over the next year and beyond this year, you start talking about downturn, recession, but it's not coming in the next 12 months >> you know, john, the canaries in the coal mine here, when we talk b about why this shouldn't have been a surprise, look at

the crypt o currencies that's and indicator that risk premiums were getting out of whack in december. that's what's starting, that low level of uninterrupted volatility wasn't going to continue you were going to see a sea change and perhaps the form was just the gasoline on an already heating fire economy to spark the interest and that's what we're seeing the fed chair zboing to have his hands full welcome to the new b job i hope you enjoy your position >> a lot of investors are in etfs and mutual funds these days they're not necessarily looking for individual stocks to pick off when we get volatility like thisful what would you advise them to do if they've got drive power? >> they don't come with a pl playbook a lot of these investors who have been throwing money at the market, chasing the rallies, there's no one to counsel them, to caution them torks say hey, maybe you want to be more diversified ch maybe the market is is too concentrated

so i think it's really an opportunity for education for investors. something that's miss ng this market i don't think there are a lot of robo investors getting calls in the robo advisers in the last 4 hours telling them about the market sell off. a lot of investors couldn't even login their trading accounts help counsel these wholesome hands, keep people, guide them, get them to the right place. make sure they can retire and their kids can can go to college. >> and the 10-year-olds can get to school. >> thanks for joining us >> thank you, have a good one. coming up amid the big sell off, there are or perhaps are billionaires out there, robert frank has that list. he's tracking it checking it twice. we'll be right back.

xwlnlgtsds r. more than a dozen billionaires e saw their fortunes fall. robert frank has the story >> you know, when market dwosgo, we talk about the billionaires getting richer yesterday, they gave some of that back. the biggest loser was warren buffett who lost $5 billion in paper wealth on monday

monday mornings he was worth 90 billion. by the end of yesterday, he was down to his last 85 billion. mark zuckerberg is now at 75 billion. gill gates dropped more than billion. he's worth 92 and still the second richest man in the world and jeff bezos, he has been a roskt wealth creation until yesterday. he dropped 3.3 billion but he's still worth 116 million. so no one crying for these guys, but it shows as markets become volatile, all the fortunes tied to these markets are also going up and down quickly. back to you. >> it's hard to feel bad for these guys >> hi class problems >> amazing remember when it was 30 and 35 >> just staggering >> yeah. although gates has given a lot to the foundation already, so

that's in in additiaddition to. >> taking a look at tech stocks, a number of doing better than what we might have expected. qualcomm is up, but not near where broad com is >> no and probably won't get there. that's it for squawk alley back to headquarters for the halftime report. welcome to the halftime report, the markets once again, front and center today as we are witnessing yet another increde bable day of volatility. stocks falling more than 500 points at the open followed by one of the biggest comebacks we've seen in years and now more whip saw action we're wondering what it means to your money this hour and we also want to let you know we're going the attempt to answer that question with that gentlemen right there, 12:30, we'll be joined by the legendary