can only hope. >> have 20 seconds until we get -- >> financial assets couldn't be higher than they are right now i am concerned about that as well >> yeah. again, i think it comes back to apple -- it's not just apple sentiment wise they said the slowing so it's not an apple issue. that's why this is going to filter and that's why this is more important than just apple. >> you don't -- you know, sometimes you don't get a huge move in the futures. obviously thinly traded and could be fairly volatile but can we see that again? put that back up there you will get at least an indication of where the sentiment is right now by virtue of where apple is. that stock's own decline and the fact it is drawing tech down across the board nasdaq would have a decline of about 2% dow about 1% i'm being told, s&p 500 about 1% as well so that's the instant reaction as we've underscored for all of you so many times

thinly traded, they can be quite volatile sometimes what you see overnight isn't the result at 9:30 in the morning when the bell rings on wall street. a pretty good representation, dan, of where things look by virtue of this stunner. >> we talked about tech. we talked about industrials. this is a disaster for financials, for bank stocks that underperformed for the last 12, 13 months. you can keep drawing lines to other parts of our equity market here where this is not good news so to me i thought it was interesting today. some outperformance by energy and people thought they were too beat up looking to take a shot early in 2019. when you think about those companies they're kind of at the eye of the storm talking about global synchronized weakness here, those are the areas i think you'll continue to see weakness into 2019. >> you've had about 160 and so point rally on the s&p 500 that was from christmas eve to where we are now are we going to give that all

back i'm of the belief we will so we talked about it earlier with tyler on new year's eve that although it looked like a textbook "v" bottom it felt too contrived to be a bottom and i think we'll retest it. i don't know if it will happen tomorrow. >> stunning moves in some other areas. currency dollar/yen dollar/yen would suggest the s&p would be down 2.3% dollar/yen aussie dollar hitting a ten-year low. big, big moves in currency. >> dollar yen at its lowest level since late march i see it down about 3.75%. there are many facets of sort of what the residual impact is from what apple did with their guidance and, tim, the overall market reaction as somebody who watches the globe as closely as anybody. >> i think there's very interesting cross currents going on again, the traders are behaving

differently than investors and interesting to see if we get that intraday spike down remember, this is the first trading day of the year and a lot aren't back to their desks and it'll be interesting to see how the market digests it. we not only will trade lower but see europe close before the u.s. market will get its legs about it but the rest of the world to your point actually has been significantly -- i don't mean a little bit but significantly outperforming the s&p over the last couple of months and said how could the u.s. continue to defy gravity if this is a synchronized economy guess who outperformed the s&p by 1200 basis points, it's emerging markets china was up today, emerging markets were up today. russia, which has been getting crushed, why, because of the oil market, not so much actually russia's outperformed the s&p by 20% over the last three months oil down 29% so i think there have been a lot of moves already. let's be clear and i just at

least want to weigh in this doesn't all happen overnight and i think that equities have priced in a lot of pain i think nobody is surprised that china printed below 50 on their pmi this morning if you are, you haven't been watching the direction of where every economic data point has been going. >> reminded of cramer who for many weeks if not months had been saying that he was hearing from people that the business climate was slowing and somewhat dramatically a large part because of the global slowdown and what was happening in trade the question is tonight, jay, are you listening, right to tim cook who gives us an exclusive interview really incredible in josh lipton out in california helping to cover this stunning news of apple and this warning, josh >> yes, scott, stunning is absolutely right apple coming out and surprising investors with this news revising q1 guidance lower so they're telling investors now to expect revenue of about 84 billion. let's just quickly put that in

context. apple previously guided from between 89 and 93 billion so a big miss there i did have the chance to catch up and chat exclusively with tim cook to talk about the quarter, the trends and themes he's missing. take a listen. tim, thank you so much for taking the time to chat. >> thanks for coming. >> i want to dig into the results, tim, in iphone revenue specifically because as you mentioned that was lower than expected and accounted for the revenue shortfall here and i want to dig in specifically to the trends you're seeing in china because you say something interesting which it isn't just the economy there, it's also these rising trade tensions. what did you mean by that? >> if you look at our results, our shortfall is over 100% from iphone and it's primarily in greater china and so as we look at what's going on in china, it's clear that the economy began to slow there for the

second half and what i believe to be the case is the trade tensions between the united states and china put additional pressure on their economy and so we saw as the quarter went on things like traffic in our retail stores, traffic in our channel partner stores, the reports of the smartphone industry contracting, particularly bad in november i haven't seen the december number yet but i would guess that would not be good either and so that's what we've seen and now there are a lot of things we can do to turn our business around in terms of both in china and more generally across we're focusing on -- if you look at iphone more at a macro level, the story on iphone is in addition to the emerging market

weakness which is primarily in china, it's there's not as many subsidies from a carrier point of view and where that didn't all happen yesterday, if you've been out of the market for two or three years and come back, it looks like that to you fx was a big challenge in the quarter. as interest rate hikes have started in the united states, there's more foreign capital coming in. that makes the dollar much stronger and the translation -- we knew that was going to be a factor it affected us by 200 basis points and then sort of in addition to those two things we've started a program worldwide where we dramatically lowered the battery replacement and had a collection of items going on, some that are macro economic and some that are apple specific and we're not going to sit around waiting for the macro to change.

i hope it does and i'm optimistic, but we're going to focus really deeply on the things we can control. >> in terms of things out of your control, i want to touch on china specifically the trade tensions are having an effect on the economy there but do you see evidence that perhaps apple is also getting caught in the cross fire in terms of is there evidence that chinese consumers say, there's a dispute, there's tension and taking it out on apple in some ways, as well? >> certainly apple has not been targeted by the government and so let me take away any kind of doubt of that right up top there are reports sort of sporadic reports about somebody not buying our products because we're american, maybe a little on social media, maybe a guy standing in front of the store or something my personal sense is that this is small keep in mind that china is not

monolithic just like america is not monolithic, you have people with different views and different ideas. do i think anybody elected not to buy because of that i'm sure some people did but my sense is that the much larger issue is the slowing of the economy and then this -- the trade tension that's further pressured it. >> given that this is a head wind and more than you expected have you talked, i'm just interested, to president trump or members of the administration this is a big, important economy and you're saying this is impacting our business have you recently talked to those members of the administration and conveyed that. >> i'm telling our investors first about what we saw last quarter and that is the way it should be. but i've had obviously many, many discussions over the course of many months to be constructive and to give sort of my perspective on trade and the importance of it to the american economy as well and i feel like

i'm being listened to in that respect and so i'm actually encouraged by what i've heard most recently coming from the u.s. and from china and hopefully we'll see some changes. >> but give than those trade tensions, tim, they do remain heated, given the pressure you're seeing, you're speaking to traders, investors and business people now, in the quarter as head how do you navigate this? >> well, you focus on what you can control and so when i look at this, i say, you know, there's some weakness outside of china. i would have liked to do better in our developed markets how can we do that the subsidies are fewer these day, that's true but we can start or have started a trading program and started it primarily because it's great for the environment and keeps a unit with someone that wants it and the person who wants a new one

gets one as well and great for developers as well but we haven't really marketed it very much and the truth is to a consumer, the trade-in looks like a subsidy because it lowers the price of the phone that you want and so just let me give you an example of that and so the retail price of the iphone xr is 749 in the united states but if you happen to trade in a 7 plus which many people are in order to get that, the price goes all the way down to 449 or less and so there's a substantial benefit, economic and environment, from trade-in we're also working on placing ability to do monthly charges in and so it begins to look like more the traditional way of paying for it through the carrier by, you know, taking the rates out for 24 months or so and so you wind up getting

incredible new phone so much better than what you've had for $20 or $30 a month or so and so we're doing that we're also putting a lot of focus on the service side. our stores are unbelievable at service. and the ability -- people are worried about transferring your data worried that this new phone, there will be something they lost in the process and so we're putting a lot of emphasis on doing that and doing that well and so those are just some things the other things which are not different than we thought but did affect our revenue in the quarter are things like we had some supply constraints. we had an unprecedented of new products during the quarter, new watches, we had new ipad pros, both of these were constrained for all or most of the quarter. >> did you think looking back, do you think you tried to

introduce too much new too fast? >> no, i think our style, josh, is we release things when they're ready and i think that's the way it should be if you ever start worrying about cannibalizing yourself you can talk yourself into not doing both things so all of our products were ready over that period now, would i have liked some of them to be ready a few months earlier, of course, i would always like that but generally we're still going to march down the road of shipping these when they're ready. >> let me ask with this release you get a lot of information and there's going to be changes in disclosure you won't get the number of iphones shipped anymore. if that isn't the data points that investors should be focused on what are the data points that investors should focus on? >> look, what we did years ago actually with apple watch, we've never disclosed units on

watches. why? it wasn't because we were secretive people but looked at this and the watches were wide range in terms of pricing. we knew that eventually we would have a cellular watch. there is a stainless steel versus an aluminum there's even an addition and so you begin to say, what value is there in adding these things up? i've made the comparison it's sort of like you and i going to the store and putting things in our cart and coming up to the register and the person saying how many you got? it doesn't make sense to add them together anymore because the price ranges are so wide so we didn't do it on watches from the beginning and never did it on the ipod as we step back from the phone we have phones being sold in the emerging markets like an iphone 6s for $300 so you have a range from 300 to a thousand or in some cases over a thousand depending upon your selection of

flash and so fort. and so this thing has lost its meaning and so we felt that at the end of the day we were giving investors and sort of pointing them to something as if it had this incredible importance to it well beyond what it does that doesn't mean we're never going to comment on units again. if we think that we can better explain results with talking about units, i'd be glad to say something about them but generally to have it on an every 90-day clock of releasing this, i think it does the investor a disservice, frankly but now we are making additional disclosures, as well like, for example, we're going to give the gross margin services business. we've never done that before services has grown, you know, been an incredible amount. we're over -- we're going to have a report of over 10.8 billion when we report late

they are month for last quarter. that's a new record. >> what drove that the app store? music? >> this is an incredibly exciting thing for us because so many things hit records in there. the app store did. apple music hit a new record apple pay hit a new record our search ad product from the app store hit a new record icloud hit a new record and so, you know, it's very wide and each of the geographies hit a quarterly record so even in china, the app store hit a quarterly record why is that? it's because it's driven by the installed base and our install base grew, you know, nicely year over year in china as well and as i say in the letter, we picked up 100 more million

active devices over the last 12 months alone so, this is an incredible number and we've got some interesting things in the pipeline on services and, of course, we do on products, as well and so that's sort of another way to grow the company. >> final question here you say you'll end the quarter, 130 billion in net cash. >> that's right. >> apple has a history you do a lot of acquisitions they tend to be smaller. biggest was 3 billion for beats. do you think maybe given that cash position, would apple be open to maybe shifting how it thinks about acquisitions and doing acquisitions that maybe investors would think are bigger, more meaningful? >> you know, for us we've never changed our view on acquisitions, we've never said thou shalt not buy a big company or a medium company. we've always looked at it from a

strategic point of view and asked what does it do for the customer what does it do for the user so the vast majority of ours had been technology and people that we think would bring a better user experience, that there's a feature or something we could do in the future and they could help in doing that but that doesn't -- i've always been very clear, we've looked at many, many companies including very large companies, we've elected so far not to do those because we haven't found one that we say, wow, that's a nice intersection with apple but i never rule it out. we do have a lot of net cash and i believe the company's stock is an incredible value and so you can bet that we're going to be buying some stock under the plan we've had out there for quite some time. >> thanks for your time. you were generous. >> it's good to talk to you,

josh >> thank you >> yep >> so there you have it. tim cook talking about this revenue miss and what explains that and as you heard there, really talking about some of the pressures that iphone franchise is feeling one is china, a slowing economy and heard him talking about the trade dispute between the u.s. and china, in his opinion how that is impacting the chinese economy. you also heard me ask him, given that, listen, given this is a big, important american company, has he conveyed that to president trump and the trump administration cook saying he has conveyed those opinions and felt like he's being listened to wasn't just china when it comes to iphone. you taheard him talk about developed markets. a few different easons, fewer carrier subsidy and u.s. dollar strength and what he considered positive results in the quarter, services, remember that's mostly driven by the app store,

all-time record revenue there as well as he said all-time record revenue in wearables that category includes the watch and ear pods but apple was surprised by some of the bigger broader trends and themes and forced to lower that guidance and investors reacted in the after-hour. >> stay with me. want to bring in "squawk alley's" jon fortt you followed apple for an awfully long time and look at tech broadly what do you make of what apple had to say tonight >> there are very few moments like this we've seen with apple. i think back to 2001/2000, when they had a bad quarter and broader macro times when they've had issues this. is different this is a $7 billion top line miss and we're focusing a lot on greater china. there's good reason for that greater china at just shy of 20% of apple's revenue, if you look

back a year ago, q1, that was about $18 billion. this doesn't sound like a 40% miss just in greater china tim cook and apple also pointing to other broader issues, he talked about the lack of subsidies for phones that's not new i mean, carriers in developed markets haven't been doing subsidies in the old style for years now but apple with the x line and max xs and r and they're more expensive that combined with a strong dollar and combined with customers trying to extend the useful life of phones by replacing the batteries instead of upgrading seems to be creating kind of this really challenging mix, not just having to do with china but also in some developed markets, the customer not wanting to upgrade as much. that's something that some analysts have been saying for awhile a little on the bear side. that seems to actually be playing out now that we're

seeing the iphone x cycle come to fruition. how much can apple do? the non-x iphone, the 8 is similar to the 6, does apple need to redesign more than just the high end of the phone now that they're encountering this price sensitivity? >> forgive me for putting you on the spot any color at all on were you with cook as the stock re-opened? he must have had an idea that the stock chart was going to look ugly right from the get-go once the stock did re-open after its halt >> yes, i was not with tim cook when the stock opened there so i couldn't gauge his reaction. you know, listen, i'm sure cook has been at his company a long time of course, before he was a ceo he was the company's supply chain guru i'm sure he had thoughts about how traders and investors would react. the bottom line is, scott, i simply think there was some

trends and themes as john was just talking about that were worse than they anticipated, certainly when it comes to china, the economy worse there than he may have thought the trade tensions having impact and also in developed markets as john was referencing there as well, the upgrades not as strong as they thought. so, i'm not sure -- i wasn't with him when the stock opened but i'm sure he had a pretty good idea it was coming. >> he must have known it was going to be a rather ugly -- jon fortt, i'd imagine the gang on "squawk alley" is going to be looking at more broad tech issues as a result of what you just got from apple. some of the other big names, the supply chain which is going to take a big hit and already is in the after-hours session. some of the other large, large cap technology stocks that are going to be under some serious pressure. >> well, they will, scott and likes of hp, some of the hardware players were very much in the cross fire of this trade dispute and i would also point out that qualcomm in its most

recent earnings did point out some of these same china issues around smartphone uptake while the customer in china is more migrating toward premium end phones which should benefit apple, there's also a bit of an overall demand challenge in china and for a long time we tended to talk about it as a market unto itself that seems to be perhaps less the case than it might have been in the past and may be reading more across into what we see trendwise from qualcomm from other players in china and reading through not just the supply chain for smartphones but also what the broader impact might be are other companies seeing this same kind of dramatic effect on demand in greater china or perhaps is apple uniquely impacted to the downside which is something that we haven't tended to see with them in recent years. >> jon fortt, josh lipton, our thanks to you both the supply chain, some of that stock activity in the after-hours and those names are down sharply

another voice to the conversation cara swisher, well-known to you. are you there? >> hi, yeah, i'm here. >> you want to put this in perspective. somebody who followed this condition for a long time. >> yeah, there is a lot going on china is at the top of the line. the market in china and pressure in china and apple is one of the successes of apple being successful in china instead of seeing the downside of a market that is contracting. the lack of product in the innovation cycle has slowed down i just replaced my iphone last week but i didn't rush towards it we were on the upgrade system so i think there's not exciting products and that's one part where is the new innovation coming out of the mobile market and this is primarily iphones is what you're seeing here and then the pressures of all these trade talks and the market itself being so hard for companies so you'll see this impact on companies and then throughout tech, going forward, where is

the innovation cycle for the next group of products and is there an economy to support it >> kara, tim cook has had to fight his way out of steve jobs' shadow amid, you know, megaphone calls that he's not innovating enough and that he's not leading the company enough into the future, that it's so reliant on the iphone even though their services business as we both know is growing dramatically does that get underscored on a night like tonight >> no, i think -- they've done really well since then and steve jobs has been gone a long time it was a tragedy when he died but i think he's been doing a great job with the company since then, running the company but all of tease companies, someone the other day was asking about apple. it's a product cycle where is their exciting new product and exciting new pray muirs within that company. this group has been together a long time and i'm not meaning to call them old. it's just they've had so many hits, you're kind of -- you think of them as like this

amazing rock band who has just been doing hit after hit after hit so they've got to see what is the new product coming and is there one from this group and at the same time, the stuff that tim cook has done with that company is just -- is astonishing in terms of running the company and making it such an enormous economic powerhouse but, you know, like anyone else, reality hits when something in china is going wrong or the economy or there's trade talking, you're not immune from this unless they had the product everybody has to have. >> hey, kara, there is a lot of blame being placed on china but service, tim is trying to spend a lot of time on that interview on services. maybe a quarter of them come from google and their traffic acquisition and then maybe about a third fromapple care, isn't that exciting of a business? you know, i just don't get it, especially with a slowing user base >> no, no, people use these things that's a lot of money. why would you turn that down

apple and google and all these companies are melded together because it's an entire service like everything works together i think what you have to think about is like i had lunch with tim not too long ago he talks about ar but where is that right now it's a long time away. when is ar augmented reality coming when are some of the other -- when are these services going to get bigger where are the sweet spots for the future and where is -- i'm writing about this in "the new york times" but thinking about it a lot where is innovation coming from from not just apple but from google, in every one of these companies. the only one that seems to be consistently innovative is amazon and they're getting -- they're still getting hit here in this sell-off and everything else, so, you know, i don't know where innovation is coming from. a lot is coming from china when you have the economy tanking there in some ways you're all going to be pulled down by this. >> should we be focusing more on the company's fight with

qualcomm as well which we really haven't discussed it in any sort of great detail this evening but maybe it's having much more of an impact in and of itself than we've thought. >> i'm not so sure about that. i think they've been at lots of sites. but, you know, i think the bigger issue is what is the great product and how is the economy faring app surveillance a company that does well and they have people to spend money on it we are not in the advertising business which is a plus whether it comes to the problems facebook is facing, right? but it's a minus when it comes to people making spending decisions and it's an expensive product and so if they don't have the newest, hottest product they'd have to rely on people to replace and replenish so i think that's where the problems are is right what they're saying.

>> yeah, you had one analyst tonight say in his words it was a dark day for apple you have to wonder, this is one of those moments that months if not years from now you're going to look back on it and remember this night it's hard to remember a time where apple made a revenue cut of this magnitude and dropped such a bomb on the market. >> yep yeah, definitely this is a company we expect nothing but, you know, rainbows and unicorns from all the time, right? they never disappoint and always outgun -- they always win so i think when -- part of a broader tech question is this the time when tech starts to falter again. all these companies, their advertising and products business and where does the next great wave come from that's what's interesting to me is that idea >> yeah. >> of what is the next -- mobile has taken us a long way and made people really wealthy, right and made a lot of investors really wealthy so mobile is being played out so when is the next -- what is the next

innovation cycle that's going to do what possibly did that's been, what, since 2004, 2004, that's 15 years and above kind of stuff. >> stay with me if you would >> okay. >> the futures have been open for about a minute -- excuse me, since the top of the hour. 30 minutes just want to recap there's your picture futures thinly traded. not a lot of volume as you know. i want to underscore that so you don't think this is the gospel you're looking at and the way the market will open in the morning but the dow would open, apple a dow component apple lower by 300 points, off the worst levels of this early session. there is the s&p 500 and showed you the nasdaq, could be get harder because of the tech-heavy weighting. i have the gang here i'm sure everybody wants to get in on the conversation tim. >> my question would be we debate all the time whether the chinese market is really ready

for a thaw dollar phoousand dol. are they barking up the wrong tree >> they've been doing great in china for a long timing. it's just not now. china's embraced apple products for a long time. they've been how many -- forever, right most american companies don't do well -- i think they're the only one deeply in china and making money there. others contemplate it or do badly. so they've been doing well i think it's just that the market is trying -- it's contracting for all kinds of reasons including trade talks which have hit everyone and are disastrous and tim cook has talked about this, has had other areas. and so they enjoyed the upswing and now they're exposed here in a way that other companies aren't so you'll see that. again, these upgrade cycles like i literally just upgraded. i forget when the phone came out. i might not have done it had it cost almost nothing. i had already paid off my phone.

i didn't rush to get it like i did previously it wasn't that fresh, right? so that's another issue. >> kara, i'll lob you a political question of sorts in the way you think about or the relationship between this administration and corporate america, specifically technology companies. do you think the administration underestimated the impact of the trade war in china maybe thinking that china was going to capitulate sooner how do you think about that question tonight when you see the impact of what apple has told us? >> i think china can wait us out and that's what they're doing. they're obviously being impacted but china plays the long game. i don't think the trump administration plays the four-second game i think it's a really interesting problem. i think it was -- it's been thoughtless, most of these thing, all of them have been so the question -- corporate leaders have been warning about this it's not that we shouldn't -- look, some agree with the trump administration around some of the encouragement by china, some of the copyright stuff, some of the trade stuff but the way --

it's the way it's been done has been disastrous for a lot of these companies and especially the mood on wall street when everyone starts saying the word recession, you kind of get it. it's a mentality that builds you can't forget these are all emotional. markets are emotional so emotions have been -- we're headed for trouble and especially with the rhetoric that comes out of donald trump every day on twitter which i wrote about last week, he's governing by twitter >> kara, it's been good having you. thanks so much kara, thank you very much for joining us quick last comment here? >> interesting what she's talking about, the lack of innovation, one thing. apple has been in the past that innovative company but now coming back to bite them >> a lot ahead we're back in two. apple down nearly 8% after hours.

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welcome back breaking news, get you right to the futures. there's apple shares are down nearly 8% in the after hours after that big revenue guide down and there's the impact on

the overall market app surveillance a dow component. the stock, the overall market looks like it would open lower, of course, that's thinly traded but nonetheless gives you an idea how we could open in the morning after apple's warning. three charts we need to pay attention to what are they? >> the s&p, now, you know, just staring at that, that's a long-term chart and i've drawn those lines not to manipulate your eye but put in context really nothing has happened yet. meaning we've just started if one wants to make a very unhappy case for equities. this is the great run of 19 -- mid-1990s to the peak in 2000. we peaked on the 24th of march it was a friday. and you see that after we broke trend, it got pretty unhappy this, of course, is the big run-up, again, and we peaked in 2007 and after we broke trend, it got pretty unhappy.

these are both 50% sell-offs now, it's inconvenient but we have just broken trend those circles are each 20% down. the point where i drew it, we're 20% and know that from the peak to trough. really nothing has happened. if one wanted to put in that third red arrow it would sort of look like that anyway, food for thought let's move on to gold and then one other chart. now, there's a lot of tension here you can see it and i've drawn lines to manipulate your eye but have worked into a point where something explosive is about to happen and think gold will break down having been within this basically well defined formation for quite some time, we are working into the point where there's a likely resolution. unbullish, i think, gold resolves higher. it is also worth noting that the lows, equities are at a bull peak and no one wants to talk

about gold in 2000 it peaks in 2011 when the stock market is crashing after the u.s. debt downgrade and now the standoff, a 00% retracement. my guess is the green arrow is the right arrow to draw and then finally this is all sort of thematic here we have really the mess that is china and china is hovering ominously right out of a well-defined line and my bet we'll break and that would also then therefore get the red arrow. u.s. equities presumptively lower this could be a part of the u.s. equity presumptive lower move and gold, why not? >> carter, thank you. >> thank you. >> carter worth, cornerstone macro. mike, he showed you the charts you think this is broader than just china. >> i think it's broader than apple and china. what's interesting it's a little bit of a microcosm of what we have in the markets apple stock down a ton

obviously the market was sniffing out fundamental weakness but when you get the reality and revenue guide down and by tomorrow the inevitable further earnings estimates cut the question is how much has been priced in right now who knows. apple could finish higher tomorrow we don't know exactly where it's going to go. but i think this is the fix that the overall market is in to some degree it doesn't have to resolve in a nasty way. would knows what the forward chart will look like but when people say as a lot of people are saying with their year ahead outlooks the s&p has priced in flat earnings or it's already priced in something close to a recession, that's easy to say right now but the process of getting those earnings estimates coming down is messy and so the market often doesn't necessarily get to that end point of pricing it in before you have some kind of confirmation. >> we've gotten warnings from other companies. maybe the most recent being fedex and micron do have to wonder whether this in some respects open the floodgates to more companies,

more ceos coming out and cutting their numbers as a result of the trade war and weakness in china or elsewhere. >> at least it removes that psychological impediment to try to deny it apple is not immune, none of us will be immune so, yes, i do think that might be what we're in for but, again, you can't lose sight of the tack that the market has already made part of that adjustment. >> do you think the market -- when we talk about china break ago part which i realize they've got a lot of money and said it for years. a trillion or a couple trillion but the ecb is possibly pushing europe into recession a lot faster than the fed is to us where do you see systemic risks? >> i mean i think you can see the almost potential ones wherever you look and honestly have not focused on that saying even if you don't have some kind of really bad accident in the financial markets where it is very systemic, you stull just have to price in this further fundamental weakness potentially. again, i think this is the

push/pull of the debate because i think, you know, in a short-term basis a lot of folks are in action and said, wow, we got negative in a hurry and concentrated a lot of selling in a short piece of time. let's see if it can pass the test. >> tim cook tonight validated in some respects the folks who got negative quickly because apple in its own right got more negative much quicker than people thought. >> that's -- when it kind of runs in reverse that way, that's usually the way it goes. so i think you're right. what does it mean? does it mean that the market is not going to kind of give the benefit of the doubt, that, in fact, bad earnings are priced in we're 14.4 times forward earnings to the s&p right now. that's if you get the almost 8% growth that is now the consensus. >> now that seems high. >> that seems high. >> you get 3% growth you're up to 15 times earnings

which you possibly would say is not that cheap especially if you think the market is a 25 basis point, you know, potential fed error from people freaking out again. >> speaking of fed and a possible error let's bring in joe who has been writing and talking a lot about the fed late i. joe, does this seal the deal this keeps the fed no more hikes for the foreseeable future. >> i wish i could yes, but, boy, this fed has just gotten so many things wrong and hope is as you guys know is not a good investment strategy. my guess is the markets are going to continue to punish the powell-led fed lower price, wider credit spreads and eventually the fed will relent. the question is h the longer it goes the sentiment can certainly feed on itself when you have an economy where the financial sector is over four times the size of gdp, what the markets do is very important, it becomes very self-feeding and self-sustaining. if powell is dovish on friday, i think the markets could stabilize but they really need to reverse course on this

balance sheet and on projected heights. if they do that, the fundamentals will reassert themselves i don't have a lot of confidence in powell because what he's done recently is flip-flop a lot. the answer is i don't know. >> when the once biggest company on planet earth not that long ago comes out and cuts a revenue forecast as dramatically as apple has done, that has to get the fed's attention. >> but, scott, it should but, you know, these guys tend to be ivory tower folks. look, you've got a $10 trillion treasury market where the curve is -- some parts are inverted and the fed says that doesn't matter so, yes, anecdotally apple is certainly very important china is weak and by the way, the u.s. market was doing great in september and everything unwound and caught up to what the fed is doing these have been there but i feel this fed is too model driven,

scott, and i think that's going to be their undoing. >> they've said publicly whether it was jay powell or whether it was williams with liesman in the days that followed that they had seen no broad impact from this trade fight with china now they've gotten their real evidence from a company like apple which is one of the biggest consumer brands on earth. >> it is but here's the thing, they'll highlight trade as a risk and app surveillance part of the china story but they're looking at low unemployment and a decent payroll number but my guess is they'll say, look, the fundamentals are solid we don't need to panic and this scott would be classic fed decision-making where it's too little too late. it's a little like you look at tech, you go back to the late 2000s. in november 2000 they had a tightening bias and went to an easing bias five weeks later and greenspan cut two acts after

that it's not unprecedented for the fed to lag the markets it's real information for them to follow. they don't have a good history of doing that. >> so i'm curious, if powell comes out on friday, what would you consider kind of a dovish view does he need to walk back the quantitative tightening and balance sheet talk or need you to go so far as saying we're questioning whether or not we're even going to raise two times in 2019. >> all that have would be great. if they do anything, i don't -- he won't do that in my opinion what he would say and what would be mrupprudent is say, in light the recent and dramatic tightening and financial conditions, we will take this into consideration when we next meet that's all he has to do. shops out there that think they're going four or five times. they could say, well, maybe it's not four, it's two people who don't think they should hike but ease, they'll be happy. i think he's got to keep it very broad but i don't know if he'll do that because he could have said two weeks ago at the

meeting that the drop in commodities and oil and lower inflation gave them the leeway to be really dovish and he wasn't i have a feeling maybe i'm a cynic. i don't think he'll do that but he needs to do something he's with bernanke and it's probably going to be consensual and probably will give us a whole lot of nothing. >> it's tim. back to the ted and what they target i mean there is a time in which the fed was targeting asset prices and they really wanted to get them and got them up and i think one of your core views is this is really where you sit on the precipice of a major pullback when, in fact, asset prices are this high going into a pullback. >> you had the genius of bill dudley when equities were down 10% when they said it was a tempest in a teapot and bill is a nice guy are you represents to my mind the way the board staff thinks about things so i mean i just feel as if, you know, the fed is very model driven,

they're very focused on output gaps in slack and when you get to economic inflection points, all that stuff goes out the door it's all about sentiment and as we're seeing it can change rapidly and brian's point about the balance sheet is key i mean, you look -- you saw a few weeks ago when powell said it was on automatic pilot, s&ps dropped like 20, 20 points within a second. i just don't think they fully get it and -- >> williams did his best to try to walk that back two days later. >> but you know what, one, it's a little too late and not the chair. that's the problem they want to hear from powell. this is a leadership -- they want to hear from the fed chair and they want to hear from somebody who is perceived to be the person who drives policy. >> guy has a question. >> what was the model for eight years when keeping interest rates -- nobody seemed to care they weren't model driven and let the stock market go up every

day. my question is at what point do they have to let the stock market stand on its own two feet and get to us levels where forgetting about us today, you know, the future of our dollar in my opinion is at risk when the fed as been accommodative in many ways. i think, well not corrupt but just threw caution at the wind for eight years. >> and confidence is probably the word you were thinking of. >> i didn't want to say that, but, yes. >> look, fed doesn't have a good track record but the point is -- >> he said corrupt. >> unemployment peaked at 10% in the fourth quarter of 2009 and came down and it was only the last few years where the unemployment rate has been below where they think the economy is capable of generating unemployment without inflation that they've gotten worried. unemployment and flawed view which i harp on time and time again. low unemployment does not cause inflation. please, i hope you're listening. >> we listened to the fed but what apple told us how important

is this trade situation and getting it resolved soon >> it's important but just the icing on the cake. it's all about liquidity and confidence if you get some type of intermediary truce of some sort, i don't think it will last, that will help but the fed has to back away and also you guys mentioned earlier about the ecb. i mean, you've got a few things happening all at the same time the ecb not buying securities and the italians going into the public markets for the first time in years, that could cause some big dislocates so to me the trade stuff is important but this is really in my mind all about central bank. >> joe, thank you so much. joe lavorgna joining us. our michael santoli. see you on the air tomorrow. i am certain of that we are going to step away. we'll take a quick break it is the question of the night. what to do with those shares

right there. apple, is this a golden opportunity b ttouyhat stock. your first trade is next.

it is the question of the night.

we're back with breaking news apple's stunning revenue warning ha

haveing a major impact, the dow looking lower by more than 370 points and s&p down by 38 and nasdaq down by 160 yes, it is early and thinly traded but sentiment clearly not good after that stunner from apple. speaking of, critical stock for the entirety of the asset management business. leslie picker looking that that back at headquarters >> that's right. the tri willing looking at the moves at the open. it's a critical stock for the entirety of the industry some of the stock's largest holders include vanguard, blackrock, state street and fidelity which owned more than $130 billion worth of apple's stock at the end of the third quarter when the latest disclosures took place if the stock opens down 8% tomorrow, rounding up that amounts to losses of about $10 billion for those four firms alone. those firms, of course, manage pass ifshgs instrumefunds.

those may slip because apple makes up such a large weighting in the s&p, nasdaq, dow, warren buffett's berkshire hathway owned $50 billion and shrunk over the summer. if the stock opens lower by 8% tomorrow, berkshire hathaway is looking at losses of about $3 billion in one day alone at the end of the third quarter goldman sachs said that apple appeared as a top ten holding in 27 hedge funds, among the largest holders include millennium management code two and tiger citadel. that's based on most recent disclosures and have likely changed since then it's worth noting apple's timing releasing them on the first trading day of the year meaning that funds that booked their performance at the end of the year won't be including these

losses guys >> leslie, thank you so much it is worth talking about. you mentioned buffett earlier. berkshire hathaway i mean between the apple decline to end 2018 -- the ibm thing is well known, the slide in the banks in some of those stock, bank of america, wells fargo, they'd be worth looking at berkshire hathaway shares as well and a story to talk about the days ahead. >> i'm trying to find this cost. doug tweeted out buffett's cost is 146 or so i haven't verified that. if doug put it out it's probably true so effectively that doesn't matter it doesn't matter where you're long, only matters where it's going. to your point he seems -- maybe -- well, i shouldn't say that maybe he's lost a little off the fastball. >> he's been known to make bad bets all in the last five years and actually takes losses which is -- >> i'm not suggesting anything at all to your comment about his investing proud wwess by saying matter of fact that berkshire

hathaway, their bigger positions have done well to end the year and with apple to begin 2019, it is something to at the very least note. >> yeah, what's also notable is that apple is considered as bulletproof of a tock for pension funds to own and some of the holders of apple new york state retirement system owns about $3 billion worth of stock on an $86 billion outstanding, you know, as set base -- >> again, that's another one of these stocks that a lot of very defensive pension fund yield driven investors and this is not a good time for them and they suffered a lot of losses already. >> we have less than two minutes to go in our program tonight what do you tell people to look for tomorrow >> you have to look for some kind of a capitulation day so let's say we open up on the dow down 350 as the futures are indicating now maybe we had a little bit lower and the market rips higher

that's what i'd look for. >> i think you wait until they put the report out i think it's important to remember there was just a few pieces of data about this and, you know, we want to see what the guidance is for the next quarter. i don't think you buy it until they report their q1 reports >> hasn't apple made it easier for a lot of other companies to come forward we were waiting for fourth quarter earnings i don't think we need to wait. mike made a great point. maybe it's taken the panic effect away but the guidance here and consensus earn vgz to come in not just for apple. >> would you buy apple here or no. >> i own some apple and i have to say around 146, 145 is where we're trading it looks pretty darn interesting i don't need to do anything with apple. it won't get away from you we've gotten a bearish outlook from a company i think you have to hang out. >> summer of 2015, it topped out around 127.50, 128, it feels like that's what it wants to retest and quickly in terms of

what i'm looking for, the currency moves are staggering? >> thank you for watching. worldwide exchange 5:00 a.m. until then, "deal or no deal" until then, "deal or no deal" begins right now... - you wanna go back to michigan. - bring me home! announcer: withrs! - yes! - this is bigger than ever. each case can change your future. - oh, my gosh! no deal! announcer: but will she crack under the pressure of an incredible new game twist? - i would like to counter-offer. - you just handed the game over to her. - she wants me gone. announcer: it's an unbelievable ending. - how amazing is that? - oh, my god! announcer: from universal orlando resort, heart-pounding thrills and hair-raising adventure await. it's "deal or no deal."