good friday morning. welcome to "squawk alley." we're at post nine of the new york stock exchange. we say good-bye to the month of may today. we begin in washington president imposing this 5% tariff on all imported goods from mexico beginning june 10. it triggered a renewed selloff in stocks, automakers being hurt the most what does the tariff mean for the sector >> this comes at a time when the auto industry overall is at record production in mexico. in terms of the number of vehicles coming from mexico up to the u.s. and canada, these

are the latest numbers from the mexico trade association auto trade association general motors by far ahead of fca and nissan and vw. look at the chevy blazer this is an example of an suv in a hot segment. they expect to do well it's in short supply because it's doing well. they're stuck. what do you do here? you take it in the shorts in terms of margins if there is a tariff and you're not passing along to consumer or you do pass it along to the consumer that's why the auto stocks are under pressure today anywhere between 2% and 5% in terms of overall production, we talked about this all morning. you have mexico now with more than four million vehicles being built in mexico. it is now the number six country in the world in terms of auto production that is not changing that's not changing any time soon >> phil lebeau, thank you. >> peter navarro joined us to discuss the president's decision to threaten tariffs on mexico

saying investors in wall street should look at the move calmly take a listen. >> look at this calmly look at what we're trying to do. this is actually a brilliant move by the president to get mexico's attention, to get them to help us so far they've been standing by and they really have the power to help. the two institutions that had the power to help us is the mexican government and congress. >> with us now to break this down, former deputy assistant trade representative matt gold as well as global chief market strategist gentlemen, good morning to you both matt, i'll start with you. mexico, the u.s.'s second largest supplier of goods and imports. your reaction to the comments from peter navarro >> look, peter navarro wouldn't recognize a trade agreement if it fell out of the sky and landed on his head peter navarro does not begin to comprehend the consequences of what he's advising the president to do. it has been advising the

president to do for more than two years. it's really a sear justicerious dangerous situation that he is advising the president and on cnbc and talking about things that he didn't have a clue what he is talking about. this move, if the president takes it, will very severely violate nafta. it will basically invalidate the entire agreement because we will be failing to fulfill our most fund al obligation in the entire 300 page agreement it violates the world trade organization agreements which compromise huge portion of the international law and critical for global stability these are the types of consequences you're looking at in the long term for this kind of move. >> matt, to play devil's advocate here, not saying right or wrong or disagree or agree, you spent time in the executive branch and spent time working on trade agreements in the past when you have a congress that is deadlocked over immigration for years and years now, in terms of

the laws that are on the books and the unilateral power that is in place for the president of the united states and the executive branch to take some sort of drastic action where something like say immigration is occurring, what else is available if not tariffs >> well, first of all, back when we had presidents who were actually diplomatic, they had good relationships with mexico and mexican government we shared enormous border with mexico and they're enormously reliant on our market. the fact of the matter is that past presidents would have been able to sit down with the mexicans and been able to apply pressure in other ways that didn't severely undermine international law and global security in order to get the mexicans to fulfill some of their own responsibilities under international law with regard to not allowing this mass migration to america's borders but president trump doesn't have the options because he's alienated every one of the

united states' closest friends and allies these are the only options that president trump has left this is not a situation that any previous president would have been in, republican or democrat. >> peter, to what degree do you think these tariffs against mexico are factored into the market action today? is 5% fully factored in? what do we start to see the market factoring in higher >> that's very difficult to assess i think more broadly what is important to recognize is that after the most recent recession, really global trade has been a really important part of global growth and, for example, when we look at emerging markets, a lot of productivity gains came out of emerging markets and productivity has been stagnant i think the amount of friction created in a prolong global trade war is very, very

important to recognize and i'm not sure markets priced it in fully, especially given in the context of all of the other headwinds i think that markets are facing naturally this late in the economic cycle. >> peter, if that's true, when do numbers start getting cut >> i think numbers have already been starting to get cut if we're talking about earnings, for example, you know, we already seen a flat first quarter. i often have to chuckle when strategists get on and say earnings for the first quarter were okay. flat is okay, with a market then at 2900, then i guess they are for the second quarter, earnings revised down i think margins likely peaked. and with cost inputs going up because of tariffs, we think margins will compress considerably more. moreover, i think if you look at what the rates markets are telling us, you look at the correlation between long rates in the u.s. and pmis, for example, or with ism, it

indicates that while the u.s. is not yet in contraction, that correlation is telling us that it will go into contraction and likely follow the rest of the world. pmi is weak in contraction as we expected zbhchlt how does this play out and effect and impact the other trade talks afoot for the united states and china? >> it's president trump putting him sne himself in a position where he is going to pay a price if he ends up with 25% on tariffs from mexico and when the u.s. economy pays a price for that, then trump is in a weaker position to ask the u.s. economy to continue to pay a price for the cost of the china trade war. one of the things that president trump's advisors successfully convinced him of not too long ago is he had to resolve the deadlock over the new nafta gains in congress. he had to give american farmers

relief from mexico and retaliation against the tariffs. he had to do that in order to maintain his trade war with china because american agriculture couldn't sustain the cost of both the battle with canadians and mexicans over the aluminum at the same time. trump listened to that advice, he moved us forward towards resolving the problems with steel and aluminum and mexico and canada but now he created a new problem with mexico. he is weakening the position by getting into a trade war with mexico. >> what do you think people are trying to surmize what china is saying about all of this today. one idea is they're saying how can you expect anyone -- how can anyone expect the president to abide by a deal that was almost about to close the other is if his goal was to get people to move their manufacturing out of our country to countries like mexico, maybe that happens on a lesser degree

now, net-net zbhchlt th. >> that is grate poia great poi. i consult with investment banks, one thing i'm talking to them about for last year and a half is relocating assembly outside of china and more of that is going to mexico or going to go to mexico than to any other one location now where does it go and now do they now completely reconstruct supply chains yet again to accommodate another trade war. he doesn't seem to comprehend the mess he is creating. >> matt, i want your take on navarro's statement that u.s. consumers don't fully pay the price of tariffs the producing country ends up paying them because companies there are forced to lower prices or miss out on orders altogether plus, some would argue in a tight labor market with some prices falling, consumers won't feel price increases anyway. what is your take on that side >> the actual answer to the question is that when tariffs

are imposed, an attempt is made to spread the cost along the entire supply chain. if it is chinese, the chinese manufacturer can sell only for less money the u.s. importer is going to try to resell for more money to the u.s. retailer. the retailer is going to try to sell for more money to the u.s. consumer they're going to try to spread the cost along the supply chain. it depends on the type of product you have there are many products where you impose a 25% tariff. that supply chain shuts down and that's the end of it it thohas to move somewhere else in other cases, you can spread out the cost but not along all parts of the supply chain. so one part of the supply chain takes the burden it really depends on the supply chain. >> period of time, we're seeing auto stocks sell off and the freight names like kansas city southern sell off, weakness in the energy markets as well the other place this is playing out is currencies. the peso is getting hammered

the biggest decline in seven months the fact you are seeing weakening against the dollar right now, does that negate the effects initially of any tariff that's were put in place next month? >> well, look, i think the currency markets are incredibly interesting. what they're recognizing is at the end of the day, the rest of the world and emerging markets right now are starting to suffer more than the u.s. initially and that's one reason why we've been calling for dollar strength this year. moreover, rates in the rest of the world have come in quite a bit. if we look at the bunld at minus 20 basis points that, is the all time low so the dollar strength is not necessarily all that surprising to me. especially when you consider how much the rest of the world is slowing in advance of the u.s. you know, my view has been for some time that it's going to be difficult for the u.s. to continue to grow as quickly as

it has been, as the effects of the tax cuts wear off and the rest of the global economy slows. again, as headwinds, natural headwinds this late in the cycle start coming from the credit markets as well. >> thank you for joining us today. >> thank you >> thank you still ahead, a lot more on this selloff tariff threats weigh down stocks all the major averages down about 1% the dow off 250 points we've got legendary investor weighing in next ♪ lower carbs. ♪ lower calories. ♪ higher expectations. the light beer you've been waiting for has arrived. corona premier. ...or trips to mars. $4.95. delivery drones or the latest phones. $4.95. no matter what you trade, at fidelity

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i'd rather not. major averages in the red. about 100 points off session lows joining us at post nine to weigh in, allen patricof do you have a secret as to how to navigate this current investing environment? >> if i had the secret, i would be a miracle man we're in a crazy environment i mean with a $22 trillion deficit for this country, we have a president that is playing with the system every hour the latest of changing the tariffs 5%, what is it every other month to get to 5%

i mean the world is -- and yet, the stock market is not going into chaos >> consumer confidence is high. >> yeah >> employment is great but the thing that i keep hearing from some is that you wake up in the morning and it's about managing global headlines. it's to longer about finding great ideas. what do you make of that >> i can't agree with that because i'm the world of great ideas. that's all i do. if you judge by the activity in our firm, you are monitored for a week you would say the world is in great shape and we have more exciting new projects happening whether it is cybersecurity or new technology and real estate or insurance i mean, it's a great environment. >> in ways that regular

investors can participate in >> all of our companies are in the private area but are gearing themselves up to be in the public area at some point. we hopefully will have a couple of companies in the public environment this year or early next year. >> you are hearing about effects on demand particularly enterprise in this environment we heard from vm ware last night. they're cautious in the guidance because of the macro and that surely a big part of the reason why the stock is down as much as it is today >> we have a company called isertis in the contract management software business if you were judging from their 100% a year growth rates, you would say, i mean, people, business to business traffic is -- business is very good. companies are upgrading and are improving their technology and introducing new technology so it's -- never ceases to amaze me as to how new concepts keep getting deployed

we see over 200 new projects a week, a week and it's not all of them are exciting >> today we're talking about mexico china has been the overarching theme and we see a very hawkish stance as of late where technology and some of the ip and ideas innovations are concerned. is that affecting the way you're looking at or assessing companies that you might invest in >> i think companies that are dependent on importing some components from china now are -- you really have to be concerned in terms of what impact that's going to have and what alternative markets and people trying to find alternative markets just as i'm sure in china they're trying to find alternative markets that -- to the products that we're slapping export taxes on.

we're in a turbulent environment. the market is down a couple hundred points today i don't see on the lists i follow dramatic in the technolo technology world or traumatic changes. >> if you have a start-up that needs hardware or software, they have to manufacture it many somewhere. they're trying to decide whether to do it in china or mexico, what do you tell them? >> try to find a place in the united states so can you do it >> our whole industry is focused on software services and trying to avoid hardware dependence >> does that make you even less willing to invest in hardware in this environment if you have to do it in a higher cost environment whether it's in the u.s. or abroad >> well, every company that we do have, you can't avoid it. it has sh device or whatever they're importing. they're all looking for alternative sources and they're

going to berma and romaine yachlt i me romania and all new countries to avoid dependence but china and mexico, this is a key areas from which we import in this country. >> i think every name in fang is below the 50 day moving average. do you see that lasting? >> you may or may not know, i'm come out and say i think we have to look very seriously at f.a.a.n.g. i don't include netflix but facebook, google, apple, amazon and in terms of what importance, control, monday open i had positions they have in the country. you can't avoid going through the apple tollbooth if you want to get certain things done you can't avoid in the social media, i mean it's funny i've spoken out on this issue about google yet, i can't resist. every time i'm in a conversation, i pull out my phone find out the answer. i have -- i goent to google

we're so dependent on that source is congress is probably the only source we can look to to find out some technique because it's not going to get any less. >> do you think the tide is turning in terms of the narrative around ride sharing? profitability, certainly doesn't seem to be anywhere in the near future but this idea that competition is not quite as fierce and pricing is getting better? >> i don't buy that as a writer, i don't buy that i know the inventives still out there from the writers and for the drivers. i must say in looking at uber

and lyft, uber was appropriately priced it was $45 to $40. it's not a dramatic. lyft is a much greater decline i'm surprised in a dlik today with 250 points down at the moment, uber is -- and with the earnings which i don't think are fabulous, i mean, at a billion dollar a quarter, you know, you can multiply that by four. double the loss of a year ago. i mean how long will shareholders sustain those losses everybody likes to compare it to amazon's loss of $3 billion. amazon lost $3 billion not a billion a quarter, they lost three billion over ten years i think we're in a place where shareholders are supporting the companies. and the idea of that net free cash flow is out of the window and there is an assumption it will grow out of where it is it's a dog eat dog out there i mean, we've all ridden in one or more. i happen to be a via fan, it is

a ride sharing that is a little different i'm not an investor. but i am impressed that the fact that uber is holding up this well today i guess lyft is up a few points which is surprising. >> all green >> in the face of a bad market and bad earning ands bad market. it's telling thought market, you know, i send this a couple months ago here. i think we're seeing first results in the market and they're saying okay they did what we expected there wasn't a great disappointment when he this have the disappointments, get out of the way. >> allen, thank you >> thanks as always. >> when we return, the ceo of vm ware, an exclusive interview following the company's quarterly earnings but first, stocks posting the

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you can see vm ware is down 6% amid a market selloff despite posting a beat on earnings joining us exclusive from palo alto, pat gelsinger. >> good morning always great to talk to you. >> we have a couple of increased price targets for vmware from vmo and key bank they increase the full year guidance after they and on the macro and maybe that's what this is is this mexico and we have part of the reason. >> overall, we don't think anybody -- even as we executed

very well and we saw by the quarterly results, we don't think anybody is entirely immune to the overall macro environment. and some of the trade issues clearly give us. i will remind you that we're set to very i would say surprising 12% growth target for the year they're a bit taken back by our aggressive view. that is just a quarter ago and that is reaffirming our guidance for the half and for the full year. you know, we believe this is a robust statement of our outlook on the year. we're executing very well. and despite some of the others not foremani not pe forming very well, we're affirming our guidance and i think executing quite well as a company. we're very satisfied with what we said to the market. there are conversations with and customers. as you talk about, there are other enterprise companies names that have not faired so well

this earnings season they're relatively strong and is this customer who's are slowing down our spending just because of the uncertainty in the environment? >> we have to see customers. >> that's our conversation we do believe that customers and i think that's effective that's for the other characters. that's characteristics that we have seen in the marketplace and we have a value proposition. and there are client offerings it really is a sweet spot over kists and forward looking strategies overall, we're seeing a continued robust and it's the marketplace and there is a value propositions

we're doing. >> along the lines, you had 16 deals worth $10 million. that is the quarter i believe. >> we've seen a large deals continuing to expand every quarter over the last year and beyond so this quarter is, you know, and this is a barn burner q-4. we also believe that our conversations now as we have expanded from selling computer to a complete cloud infrastructure, a transformation of the securing offering this is this platform and that core idea, john, of, you know, how do they get to that digital future you know, that is not an i.t. discussion anymore that's a business strategy conversation and that's why we're seeing this

real uplift in the position and the conversations that we're having with customers globally >> analysts wanted to know on the call last night about this jedi contract. it looks hike amazon and microsoft are the last two preferred bidders in there you have a relationship with both of them so potentially upside for you. strategically, how does that work for vmware? is there a mult flyiplier effec. do you see having a significant role there >> we positioned in the past, john, people moved to the full vmware offering, that is a mult mire a company or institution that is using this as a hyper visor now, network compute, automation, that is a business expansion opportunity for us we're seeking that ability to be

a cloud provider for the government and many of the governments in defense and intielligence are bi vmware footprints. as the contract gets resolved, we hope to be positioned with amazon and azure given relationships with both even as our preferred relationship with amazon is very strong. we see the ability to participate for government business being an essential element of our multicloud strategy there are other cloud partners all give us a great opportunity to participate for those government opportunities >> lots of dance partners thank you for being with us. >> thank you >> potential winner regardless in that jedi contract and the dog fight that's been such a fierce competition

european markets set to close shortly. seema mody joins us with a break down of the action >> it's one of the days where the market is trying to quantify the risk & and in europe weeshg down 1.5% in the dax they're trading lower. voekz wag an and vee fiat chrysler, there is a note from deutsche bank this morning it highlights that 29% of the total parts for cars and trucks from mexico. if the trump administration raises tariffs to 25%, fiat could take a $4.8 billion earnings hit meanwhile, citi is projecting volkswagen could see a 3% earnings head wind from that, just 5% tariff level alone you're seeing that is, of course, one of the auto stocks in focus risk to unite investments too. mexico is a bigger hub for

daimler and heavy trucks and buses and bmw is set to open a plant in central mexico next week take a look at the spanish banks with exposure to mexico. they're all down about .6% to 4% on the day let's also talk beer they generate 10% of the total earnings from domestic sales of beer in mexico the analysts say sales could be pressured if the mexican economy weakens further. what to watch next week? we have our eye on u.s.-china trade talks. u.s.-europe trade talks will be in focus too the kmigtser warning ministers earlier this week that they should brace for u.s. tariffs and also comes ahead of president trump's state visit to britain and we have the ecb meeting on thursday. back to you. >> thank you, sima now let's get a news update.

>> good morning, jon good morning, everybody. here's what's happening at this hour secretary of state mike pompeo holding brief talks with german chancellor angela merkel in berlin she stressed before the meeting that two would discuss how to prevent iran from gaining nuclear weapons. it is pompeo's first visit to germany. in a second suicide attack, a car bomb targeting a u.s. convoy exploded this morning leaving seven afghan casualties. four u.s. service members were also hit with minor injuries rescue crews in budapest gearing up to raise a sight seeing boat from the bottom of the danube river and scouring the waters for 21 people still missing. hungarian police detained the captain of the cruise ship that collided with and sank the bowl killing seven south korean tourists eight competitors were named co-champions of the 2019 spelling bee

they spelled the final 47 words correctly going through five consecutive perfect rounds each speller is going to be given the full $50,000 cash prize. fantastic. that's the news xwup daupdate t hour downtown to you. >> hands down the best story of the day. >> so far, yes. it is. five rounds. can you imagine? >> thanks for bringing it us to. >> incredible. breaking news in washington. let's get over for the latest. >> we learned that business groups are weighing all legal options against the white house in response to the unexpected announcement yesterday of that new 5% tariff that will kaes late on mexico the u.s. chamber of commerce confirmed in a call with reporters that since they learned about this policy late yesterday afternoon, they have been exploring the legal options nonstop. i also spoke with sources at other business groups that said all of these groups have been in discussion with each other they would likely continue that

discussion through the weekend and hope to have an agreement by early next week, possibly monday morning on how to proceed. this will potentially be a lawsuit against the white house or a specific member of the customs and border patrol involved in this decision. of course, we wait to see exactly what this legal challenge will look like, who will be a part of it, and exactly what it would do to this policy whether it would stop it in its tracks and lead it to a protracted court battle or whether the president and his white house counsel would find another way around it. back to you. >> all right thank you very much. at the same time, getting headlines that mexico's foreign minister is going to washington, d.c., to talk about all of this. averages have come off the lows, obviously. session low is about 329 we're down 216 rick santelli? >> we're going to discuss all the topics of the day, whether it is tariffs or what is going on with ten years, down almost 20 basis -- wait, liesman is going to be there. forget that we're not going to discuss

the issues we're going btalitoe ckng the issues after the break e. so, every day, we put our latest technology and unrivaled network to work. the united states postal service makes more e-commerce deliveries to homes than anyone else in the country. your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

we're with steve liesman >> equity prices, i think everything is sort of connected. with regard to tariffs, all my

sources are texting me listen, mexican peso is down 3%. these things go a long way and with regard to costs and interest rates, i don't know what is a bigger story, the fact that twos and tens are down 17 basis points on the week that's a big move. >> steve, what do you make of the new call >> i think thing was have to get worse from where they are right now. i don't think the fed knows what to do with the tariffs i think they ultimately see them as a threat to growth. i think that ultimately see them as deflationary. but if you told me that we were going to raise prices through tariffs on two of our biggest trading partners at a time when unemployment is 3.6%, at a time when wage growth is plus 3% and

right monetary response is to cut rates, you know, i think i'd say have another drink is what i would say. i'm not sure that on the front end that is the right response the fed may get there. i just don't know that they get this quite as soon as the market thinks and that is one of the things that gets me worried if i'm write and the market is too far out in front of the fed, i could be wrong about this. just as easily, i guess. there's an adjustment that has to happen. >> you know what i think, can the fed be more fluid in i think jay powell that's the ability to be more fluid. they get nervous about this and stretches out a bit whether it is mexico or china, one or the other or both. if they decide they want to ease, not take a chance, just to give not necessarily an insurance cut but to deal with some of the volatility and uncertainty with tariffs getting longer in the tooth, are they quick to take it back if things start to improve and talks

started to make head way i wouldn't have a problem with that if they can't do that, then they should keep the powder dry >> you don't want that, rick you ask for. that you don't want that >> i always want that. >> no, you don't listen to me i'll tell you what you want, rick >> we don't know what that make of the fed we go this way for a minute then back the other way there is incredible momentum to policy >> so, steve, when you buy a position in stocks, you never get out? it goes up and down, you don't adjust it? why can't the fed adjust >> making interest rate policy for the most important economic country -- >> press it out the window think outside the box. >> it's different about making a trade. >> that's why i like jay powell. i like him because he's not a phd. you don't like him because he is >> i don't like the idea of thinking about running the american economy like it's a dune buggy when it's a --

>> i think get rid of all of them get a john taylor modified equation and computerize it like the market. >> what happened to my friend rick santelli so into the markets. >> i am into the marketses i'm not into a group of people managing the markets >> well that's what are tariffs, rick what are tariffs >> you changed lanes so fast we were talking about the fed, now you're on tariffs. >> i'm just saying it's all a piece. >> he's the genius on this and he agrees with you, tariffs are taxes. zbhu want the fed to tweak the economy every quarter and month. >> i didn't say tweak the economy. i said tweak the fed funds rate. >> what are interest rates >> what is going in mario draggy's house now >> you make a lot of really good arguments, this is not one of them >> okay i think it's a great one >> steve, jim paulsen has a nice piece on the split between consumer confidence and the ten year yield he tries to take a crack at what

equity markets do when one side's strong. >> we're monitoring that it's part of my sort of underlying thesis to why the fed may not be so quick to cut i don't see the economy certainly right now as weak as the markets do remember, the market was certain back in december we were going have an apocalyptic recession. that did not come to pass. and now we're running 1.5% to 2% on the cnbc wrap it up for the second quarter i have strong consumer confidence but i have a bond market that is sure about the apocalypse. if i have low unemployment, strong wage growth and pretty good overall growth, i'm going go with that over the bond market whereas maybe my good friend and colleague from chicago, i don't know, who do you side with, rick? >> listen, i always think the bobb bond market gets it right in the end. whose bond market is controlling

our bond market? that's the problem >> you know what i think i think that as art cashman said, the end of the world just happens once it's a trade you have to time very carefully. >> there is a group gathering on a mountain every sunday looking for the end of the world i get it >> we may take a hit from the tariffs, especially the ones on mexico which i think are going to be real kbrly painful. >> i'll bet you a cheeseburger in the next ten day that's gets you worked out with mexico we on some. >> i don't have a feeling about that >> yes or no, pal? >> i'll buy you a cheeseburger for the heck of it. >> all right that's a deal. >> i don't handicap political outcomes very well the market doesn't either. they can handicap earnings and the economy. it's really lousy that -- fundamental to investment is handicapping political outcomes which the market doesn't do that well >> although we do love bets on live tv. thanks so much >> and i love cheeseburgers. >> and a beer. >> all right

coming up, stocks mostly in the red across the board tariff concerns continue to drag down sent. is a brighter june ahead we're going to discuss that next let me ask you something.

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here he has his eye on three stocks we'll reveal them at noon. we'll discuss and debate whether now is the right time to get into them. can't wait for that. we'll see you in about ten minutes. >> we can't either, scott. thank you. keeping an eye on this the points, off the lows but in general, major averages tumbling in this last day of trading and what is poised to be first down month of 2019. st wh ayitus your daily dashboard from fidelity. a visual snapshot of your investments. key portfolio events. all in one place. because when it's decision time... you need decision tech. only from fidelity.

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dow down 230, a bunch of swirling currents on trade as the mexican foreign minister heads to d.c. and now the canadians say the mexican president will still push for mcrafition we're back in three minutes.

welcome back we got major averages off their lows, the dow is still down, let's see, 238 points. let's bring in chief strategist and chief economist david rosenberg, who joins us on the phone. david, good morning. we've got looming threat of tariffs on mexican goods and you have been calling for a long time for the fed to cut rates by labor day. you think this increases the chance of that happening >> well, i certainly thing it does raise the odds that the fed is going to have to ratify the message that the bond market has already been giving it for the better part of the past few months you know, the comment is that this is a tariff on mexico, but you know, we -- the north american manufacturing is the

largest supply chain on the planet, and someone's got to do the arithmetic on what this means for all the american companies that make stuff in mexico that gets exported into the united states that's going to be faced with a higher tax. that's really part of the process here is that this isn't just something on mexico this is something that actually also affects corporate america's bottom line. >> you're right, david i think a census report says two-thirds of imports are what they call related party trades which is essentially moving goods from one corporate subsidiary to another, cross border, but your long-term thesis has been that the fed can cut, it's too late you still believe it >> well, i do believe it i think that the fed -- you know, when i look at my estimate of the neutral rate, it's not anywhere close to where the fed's estimate of the neutral rate is and it's because of the inflation numbers that i am looking at, observable inflation in the united states, observable

inflation not including the prices running well below 1% the fed overtightened in my opinion, at least three rate hikes this cycle, were totally unnecessary, it's the one thing i did agree with the president on, that the fed did overtighten and the treasury market, which usually gets it right before every other market, has been screaming this for the better part of the past four months and i think in due course, we'll figure that out. you know, i look at the first quarter gdp numbers, you add up the domestic guts of the economy, it's running flat, and we know there's no improvement in the second quarter and my sense is that all the -- what the fed's already done, i mean, put china aside, put mexico aside right now, you have to explain how it is that the regional banks are back in a bear market. why are the small cap stocks back in deep correction territory? what about the retailers the parts of the market that are geared towards domestic demand are giving you a very consistent story that the treasury market was giving you, even before this latest round of escalating trade

tensions did >> yeah, david, i would actually throw transports into that bucket too when you see the turnover and rollover we've seen in freight data in recent weeks and months as well so what's an investor to do? where should they look for opportunities? quickly. >> well, again, i think that you know, i still say that the u.s. bond market's a good place to be, yields are low, certainly in historical terms, the ten year note at, say, 2.2% but it's still the smartest kid in summer school globally. i think ultimately, the ten year treasury is going to gravitate towards where yields are overseas and i'm not saying you got to talk about germany negative or japan. look where the uk ten year gilt is right now it's well below 1% and that's only because their overnight rate is only 0.5%. when the fed cuts rates, not if, but when, the curve will steepen but the whole curve will melt and a lot of money will be made in the longer end of the treasury market over the course of the next 12 months, as has already been the case so far this year.

>> all right david rosenberg, appreciate having you with us, sharing those thoughts obviously, no one's going to be sad to see may go away. we'll talk early next week about june and whether or not that typically underperforming month lives up to par. right now, we're down 226, get to the judge carl, thanks, i'm scott wapner, trump's tariff shocker sinking stocks this hour, is a major correction now more likely than not it's 12:00 noon, this is "the halftime report. >> announcer: stocks sell off after president trump's threat to slam mexico with tariffs. 10 of 11 sectors now negative for the month. 7 out of dow 30 stocks now at or below christmas eve lows is it time to put some money back into the market the halftime investment committee is lining up with their picks. plus, a man who made the right call last year on what will happen in 2019 see what morga