krogers. i do not own it yet, but i'm looking at it very closely >> northrop grumman s got good momentum, itn sateites, communication groans, et cetera. >> agree realty, which is one of the biggest tenants is cvs >> thanks for watching "the exchange" begins now. thank you, scott hi, everybody. here's what's ahead, the great rate scare yields are plunging around the world, and that has investors fleeing the stock market again today. we will look at the global race to zero and what it means for your money plus, the man who called it. the strategist who said the ten-year yield was lower and an even bolder defensive strategy he will join us later this hour. and as trade war worries dominate, what the administration's next move may be and how much market pain they are willing to tolerate. dom chu is here with those numbers. >> the market pain is a lot less than what it was in the first hour or so of trading when the

dow industrials fell by over 550 points at that stage right now we're only down 212. so less than a percent of the down side here the s&p 500 still below that key 3,000 mark however, two-thirds of a percent of the downside and the nasdaq composite outperforming a bit thanks to some strength in some of the these large cap communication services and tech names. the bond side of things very much in focus. a record low here for the ten-year bund yield in germany now negative 58 basis points the french ten-year also negative 31 basis points that brings usto the relative outperformer from a yield basis, we still get a turn at least a yield of 1.65% it's not a lot but capital should flow to the u.s. because of that rate differential, and crude oil prices and focus extending declines but off the lows of the day so far some more bearish inventories, a surprise

build. but wti crude, $51.21 from the highs that we saw last year, we had fallen by 45% during that span only to rise by 55% again to the highs that we saw earlier this year and then only to fall again by another 23. the so that volatile oil trade continues. kelly will be watching that energy complex back over to you. >> see if it cracks 50, dom. welcome to "the exchange," everyone i am kelly evans and three central banks cutting rates today, new zealand, thailand, and india this time. and all this as we learn that germany's industrial output fell by the most in a decade in june. gold rallying past the $1,500 mark for the first time since six years. let's get to bob pisani on this. >> yeah. global earnings, kelly, are starting to come under scrutiny for the second half of 2019 is and for 2020 and with very good reason two big things have happened the last few days.

first, the fed has started another global easing cycle among most of the central banks as well we saw that overnight. and, second, trade tensions including the possibility of a currency war on top of the tariff war that's making it very difficult to project earnings in the second half in 2020. since the start of august when additional tariffs were announced, the global stocks most exposed to trade have underperformed i'm talking about energy stocks, semiconductors, industrials and banks. the banks of course underperforming as global yields have weakened. names with significant exposure overseas are again among the weak performers today. you see them, emerson, 3m, cater pill lar john inch noted the earnings' concerns he told clients today, and i'm quoting, with trade tensions worsenning, the prospects for industrial company earnings and share prices at trough appear to be getting further pushed out.

kelly, we talked about flattish earnings for the s&p 500 this year and light uptick in 2020 those numbers are going to start coming down very, very quickly into negative territory, these kinds of global wars, global trade wars continue. you notice we've got a bounce, kelly. that's not industrials that's all proctor&gamble, coca-cola, all defensive largely consumer names have been leading the charge off of the bottom but not in the cyclical space. >> low rates are wreaking havoc in that part of the market the financials are off 8% in just the past eight sessions i am joined by andreas garcia of maya, he is founder and ceo of zoe financial. and is chief income strategist at janny capital management. these moves overnight, what do you make of them, and what world does it make sense to you that the german 10-year with yield

minus 0.06%? >> it still has positive carry so, the concept of negative yields influencing or hitting the global bond markets is nothing new. we have been in that circumstance for about a year and a half now but i ink the threat or the concern is that at some point that starts to have negative feedback effects on the banking system and the regions in which there are negative -- >> aren't we already al that point? if you look at the european financials they've gone nowhere for years now. it's hard to understand how the japan outcome, how europe's doing. how is this helping their economies? >> well, i think what's really crucial is that if you look to some of the papers presented at the chicago fed conference a couple months ago, the federal reserve and many of the central bankers here in the u.s. have largely ruled out a move towards negative interest rates or at least only are along to consider

it only after another round of qe i don't think that's the next likely outcome, but i think that fear is a lot smaller here in the u.s. than it is overseas >> but it's definitely growing we actually have an auction. rick, how did that go? >> we all know the answer. there's no way this rq is going to go well, and it didn't go well 27 billion first offering we usually have two re-openings thereafter 20 some billion 10-years 1.67 was the dutch auction yield, well above where the auction was creeping up anyway that's a big negative write-off. but let's go through it. 2.20 now this is interesting. it's only the worst since march of -- may of this year but if you look at may of this year, then take that out, you have to then go all the way back to march of '09 to find a lower one. i guess what i'm saying is, is that march was terrible, and this is pretty much just as

terrible 55.7 since april of '18. really the only glitter of hope on this one was 13.6 direct, steelers take a d-as in dog, and that doesn't even include the system open market account which yesterday purchased with the runoff which has started again since the fed meeting an extra 27 billion of 3s yesterday i just don't have that number. and tomorrow's 30s, maybe the third year will go better, but everybody should stay alert. we've bounced a little bit in yields we're 216, 210 is the all-time low closing yield in 30s and, boy, you want to watch that closely. back to you. >> andreas garcia, we'll brick ybrick -- bring you in on this and it may go lower still if it cracks at levels rick was just referencing. what do you do in this environment? would you call this a bond bubble is there any way to rashalize

this kind of activity? >> well, one, you earlier were commenting it was happening abroad there's a lot of bonds, the government level they were already in negative territory. so it's hard to make the case that just because we're seeing yields at these levels here is not something that we've seen that before. >> but to flip that around, it's because france is at minus 0.4% and germany's at minus 0.6%. are we getting sucked down by that anchor globally >> i think that's part of it but even six weeks ago i was sitting on this chair and we were talking about how the markets were at all-time highs, yet, yields were starting to drop, and we saw this disconnect and we said which one's right. it seems that the bond market was reading these trade tensions with a lot more serious than the equity markets and now the equity markets are kind of waking up to the reality that this is just a little bit better >> when we look at what happens we can tease or the kplee from

here, if we go into recession and it's a really awful one, you can understand some of the moves and the reasons why this is all being priced in. even then i'm not so sure you can. what if that doesn't happen? even the tariffs that have gone into effect this roundwe've already seen an offsetting move by china's currency. does that really mean that the stock market is setting up for some big fall? >> i don't think so. i think this was a great opportunity for equity investors. we just got through second quarter earnings, and there were some great reports look at microsoft, look at mastercard you can buy those stocks 5 to 10% cheaper and they will be relatively unaffected. great numbers, it's trading off today at zoetis. you are still going to give your medicine to your dog or cat no matter what happens. >> i understand that if things slow further from here, there's risk out there it seems that no matter what we're talking about, what growth scenario, you can't escape the thing that -- the u.s. is doing more bond buying because it's

not shrinking the balance sheet the way that it was going to how do you, if you have a buyer of last resort, who would be selling bonds? >> i think you have to ask the question are central banks pushing on a string? and we think they are. this is not stimulating the economy. look at what's happened in the eu for year it's hasn't generated the growth they want so is this the best approach i don't think so i think we have modestly higher rates. that's fine for the economy. and in that scenario you really want to be in equities >> all right, guy, we have talked about the levels of rates, but there is also the yield curve which i have to bring up the fecut rates last week after intense market pressure, and that didn't solve anything, so to speak. the yield curve didn't steepen it's flattened conditions have tightened. they have not eased. is this market going to keep pushing this fed to do more and more, and is the if ed going to listen to that where does it end? >> well, you're right that there is a sort of feedback loop that's emerged and not just the

federal reserve but also the federal reserve and the trade tensions -- not just the federal reserve and the markets. so right now the markets are pricing somewhere between 30 and 40% chance of as much of a 50-basis point rate cut at the september fomc eeting. and so long as these trade tensions are there and they're a stated reason for the federal reserve to ease policy, it makes all the sense in the world for the markets to continue. a comment about pushing on the string it doesn't matter if these rate cuts are actively stimulating the economy in the short term. what matters is whether the central bank, in this case the fed thinks they are stimulating the economy, and that right there is enough for these rate cuts to persist. >> what matters is if they're right in the long run, guy >> well, i mean, i'm here to establish what the federal reserve is likely to do, not to share an opinion about whether

they should or shouldn't >> i know. but feel free to share both. we welcome both of those in this environment. >> but i think we've heard from the federal reserve. they really don't want to do this they don't think this is being productive, but they're being dragged into it. we don't think it's overly productive >> guys, thank you all i really, really do appreciate it on a day like today and let's take a quick look at the markets which are well off session lows we were down almost 600 points earlier, now we're down less than 200 we'll have most are as we continue to follow this. dow the worst performer because of disney. the nasdaq's only down a quarter percent. coming up, the president thought he thought the stock market would be lower. how far is he willing to go? we'll debate that next plus, the new kids on the block. we'll take a look at how recent ipos perform and what it means for some of those big names waiting in the wings and one strategist told us

that rates would fall number 2 ers earlier this year. he was right he'll join us with his playbook which has one very bold pick ts "e chgeon ts "e chgeon cnbc you can find it in the vitamin aisle in stores everywhere. prevagen. healthier brain. better life.

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welcome back to "the exchange." president trump shrugging off this week's selloff telling reporters he expected it to be

even worse >> the market reaction is to be expected i might've expected even more. at some point as i just said, we have to take on china. china's losing so many -- they are losing thousands and thousands of companies i am leaving china now because of the tariffs and we are in a very good position as to whether or not a deal which may be made, i will tell you this, china would like to make a deal very badly. >> is the president willing to take whatever pain is necessary in the market as long as we get in a trade deal ultimately with china, and is that the right move as 2020 looms let me bring in eamon javers and stefanie miller who is co-founder of sandhill strategy. there are tons of people in the market right now who say why would the president risk all this as we are getting closer to the 020 election isn't this going to turn into a major liability for him? >> yeah, politically it could. but that was his answer on the south lawn

i asked him if he's been marketing the stock market reaction he said it might've been even higher he anticipated that when he took these steps on china, anticipated that it might be even higher than today but he was comfortable moving forward because this is a president who's willing to take some stock market pain in order to get the results that he feels he needs in terms of the china relationship he wants to rebalance the entire tried relationship between the united states and china. that is a huge thing it's going to require some pain. this is a president who is signaling that he's willing to take this pain >> stephanie, do you think that's because he thinks that this is basically as bad as it will get >> i mean, it's hard to know what exactly he thinks but even if it gets worse, when you look at what the market's done since he was elected, he has some room for it to go and the presumption it will go back up i think is a reasonable one for him to be making and so maybe the market can take a little more pain before we see

some gain. >> one of our guests said the president works in four to six-week cycles. we're ending this one. that means he's going to sparked the panic, created a lot of confusion but will ultimately step in and clean things up. >> i think four to six weeks on this issue is way too soon i don't see a lot of incentive for the president to win on china until much closer to the election i think voters have amnesia on these things >> to that point, i've heard people say you have to kind of lock this stuff in, in terms of what the impression of the voting public is nine months before, you know, november so we're talking about february around that time frame that's not that long from now. it's plenty of time. listen we know things could change on a dial with another tweet. but he's got about six months to work with here, right? >> yeah, absolutely. i think the next thing to watch for that early september time frame when the chinese delegation is supposed to come to the united states to have

additional talks the president said to me last woo neck response to another question that he feels he can raise the 10% tariffs on the even as high as 25% or more if he doesn't like the response that he gets from the chinese. or he could lower it so the president views that time as a time in which he can sort of dial up and dial down the pressure on the chinese with that tariff threat which doesn't actually take place until september 1st, according to what he said. so he's very much in a fluid negotiating posture right now, and so i think it's going to be a wild ride, especially if we get any indication that that september session is not happen, if the chinese back out or if the u.s. back out. >> but, stephanie, you think this could go even closer to november so investors who are thinking maybe in the next six months you think it could be even further out. >> i think if he's going to rachet the tariffs beyond the 10%, i think that makes a lot of sense, but i don't think he

needs to do it in the next month. i think that could come at the end of the third or even beginning of the fourth quarter. and then at the beginning of 2020 you start walking back these counts so the last tariffs in are the first ones out and then that leaves the first two which are on really important chinese experts. >> and that gets you into a really important question which is do the chinese want to give this president a win, a big win before his election? do they want him to be re-elected or not? do they want to continue dealing with him for another four years or not if they feel they have a major influence there over the u.s. economy, that political calculus really sort of upends the strictly economic calculus that i think a lot of people are making >> we'll talk more about this with the president's trade adviser. eamon javers and stefanie miller a look at how a prolonged chill in the markets all of this as uber and lyft plus, disney is down on an earnings miss, and it's dragging

down the dow today but ceo bog eiger is bullish on being able to navigate cord-cutting a look at how he plans to do that ahead (gentle music) - my degree from snhu has helped me tremendously. the flexible class schedules allow me to go to work full-time, run my catering business and be a mom and parent. when i reached this accomplishment, it was like, it's here, it's happening, it's now. we, at southern new hampshire university, are the ones who succeed.

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welcome back to "the exchange." dow is down about 192 points right now. three-quarters of a percent, but it's the worst performer in part because of disney's big decline. nasdaq down about 25 points. and let's get a check on that 10-year yield. this is the real mover today

falling below 1.6% it's rebouned some after that auction at the top of the hour rick santelli giving it a d, not a great one. 1.655% is the latest there and here are some of the stock movers this hour which are dodging the downward trend in markets overall today. weightwatchers is gaining more than 39% today this despite a revenue miss. the company raised its full-year forecast on upbeat member recruitment trends meantime match is soaring 24%. they also raised their full year forecast citing strong subscriber growth at tinder for helping results. and shares of wendy's up more than 6% despite a revenue miss today. better than expected sales in america giving wendy's a boost more that 6% as i mentioned over to susan herera now for a cnbc news update. sue? >> thanks very much, kelly here's what's happening at this hour, everyone president trump receiving a mixed reception in dayton, ohio. holding signs and flags, trump

supporters lined downtown streets to welcome him along with protesters who were opposed to his visit the president goes to el paso later today. the headquarters of usa today has been evacuated as police respond to reports of a man with a gun in the building police squad cars converged on this scene as employees waited outside. fairfax county police say they have found no evidence yet of violence or injuries and people visiting times square were sent into a panic last night after hearing what they believed were gunshots. it was later determined to be a motorcycle backfiring, but people were unaware of what was going on they took off running, witnesses said that they were screaming and climbing over each other several people were injured in the frenzy and more evidence that a plant-based diet is good for you. johns hopkins researchers studied the eating habited of 10,000 middle-aged adults for more than 30 years and those who ate the most plant-based foods

were less likely to develop and die from heart disease you are up to date that's the news update, kel. back to you. >> on a day when i had a grilled cheese with tomato and bacon, sue. >> that's always the way, isn't it >> that's not the news update i was looking for. [ laughter ] thank you, sue we've seen sky-high valuations for recent ipos and for those waiting in the wings this we cek we're going to hear from lyft and uber uber is expected to lose more than $3 billion. leslie, we wanted to ask is the market more or less forgiving to these recent ipos when we're in major sell-offs like this? >> reporter: it's a really good question i want to start with what the norm is. and this market clearly isn't the norm but the norm, if you look back five, ten years ago when you have an ipo, it's seen as a more of a high betaing about to, meaning that it is a lot more volatile than the overall market when you see moments of sell-off and moments of distress in the market that's not really taking place

right now, and i think there are several factors at play that are the cause of this. number one, often times the ipos that we've seen, are in sectors that a lot of investors believe are secular growers like software companies as well as consumer names that people just think regardless of what happens in iadownturn, these are stocks that are poised to process pore. also ipos aren't included into the major indexes yet. so when you see days where there's a lot of pain in the market, there's a lot of index-based selling ipos aren't really caught up in that dynamic as well, kel >> it's interesting because i can see obviously these high flyers get hurt in a market like this but at the same time if people are worried about growth overall, why not go to a story that at least has organic or secular growth, and that story >> exactly and often i should mention that i think 80% of the ipos that have gone public this year have done so without profits. they're also trading at higher

valuations than the ones that have gone public with profits and that seems to still be the case despite the recent sell-off, which begs the question, are how are investors really valuing these things? because without positive cash flow, it's really difficult to do your traditional models and come up with the census of what the valuation should be harder than say a traditional industrial company or a sponsor-backed ipo these are unusual times. it's also worth noting that a lot of the irans that have gone public this year are u.s. centric. it doesn't affect a lot of the ipos that we've seen come to market this year >> no profits, that's normal times. now we've got no bond yields, leslie, so everything's totally out of whack thank you. leslie picker, keeping an eye on that for us. as i mentioned lyft is coming tonight uber tomorrow. in the meantime a flight to safety is sending gold and crypto higher today. oil is falling fast though on worries about oversupply and growth

disney is down on earnings, but ceo bob i agreer is bullish on cord cutting we'll have more on all of this on the other side ofhibrk. ts ea

welcome back let's catch you up on a couple market stories we're watching at this hour. we bring in morgan brennan, dominic chu, seema mody, and arthur hogan from boston, the chief market strategist with national securities. and let's start talking about some gold and bitcoin. both of those are higher guys, gold hitting its higher level in more than six years it's over $1,500 an ounce now. we know bitcoin's been a little bit more volatile. but bitcoin would be higher if it weren't gore gold >> one cannot dismiss that the rise in bitcoin and gold is coinciding with the sharp drop that we're seeing in equities and bonds. there are also other market forces that we've been discussing today, $15 trillion in negative yielding debt. plus, even the s&p 500 worth noting even with a decline today, it's still trading at 19 times price to earnings.

so it's still highly valued stock market that investors are dealing with so is it the time to diversify into other assets is the question >> that's many real assets, even real estate is getting a bid because of interest rates. bu when i walked in this morning i remember doing a market update on "squawk box" this morning highlighting what was happening on gold. someone reached out to me on social media, on twitter, and they said forget gold. did you see what's happening with siller? so it's not just silver and gold and crypto it is there for the safe haven or perceived safe haven trades, not just for every asset class out there. >> yeah, two things. first, you cut interest rates, you make gold less expensive to carry. price tends to go up second thing, do not overlook the fact that central banks around the world, china being the latest to put numbers out today, are buying up gold as a hedge and looking to shift more

of their reserve as way from the dollar >> by the way, this is all happening with the dollar really high, right? so gold should be much lower these are all priced in dollars. so despite all those things that morgan was saying even with the high dollar you've still got things like gold elevated in price. >> and oil, equities are off their lows today, but oil just keeps slumping there's slowing global growth. wti and brent down wti barely hanging on to the $51 mark if it breaks 50, it'd be the first time since january >> was down to start the day, but it was not down to the degree it was until 10:30 a.m. eastern time today when eia inventory data coming out showing a surprise build in inventories 2.4 million barrels, 2.8 million drop we thought it was going to be in terms of inventory overall. so are we using oil? >> i think one of the things you

have to remember we think about the similarities that we see here think about august 2015. we were producing 7 million barrels of oil a day >> and what are we up to now >> 13. >> so we almost doubled in three years. >> and that's going to get even larger because of the logistics in the permean base. >> look at what's happened over the last three years that. supply has doubled and the energy stocks have been horrendous we were talking about this yesterday, but are the economics pushing against this saying we've reached these levels and the stocks can't take it anymore. >> every investor in energy stock still has ptsd when the economy went from $100 to $30. >> some of those stocks are trading at worse levels. >> right and the large concern is how much data is sitting on the balance sheet of all of these companies domestically they're still very debt-heavy. i think the hurdle press has

come down significantly over the last three years, but it's not low enough where we can stay in the $40.50 >> we tend to focus on the oil producers which are all down over 7%. but even the industrials get hurt, a company like caterpillar which has a significant oil and gas sector if the price of oil declines, productivity declines and that means less demand for their products >> and you think oh, the transports will benefit. no, that's the old economy >> they lock in the price early in the year. >> as i talk about all this, the dow is only down about 140 points right notch that's a half a percent. a lot of that is disney. and then nasdaq is almost positive so let's dwell for a moment. let's dwell on the mouse ears, so to speak. disney is the biggest drag on the dow today after its results they had monster hits at the box office, lion king, captain marvel but they came up short on earnings and revenue

julia boorstin is here -- i mean, julia, there were anecdotes about indian cricket and the star wars theme parks here what's going on? >> reporter: kelly, there were a number of different factors. one of the main factors going on disney's bottom line is higher than expected costs from building out its streaming services but ceo bob iger told me that the company is putting together all the right pieces to adapt to a cord-cutting environment and to compete in the streaming wars they plan to bundle together disneylus, espn plus along with hulu with ads for $12.99. that's a $5 discount which iger says will help achieve scale and that's not just about subscription revenue but also helping to grow revenue from hulu's ads >> did they themselves say that -- i read about the theme parks. >> it was like, well, people thought star wars would be too crowded so they didn't go. >> well, so, kelly, they took

all of these steps to prevent the new star wars land which is called galaxy's star war's edge in anaheim but they said the combination of the fact that they were charging peak ticket prices which is more expensive than they have in years past, also the fact that hotel rooms were more expensive not just at disneyland but also all the surrounding hotels had raised their prices and all this chatter about crowds they said that that added up to fans wanting to hold back and wait. and also, kelly, don't forget that star wars galaxy edge is going to open a second attraction the land opened with only one attraction so they think people may be waiting till the second ones open. >> do you have a ticket, dom >> i went in may and i said why couldn't i have waited until galaxy's edge was open but you make it a little bit of that effect of kind of waiting till the one in florida kind of opens up fully my big takeaway from this is i started to look at the price points for the streaming service, and i got to tell you

i'm cancelling my hulu outright because it's 6 bucks a month and i'm going to buy the bundle. there's no doubt about it. the only question i have for myself, guys, whether or not i cancel my netflix to help finance the other portion. >> and i think that's a key point. it's certainly being pulled into the conversation today how competitive disney is making this bundle versus netflix the other question i think is raises, what does it do to all those companies that maybe don't have their streaming services out there in the market yet when you have something that is as formidable as this bundle. >> nbc universal, the pairing company of this network. >> so you get espn plus, hulu. julia, are they going to be taking losses on this product? >> reporter: so i pressed iger on that question because they're offering a $5 discount each month to offer these three services together. but what iger pointed out is that the hulu they are offering is the one with ads and reaching broader distribution for that service getting more people to use that service will help them make more money because those ads are so valuable.

they are premium content so they can attract top advertisers, but they have the advantage of getting the kind of targeting you get from digital so they are hoping that that will generate some new revenue stream even if they don't make money on the subscriptions itself >> disney was one of the major reasons that the dow was still negative at this hour. the nasdaq did just go positive. it is up by about 3 points in there apple is no longer one of the top three phone makers in the world. but if they make a foldable phone, they would regain a top spot finds more than a third of consumers had a reasonably high interest in bufrming a folding iphone, so much for the consumer and tariff, all the fears, they would be willing to pay up to $600 more for folding products >> i don't think you could pay me $600 to want a folding phone. [ laughter ] my first phone folded i could not tell was a motorola shell phone. when we think about what people say in surveys and what they

actually do in life can be two completely different things. they're going to have some exciting things, but we're not going to see real growth in the smartphone until 5g rolls out. very much like why did i go to disney before this >> and we heard verizon talk about that we've talked to the providers as people just wait for the next upgrade. by the way, what would you do with the nasdaq here i mean, just to kind of bring this all back around as we watch the market regaining some of its footing this afternoon does that make sense to you? >> it does not make sense. remember there's going to be a big gap in time between the next time we actually hear something constructive, and if we do that's in september. between now and then i think there's going to be a lot of things like semiconductors i think of the three major industries, the s&p 500 probably looks the fairest of value and 58% of the company is in the

index right now have a yield that's higher than the 10 year that never happens >> thank you, everybody, for joining us on this one today morgan, dom, seema, appreciate it despite the negative yield on the german bund on every maturity, one strategist is staying bullish and remaining a buyer. his reasons why he would be buying that very product you see on your screen there are coming up but first stocks are preparing their losses today as china keeps the door open to those september trade lktas. one of trump's china advisers joins us to discuss that next.

funds are inexpensive. they spread other risk, but there's more to the story. >> yeah. they've obviously been growing but really i think what's more interesting is they've been evolving the first index mutual fund was launched in 1970s. huge innovation at the time, but that was 40 years ago. there's 40 years' worth of research that can be used to i think as updating your index, indexation 2.0 >> so why focus now? >> number one, it's the reality that returns for the next ten years are likely to be lower than what they were for the last ten years. number two, it's also concentration of risk that we see right now in the markets if you look at technology and financials as two sectors or the concentration you have in your top ten holdings >> so how should they evolve >> i see two parts one is that risk concentration we've seen risk present itself time and time again if you look at the tech crisis, the

financial crisis investors really should be diversified. secondly, it's around owning more attractive stocks when you own market cap, you own everything regardless of the characteristics. there's an opportunity to use value, quality, momentum to identify for attractive securities >> for more expert analysis, jp morgan involve it online welcome back stocks have been super concerned about the escalation in the china trade war. president trump addressing the situation earlier at the white house. >> our country is doing incredibly well. china is not doing well. if you look at their trade situation, china just admitted yesterday that they've been a

currency manipulator, first time they've ever been called out companies are moving out of china by the thousands and our country is doing very well we are going to see how it all works out. somebody had to do this with china because they were taking hundreds of billions of dollars a year out of the united states. >> is the china/u.s. trade deal possible joining me now is michael pillsbury, president trump's china adviser. welcome to you do you think the chinese are trying to push the market down so that they can get someone else in the oval office? >> no. i don't think so i think there's a lot of misunderstanding about china's strategy and president trump's strategy they actually understand each other pretty well. the chinese have shown admiration and respect for president trump in various ways. they are a little concerned having translate the art of the deal in beijing that he's going to get the best of them. and there is a good chance there will be an agreement long before the 2020 election. so i'm more on the bullish side

that this would be a buying opportunity when the market is low. i think the chinese/american understanding over the last year and a half or so has been very intense. these talks with 30 chinese flying here, our team flying over there, kelly, they produced 150-page secret agreement that nobody's seen. all anybody knows on the outside is how close everybody has come. and president trump has several times now said he greatly respects the chinese economy right now that clip you just played, of course has playing them down a little bit but what he's saying is if hillary clinton had won, china would surpass america while hillary was president. and that's not going to happen on his watch and some indicators, kelly, what they call purchase power parity if you're really a policy wonk china surpassed us three years ago. they're 21 trillion. we're 19 trillion in the

so-called ppp. that's a term to show off, you know, if you want to say you're a real economist, you know about ppp. [ laughter ] >> here's my real question, though so we talk about the main -- and secretary mnuchin said this as well he said we got 90% of the way there, but the last 10% is the hardest part because we're talking about potentially trying to change china's behavior as it regards state-owned enterprises, intellectual property and other really important issues. are you telling us you really think a deal that includes those terms and enforcement is still possible >> yes the chinese have been very, very specific that what they hate the most about the draft deal that they sort of reneged back in early may, they hate the part where it's legally binding, and there will be a system that they more or less agree to, and now they have backed out of perhaps out of gear. there will be a system to punish them if they're caught in violations for example, if a company, american company suffers theft of intellectual property or is

forced to transfer technology, they can report that now through a system the chinese agreed to with a body and then a final decision to put tariffs or other kinds of punishment on the chinese who did that this has never been done before by any country in the world. >> but if they hate that draft, why would they agree to? >> i think you know very well in bargaining sometimes the two sides can put pressure on each other, and finally the pain becomes unbearable president i think believes that even more pressure is going to be needed than what he's put on already. but we'll see in september >> tariff pressure >> theres a lot more things the president could do personally i think he's been very restrained in what he's done he was quite tolerant about some things in the negotiations i don't think he's a super hawk. president trump who i have obviously talked to, i think he has a vision of u.s./china relations improving and i a higher level of investment and

trade. but two things have to stop. one is the cheating. i think he has a sense -- it's in one of his books. he has a sense that china has cheated its way to the top they have more billionaires than we have now. so we got to end the cheating. the it may not be president xi who's behind it. >> he's been very careful to say china's doing this, but the implication is not, my friend, president xi so the other thing that's got to stop is this growth rate being three times or four times faster than us. so the president is trying to bring up america's growth rate like the tax cuts. but also he's got to make sure that china doesn't cheat its way to the top and surpass us. they have more billionaires. they have more manufacturing they're a highing trading company. so this has all got to stop. >> final question because i'm about to speak with a couple of market strategists who think that bond yields which are already low are going even lower and the risks are a global recession are very high. what would you say to them and to people that have that view?

>> that's excessive overreaction they are not understanding the degree of cooperation president xi and president trump have. these are two leaders who talk on the phone all the time. they meet in person. this is a over cheating that president xi himself has never said, you know, i want to be able to cheat as much as i want. if i want to steal intellectual property, i'll do it president xi has been remarkably restrained that's what leaves the opening to coming to a deal. the deal could be smaller than the president's comprehensive deal there could be a phase one, phase two, but i'm quite optimistic on these talks because they have done so well until may. >> michael pillsbury, thank you so much. appreciate your point of view. the dow is down only 70 points and a lot of that is disney. the nasdaq is positive by 17 the s&p is only down three and

bond yields around the world are hitting record lows. the ten year sitting just around that 1.6 handle. scott meinard is on the cnbc news line right now. 9:00 a.m., the going to 0, 2:00 p.m., going back to 2%, what do you think? >> give us some time, and it will probably visit both levels. >> right >> but i think, yeah, i was on last week or so and i was talking about the prospect that we're going to have negative yields and i do think that ultimately by the time we get to the extra session, you know, the 0 is definitely in the cards and probably negative yields just like what we're seeing in europe the other side of this is we have had quite a move here technically we're getting to an exhausted level. i could see the ten-year note getting down to 1.4% before we correct, but ultimately, i think we're going to have to back

rates up a bit, and have some consolidation, and also watch the economy. >> right >> what happened today that dependence. >> well, exactly i think data dependence went out the window i mean, i think that, you know, the federal reserve has shown us that they are on a path to do anything they have to do to try to keep the economy going. >> scott, you put out one of the best notes i have read on this lately where you said the main impediment to a growing economy right now is more labor supply that doesn't have anything to do with the federal reserve and you thought they should maybe hike rates into this. >> it's interesting. if you landed from mars, and you had no idea of anything else but our economic data, you would say you guys should be raising rates, but the bottom line here is that -- and we are hitting capacity constraints, but the federal reserve is so afraid of interest rates getting back to 0, and the united states ending

up in the same quagmire as europe and japan. >> but they are causing it scott. you tell me. you're the expert. japan and europe are causing negative rates because they are saying to their countries we will continue to buy bonds and maybe even equities at these levels if the u.s. goes the same way it's going to be their fault in everybody flips their debt to them. >> that's true, but kelly, unfortunately because on the fiscal side we're not doing the things we need to do. >> right. >> to create growth, the reality is that ultimately we are going to end up in a recession and given how low rates are, and the fact that the federal reserve is the only game in town, they are going to do whatever they have to including negative interest rates to keep us going. >> wouldn't it be better if people stood up, you're, and other market participants, others tell us rates are going

to zero because the central bank is the only game in town what if everybody said the central bank doesn't have to be the only game in town. >> i agree, kelly. i have been pretty vocal we should take out a full page ad in the "wall street journal" and find this thing because the real problem, if you look at japan, you look at europe, the source, the fundamental source of their problem is demographics they're working age population is shrinking the united states, our working age population is very very slowly growing and will eventually start to shrink the answer for all of the world is to get more people to work, and that means, you know, look, you could increase the birthrate, but, you know, that' going to take a long time to have an influence on the working age population, so immigration would be the smartest thing to do. >> i think you guys should do it, full page ad, we could use

income tax incentives to incentivize people having more kids they're doing it in hungary. >> i don't think we have 20 years to wait for them to get to work i think we're going to need something faster and, you know, this is a crisis. let's face it. you know, the rule book of how things are done and how they're analyzed, we can just throw out. i had a research meeting this morning with my economic team, and, you know, we were talking about things central banks could do, and one of the comments from one of the analysts was, well, if the ecb, you know, were to suddenly buy like $50 billion worth of gold to force their currency down, that would draw attention and it could be a problem, and i said it doesn't matter if it draws attention anymore. >> right >> everybody is just doing whatever they have to to survive, and, you know, i don't rule out anything at this point in terms of the craziness of

what we're going to go through. >> you can't and the central banks are telling us we shouldn't. scott, a pleasure, thank you very much. >> thank you, kelly. guggenheim's scott minerd. warning of the slide in bond yields for some time, he has a bold call for how to get defensive. joining me now is kumar, president of kumar global strategies i'm afraid to ask you wrung bond yields are headed next. >> good to be with you, kelly. this is a bullish day, you know my point on bonds and i think at 165 or 167, we are way too high on where the yields should be. i think the july 2016 low of 1.36%, 1.37, is going to be overshot by a big margin i'm in agreement with scott that the issue is more about how low the interest rates go, and the

craziness of the central banks and both the european central bank and the federal reserve are essentially slaves of the markets. you're not going to have any independent response from them >> it's really important that you said that right now. it's something steve liesman told us yesterday when we said, we had james bullard out with comments that weren't that.govithadovish, and he shrugged it off if i were a central banker, i would want to break that cycle of expectations and let the market know who's in charge. >> you're absolutely correct, kelly. you're spot on, but in order for you to do that, as the head of the central bank, you would have to allow rates to increase you would have to squash the speculative bubble, and cause a serious recession right now. are you prepared to do that both economically and politically

face the onslaught >> if we have the ten year go from 1.7%. let's say there's a taper tantrum repeat because the central bank says, no, no, no, we're not following you down, and the ten year goes from 1.7% to 3.2%, and we were there in september, and the u.s. economy was fine i don't know why that would throw anybody into a recession. >> here's the difference, if the fed were to say that, let's say they're going to quantitative tightening, or if they are going to increase the interest rates, the big difference i would have with the position you had is that the ten-year doesn't go from 165 to 3% the 165 goes down to near 50 basis points, it goes the wrong way. i have always explained that the ten-year yield is a product of inflationary expectation. >> i know what you're saying, but look at what happened last week the fed finally came out and cut rates without the data saying it

was necessary, other than the financial data they came out and cut rates. the 10-year-year-old didn't rally. the yield curve didn't steepen, it fl-- flattened. >> it took a bit of time for the bond market to react the bond market had to figure out, especially after thursday with the increase in u.s. tariffs with china with the response coming from china on monday that showed the bond market that the recession was getting very close. they realized the inflation pickup is not going to be increasing, so those two, kelly, are the major determinants of the ten-year bond yield. after the fed does what it wants to do, you have to look at impact on the real economy and inflation, and once again, even if the fed were not to ease and if they were to tighten, you're going to have the ten-year, and 30 year drop like a stone in terms of yield and that is not going to change because of what they have done so far. >> right >> the problem is a lack of

credibility. there was a quick pivot from december to january. >> yes, yes. >> by chairman powell for no reason at all, and we have continued now with frequent switches in policy >> sri, i'm sorry to jump in it's only because we are out of time >> let's go to "power lunch" thank you for joining me on the exchange. >> thank you very much and we'll see you over here at "power lunch" in a moment. i'm tyler mathisen, here's what's new at two, stocks have been rocked, up, down, down a little bit, not where they were. trying to make a major comeback as central banks around the world cut rates that has spooked stock investors. is there more pain ahead we'll discuss that. plus, global yields, they are sinking and sinking fast, why it could be a major warning sign for investors and the major inde