you stayed within your diversified portfolio, you're going to get more opportunities now. if you have cash on the side and you're really scared of equities, you're going to get bonds at 4%, 5%, you can do that as well, but i would not sell at this time. i mean, i think this is the wrong thing to do, and you should just prepare for more opportunities, and you can also then revisit your portfolio and look for opportunities at companies that are beaten up, so i think there's great opportunity. >> sarat, thank you very much. that does it for us this week. melissa, thanks for being here today. we'll see you back here next week right now, it's time for "squawk on the street. ♪ good friday morning, welcome to "squawk on the street," i'm carl quintanilla with morgan brennan and david faber. cramer is on assignment. the dow does look to take out the june low today as the selling pressure in europe is pronounced down about 2%. big swings in currencies the pound near $1.10 oil is just 50 cents from a 7 handle our road map begins with the fed fears fueling this flight to

treasuries the two-year hits a 15-year high, goldman takes a big cut to its s&p target >> plus the inflation impact on corporate results. fedex remains on watch costco, for its part, says it sees, "light at the end of the tunnel." >> and shares of retail brokerage robin hood moving lower, giving up all the gains following reports the s.e.c. would not ban payment for order flow ceo vlad tenev joins us to discuss that and much more in just a few minutes >> let's start with the markets under pressure this morning. we'll talk about swings in the curtain s&ps and the pound and liz truss's economic package but a lot of this got started with goldman cutting their year-end target, they're talking a lot about 15 times earnings, and it's that pe that's come down. b of a, again, echoing what they have said, that a 20th century multiple of about 15 makes more

sense than the 21st century of 18, so as they said again today, guys, nibble at 3,600, bite at 3,300, and gorge at 3,000. >> yeah. i mean, another 10% to 15% down, some of the people i'm speaking to sort of continue to see those who have been negative along the entire way, at least, that i have quoted many times, broadly speaking, those so-called hedge fund managers that didn't believe the significant rally we had in that july period. citing what they believe would be lower estimates and they come back and say, real rates, if you take a look at real rates and the correlation between real rates and the market and pes, you do get to a market that is still substantially lower than where we are right now though we do seem to be rapidly moving towards those targets >> rapidly moving towards those targets and to your appointment, historically speaking, if you look at bear markets and s&p valuation in previous bear markets, to your point, we have farther to fall in terms of valuations, 18 times is still looking pretty hefty in this marketplace. it's pretty incredible to see the moves we are seeing in both

bonds and currencies as peter at bleakly pointed out this morning, you're seeing developed markets where bonds and currencies are concerned, swing and move the way you would emerging markets and just this violent tremor that's sort of taking the world over as not only the fed aggressively continues to hike but also so many -- what is it, 17 other central banks this week alone? and then, of course, to your point, carl, the uk, a fiscal stimulus package that could possibly be more inflationary and is really adding to the fire this morning with so much of the pain readuating out of the uk. >> liz truss gambling on trickle down, cutting income taxes, the cap on banker comp, a lot of that's going to be financed by debt and that's why -- that explains what's happened with gilt today and even just yields across the continent german two year have risen 48

basis points this week >> that's incredible when you think about it, how long they had negative rates, and we sat here talking about negative rates trying to understand exactly what they meant and the idea that you could move up as much as half a percent in a week and obviously well in up to positive territory, we don't even talk about negative rents any longer. worth mentioning, foreign markets, fotse is down >> to your point, it was $18 trillion in negative yielding debt and bonds the world over at the end of 2020. we're now less than $2 trillion in negative. i mean, that's a huge move in, what, less than two years, to your point i would also just note, and you said this at the top of the hour, the dow right now, where futures are indicated, is poised to open below those june lows, s&p and nasdaq are also on watch. they have a little further to fall for us to see those levels achieved but there are economically

sensitive areas of the market that have already been flashing these warning signals that we were probably going to test lows look at the smh, semiconductors, very economically sensitive. they've closed below their june lows the transports, as well, have been flashing warning signs for a while which brings us to fedex too, which doubled down yesterday with a lot of analyst pushback, but doubled down on this idea that it is a macro-story that is affecting that company but we know there are very company-specific things as well. the fact that they're raising rates aggressively, shipping rates, starting next year, despite the fact that they do have loosening capacity is pretty eye-opening, carl >> yeah. i mean, keep waiting for amazon or u.p.s. or some other major freight companies to sort of ratify that view >> when fedex -- when one raises

the other typically raises the same amount. fedex is raising 6 .9%, it wouldn't be surprising to see u.p.s. implement a similar increase here's some sound from the new ceo. very frank about what caught fedex off guard. >> what we did not anticipate, to be perfectly honest with you, was the tremendous inflation of costs that hit us squarely last year, and that was what really got us and even with that, you know, we had tremendous results in fiscal year 22 from a eps perspective but we absorbed a lot of cost from the inflation side of the house, and then, of course, and now that we're dealing with this situation, we had to build capacity, and now we have more capacity than we need, so could we have timed that a little better i don't know how you could calculate it you can't build half a building,

can you? >> yeah. they're going to take out -- are looking to take out billions of dollars in costs from their network and their systems. bmo this morning said, "we sense that we may be in the initial stages of a cyclical downturn and we have limited confidence in the near-term earnings outlook," referring to fedex yeah, so, asia, u.s., europe, weakness really across the board, according to that company. >> you know, i talked to a couple of large shareholders who are obviously disappointed but they're also still questioning sort of management and some of the basics here. they wanted more detail on exactly how they missed, and the fact is that they didn't -- the lack of specificity that's been provided in terms of at least helping investors understand what it was that fedex missed in their business that allowed for this big miss gives them pause on whether they're going to be able to deliver on some of the cost-cutting that they're talking about. so, there's just -- there seems to be a lack of belief in their

ability to execute at this point. of course, we'll see whether they're able to overcome that. >> they've been having hiccups for a couple of years now, and it's interesting because it used to be a situation where the fedex stock chart was the outperformer versus u.p.s. that has reversed itself in the pandemic >> for a long time now >> that's right. and that continues to play out also noteworthy were the costco earnings, which were very different. we're seeing a lot of preannouncements, negative preannouncements, they're coming from industrial companies, chemical companies, materials companies. they're coming from ge and fedex and the like, the industrial part of the economy, but the consumer-facing part of the economy, at least here in the u.s., still seems to be pretty strong and resilient costco was trading lower this morning but they had 14% comps, right? and they grew revenue, i think, 17% for the quarter. >> some of the comp numbers we sort of know because of their monthly reporting, but they did have some encouraging, at least,

color on inflation, light at the end of the tunnel. our buyers are seeing a few examples are prices are coming down, starting to see things go in the right direction again it's fascinating because the underperformers of the last couple days, macao gaming, online travel, airlines, lodging, maybe there's worries about even that shift in danger now. and by the way, oil below $80 today for the first time since january. >> and i will say, anecdotally, i am starting to pick up the plans for more layoffs in many companies. we'll see how much they follow through on, but the preparation for cutting costs in anticipation of weakness, sort of can have a self-fulfilling effect as well and there are many companies, at least based on my understanding, they're coming >> coming up after the break, an exclusive with robin hood's vlad tenev

santoli points out, four of the last fridays have been down. and we'll see if this one's any different. back in a minute power e*trade's easy-to-use tools like dynamic charting and risk-reward analysis help make trading feel effortless and its customizable scans with social sentiment help you find and unlock opportunities in the market with powerful, easy-to-use tools power e*trade makes complex trading easier react to fast-moving markets with dynamic charting and a futures ladder that lets you place, flatten, or reverse orders

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robin hood rolling out a new benefit that will earn its top-tier members 3% interest on their accounts, at least the cash they have in their accounts joining us exclusively to discuss that, and reports that the s.e.c. will not ban payment for order flow, is robin hood markets cofounder and ceo, vlad

tenev. good to have you with us this morning. i do want to hear your thoughts or get some more details on this 3%, but i'd love to come to this news, at least, that has not been yet shared by the s.e.c., but has been reported by a number of news organizations, that the s.e.c. will not move to pan payment for order flow do you have anything to share on that in terms of your understanding as to whether the s.e.c. has reached that conclusion and/or what it might mean for your business >> great to be here. no, we don't obviously, nothing definitive has been released. we're on the lookout with everyone, but i do think that it's great news for our customers, payment for order flow and the business model that we've introduced has really helped establish commission-free trading as the standard, and customers have never had it better for their investments but what i'm here to talk about, as you mentioned at the beginning of the segment, is we're rolling out a 3% interest

rate on cash for robin hood gold customers. as you guys know, that's a very high rate, and especially in times like these where inflation is high and interest rates are increasing as well, banks are paying almost nothing on customer cash, so the 3% is 23 times what you would get from a typical bank, and we're excited to offer that to robin hood gold members. >> you've learned well in a short time how to pivot to what you wanted to talk about, but let's come back to what i wanted to talk about and then we'll talk more about the 3% you don't have any understanding in terms of what the s.e.c. may or may not propose, whether there is no ban but perhaps there's going to be still, you know, a bit more that's asked of you in terms of this, that could crimp margins? just anything you might be able to share would be helpful. >> i mean, as we mentioned

before, payment for order flow, i think, from a business standpoint on equities was around 9% of our revenue, and you've seen robin hood continue to diversify and offer more products that offer differentiated value for customers, so not just, you know, the high interest rate on cash that we're rolling out for gold members today, but things like stock lending that allow customers to earn yield on stocks that they're holding in their accounts, so we're continuing, especially in this environment, to diversify our business, diversify our product offerings, to make sure customers can generate income and generate passive income even when they're not trading >> all right, before i hand it over to morgan and carl, i will come back and say, how are you getting to this 3% give us the mechanics behind it, why you are able to offer a rate that obviously is far in excess of what anybody's going to get in their checking account or

savings account. >> yeah, and we're really excited about that so, in particular, what you're seeing now is a lot of the major banks in the u.s., as rates are increasing, as the fed is increasing the funds rate, they keep the rates they pass off to customers at close to zero, and they're viewing this as an opportunity to increase their margins at a time when customers are feeling the pain at the pump and at the grocery store the most so, what we actually do with this cash suite product is we sweep it to a network of banks, so not only are customers getting the high interest on their cash with no cap, but they're also getting $1.5 million in fdic insurance, which is five times what you would get from a typical bank, and that's because we actually can sweep it to multiple banks and provide you even more protection so, it's really a fantastic

product, and it helps people generate passive income, even when they're not investing >> vlad, the fact that we're having this conversation about a product offering around cash, how does it speak to the activity you're seeing across your platform with your users, your customers, so many of which are retail investors who are millennial, are gen z, have not necessarily seen the types of wild moves to the downside we're seeing in the market right now >> yeah, it's a learning experience for our customers, for everyone i mean, nobody could have expected the fed's moves over the past two years, let's say, with the rapid lowering of interest rates at the start of the pandemic, and then kind of the rapid increase last year but from the very beginning, robin hood has been focused on not just providing tools for people to invest and trade but also we've been excited about

this idea of taking interest, which historically has been available -- high interest is available to institutions, high net worth individuals, and passing it down to everyone, making everyone benefit from that, and that's really what robin hood is about is -- it's not just investing and trading, but it's really about taking these great tools of economic opportunity and offering them not just to -- not just to the wealthy but to everyone. >> yeah. but where are people actually -- what are the trends you're seeing where are those opportunities actually manifesting right tnow? you added more to your cryptocurrency offerings with stable coin. we're talking about the interest on cash today. i mean, there's fractional trading. where are you seeing folks spend most of their time and attention and efforts on your platform >> yeah, i mean, we've got over 23 million customers, so there's a wide disparity of different

things that people like to do on robin hood so, we've got customers that are first-time investors, and they're looking to build portfolios, and you know, even in this time, when interest in the stock market is a little bit lower because people have other concerns, we've got people coming and doing that. we have more active customers who are more sophisticated, and they're benefitting from the low cost structure in our crypto and options offerings as well as equities and then, we have customers that are using our newly released cash card product, which allows them to direct deposit their paychecks, auto-invest their paycheck and earn rewards on swipes, so alongside the very competitive 3% interest rate for gold members, we're offering customers a suite of experiences and services that put more money in their pockets, regardless of

what they'd like to do >> so, vlad, i don't think we've had you on since reports surfaced over the summer about takeover chatter i mean, your stock's down 90% from the intraday high last summer after you went public is m&a on the table for you? >> well, we feel very confident in our position. we've done a lot to both grow our product suite and control our costs, and we've got about $6 billion on our balance sheet, so we're actually looking to do acquisitions of our own in this environment. we think there's an opportunity to use our capital strategically and grow the business, but we feel very confident in our position as a company that's stand alone, independent and public >> yeah. and you have a controlled position in terms of the vote anyway vlad, you know, you mentioned cutting costs. obviously, you've reduced head count. i think you also have said you're looking at things like

spending on software and cloud hosting. given what we're seeing in the economy right now, is it enough? do you feel like you're positioned well enough in terms of the cost cuts you've already outlined or is there going to be more to come >> we do, and i'm really proud of the way the team has put together to just look at everything from our head count to our expenditure on technology and software and we've really done tremendous work, and i challenge the team a couple of quarters ago to work to get to adjusted ebitda profitability by the end of the year, and the quarter-on-quarter trends, we're making great progress, and we really love the position that we're in, and despite doing all this, we've continued to invest and innovate on behalf of customers, giving them great products like robin hood gold, and then continuing to give them

more things to benefit, even in this difficult environment that we find ourselves navigating >> yeah, and again, back to sort of morgan's question, this difficult environment that you find yourself navigating, and that many of your users find themselves navigating, i mean, what are your expectations for use of the platform? how that's going to change how your client base is going to be impacted by, frankly, losing potentially a lot of money as many who own equities are doing right now? >> well, i think that's one of the things that we do see as an opportunity with rolling out this new 3% interest rate on gold is that, i mean, as you mentioned, it's a very high rate it's one that -- i don't know if i've seen anyone offering that at this point. and i think it's just economically rational for them to put their money in robin hood, their cash in robin hood, even if, you know, even while they're not investing.

even as they're not ready to start investing yet. so, i think that, you know, times change the economy is of course been fluctuating so much, even over the past few years with the moves of the fed, but over the long run, the u.s. markets have been a fantastic source of wealth creation, so i think it's about building products and services that customers can use in every market environment to solve their main financial pain points >> yeah. vlad, back to the 3%, just, explain. are you taking their money and putting it in banks that are offering a high yield? how are you generating that 3% obviously, protecting yourself from any potential losses. >> yeah. that's right so, we -- under the hood, it's a cash sweep program, so we have a network of banks that we sweep the funds to those banks are paying the interest, and we pass that through to customers, and robin

hood gold customers are getting the 3% rate, but all robin hood customers are actually getting a competitive rate, so if you're nongold, you still qualify for a 1.5% rate. and as i mentioned earlier, i think it's actually a better product because you get $1.5 million in fdic insurance because your money can be swept to five banks and so you're not only getting the high rate as a customer, but you're getting really fantastic protection on your assets. >> so, vlad, when you think about timing, when do we start to see maus, equity, option, crypto volumes go positive year on year? >> i think over the long run, as we add more products and services and improve the core of the offering, you should see those continue to increase, and over a long time horizon,

obviously, robin hood has driven great growth in users and in maus as well year over year, especially when you're comparing 2021, which is kind of a unique market environment, with 2022, it gets a little bit harder to predict, but everything that robin hood does is for the long-term, and we're making investments for customers and for the business to be successful over a long period of time >> all right and we'll be checking in with you during that period as well, but appreciate today vlad, thank you. >> thank you guys. take a look at futures here, going to be a weak open. oil, $79.79 and just about fewer than 200 points separate the dow from its june low. back in a moment

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costco's moving lower in the premarket like much of the tape despite this quarterly beat and the beat on the top of the bottom line. operating margins slightly below

consensus, impacted by higher costs. some of the upside metrics, membership renewals approaching 91% around the world and that's the trend there is near some new highs. >> even as we have seen, and i say this as a costco member, i have seen those prices rise over the last couple years. the fact that they've held steady on the membership prices themselves speaks to the stickiness of that and in an inflationary environment where costco still -- you're talking about bulk buying still attractive, perhaps more attractive to customers right now. similar conversation, i think, that's been had at walmart and the likes there. >> yeah. walmart, who has been pretty vocal, david, about the impact of higher prices forcing some consumers to make tough choices, and definitely being cautious on seasonal hiring. >> yeah, much more so, as we pointed out, than target, which plans to hire 100 how to workers. walmart coming in at roughly half of that as we enter, really, the holiday season beginning very soon. in fact, some of the discounting already beginning.

>> yeah. and i don't believe fedex put a number to their hiring for the season either. the capacity is there. >> let's get to the opening bell here and the cnbc realtime exchange at the big board, it is the nelson mandela foundation, and at the nasdaq, brenmiller energy speaking of energy, it's going to be awfully hard to take your eye on off crude oil today, below $79.50 now a lot of that is going to be tied to global recession fears but also the dollar index close to 1.12 as we're watching these currencies outside the world get beat up. >> strong pressure on commodities and recession fears are affecting crude. copper as well you have had gold under pressure, which is interesting because you would think that potentially this would be an inflation hedge, a geopolitical hedge, even everything we're seeing the world over, david

>> i know gold is down 9%. the gld is down 9% for the year as you point out unex unexpected in many ways given what morgan has said typically viewed as an inflation hedge. you would expect it to have a good year. that is not the case you can look at the gdx as well, the gold miner index, which also has been hit and underperforming certainly what many might have anticipated, carl, in terms of the year like we have had so far. >> yeah. that's a new low or the june low for the dow, i should say prior on june 17 low was 29888 s&p needed about 91 points for the june low we're about halfway there. obviously, breadth is pretty pitiful. morgan, you can't get the vicks above 30 to save your life it's fascinating, right? >> it's fascinating. to go back to equities right now, energy is leading the

charge down. all the sectors in the s&p are in the red right now and just keeping an eye on the nasdaq too, just because we've seen a lot of pain over this year for the tech-heavy nasdaq and i think there's an expectation especially -- and i know we're going to have this conversation later in the hour, where a name like apple is concerned and whether the valuations of some of these heavy hitters that continue to be outsized in the market more broadly need to come down too. as we see treasury rates move higher >> yeah, apple's going to be one to watch i mean, ordinarily, we might, david, be talking about apple music becoming the new sponsor of the super bowl halftime show, replacing pepsi. going to be hard to find room for that today >> i think you just did. >> yeah. you know, it's interesting, that amazon and the nfl sort of comes to mind as well. just when we think about some of the power of these companies and the areas that they've moved into of late that had not

typically been the case, as you see there. carl just told you, of course, apple music, an important component of their overall streaming strategy and subscriber base strategies multiple on which you get a higher -- revenues on which you get a higher multiple, i should say, but apple shares also down about 1.2% right now still, well better than the broader s&p, with apple down about 15%, morgan, with the s&p now down 22% year to date and the nasdaq back down at that more than 30% level, down for the year so, very much approaching some of the june lows that there had been hope that we would never see again, given the strength of that rally but there was that course out there saying, we still have not seen the impact of the feds' moves and then really since jackson hole, it's been not a lot of good days here, at least

if you're long the market. given how stronglymr. powell has talked about attacking inflation and making it very clear that that was what he was focused on >> yeah. and steve liesman reported on this earlier this week as well, right? it's not once, it's not twice, it's three times now, essentially, that fed has very explicitly said, we're going to go the course here with inflation and, you know, at least suggesting to the market or strongly suggesting to the market that the fed is not going to blink the market seems to be getting its head around that the two-year yield here in the u.s. really seems to be the key metric to watch right now where equities are concerned, and just where everything is concerned. and certainly, the moves there have been just incredible, even just this morning, in premarket, the moves higher we were seeing and not just in the two year but also the ten year and the yield curve in general, you started to see this inverted yield curve but the longer duration treasury notes, we've seen those yields

start to increase pretty meaningfully this week too >> two year got to four too earlier this morning, settling back just a little bit the b of a sees 4.4 by tend of the year the market is listening, but they're not in sync with what the nfed is telling you is comig so that's led some to believe when the fed-speak resumes, there's going to be more jawboning, like, we are serious, we're not joking around. li liz ann saunders had a great metric this morning, looking at the simplicity of the language in the fed statement it's gotten simpler and simpler over time. you need less of an education to understand what the fed chair is saying >> we are moving rates higher because we do not want inflation to be where it is. but again, where we end up, the terminal rate and how long we stay there, continues to be one of the key questions in the marketplace. and to look at that two year, the parabolic movement is not captured by a one year

when you look over time, you get a sense for how dramatic this has been look at the spread there between the two and the ten, which often does point to the possibility. there it is. >> yeah. >> wow >> there it is the bond market's telling you a recession's coming, right? we've talked about this in previous years, when you have an inversion of the yield curve like that, the bond market is saying, there's a recession coming you could argue we're already in a recession. >> same with lei when you get six months of declining l.e.i., very rare to see that outside of a recession. yesterday, jpmorgan started to look the a banks that are turning more dovish around the world. norway was one example, and then brazil held policy steady against our expectation for a final hike we think the next move is a 25-basis point cut by june in brazil so, as this is -- >> brazil's rates are -- >> banks are going to respond. >> yeah. speaking of banks, guys, i did

want to come back to one particular name that we haven't focused on that much, but it's one for those of us who have been reporting on investment banking for many years remember the storied name, first boston, building the m&a business there the acquisition of dlj along the way. credit suisse. we've talked about it here and there, of course, the blow-up was something we focused on for some time, the losses that credit suisse accrued as a result of that a number of other significant missteps the bank is undergoing a significant strategic review right now that is very likely to result in significant changes to the way it goes about doing business, particularly here in the u.s. and i wanted to come back to that in a moment, but there have been a number of stories as well that indicate that credit suisse is looking to raise more capital. the stock may be down in part, certainly, because of overall weakness in the worldwide economy. we've seen what's been going on in the european markets, but it

may also be down in part because of this idea that they're out there looking for capital. people close to the situation, close to the board, indicate to me that there is no capital raising process ongoing at credit suisse at this point. nothing that has been board authorized in any way for that they have about $80 billion in capital. they're fully in compliance with all their capital ratios you may see when this strategic plan is fully unveiled, which will be either prior to or on october 27th that's when the company will release its next earnings report you know, you may see, and it's already been reported, for example, the sale of securitized products that actually will be a capital releasing event, in other words, you sell a business like that, the capital will sell against it, can be released. it's seen as a benefit the bigger question for most of us, those of us that know credit suisse, certainly have been

asking, what's going to happen to the u.s. here you're talking about a company that has a $13 billion overall market value that's what they spent to buy dlj. but you're still talking about a trillion dollar swiss bank, a wealth management business with $650 billion in assets but the question is, how do you continue to operate sort of some of these businesses that require you to pay a lot of people to call on the top 200 clients in the world? it's very costly to be in the business, and the capital needed to compete against the likes of morgan stanley and goldman-sachs, well, simply not there at this point. and so there is a widespread belief that whatever they come up with is going to include significant reductions here in the u.s. in terms of their overall business what that's going to look like, we'll have to wait and see you're talking about a company with $23 billion overall in revenues, 55,000 people, but trying to have four businesses given the current capital, given the market cap, given the cost needs, it's simply not doable. you know, credit suisse right

now, business is sort of similar in size to jeffries, not to goldman-sachs. and so, we'll see what they come up with. but i did want to point that out, because there are going to be a lot of rumors between now and when we actually see the plan unveiled, and certainly one would expect that it is going to involve a significant reduction in a storied firm with a storied franchise that included many, many very talented people, and still has quite a few. so, we'll keep a close eye on that in the next month ahead, but did want to get out there. in terms of that capital raising right now, sources i'm speaking to, who i believe absolutely know what they're talking about, what the plan is saying, no, absolutely not, nothing planned at this point. >> when i hear you talk about significant reduction, i mean, the read through there is significant reduction in jobs. >> yes >> stateside as well >> yes >> that's actually the conversation from earlier. >> and the talent pool overall you can't maintain the kind of franchise that they're talking about, given the constraints

that they're under particularly in a period like this as well so, there's a lot of discussion about the talent pool, what they would need to keep in terms of helping to support as well, the wealth management business, because there are certain functions in the investment bank that are needed and helpful to a certain extent, trading support. we'll see what they end up with. i don't want to speculate on that at this point, but it will most likely be headline-producing when they finally get there. for a company that has had -- it's just -- it's rarely missed an opportunity to miss an opportunity. that's certainly been the case all right. we're going to keep a close eye on these markets right now with the s&p down some 1.4% i want to remind you as well, cnbc's delivering alpha returns in-person. that's going to be next wednesday. jim cramer and i will be there we're going to hear what the world's top investors have to say about navigating this market right now. if you want to register, just scan that qr code, and you will

have done it before we head to break, we've talked a lot about bonds, certainly worth taking another look, though, at how treasuries are faring this morning. you saw that parabolic movement, two-year, there it is, 4.152% and as carl said, some calls for it to be as high as 4.4% before the end of this year we're back after this.

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♪ welcome back to "squawk on the street," rick santelli here live at cme hq on a wild market day with breaking news s&p global, pmi's the manufacturing pmi coming off the worst levels since july of 2020. well, it rebounded but only slightly, 51.8 and that's facing in the rear view mirror the 51.5 i alluded to they will change if we look at the services side, 43.7 was the weakest since may of 2020. that improved to 49.2 and if we

look at the composite, 44.6 in the rear view mirror, rebounding to 49.3. so, one out of three is an expansion territory. obviously, services, the bigger swath of the economy, and the composite are not, so there's plenty of room for improvement on a day where the global reset is of giant proportions. tu aer see wl strt"il rernft ahort break (vo) at viking, we are proud to have been named the world's number one for both rivers and oceans by travel and leisure, as well as condé nast traveler. but it is now time for us to work even harder, searching for meaningful experiences and new adventures for you to embark upon. they say when you reach the top, there's only one way to go. we say, that way is onwards. viking. exploring the world in comfort. this thing, it's making me get an ice bath again. what do you mean?

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through project up, comcast is committing $1b to open doors for the next generation so they can build a future of unlimited possibilities. apple trading lower this morning, giving back a lot of those gains. two of its new products are launching today, the new apple watch and airpods. tomforte is joining us to talk about how the stock might act in a tougher tape is it your sense it's going to be a general or a source of funds? >> i definitely think it's going to be a general. the good news for apple is that to date, consumers have shown a willingness to have some of their discretionary income go to apple's products i also think the good news is for the iphone 14, there are limited in their ability to get 13 in the hands of consumers, persistent supply chain challenges to the extent you see

improvement there, the iphone 14 should outperform the 13 >> you think they're pricing for a troubled consumer? >> yes so, i think they are -- at the same time, they're doing it kind of in an apple way, which is, think of all the things they're doing to enable a consumer to spread the apple you know, essentially engaging in their version of buy now, pay later. they have the goldman sachs credit card that allows you to spread payments over time to the higher priced apple items. ultimately they'll mirror what the cable companies did, which is charge you a bundle monthly rate for hardware and services, and that will enable them to sell the iphone for $2,000 not $1,000 >> tom, does the valuation of apple need to come down here >> i don't think so. to the extent one of the reasons the stock has done so well for the extended period of time is they continue to generate a ton of free cash flow and use a lot of the free cash flow to buy back shares.

i think you'll continue to see support for the stock. and again to the extent some of their higher margin services efforts continue to do well, i think that could sustain the multiple >> i'm going to channel carl here you got apple sponsoring super bowl halftime show starting in february, taking the mantel from pepsi, pepsico how big of a deal, how big of a coup is that for apple how could that potentially translate into more sales or more business for them >> it is a coup. i am nervous i've done a lot of research on why i think amazon is spending $1 billion for "thursday night football" is a money loser i do think this is a signature day for apple with the yankees playing tonight on apple and potentially judge hitting his historic home run. it's good for apple to sponsor the super bowl, but i hope they don't get crazy and get nfl sunday ticket and follow amazon down the challenges there. >> yeah. that was the first thing i

thought of when i saw the sponsorship news although, tom, amazon's ratings, 13 million viewers, is up 47% from what the nfl used to do on week two >> 13 million viewers, carl, the way i'm thinking of it, if there's 200 million watching prime video, 6.5% penetration rate, 3.9% aren't watching it and the 93.5 may not like spending $20 a year more for prime, so i am concerned. >> yeah, it's interesting, though, because the nfl built the fox network, for example i mean, aren't there other benefits that are, perhaps, harder to quantify for amazon that shouldn't give you as much concern in terms of what they're spending, or what apple may be spending in terms of sponsoring the super bowl halftime show >> there are definitely benefits i think if you want to be optimistic for amazon, you could say it's going to advance their advertising business

most of the advertising revenue to date is energizer, so to the extent this expands their video advertising t could be good. i think this is a big night for apple sports and we'll see how it does as far as advancing their services effort, which is higher margin and helps. >> it will be fascinating to watch, tom interesting name, obviously, in this environment thank you so much. >> thank you dow's now looking at the lowest levels since november 2020 let's get to bob pisani. >> good morning. what i'm watching is 3666. that was the old june 16th low and we're maybe 30 points away from that. dow's, already, of course broken below that i think energy is really significant. brent -- excuse me, west texas crude, 78.87 it's been dropping all morning here we have to go back to january, even before that, to get lows like that. you see the energy sector getting clobbered. metals and mining are also weak.

these are proxies for global growth in general. you see health care, consumer staples holding up tech down 1.3% that's about 1% -- that's about 1% from a new low there. transports have already broken through the new lows speaking of new lows, i want to show you how we opened on the market today a 10 to 1 declining advancing stocks that's very unusual. you put together a couple of those 10 to 1 declining advancing days often signals some short-term bottom 565 new lows i saw at the open that's about 25% of the new york stock exchange listed. that's a pretty high number. a similar number for nasdaq as well i want to emphasize, commodity names, energy and metals and mining and this is true over in london with glencore, rio tinto. proxies for global growth. uk stocks down about 4%. that fiscal stimulus program over there not being greeted

with open arms it's the biggest tax cut in half a century. they'll pay for it by substantially raising the debt levels the market has reacted in a way that indicates they are not happy with the inflationary potential aspects of this. so, this is sort of the end of an era fiscal stimulus program being greeted very negatively by the market because it's perceived to be inflationary. there's the ewu, that's what you want to watch, that is the uk stocks that's the etf for uk stocks you see that sitting very close to two-year lows that's a new 52-week low right there. the problem we're dealing with, and we talked about this all week, and talked about it yesterday particularly here is the market doesn't know how to price stocks right now because it's a very, very wide range of potential outcomes the two things i keep emphasizing matter is what's the earnings and what's the multiple nobody knows what the right earnings or multiple should be we're expecting 2023 earnings to be up 8% is that right? a lot of people don't believe it should it be flat or down 20%, which is exactly what you get when you have a very serious recession. that's a very wide range of

outcomes for the earnings multiple, we're at 21 in january we were at 16 in june. what's it ripe for now historically 15 to 17. in a recession it can go 13 to 15 good heavens, what's the right number, 13, 15, 17, 18, 19 nobody knows david costen at golden, very good market observer, real professional, acknowledged that today. he came out and said the outlook was unusually murky. he was talking about inflation, earnings and valuation he had 3600 and lowered the price target here's exactly the problem he had 18 times multiple for the s&p 500. now he lowered it to 15. why did he do that the reason you take a multiple down is when growth contracts, earnings contracts or inflation yields which compete for stocks, make stocks less attractive and kostin said just that, real yields are notably up and that

makes the stock market notably less attractive on a relative valuation basis. back to you. there is no alternative. there is an alternative. >> bob, thanks when we come back today, more reaction to the selloff we are below 3700 on the s&p dollar index, 1.12 oil below 79 all dow stocks are red

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good friday morning. welcome to another hour of "squawk on the street" live at post 9 of the new york stock exchange stocks definitely taking the hard landing view up a notch dow's down 400 as we got big selling in europe, lost 3700 on the s&p and the june low on the dow. >> 30 minutes into the trading session. here are three things we're watching there are a lot of movers but we'll start with these fedex, shares moving lower after reporting results. the company announcing a 6.9% increase in shipping rates shares plunging 21% last week, last friday when the ceo said he was predicting a goebl

recession. we'll have more on that later this hour. boeing also lower after agreeing to pay $200 million in an s.e.c. settlement that says the company made misleading claims about the safety risks of its 737 max jet after two of those jets were involved in fatal crashes. all of the aerospace and defense names after a pop midweek are lower today. finally, costco in the red as well a beat on the top and bottom lines being overshadowed by operating margins that were slightly below estimates those shares are down 2% right now. we will start with the broader market all of the major averages are under significant pressure we got the s&p down some 1.75% we're right near the june lows on the s&p, the nasdaq this morning goldman says more pain is coming, cutting into its year-end s&p target by some 16%. let's bring in cnbc senior markets commentator mike santoli and get his take on it all let's just start there what are you thinking?

>> well, the goldman sachs move is kind of instructive because he's essentially running the current level of bond yields, interest rates and the outlook for yields through the valuation model. he's sort of marking the target to market in an interesting way. i think valuation is where most of the work is kind of already occurred in the market we talk about 16 times forward for the s&p. you take out the biggest five stocks, it's closer to under 15, i think. so, it's really about what do you think is going to happen to earnings more broadly, what's going on right now, globally yields rushing higher, currencies with these high velocity moves, all of these assets moving so far out of the range they've been in for a decade or more that's what has people unsettled. it isn't just about where's the absolute level of rates. it's how fast they got there, what does it mean about where they're headed and the damage done along the way and i think it just saps any interest in wading in, getting in the middle of it, betting

we're coming to a culmination point. the stock market, i think we're back to the moment s it as bad as it's good like in june the oversold technicals are so bad it's good. so many stocks down below whatever moving average you want to use that all of a sudden it's going to bounce because it always bounces that's a tough spot to be in in late september and given the other conditions but i think that's where we are again. that's how we retest the curve because with we think the old low is not going to hold because we want to see how the old hold looks. >> you mentioned september we have to factor in there's seasonality. it's a terrible time of the year in general for markets some folks that remain bullish are at least hopeful in this market environment have point to the midterm elections coming up, too. is there really stock to be had in stock around the historical moves you've seen there, given we are in a bear market and we've been seeing a bounce >> i think you absolutely have

to respect the fact that it's one of the stronger six months in the entire cycle, but it doesn't start until november 1st, let's say and what can happen along the way from here to there that's just, to me, broad pattern guidelines you keep in mind as you look at the here and now with trying to essentially filter everything going on when the risk free rate is going up this fast, when it seems like policymakers want to get to a certain aggressive destination and don't care what they hurt along the way. you have to kind of sit back and say, we have to watch that play out for a little while now, come november 1st, if we're at this level, the s&p 500 will have gone nowhere in two years that's good. right now the two-year return on the s&p is closer to 9%. and it's better when i think you've had a much longer term reset and that means forward returns would tend to be better. if you're starting a portfolio from zero today and you say relatively safe bonds, i can

lock them in at 4%, 5%, if i'm going to hold to maturity and not worry about how much they lose along the way and you're buying the stock market at 15 times earnings or maybe more because earnings are going to go down, that's not the worst starting point most people didn't start here. most people are sitting on 20 plus percent losses on both sleeves of that asset allocation. >> energy below oil coming down. certainly going to take out the argument that there's upside danger to cpi in the coming months. >> it should and i think you want to see if that has an impact on bond yields i mean, are bonds going to respond to anything aside from the fed wants pain and i think they will at some point. the two-year note yield in an hour this morning went from 4.25 down to 4.14 on the one hand that suggests we're getting stretch to the upside on yield. on the other hand, it's not comfortable when u.s. short-term treasuries trade in that kind of band, in a short period of time.

>> you mean it's not normal? no i'm being facetious. mike santoli, thank you. for more let's bring in schwab asset manager omar the moves we have been seeing in the bond market as well as the currency market and now subsequently in the equity market, your take on where we are here and how much further we potentially have to fall in something like the s&p >> well, so, it's nothing but moving targets right now the fed surprised by being even more hawkish than they have been that raises the two-year yield that raises the real ten-year yield. to me, that two-year and that real ten-year are the primary drivers for this particular cycle. they're not always drivers for other cycles but in this case they are if you do a simple regression of the forward pe against those two variables, you find that it has

been a moving target in june the fair value for the s&p was 15 times forward earnings we got there then we rallied 17%. completely unjustified by the fundamentals now we're back down there, but now that forward pe, that spare value, is down to 14 or even 13 times. that brings you down to 3300 or so on the s&p. so we're probably not out of the woods. it will be interesting to see technically speaking if we do undercut that old low, whether we start seeing some juicy bullish divergences in some of the breadth and momentum indicators we're not there yet. so, that's a moving target that's assuming that the forward earnings estimate, which is $235 for the next 12 months, ends up holding. so if we end up getting flat earnings instead of 10% earnings, then you apply that 14 times or 15 times times 219. that gets you down towards the 3100 or so my sense is this decline is not

over it won't be over until the fed cycle finishes at that point we'll see whether there's a soft landing or a hard landing. >> i pressure that off-the-cuff math right there and it's sobering, this conversation we're having. omar, do you agree with those comments do you think there's more pain to be had here >> well, it's kind of an interesting question because when you look at the observations, we're back to june you think about where we are in terms of the technicals, in terms of forward earnings, multiples and you think about the overall structure of the equity market. you know, we feel like we just basically went back to where those numbers. the biggest difference is that we have over 17 global central banks that have actually raised rates just over the last week. what that means, including the fed, is that everybody is rushing to try to get these monetary policies so tight that it's actually making the outcomes to just be much, much

uncertain. on the one hand, you know, we all know that monetary policy takes a while to get into the real economy so, every single thing and every single move that the fed has done and will continue to do will take a while to just see what the effect is in the economy. and i think the biggest challenge today is for investors to try to understand, you know, how much of this lagging component will be reflected into earnings going forward everybody knows it has to come down everybody knows that these earnings estimates need to be adjusted but at the same time, you know, they're trying to realize that whether or not the economy is strong enough to actually provide that support so, the range of outcomes we can have from here on is as uncertain as it was back in june we can actually have a very clear support with the labor market, the housing market staying not too bad. on the other hand, we can actually see those effects of the economy to just take us to a lower level.

>> lower level being what? that's what everybody's trying to figure out here, omar, in terms of what that number would actually look like based on the factors you just outlined. >> well, you know, the biggest part of trying to find a multiple or trying to find a level is just related to relative to other asset classes. the biggest part in here, david, is really just realizing that there is positive things in the market there is the credit market is pretty strong. the commodity prices are coming down that is balancing out that potential. so, we will have a range we always encourage our investors not necessarily to be focusing on what is the short-term potential fluctuations but really just take a look at what is ahead and how this fits into their overall structure. if you look just -- you close your eyes and you look at the credit market and you look at where high-yield returns have been, you actually would never think we're in a situation like where we are in equities or just

in general, even in treasuries it is uncertain to try to pinpoint a number to try to understand, you know, how we're going to go from here other than, say, there is more uncertainty. clearly every investor that is out there is trying to understand how these high levels of inflation affect their overall portfolio. the job of an asset allocator is more difficult because it makes it difficult for investing >>. >> i would just add to that that you don't even need a recession or widening credit spreads or falling earnings estimates even at the current estimates which are 10% plus growth in 2022 just that reset brings you down to new lows. a contractions earnings on top of that would be icing on the cake but in a bad way. but even a soft landing approach suggests to me that the way the two-year yield is trading that we're not quite out of the woods

yet. we're not far but we're not there yet. >> all right thank you for joining us with the s&p at 3697, moving closer and closer to those june lows. as we head to a quick break, here's a look at our road map, including the outlook for defense stocks we'll sit down with former secretary of defense mark esper as we get news out of raytheon. weighing in on reports the s.e.c. won't ban payment for order flow we'll bring you the highlights. as interest rates continue to soar, manhattan's luxury real estate market, well, it's bracing for a fall we'll be live from america's most expensive listing, towering quk t see ijupark "sawonhetrt"s st getting started.

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we're on the lookout with everyone, but i do think it's great news for our customer. payment order flow and the business model we've introduced has really helped establish commission-free trading as the standard and customers have never had it better for their investments >> that's vlad tenev, robinhood reacting to the news reports the s.e.c. will not ban payment for order flow he was on to taut their new 3% rate for banks that pay a high right to allow some of their customers to get that rate

still talking, i think, 9% of their business is the payment forward order flows is the number he used obviously important for them to maintain their ability not to charge customers to do trades. >> to your point, didn't necessarily say a whole lot but this moved the stock yesterday not just this stock. it's down 4% today it's down 90% from the intraday high when it went public last summer it was another thing we talked to vlad about, this idea of takeover targets, which there have been reports of ftx looking at robinhood over the summer we haven't had him on since then and we asked him about that. he said they were looking at potential acquisitions themselves, they were open to making some deals on that front. so, i thought that was kind of interesting, given just how bludgeoned some of these names have been. >> trying to get him pinned down on when volumes might go positive year on year. this summer, equity volume down

33, crypto down 53 most he would say is in the long run, things like that new product hopefully get people back. >> yeah. or at least make them feel better about waiting for a market to turn if, in fact, you're looking for the market to go higher. of course, if you're looking for that, don't look at your screen today. as we head to break, we're keeping an eye on all the markets which are down sharply the nasdaq, as you see, the worst performer so far in the session. 1.92% is the loss. back after this.

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welcome back to "squawk on the street." take a look at defense stocks for the week everything is in the red right now, but hanging onto games. two names, lockheed and northrup grumman. this, of course, as international relations face some pressure. it's been a big week for geopolitics. pushing the pentagon towards funding one of those companies with a near $1 billion contract. here with what all of this means for the markets, for the military, for the broader economic outlook, former defense

secretary under president trump, mark esper mr. secretary, it's great to have you back on the show. thanks for joining us today. >> good morning, morgan. great to be with you >> so, i do want to start with the geopolitical landscape it was a very big week in terms of both the u.n. and the comments we got from president biden and russian president vladimir putin essentially threatening the use of nuclear weapons in the middle of the week let's start there. how do you read the significance of those comments from putin and should markets and should the world be paying very close attention, be concerned about this right now >> first of all, this is the first war of this new era of great power competition. it's one in which russia is losing it's been a strategic failure for vladimir putin for a number of reasons we've seen it go through multiple phases. the first inability to seize kyiv now his inability or the fact

he's losing the donbas now he's threatening the use of tactical nuclear weapons, he called up possiblization of 300,000 troops so, yes, we should be aware, we should be vigilant but we should not be self-deterred from taking the right action from supporting ukrainians because it matters not just what's happening in ukraine right now, but i can assure you that beijing is watching very closely with regard to what the west will do and how we stand up to this type of bullying. >> are there off-ramp possibilities here for putin >> well, there are there are other off-ramps being created by his own people. there is unrest in russia. russians are fleeing their country by the thousands, boarding trains, planes, people being arrested they may take the matter into their own hands as well, we can only hope. at the end of the day, vladimir putin's goal is to stay in power. this is where the situation

starts getting very tricky i think we need to be clear with regard to our intentions and our expectations and if necessary, act preventively to make sure that he does not employ tactical nuclear weapons or any other type of weapon of mass destruction. >> we do know russia has been testing hypersonic missiles on the battlefield in ukraine yesterday raytheon winning the award for the air force, nearly $1 billion contract. not one that moves the needle, at least right away, for revenue for a contractor like raytheon but seen as a move forward in hypersonic technologies and capabilities and raytheon's role in it versus lockheed martin or boeing as the u.s. continues to field these technologies where does the u.s. stand versus a russia and china where hypersonics is concerned, and what does it mean in terms of defense spending and priorities here moving forward?

>> we had hypersonics years ago. we stood back and allowed the chinese to pass us up, in a lot of ways. during my time we put a lot of money into hypersonics i think multiple companies will get involved it's a great weapon system it's not a silver bullet it's another arrow in the quiver we need to develop for defense companies, what the focus should be from them and the white house, frankly, is how do we build our stockpiles of weapons and material needed to fight and support our allies in these conflicts. think about stingers, javelins, himars, all these are critical stockpiling has to be put to the top of the list. it's not a sexy thing but critical when you're fighting in these types of engagements >> secretary esper, the use of this word tactical nuclear weapons, for those that, perhaps, haven't followed the development of these weapons that closely, maybe you can explain to our viewers, are they

really a viable means of waging war? in your opinion, if you were still in office, what would be the mode of deter republicans to make sure something like that is never used >> yeah, well, let me put it in a little bit of context here tactical nuclear weapons are short-range systems often delivered by a cruise missile, short-range ballistical missile or a bomber, gravity bomber. they can be single kilotons. the bombs dropped on hiroshima was a 15 kiloton weapon. i think what putin is trying to do is stir us up to get us to self-deter to back down so we will stop supporting ukraine with material, with intelligence support, with ammunition and so on if we actually see -- have indicators he's moving to do something, maybe nato should consider putting an air umbrella over that country to prevent the

use of such weapons or declare as a policy that we will strike their launching systems before he's able to deploy them >> mr. secretary, we keep hearing that this is a priority in the midst of the last couple of months of this conflict both here and among allies, increased defense spending, the need to spend military and aid to places like ukraine, the need to counter china for future potential conflicts as well and to deter such a thing from happening. and yet it's taking the defense department a long time to replenish those stockpiles for those military efforts in ukraine, and the u.s. government is poised for another resolution, which never helps defense spending, which is already being dinged by inflation. what would it take to actually see some of those dollars translate to higher stockpiles in a meaningful and quick way? >> look, you have to -- the challenges, you noted them,

under the continuing resolution, which will likely go into place in the next few days, you can have what is called new starts or expand your weapons pile. these weapons don't take days and weeks to build they take months and years to replace these stockpiles i recently traveled to taiwan several weeks ago. i visited our allies in europe as well. all these countries want the same type of systems, stingers, javelins, himars, they want f-16s. we are years behind into delivering these systems so, it's just a matter of congress appropriate rating the money, the pentagon lifting the contracts and contractors getting on with their business of expanding their workforce, factories going to multiple shifts, whatever it takes to meet the demand. >> mark esper, former defense secretary, thank you for joining us today >> thank you we're going to continue to watch the selloff today. this morning has been tough but tech has been hit the hardest this year. the nasdaq down more than 30% for '22.

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nasdaq down big on a tough day for the tape tech stocks are down elevation partners founder and early facebook and google investor, roger mcnamee. i wonder how you're feeling, you've been cautious for a while, but at this point do you get incrementally more cautious or dust off your shopping list or something else? >> carl, i think we're stuck in the middle ground between those two places the conditions that made the market so perfect for tech, you know, since the 2008 financial crisis, so basically optimized global supply chains

access to all markets, accommodative fed policy, low inflation, no regulation, full employment, consumers having a lot of disposable income all of those things which were tailwinds for years first started to break down because of covid and now because of the geopolitical issues with china and with russia, because of covid breaking supply chains, all of those things are under pressure and none of those -- almost none of the things that have changed are specific to tech, but because tech had been the best performing category on the way up, it's particularly vulnerable now. and the key advice i would give anyone today is don't worry about what you owned going into this bear market you're supposed to look at the world now and recognize that some things have changed in ways that are substantive so the winners in the next upcycle are going to be different. it doesn't mean all the ones that were winners before won't

be winners again, but some of them won't be. there will be new winners that weren't winners before because conditions changed. >> it's funny you say that because i saw goldman had a note this week that said about half of the fortune 50 was founded in a period of recession or severe economic risk and they names companies like mattel, uber and they say it's perpetual, not reliant on business cycle. >> that's right. innovation is constant what is different is the demand for it some innovation come and go without any demand at all and some catch the moment exactly perfectly and become die begantic businesses. the thing i would note is i think the geopolitical thing is the change that's likely to persist longest. i think the notion of optimized supply chains that are ultraefficient on a global basis, that's probably not going to be as great a feature of the coming bull market as it was with the last one. that companies are going to have

to find ways to manufacture things much closer to the markets they operate in, which means almost everybody is going to have to manufacture a lot of stuff in north america hardly anybody does that today and so i think that's a huge change and i think it suggests that profit margins will be lower because the manufacturing cost of things will reflect local costs much more so than they have in the last ten years >> presumably, hopefully, you see a stronger, more robust middle class >> exactly. >> we're talking about the public markets what are you seeing in the private markets right now? when we had this conversation about innovation and future companies that are leaders, what do you see in terms of the funding there? >> great question. i think there are two things going on one is that the bull market lasted so long, that essentially every idea you could think of got funded in the venture world. there are things addressing climate change and there are

things addressing the great advances that are possible with medical science, but there's also a lot of nonsense a lot of things replicating that worked in the past and trying to make a new spin on it. i think most of those go away. but i think seeds have been planted in the categories that really do matter it seems to me that it is inevitable in a world where geopolitical risk is rising, that energy independence and moving away from oil-based energy towards things that are renewable and local is inevidencible and it's actually really good for the economy. investing in clean energy is going to be one of the things that creates a massive bull market opportunity and it would reduce our risk in the middle east t will reduce our risk with russia and i think those are inherently good thing national security, i think, will drive us towards that new investment there are a lot of venture things pointed there i think the same thing is true about a lot of the stuff related to cleaning up carbon. you know, i don't know which ones are going to be the winners

yet. it's going to take a while to shake that out i'm very confident that the stuff is there to me, the challenge for venture people is that so much of their activity was based on the mindset of the last ten years. so things like crypto, almost all the web products that are internet services for consumers, those things, i think, are based on assumptions no longer valid you'll see some real chakup that goes on in those places. >> roger, take off your venture capital hat for a minute and put on your private equity hat are there cash flows going into the future given this downdraft in valuations that look attractive, that you would want to buy a company because those cash flows have been discounted to such an extent that it would mack a lot of sense to get the return that might bring? >> david, i think private equity business has an enormous opportunity over the next few years. you may recall that in the last -- well, two bear markets

ago, so in the -- off of the '99-2000 bubble bursting in tech, i was involved in the start of something called silver leg, the first tech, and there were things priced in at tech, specifically companies like seagate, that were priced, you know, against the old rules with very low valuations but were market leaders, where if you invested as though they were a venture capital situation but in the public market, you could create a sustainable been pit. those kind of things exist today. the challenge in private equity is the stuff they've been doing is all levered up with a lot of paper that i think is going to struggle with higher interest rates. they have to agust both their behavior going forward but they also have to mark to market because i think there are a lot of things out there that are going to look less attractive with t-bill at like 4%

everybody has to adjust here i don't think there's an easy path for anyone. that's why they call them bear markets. they're democratic >> well, some of the bull arguments made, at least this week, roger, one argues that a lot of operating tech is labor based. we've seen layoffs in tech and that will lead to operating leverage do you have a problem with either one of those? >> i think the second one is clearly true i do think there are ways that software is going to prosper going forward. to me the core challenges in the tech industry are that they have been so focused on maximizing scale and maximizing speed that they are -- that the product development is both incredibly costly, not very efficient

in many cases, produces really undesirable social outcomes. a lot of the companies are going to have to change the way they operate internally and that's going to be difficult because employees are very used to the sort of google excess, right, having all kinds of fancy food all the time and having -- being able to essentially live at the office. the question is, is that a sustainable model? is the notion of bussing everybody down from san francisco to silicon valley something companies want to keep going? i suspect the answer to that will be yes, but they will allow more remote work in order to manage the costs better. the challenge, again, is there's going to be a transition, carl i just don't think you get through this without a few bumps and bruises, but at the end of the day, i do think tech is better positioned for the coming economy than most sectors, but not all tech companies are equally well positioned. facebook is much less well positioned than microsoft. you know, exactly how that's going to shake out stock market wise, i don't know

facebook could be an okay stock from here, but it's certainly not going to be as well positioned as microsoft because it has tiktok to worry about, it as apple's changes with respect to advertising to worry about, and it doesn't have the safe harbor that microsoft has in enterprise >> yeah, that's interesting. and certainly your comment about bumps adds some color to these reports about the tough meeting with employees, at least the ones making the rounds today roger, appreciate very much. great to see you. >> good to see you. coming up on "techcheck" more on the themes at 11:00 a.m. eastern time delivering alpha coming up on the 28th in person a meeting with economic leaders, policymakers and the world's best investors share ideas on risk, opportunity, how to navigate this opportunity right now. scan the qr code

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we're an 1 and 12 minutes into trading and we continue to be down substantially on all the broader averages off our lows just a bit. with that, let's bring in ubs's director of floor operations, arthur cashin, he's on the news line we appreciate having his voice on days like this, in particular art, what are you keeping an eye on what is foremost in your mind as you look at this market action >> well, a couple of things. some near-term support, we're right at it, 29600 in the dow and 3685 in the s&p. david, i'm going to watch carefully to see what happens as we get around 11:30 when the european markets are closing do we start to firm up then? does that tell us that some of this is some systemic risk selling coming out of europe if we don't firm up then, then we know it's equally here in the

u.s. and i think some of that may be -- you know, we've been talking about quantitative tightening i think we're finally getting to the balance sheet. not big, but it's beginning to show up around the world as a decrease in liquidity. >> yeah. how important is that? how closely are you sort of monitoring that side of things in terms it of the fed balance sheet? >> well, it's tremendously important. the new british prime minister decided she wants to be margaret thatcher ii and she put out a new policy today that was a little disruptive. we're going to have a major election in italy on sunday, so we've got a lot of things coming up and as you know, david, i do some cycle work, too and the cycle's telling me to be careful as we get into october,

particularly between the 7th and the 14th and watch out for possibly things heating up geopolitically, particularly in taiwan so, we've got a lot to look at ahead of us. it's important they circle the wagons here pretty soon. >> we have a lot to look at, art. i'm wondering, i mean, can we say it yet, can we say this is a bubble that is being deflated by the fed right now? >> well, welcome back, morgan. yeah, i mean, it was, to some degree, self-induced bubble. you know, we are at a critical juncture here. the markets, we had covid, they pumped money in. we had money put in from the fiscal side, the mondetary side it's going to be critical as to where we go from here.

now, hopefully things don't all come apart, but if we make lower lows, which it looks like we might be on the verge of doing, there could be a problem we also have, again, back to cycles and tradition, rosh hashanah happens sun down on saturday when i was an altar boy in jersey city, i was told that tradition is you sell on rosh hashanah to buy back on yom kippur because you want to be without worldly goods. i think that might be adding, believe it or not, to the mild pressure people wanting to get out for religious decisions. we'll see if piety pays off this year it doesn't always. >> we've had on you earlier in the year where we talk about yield environments where things like an orange county happen do you think the analogs are fair and do you think the fed response would be any different? >> i think -- yes, i think the

analogs are somewhat fair. i don't think they're exact. but i think there are people overstressed for example, on cryptocurrencies i would be keeping a big eye on this bitcoin, if it breaks down below 18,200 or so, then, you know, there are always fear there that there might be some systemic problems. where you are now, carl, the dangerous spot, is that if liquidity is going to dry up and if the balance sheet, in fact, is finally going to kick in and dry up, then you're going to get those liquidity stresses not unlike orange county, california and these things happened, the character in the hemingway novel was asked how he went bankrupt. he said gradually and then suddenly and that's the way things happen in this kind of market you begin to move into thinking, well, that's not so bad. and then, bang, things start to

kick in. liquidity problems, very dangerous. you have to watch out for them traders should hope to see the vix get that vix up above 30, at least, and then maybe we could pick up on some of this oversold condition. >> i think that was jake in "the sun always rises". >> yes >> always good to get literary reference in there, art. have a great weekend i know we'll be checking in with a a lot. >> thank you happy fall, david. let's get a check on the markets. to art's point, vix has been stubbornly below 30, 29. the june 17th close on the s&p was 3675 be right back.

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u.s. transportation etf, ticker iyt, underperforming the s&p 500 this year by about 8%. fedex a top holding, top ten holding, key contributor to the declines we have been seeing there. announcing a 6.9% increase in shipping cost, along with a game plan to cut $4 billion in annual costs over the next two years. the delivery giant's again blaming the broader macro environment for the slow down it's seeing in its business, despite the fact that there's been some analyst debate, shall we say, about the company's own execution. but doubling down on that, saw a decline in volumes for the first quarter that accelerated in the final weeks citing asia, the sk u.s. and europe for that weakness. let's move on here, throughout this month, it's hispanic heritage month, we are

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they asking, robert? >> when you said high, very high, i'm on the 131st floor of the penthouse of central park tower, the most expensive listing in america at $250 million it is also the highest residence in the u.s. at over 1,400 feet now, right now, this market, this luxury market is seeing a lot of pressure and weakness from these falling stocks and rising rates, as you mentioned you can look at sales contracts in august in manhattan for those apartments priced 5 million or more that is down by more than half compared to last year. even if you look at ultra luxury, so that's the $10 million plus market in manhattan. that is down 38% year to date compared with last year. even nationwide, the luxury market is seeing its biggest declines in over a decade. now, the broker for this apartment, ryan surhan saying

the billionaire less affected by the market swings. it is unique, 17,500 square feet it spans three floors. it's got eight bedrooms. it's got 11 bathrooms, it's got two kitchens, and i am in the ballroom this is the highest ballroom in the world. it's also one of the biggest at 2,000 square feet. the ceilings are 27 feet high. and what's interesting, guys, is that despite this price, despite these markets there are buyers flying in from overseas to see this already we'll see whether it sells and for how much >> amazing, yeah, i mean, interest rates don't seem to matter too much to that class of people robert, what about that building you were in. it was one of the later ones to go up. we talked about it a bit the prospects for being able to sell out seemed somewhat dubious giving the timing? >> the timing has been tough,

david. if you look at what sold in this building of central park towers so far, the discounts from the asking price have averaged 38% the most recent sale, the discount was 40% maybe it shows that the original prices were too high it was supposed to come to market at 300 million. they brought it to 250 to accommodate the current market conditions. the sales of the building haven't lived up to the original expectations when it topped out three years ago still strong and high, just not as high as they originally thought. >> speaking of, robert, i mean, you are high, 132nd floor, one of the things for folks who maybe haven't been to some of these very tall skyscrapers is when you get to these levels, are you swaying in the wind right now? >> the good thing about this building, unlike a couple of others you can see it's very wide, it's very solid. there's no movement. we were down at the terrace, and

because it's blocked off with glass, there's no wind, no noise, it is incredibly peaceful up here, but it is very high the views are amazing. >> they do seem to be amazing as we look over your shoulder robert, thank you. robert frank, high above central park as you see it there of course back to the markets. well, that's where we're going right now. have a graeat weekend, everybody "tech check" starts now. good friday morning, welcome to "tech check," i'm carl quintanilla with deirdre bosa. we've got the volatility playbook this hour big tech cutting back while robinhood expands wh, what that means for stocks the party is over. and an inside look at celsius as the company tries a new hail mary approach to paying back its lenders. >> we've got to start with tech investors, let's call it deja