doesn't expect interest rates to surge. [closing bell rings] liz: it will be in the end by the time we really settle about a loss of 3% for the dow. three clear percentage points clipped off the s&p. 4% off the nasdaq russell, just under 3%. it is ugly day. david: indeed we will. two storms we're talking about actually. first of all hurricane michael slamming the florida panhandle. they haven't seen anything like this before, with winds up to 155 miles per hour. and then there is the massive selloff on wall street. what a storm this is. stocks plummeting amid an on going surge in treasury yields. the dow dropping further into the red. down 818 points down. that is 3%. 4% on the nasdaq. s&p 500 closing into the red for fifth day in a road, marking its longest losing streak in two

years. technology is leading the selloff. nasdaq closing down about 4%. hello. good afternoon, everybody. i'm david asman. what a day to tune in. melissa: a lot has to do with the algorithms. you cannot forget that. i'm melissa francis. this "after the bell." to our own gerri willis on floor of the new york stock exchange. gerri? >> what a day, the dow down 820 points or 3%. nasdaq even worse coming in 4% down. talk about worst performers. nike, microsoft, boeing. technology really leading the way here. amazon down 10%. netflix down google down.

leaders of the market that have done so well, really taking it on the chin, netflix down 8% as you're seeing right there. i want to talk a little bit what happened in industrials and energy. industrials which had been a great spot for the market. boeing down 4%. caterpillar down 3%. energy down two and we saw energy really doing well for a time, not today. exxon down 2%. chevron down 3%. traders here on the floor giving me a lot of reasons why this happened. one of them was, as you said at the very beginning of the show, interest rates are higher, yields on treasurys higher. we're seeing, right up against previous highs. people here do not like that. they see it, specter of inflation. they're sort of discounting stock prices on basis of that right now. i was also told that some folks don't want to hold stocks coming into earnings season. earnings season starts next week

as you know. starts with those big banks. we'll be watching to see how they did. but traders here tell me they are watching statements that are forward-looking because a lot of what we've seen in the markets which has been moving markets really baked in the cake. we'll have to see if ceo says something, cfo says something about the future. what kind of trading we're seeing today will mean for these companies. should you be panicking? no. absolutely not. this is only 3% on the dow. what traders are watching today is the fact that we fell through 50-day and 100 day moving averages on the s&p 500. we were watching if it closed at trading today, to see if we go through 2765 on the s&p 500. that would be a 200-day moving average we would fall below. this is technical analysis. this is something traders talk about amongst themselves. it is really something they use as a measure for how committed they want to be to this marketplace. i will send it back to you guys

but, boy, what a day down here. lots of drama. melissa: great wrap on that, gerri, thank you. david: let's bring in today's panel. our own deirdre bolton is with us, james freeman from the "wall street journal," gary kaltbaum, from kaltbaum capital management who has done a good job all day, gary, good work. jonathan hoenig from capitalist pig hedge fund, fox news contributors, and danielle dimartino booth and former federal reserve advisor which has a big part to play. october 1987, the market was down 23%. today was substantial 830 points is 3%, no comparison. since the election the dow jones has gone from 18,000, or thereabouts to 25,598. it is still about a 35% increase from where it was when president trump was first elected.

so putting things in perspective, it's bad but it could be a lot worse, right? >> yeah. in the immortal words of ace greenberg stocks fluctuate. look this happens. as you said we've given up a few months worth of gains. the dow and s&p at seven teen sometimes forward earnings. i don't know if that is crazy with a growing economy, growing earnings. atlanta fed, st. louis fed, saying 4.2% gdp growth in the third quarter. melissa: wow. david: danielle, the president himself wade in on what the fed is doing in terms of raising interest rates. we'll have two, three, four more interest rates rise over next 12 months, as a result of that. a lot of people are saying, gee, you know, the market has just about topped off. if i cash out right now, and put my money in three-month, six-month treasury, i get guaranteed 2 1/2% interest. that's why a lot of people are repositioning their money, no? >> absolutely.

cash has begun to pay for the first time in a generation. there are people alive who can't remember when cash actually paid any kind of an income stream to investors but by the same token i think what is interesting in today's market, is the markets don't mind it when the president comes out and says that the economy is strong but it all kind of started last week with uneasiness when jay powell said this economy is strong because the markets interpreted that to mean he was going to continue raising interest rates, maybe three or four more types and then we saw this skip up in bond yields and that has been the focal point since then and realization maybe that there is some pockets of this economy that regardless of how low interest rates are cannot handle interest rates rising off their record low levels. david: jonathan, we've become so accustomed to the unusual which is zero interest rates. i mean you and i talked about this, how unrealistic the whole concept of having zero interest rates is in a world economy and

yet it is not just the u.s. economy. economies all over -- for goodness sake, japan and other central banks began having negative interest rates which is more crazy. this is unwinding of something that was very unnatural, no? >> yes. david, a process that took for the better part of 10 years, fueled many say a tremendous speculative bubble in exactly the names we're seeing among the weak of the now. i will disagree respectfully with danielle, this doesn't start last week selloff in stocks, we've been seeing the deterioration of equity markets better part of the year all holding market up is the fangs, high-tech stalwarts like microsoft, netflix and et cetera. david: gary, let me interrupt for a second here because there is something holding up the markets and that is the economy. we keep getting these extraordinary numbers, whether dealing with growth or consumer confidence or job numbers. in my lifetime i never had a period where there are more jobs

than there are people looking for jobs. there is real stuff going on, not to mention corporate profits that has a lot to do with why the market, not just, it is not just market sentiment, it is real stuff going on in the economy that has been keeping this market up, right? >> well every data point has been is what i see off the charts very, very strong. the question is, what is the future hold because the market is a forecasting mechanism. and as i've been saying you have energy prices at multiyear highs. the average over one year period, 70 billion-dollar tax increase to the consumer because how high gas prices go up. now you have interest rates spiking, you add the two together, i'm wonder whether you will see a lot of companies lower guidance and whether markets see that the economy may slow. by the way, as we look around the world, as jonathan said, this just didn't start in the last few days. world markets have been a horror

show over the last few months. i have a a new low list from a week ago before this drop of about 3 to 400 names. so underneath the surface hasn't been so great. going to be interesting next few weeks as we head into the election. melissa: i want to ask deirdre bolton because you've been a good student of the fed. when you go back and look at the headlines what chairman powell said a lot of people picked out too good to be true. this unprecedented economy, this unprecedented in modern history. i wonder if that ends up in some people's mind becoming the irrational exuberance moment? danielle brought that up, maybe the fed language that is thing that really spooked the market. what is your thoughts? >> it does seem to be a lot of investors read in exactly as you point out, melissa, comment that go through the first quarter of next year. it does seem if you're looking at these federal funds rate if there is a flattening out, it is

later, it is later, it is a short term reaction. one thing we do know from the markets it is rare to see stocks and bonds sell off at the same time, right? that is break in a pattern. i think we've seen that three times in the past 20 years. unfortunately we can all talk about the reasons why but when that happens, as we're seeing now, it has in the past, at least predated an equity market selloff. one thing can be common, borrowing a little bit from all the star guest there is, perhaps a worry about inflation. that may be an underlining thing which brings you exactly back to the if he chairman comments, melissa. melissa: james we complained so long there was no inflation out there. that was the problem. that was the sign -- >> we weren't complaining but many were, that's right. melissa: we need to see some wage inflation. oh, my goodness. prices are not keeping up, there is no leverage, blah, blah. now you get it, nobody is happy ever. >> i don't know why the fed

thinks two percent inflation is great. we never really understood that. now that they are getting what they want i think it is important to note 3.2% yield on the 10-year is not incompatable with economic growth. it is not incompatable with a good stock market. we saw both of those things in the '80s with higher rates than we have now. so there is nothing wrong. a lot right with rates going back to what you might call normal historical level. i think some companies will feel the pain of higher rates. generally the economy is strong. who really needs to get the message is washington. this is the moment where they finally have to rein in spending. i hope that becomes part of the president's agenda. >> will never happen. >> as rates go up, it is going to get tougher. melissa: interesting that you would bring that up. danielle, let me move on to you with that one. if you look deep into what the president was saying, we just don't need rates to go up too quickly, too fast.

that is never great, blah, blah and you're kind of like, you're pricing in what this is going to cost you in terms of the debt. kind of see him doing the math as interest rates go up. makes it more expensive to pay back if you're the government, right? >> of course. you picture these character caricatures of uncle sam pulling out his pockets and pockets are empty. with ballooning deficit, we cannot afford interest rates to rise off where they have been basically at low, low levels. look what china did a few nights ago. they had to come in and ease monetary policy for their country and still saw a four peers -- percent decline in their stock market. that affects our borrows costs and households but clearly affects the rest of the world and we're seeing a lot of bloodshed off our shores and today is something of a

beginning after catch-up. melissa: jonathan, i could see washington reining it in tomorrow, couldn't you? >> yeah, sure. melissa: we've been for a long time. we knee to really cut back on spending. david: absolutely. >> well, it is not just washington that has overspent. among the weakest securities melissa are a lot of credit oriented instruments, high yield bonds, corporate loans, leveraged loans. these are extraordinarily weak. i think not only worries about higher interest rates but corporate borrowers ability to pay back loans they have already taken out. melissa: gary what do you think? >> on federal basis there is too much short-term debt coming due next couple years and look out above. i don't think they know how to spell the word budgeting in washington, d.c. the only word they know how to spell is spend. i've been saying for years one day we'll have to look, do something about it and shame to do something about all this, the time to do something about debt

and deficits when economy is strong. that is when you have the leverage. instead they ramped up government spending. mcconnell, ryan, leaving after he does it, insuring we'll have trillion dollar deficits going forward. i can promise you, i don't know what day, what number, what year, all i know history going back since day one, big defecits usually kill the goose and we'll see. i think markets right here are a correction. we're probably going lower. i expect 10, 15%. we'll reevaluate as it goes. david: james freeman, let's be honest about here, there are deficits and there are deficits. when you look what the democrats want to do just with one program, just with socialized medicine alone, you have, what is it $33 trillion? it has been estimated over a 10-year period. that is the entire budget. you would have to get rid of defense. you would have to get rid of social security. you would have to get rid of everything else to pay for that one program at least half of the

party, would say right now is in favor of. so you got to take your medicine. which is worse, essentially? >> was not an argument that the president's opponents have a better answer right now. sadly this is a bipartisan failing on the spending side. and fastest growing as you know, latest congressional budget office report, fastest growing of the entitlement monsters was obamacare. in terms of taxpayer costs rising. so it has been a problem in both parties and i think the president has put a lot of wins on the board. if he is looking reaction to today, one action is rein in spending. another answer, make peace, cut a deal with china, if you want a more bullish sentiment in the markets. david: quickly take a detour what is happening down south because this hurricane is of monumental proportions. one might think considering the fact there are a lot of oil rigs right dead center of that

hurricane that oil would be popping in price today but apparently not so. phil flynn, for why in heck this hurricane isn't causing oil prices to go up? instead they're dropping almost 3% today. >> i think they are more worried about hurricane stock market right now, dave, than hurricane michael but there is no doubt hurricane michael is going to have a major impact on energy both from the bearish side of the equation and the bullish side of the equation. in the short term we just got reports today 42% of all gulf oil production is off-line because of the storm. about 31.7% of natural gas. the positive side of this story right now, there were concerns last night that the size of hurricane michael would have done a lot of damage to some of the stationery oil platforms in the gulf of mexico, only because of the sheer size of this storm. early reports that we're hearing back is that the damage was not

as bad in the track of the storm and probably missed a lot of those platforms. that doesn't mean we're out of the woods yet. i think right now the oil companies will have to get back in the gulf of mexico, fly over some of those stationery oil platforms to see if there is any damage. some worst case scenarios market was worried about this morning were not there. this storm on land, dave, nobody can drive for next couple days. everybody is out of town. you see a drop in demand. because of damage when you rebuild, dave, you have to use a lot of energy, that will bring prices back later on. david: very interesting. bite description. back to the panel. deirdre, one of the things investors look overnight to see how the market does tomorrow. there is speculation people might look at 831 point now maybe the time to go buy bargains. on the other hand if you get china way down, europe way down, talking five, 6% down that might

weigh in on the market for another down day like today, right? >> weigh on the market and also just weigh on consumer sentiment, right? we're talking about as well the fact we're heading towards the midterm elections and as many pundits told us quite rightly, that is how people vote how they feel what is in their pocket. we know oil prices in the past months come up around 10%. they closed lower today. if gas prices go higher that is a factor both for consumers and for investors as well. if you add higher energy prices with the fact, we'll see if it continues, if stocks and bonds continue to sell off at the same time, if there are more tensions between the u.s. and china and if earnings, which we're beginning to see right on friday, as far as financials go, if they disappoint in some way, that would be a lot of simultaneous punches to the gut, david. david: danielle, is it conceivable, the fed is not

blind and deaf although sometimes acts like one, president said yesterday, he doesn't want lower interest rates, i'm not telling the fed what to do but i don't like higher interest rates, is it conceivable they would put out some signal to calm the markets? >> anything is possible, dave. we have to remember the first few days in office with jeh powell he was greeted with bigger declines in the stock markets than what we've seen, back-to-back days of volatility spiking and world is ending, and we didn't hear a peep out of jay powell's fed. if that is the history we have to go on, i would say he would not pull out the damage control playbook his predecessors always gone to. melissa: that is really interesting. meantime president trump keeping a close eye on the markets. go to edward lawrence at the white house. he has latest on reaction. there edward? reporter: there is no panic at white house the senior administration officials saying

they are not concerned. there is no real panic about this. this is normal bull market correction. they're saying that the economy will rebound because according to senior administration officials the fundamentals of the economy are doing really well. still, job growth is happening. unemployment is low. 3.7%, the lowest since 1969. the president when he left for erie, pennsylvania, about 20 minutes ago did not take any questions on this but again senior administration officials saying don't panic. this is just normal correction for a normal bull market. melissa. melissa: all right. thank you for that, edward. going back to the market, james, what do you think? >> i think danielle's point, i hope we don't hear anything from jay powell. there is no need for the fed to comment on down day in the markets. i think it really would be another healthy sign if he doesn't say anything we've moved out of that kind of postcrisis

era where the fed was always in charge and constantly intervening non-stop for years and years. i think we've moved back to a real economy and this isn't any issue for government intervention. melissa: yeah. gary -- >> not yet. melissa: president's reaction, you know, sounding very calm. i wonder the impact on the midterms? it is really for average americans we always say everybody has money in the market. you have a 401(k), this, that the other thing, average americans are really focused on their paycheck and less so on the day-to-day fluctuations in the market, yes? >> you can be sure if we drop a couple thousand points you will see ads running in all the districts, the dow is down 2,000 points in the last two weeks, look who is running the show. i would expect some of that i believe every dow hundred points does matter as we get close to the election. without a doubt, it is economy and paycheck and it is jobs.

right now the best word i can come up with the economy is sizzling right now. let's hope it continues because 3 point whatever percent unemployment is darn good. melissa: jonathan, argument made economy sizzling is how we got here. economy expanding greater than 4% is what the fed looking at fact we shouldn't have free money and we probably have some inflation around the corner and that is presticely bringing the market down. that is result of a strong copy. what do you think of that argument? >> the stock market sizzles long before the economy did. put this in some perspective. the market is going up better part of nine years. for a big portion of that the data was bad, the news was bad. finally the market is good. as gary kaltbaum pointed out, market forward indicator, forward looking look indicator this, is falling knife, trend is

lower and people would be wise to sit on their hands than diving back in. this is not a real correction. still a few points off the high still. melissa: building on that thought, we're returning to a normal type of economy and normal type of interest rate where we don't have this artificial influence on it where you have all this free, loose money laying around on the ground for people to trade with but not for average americans to get their arms around. >> look, a, absolutely. i think part of the problem that we're dealing with here is that janet yellen literally in charge of most glacial slow normalization policy in the history of the fed. had she been a little lesser rat tick and a little more normal for her moves i don't think jay powell would have to step into the situation. what gary was saying about a sizzling economy, duke university released a poll last week, chief financial officers across our country anticipate wage inflation rising to 4.8%.

4.8%. that is a huge number and jay powell is paying attention to these figures. melissa: i mean, deirdre, that would be a, wouldn't it, if we saw wage inflation jump by that big of a number? >> that would be a big worry, yes and i think this kind of, i can't really call it a taper tantrum, but what we're seeing extreme reaction in the marketplace would be justified. the last set of data we held steady, 2.8%. 2.9, we're all okay in that range. that said, investors are clearly spooked a little bit, right? we had the 40 basis point jump in yields for the 10-year. for the first time in something like 10 years today we're seeing the yield on the two year at a level, last time i looked something like 2008, melissa. melissa: yeah, james, bottom line is janet yellen to blame for all of this? that would be pretty convenient? >> i would say among others but what is all this?

i think things are working out. this is a bump on the road back toward a real economy that is thriving right now. melissa: true. >> i think the transition from a fed-driven economy with a big anchor from washington, more of an economy allowed to proon its own is really working. so i don't know if we need to blame anybody. david: gary kaltbaum, when i see the people have been talking about gloom and doom in the market for years now, waiting for a moment like this to happen, gloating, people like dan shaffer, suggesting the charts look exactly the way they did in 1937 during the great depression and everything, look there is a big difference between chart watchers who look at what a market did at a particular day compared to what it did during the great depression and looking at the overall economy. where the market is in relation to the overall economy. back then we had fdr with

quasi-socialist economic policies or a push toward that. right now we have a businessman as president pushing very pro-market policies. that does matter, does it not? >> yeah, what also matters is the technological revolution, the great productivity because of it. wonder drugs, i can go on and on about the greatness of this country and the hard work and ingenuity of the american people. so yeah, that all matters. i don't think you compare it to 1929. by the way dan wears great ties so i love the man. david: he is a great guy. nobody knows charts better than he does, if you believe in technical analysis of the markets he is the gee to go to but go ahead. >> let me say i heard markets for years will crash and end the world coming. crashes don't happen very often. you have to be very careful about that i will say this bearish markets do happen. bear markets do happen. typically they happen because a peaking out of economic growth

and earnings and interest rates going the wrong way or energy prices spiking. so you are getting a little bit of that. i think there is some cause and effect here and it does have to be watched. i think anybody thinking about just jumping in because we're down 800 points right now, i'm with jonathan on this, i think there will be some more price and time before we get out of this. i just don't know how much price or how much time just yet. david: danielle, on other hand, it is october, we have a big hurricane. look at worst hurricane, cat-5 economic storm if you will. not only does this continue, we get bad markets abroad in asia and europe as a result of what we saw today here. but looking forward the democrats take over both the house and the senate, what happens to the market then? >> well, if you think you've seen higher interest rates today, just imagine what would happen if the democrats were to sweep congress? we have enough public spending going on as it is without the

economic book opening up wider yet. i think you would see, i think you would see interest rates become unhinged at prospect of profligacy on congress's part and that would not be market friendly and markets would look into the future and i have brought up we're on a buyback blackout right now. we have to pay attention to the fact that companies have been a great backstop for their own shares. right now they're precluded from being in the market. that is just one other factor that is playing into how we're seeing trading play out today. david: deirdre, if you're still with us, deirdre, the thing is that we have a situation in corporate america which is not entirely different from the situation with the federal government. that is, some people say there has been so much borrowing going on in order to take advantage of the good economic environment that as you borrow money in order to grow more than you planned on growing because you think economy will do great,

lower taxes, lower regulations, et cetera, and maybe if the interest rates go up you have to pay more for the money thaw borrowed or economy stops growing as strong as it has been growing -- >> david that makes all the sense of the world. honestly if i were running a business, money were cheap to borrow, and i knew i was expanding of course i would take on debt, okay, whatever investments i have to make, whatever hiring, i mean, we are expensive. good human capital is expensive. anything cap-ex, you do see a lot of the groups in particular i was watching utilities right? because they often obviously have to put a lot of money into physical developments. they were trading right along with the volatility for a lot of people. sometimes that is a safe haven. that was not the case today, david. david: jonathan, do you look for companies that have a very strong cash flow, don't have to worry as much about that? companies like, for example,

johnson & johnson or microsoft, companies that have this strong continuous cash flow even if they do have debt there is no worry about paying it back? >> david, ironically one of the strongest performers, only strongest performers of late had been pharmaceuticals like merck and pfizer, not far from 52-week highs. those are real standout performers here. markets tend to move in trend. we saw today broad-based selling across the board and when the storm comes it is hard for any stock to find health. just as rising tide lifts all boats, i fear in a bear market environment it is tough to find any shelter buying stocks especially those in the s&p. david: james back to politics for a second. the president linked the progress of the stock market to his own policies, even before his own election even before he had any effect on policies going back to november of 2016. i think he should take credit for that because markets saw a businessman come into power. even before he was inaugurated

they figured he would be much more easy on businesses expenses than president obama was or then president hillary would have been. but now that he is linked himself to the market, if the market goes down what happens to republican chances in november? >> yeah that is the real edge he has. you notice in all the polls, even when he doesn't have an overall approval rating that's positive he gets the nod on management of the economy. same thing with republicans, even in polls that generally favor democrats. so this is their main argument. i think it's a good argument with the tax cutting, regulation cutting but, yes, for better or worse he has made the stock market a barometer of his performance. this is one of the days you see with his rhetoric he is very confident he wants china where he wants it. i think maybe one of those days puts pressure in the other direction to say, this policy is not cost-free even if ultimately it is successful for the united

states. melissa: interesting. bring in gerri willis back in. she is down at new york stock exchange. interest rates go up, stocks go down, you will these things are programmed in that exacerbates this, what are your thoughts? >> interesting you mention that because there were people telling me on the floor of the new york stock exchange they thought, some folks thought this was algorithms. somebody is making a big change in the portfolio, they're having the machines do all the work and that is what this is all about but you go the to think with the breadth of this thing baked in, down 831 points on the dow, looks more than a program or two. let me tell you, medical list sarc expectations get blown out of the water, not just for the machines but also for the human.

we've by thinking hurricane stocks doing very well, big hurricane coming into the gulf of mexico, create 2 billion to $4.5 billion worth of damage, beacon roofing up 6% at the beginning of the day, ends the day into the negative. generac makes generators for consumers for houses, that stock started the day up 3%, they're flat, unchanged as you see there. owens-corning only stock that did better, only marginally so. we thought home depot and lowe's. that those stocks would do very well indeed. they started the day much higher. look at this, lowe's down 2.6%. home depot down a percent. our expectations dashed not by the hurricane but by the stock market selloff. the only thing we were right about is insurance stocks. progressive, allstate, these stocks were down. we expected them to be down because of the damage that these companies are going to have to make good on with their insurance policies. but i got to tell you this is

the kind of day when you throw your expectations out of the window. melissa. melissa: absolutely. gerri, thank you. david: just to mention one stock in particular, i'm looking at a price, must set the record for dollar amount a of how much this stock went down, amazon was down $115 per share. that was 6% drop. almost a 2,000-dollar stock but huge drop. i say that for our cameraman david who bought shares at $300. melissa: you're jealous. david: if i had only done that then. you're still making a lot of money, david. meanwhile we mentioned president trump was talking yesterday about the federal reserve. how he was kind of upset there is a chance they might raise interest rates too quickly and too often. let's play that sound bite, get reaction from ed lawrence. >> the fed is doing what they think is necessary but i don't like what they're doing because we have inflation really checked and we have a lot of good things happening. so i will say this, we're

normalizing money and that's good but i don't think we have to go as fast. i want to be able to pay off debt. david: that was pretty mild as things go but presidents are not supposed to talk at all about the federal reserve board. some do more so. president reagan was actually quite senatortive of tightening measures by the fed back in the 1980s. back to edward lawrence at white house. anymore about the fed from the white house today? reporter: not specifically about the fed but i did talk with fed chairman jerome powell when they had their last fomc meeting. he was keyed in on the labor force participation rate how it didn't change at 62.3%. the market going up and down, the bottom line the economy is creating jobs. in his mind that is one of the things they really look at, as this is expanding, the labor force participation rate is remaining the same. that is sort of on the same level as him as average hourly

wages. you were talking about 2.8% over the last 12 months. again this white house, senior administration officials today say this is a healthy market at work and this will pass. i talked to fed officials the past two months, between now and this summer they see a pause in gradual increasing of the federal funds rate. so there will be a pause at some point. it depend on when that comes. that is something the fed will talk about internally but as it stands today, seems the federal reserve is seeing labor numbers and strong economy behind the stock market and they're saying the gradual increase is a way to go continually regardless how the stock market goes up and down. they're still seeing the job growth. melissa: edward lawrence, thank you for that. james bring it back to you and that train of thought. interest rates going up, labor

market is really tight. people still coming in off the sidelines and find jobs but they're not necessarily matching up with jobs that are open. at the same time we're having a conversation about immigration but we sort of need more people all of a sudden. maybe that is why we're seeing this inflation especially on the wage side, all of sudden employers are realizing i'm fighting over people that are appropriate for my job. elsewhere you have a mismatch. is there some of that going on? >> employers want to find workers and only some way that they can find new people willing to work. you hope immigration would be the answer. it's a bit of a puzzle. look at labor force participation rate in prime age working zone, not just talking about baby boomers retiring, there should be millions of people still on the sidelines can come in. why have they not come in yet? could be a lot of different answers. if people are willing to work, i would hope we let them in.

just on the jay powell point, i think he brought a refreshing humility on all these things where he knows the fed's models aren't perfect. melissa: that's true. >> president trump is free to comment as well. powell is probably comfortable with these comments. melissa: that's true. that's a great point. danielle, let me ask you about you will at people sitting on the sidelines are in theory working age could come back out and work as employers are getting increasingly desperate for people, what is going on there? is there a mismatch? what's happening? >> there is a definitely a mismatch. we see that in the quit rate. people, the bravado which people are leaving their jobs is at cycle highs. it is at levels we haven't seen since the 1980s. if people are walking away from their job, that means they have great confidences they are getting a higher paying job.

that means employers are fighting or people that there is great miss match if the unemployment rate was ticking up that kept a lid on wage inflation. looking forward if people feel that confident to say, take this job and shove it they feel confident -- >> i would never say that jonathan trying to get in. go ahead, jonathan. >> melissa, that makes me so cautious right now. danielle pointing out, tremendous optimism, tremendous confidence people have in the market and economy, those are good things, that happens after a major run-up in stocks. back in 2010, 2011 and 2012. that didn't exist. people were not saying good-bye to their bosses. that confidence happens now is a lagging indicator. you want to be cautious. melissa: that could mean the stock market run was artificial. we're saying it was fueled by cheap money. it wasn't fueled by real sincerity in the economy.

gary talk to me about this idea what is going on in the employment market? it is puzzling. a lot of people on sidelines coming in. they can't find enough people. what do you see in all of that? >> danielle said there is skills gap. i read about a shortage of airline pilots. shortage of technology companies and shortage in the medical industry. that is part of it. that is something we have to deal going forward. that starts with guess, what? education. i'm reading in elementary schoolkids are being taught how to code because though know how big it will be going forward. we're starting to get there but i think there is a long way to go. you see the labor participation numbers a big wow how many people sitting on sidelines. melissa: it replaced foreign language. coding is the thing. i have small kids. they have them all doing it.

>> not just technical skills. you look at nfib surveys, they need soft skills, show up on time and be courteous with customers. melissa: there is that. >> it is easily fixable if people want to join the labor force in many cases. david: if you're a millenial willing to show up on time, be pleasant i guarranty you a job. at this point a lot of people are looking for economists who saw the last downturn happen before it happened. one of those people is harry dent, the great economist who joins us by phone. harry, you said it was going to happen and if it is really tipping to happen? >> we've been telling people, we really turned bullish, when trump got elected we knew gravy train was coming. there is nothing better than tax cuts and repatriation.

david: and deregulation. >> look, this is the final blowoff rally. question how long it will last. warning people, high chance we'll peak late this year. this is the first sign of that potentially. keep to a 10 to 15% correction we could have run-up next year. the odds are shifting quickly this could be hit because we hit extremes real estate bubbles high every than average stocks. bubbles are off the charts. this could be the beginning. this is the trick. when bubbles burst, we researched every major stock bubble in the last century, the first whack is 40% on average in two to three months. david: 40%? >> the problem it is better to hedge. options are cheap. better to hedge the portfolio than necessarily get out. bretter to hedge and get out early because once it happens it

will happen so quick before people know it. david: i don't know if you hear me, you're suggesting immediate downturn in the market i don't think we've seen in decades. what do you think is the cause of that? is it the fact that we've had these sear re interest rates, artificial interest rates for a decade all around the world and finally the chickens are coming home to roost or what is it? >> absolutely. this is the first and only purely artificial, long term rally. now it is longest rally in history without a 20% correction. our demographic factors peaked in late seven as we predicted would happen decade before that and economy got weak, real estate bubble got worse and we predicted that months before it went down in 2006, when ben bernanke is no problem, it is containable, subprime crisis thing. fundamentals, including we have a geopolitical cycle down since

2001, 9/11, doesn't start to turn up until year-and-a-half. all the cycles are down yet the economy has gone up, why? $16 trillion of money. trillions in tax cuts. two trillion repatriated in united states. we're only market in the world making new highs because of trump tax cuts. europe and them have not made new highs. that is another die vern answer. emerging countries are down 22%. china is down 26% and this is saying there is something wrong in the world. david: harry, i'm sorry, i don't if you can hear, we're talking over each other. >> if it does we'll see the market down 20% by mid-january. david: we're having trouble hearing each other, trouble talking to each other. two things i say to you, give you two points in and give you final word, the fact emerging markets are going down primarily getting terrible advice from the imf, raising taxes, devalue

currencies do all the right things, but secondly do you completely discount the power of tax cuts which did revive tremendously not only corporate profits but corporate invests among other things, payrolls, hiring people and training people? also the amazing amount of deregulation going on and fact you have as president a businessman as opposed to an academic who doesn't much like business? >> no, again we turned bullish with our subscribers, the day after the election when trump got elected we knew it would be pro-business. we knew that would be another short term stimulus on top of nine years of free money and quantitative easing but again, we're in an economy where we're running out of workers to hire. the workforce is projected to not grow at all in the next decade. productivity has gone from 3% plus down to half a percent because the aging of the workforce and baby boomers. fundamental trends are going in the other direction. stimulus, short term, always

works but we don't think this works past the next year. my question is, is this top? or do we see a top late 2019. i see the biggest crash of our lifetime coming next few years. this has got more to show. this is not enough yet. the problem is, again, the first crash after a bubble like this is 40% in first two to three months. if you hang in there to see if it is going to go down you get whacked really hard real quick. that is the problem. david: other than that you think everything is rosie. >> i mean, we look, we've been bullish most of my career. we saw the baby boom coming, saw internet coming but every boom goes to extremes. this has been a bubble. and then you have to correct. we have too much debt. financial assets are overvalued. poor millenial generation will never be able to afford to buy a house and make money off it. never be able to --

melissa: you lost me at poor millenials. >> a big correction over next year is very good. david: we have to cut him off. i don't think he can hear us. harry dent, you've been right before. it is important for everybody to listen to everything you have to say. you may not be right this time but that is one end of the argument. harry dent, great to have you on, thank you very much. melissa. melissa: james freeman you looked remarkably calm as we heard the sky was falling, there was 40% correction coming. what do you think of what you heard. >> that is pretty bleak. i don't like to give investment advice, 40% correction i probably do buy at that point. melissa: we saw that, there you go. melissa: what do you think of what you heard? >> do i really want to answer? >> all right. let me say this, bear markets do happen. i think because of easy money and asset bubbles i think we can have a doozy. i don't know if it is this one. i don't take anything and put it out of the question. you have to remember something

very important. we went how many years of zero percent interest rates, 15 trillion of printing money? right now in japan and europe, if you deposit money you have to give them the toaster because they're still negative interest rates. that is the big worry. i can't argue that point. it is something that has to be watched and watched closely. melissa: danielle, does that happen when you have an economy expanding? to me those seem like things incompatable. an economy growing better than 4%. >> it is true they do seem incompatable but again markets are forward-looking mechanisms. i will bring up a point jonathan brought up to the earlier point in the show, to harry dent's point, things like leveraged loans, corporate bond market more than doubled in size. they are a ticking time bombs inside of markets other than the equity markets that could have spill over effects into the stock market and exacerbate the situation. thus far i will say in defense

of this stock market we've seen volatility for the stock market rise. it was up 30% today for heaven's sake but we haven't seen a similar move in bond market credit when i see that happen that will raise the flag for me, assets and liabilities that jonathan said. >> i would like to add to that. >> high-yield bond will have the potential to take the stock market down with them. >> i'm a big believer 07 and '08 was not an economic event was a financial event because of leveraged debt and stupidity with some people going 10, 20, 30 to one on mortgage-backed securities. we have more derivatives in the system than ever before. more in the market, debt and deficits around the globe than ever before. rising interest rate environment. one plus one, let's see if it equals two. i'm a big believer in price,

price is dictating policy. we'll see how it place out. melissa: jonathan, real quick, last word. i hear you chuckling? >> i think the trend is weak. until that changes, investors should follow the price and stay close to, keep cards close to the chest. melissa: here is dan mitchell center for freedom and prosperity. he is the cofounder. dan what is your take everything going on in the market and how it relates to economy and politics? >> there are three possible explanations what is going on. this could be nothing. two weeks from now, we could look at this big stock market crash in 1987 that apparently had no economic effect. this could be a bubble bursting all the comments we heard from people saying we shouldn't have easy money. that could be true and could be in for serious correction. we could also have a third

possible option which is fundamentals are a problem. investors are looking at a lot of government debt. neither democrats or trump administration seem serious about addressing it. seems people are getting very nervous about that. melissa: they're certainly not serious about addressing the debt in issue. people say we always seem to come out of it. you think now is the time debt becomes a problem? >> i put that as a third option because i certainly think that is the least likely. i think rising debt and doesn't cause a long run crisis we grow at 1 1/2% instead of 2 1/2%. but it could be, especially in

an environment where the fed is trying to normalize monetary policy that people are looking at toward the debt and we're going back to trillion dollar deficits. maybe i want to maybe i want to look my portfolio is safer, enough people do that at the same time, all of sudden market downhundred plus point --hundred plus points. melissa: what is impact of that? that scenario, lower market growth but not fall off for the entire planet type of thing? >> if i could look forward with the news what is happening i would give you a really smart, clever answer. i generally don't know, i don't think anybody else really knows for sure, whether or not this will even be a story two weeks from now. it could be a correction because the market is going up and up and up. nobody knows.

i will not pretend i know. if economists knew question, we would all -- melissa: try to explain what happens behind you, totally worthless but that is beside the point. with the midterms coming up do you think it is coincidental? do you think it has impact on it. people feeling pessimistic about midterms one way or the other? >> one of your guests said markets are forward-looking. betting markets think democrats take the house. if for some reason you think that not only democrats take the house and take the senate, you think therefore that means trump will roll over on tax increases and some sort of irresponsible bernie sanders, elizabeth warren policies, you might be

pessimistic. melissa: that is actually more what i was thinking implying. the idea, all the talk about this fight over brett kavanaughs has awoken a sleeping giant in the republicans that the democrats will not take everything back way they thought and predicted looking more like control on the right. maybe the market is responding to a lot of democrats out there in the market? >> well, but, you would think that regardless of what democrats want personally that they want their asset values to increase and want to be richer. people have different perspectives what makes the economy richer. people believe the imf that higher taxes are good for an economy takes all types. melissa: takes all types, dan mitchell, thank you. david: don't get me started on imf. melissa: you like the imf.

david: gary, here is the thing about imf, came out with study emerging markets are doing badly and will have the world market falling apart. i am condensing it tremendously. people think they are collection agent for the banks. they loan out money to distressed companies that can't pay bills back to the banks, bondholders to the banks. they give conditions for those loans. you have to raise taxes. you have to devalue the currency to squeeze the private sector, so the government has enough money to pay back the banks. they don't care what happens to the countries which fall because of their advice as long as countries have enough money to pay back the banks. that is why i don't like the imf. gary, go ahead. >> their whole recipe is open sit what good economies do, lower taxes lower taxes, get

restrictions off the back of the consumer aand leave people alone they are a they always think they're smarter than everybody and get in the way. they called the emerging markets market after they are down 25%. i have one word for them. duh. david: jonathan, the president says he is against the world bank he would like to pull funding out of the world bank. they do very well, loan money, get paid back after countries they loan money to squeeze the population with devaluation. the people of these countries pay the price. banks get paid off. the imf gets paid off but the countries themselves get poorer. >> imf, import, export, david all interventions to a free economy are destructive for the economy itself and us taxpayers doing everything we can to fund these expedition.

the more president to your point deregulate, decentralize, decontrol the economy, that is the es best medicine this ailing market could use right now. more decontrol and less spending. david: preaching to the converted on that one. james, look forward to tomorrow. remember after thal that october is a terrible month for stocks. very often you have these crashes. in '87 in october 1989, 23%. we came back from the 23% loss in 1987. we in two months came back before it was before the crash. if >> yeah, october has had some rough years, 1929, 1987, 2008. david: shush! >> but the good news is that october tends to be pretty good in the mid-term election years,

so there's no reason for people to believe in these sort of calendar stock-picking techniques, so look we have a good economy, as we talked about , and american business is strong and american government not so strong, and the debt problem in this country and around the world among governments is a concern. it's a big concern and it needs to be addressed, but tomorrow, i think we still have a pretty good u.s. economy. david: danielle one thing that concerns me is expectations for corporate profits are really high and we'll have earnings coming out not too long. if in fact those expectations are dashed, just a little bit, down just a little bit that could really effect the market because we're priced where we were priced for the best. >> we absolutely were priced for perfection and if you look and listen to some of what ceo's and cfo's are saying they are indicating, they are flagging that there could be margin compression going forward, because the good side of wage inflation is that americans are getting bigger paychecks.

the flip side of that, however, is that you could see corporate profits start to come down off of their peaks simply because of that in addition to a lot of the higher input prices that have stemmed from the implementation of some of these tariffs. so you could have a double whamm i on corporate profits and the market is not pricing that in. maybe they're starting today. david: danielle, gary, jonathan , pleasure to see you all, james great to have you here. deirdre had to take off but we thank her as well for their expert panel. thank you very much for being here, gang appreciate it. and back inside, so what would your economist at harvard say about all of this? melissa: they would look in the rear view and say something ridiculous. what's really going on is people are underestimating the impact and i'm not talking about day trading or program trading. david: just computers. melissa: i'm talking about those long term equations where they're looking at interest rate basing it against various stock that this happens then this then

in the long term it means this. it's much bigger than all of the rest of us sitting around thinking about it and it just has a huge impact. david: which is why us poor mortals can't hope to do better than those algorithms do. we just got to stay in for the long term. melissa: there you go that does it for us the evening edit starts right now. >> three days of wild swings are landing stocks in a tidal wave of red at this hour we're down 523. the markets are in distress in this final hour of trade. neil: stocks are falling down. >> the sell-off is across the board. neil: technology, technology, and sell first ask questions later. we have not seen a yield on the two-year note this high since 2008. david: is this a barish phase of a bull market or is this the beginning of the bear market? >> liz: will it get better or worse? yeah, that's the question the dow taking a pounding,