shaoul shaoul. always a pleasure to have you here. scarlet: we have been looking for a catalyst for this latest risk down -- this latest leg down. is it just oil and china or is there a new wrinkle in these narratives? michael: i think is all about liquidity and oil and china have had an impact on liquidity as has the decision to raise interest rate. really starting in the summertime, global markets and credit markets started to behave as if there was not enough liquidity to meet assistance. if you look at the atlanta shadow funds rate, we have seen a lot of tightening way before they hiked rates. michael: it is huge. withtlanta fed came up this and there's a way of estimating with the effect of the interest-rate was. minus two and three quarters in 2014. it got back to zero just before they hiked rates. aboutd a tightening of two and three quarters percent, so i think you would expect to see a market reaction over that time. scarlet: we have ibm results coming out -- operating earnings per share of $4.59. when you compare that to the consensus item, it looks to be lighter than the consensus estimate. we want to look at 484 as of the note to compare it to. it is a beat on the bottom line. --t means revenue to come america' new of $10 billion, i am looking at overall revenue numbers, just a hair shy of what analysts were looking for. it looks like a beat on the online and a slight miss on the top line. alix: we're in the middle of earnings seasons -- earnings season and that tightening in the atlanta fund rate, does that affect michael: people doing business? using easy access to cheap credit are being affected. the further down the scale you go, the more impacted they have been. , not soiple b important, but triple b and below is a good portion of the equity market. the russell 2000 is representative of that kind of credit. moody's this is the estimate and we have seen some kind of rally over the last few months, but we have not seen that since 2013. the taper tantrum was a move in general interest rates. this time around, corporate yields are going up because corporate conditions are deteriorating. single sector has seen credit yields go up significantly since the summer. can we blame all of this on the fed? is it fed, you just messed everything up? by mid december, there were clear signs that liquidity was at a premium. repo that waserse as high as the low 500 billions and if that is the wave as the fed now increases interest rates, the fed is not a significant drain on liquidity. scarlet: let me break in for a moment because netflix has just $.10 appearsd -- to be the number, higher than expected because the estimate was for two cents. in terms of streaming numbers, domestic numbers, 1.5 6 million, that is a miss for netflix. of people are focused on his international streaming and that was 4.4 million when analysts were looking for three point 5 million, so that is a better than expected growth rate. is looking for earnings per share of three cents and analyst were looking in the neighborhood of two cents. if you look at netflix shares acting in there after-hours trade, it is a big spike up. so we see netflix rallying, but netflix has been hit hard with omentum names rolling over. do you think the selloff we saw in the last few weeks continues? michael: i think it does. tend to be big't issues of credit and when they do, they have high credit ratings. but the names do enough damage to the overall index that you see a general liquidation of interests. scarlet: can we go back to the chart of the atlanta federal -- atlanta fed runs rate? you talk about this preemptive tightening. what does that suggest about how much further along in the investment cycle we are then investors realize? think corporate conditions are deteriorating in the way that they did in the fourth quarter of 2000 and this may be the end of the corporate softness cycle. in a time of substantial deterioration. we don'twe are and know it, what is the potential downside for the market? michael: it is substantial for the parts of the market that feel it most. otherk the danger is sectors are directly impacted. , you see sectors with no direct connection to this problem start to go through their own distress. scarlet: the profit recession will bleed into an industrial recession and bleed into a services recession? michael: i think that is the pathway. alix: when will we see a recession in the u.s.? michael: you have probably already entered that path. the actual economy looks ok. i think it will take quite a while for employment decisions and investment decisions to be turned around. you are only just starting to see/. i would worry about corporate earnings. aboutt: we were talking corporate earnings and a check on netflix -- shares rising better than 10% and a beat on adding international streaming subscribers. more, after this. ♪ shares: breaking news -- of netflix climbing more than 9% after their fourth quarter international streaming subscribers group by 4.0 4 joe: -- greww by million. three cents in terms of first-quarter earnings per share. will continue to monitor the headlines out of netflix and discuss it further. get to mark crumpton now with first word news this afternoon. mark: some key decisions from the u.s. supreme court today. justices agreed to review president obama's controversial immigration plan. itontroversial opinion said overstepped its authority by allowing deportation of 5 million immigrants. they are also taking up a constitutional challenge to obamacare. the court refused to uphold that arkansas law. ben carson has canceled his events after three volunteers and one staff member were involved in a van crash in iowa. says the car hit a pack of ice and flipped over. one volunteer is being transported to a trauma center in omaha, nebraska. the other three are at a hospital in iowa. new jersey governor chris christie has vetoed legislation allowing than owners so-called personalized handguns once they become available. seeksto comes as he supporters for his candidacy. as a candidate for state office, he supported the ban on assault weapons, a position at odds with many conservative voters. major league baseball and its fans have agreed to expand online packages for televised games. unbundledffer packages, including single team packages for next season, a 23% drop from the cheapest version available. in the past, viewers that did not live in their family teams market had to buy access to every single televised mlb game. global news 24 hours a day. back to you. .lix: back with michael shaoulbout china gdp today, but you look at something different and that is fx reserve. what is that telling you? michael: does the great impact of china on global markets. what seems to be happening is you can think of these as rainy it isnds and some of voluntary by the state. these are funds being used directly and some of them are involuntarily. it represents flight by private citizens and corporations out of china. enough to haveig an impact on domestic liquidity. alix: you say there is a path to correlation as well. a reduction of chinese fx reserves by 600 alien dollars, which we have seen, is equivalent to the federal reserve cutting its own holdings of treasuries or agencies. and we see the correlation there with credit conditions. there was not that correlation until almost halfway through. wasael: something else happening at the same time. the chinese reserves peaked at almost the same time as to e3 was completed. chinese reserves the when qe3 started to be tapered. it's difficult