tv Squawk on the Street CNBC January 20, 2016 9:00am-11:01am EST
given us their take on what's happening. >> mostly negative. >> mostly negative. we're witnessing it. it's not by coincidence. people are shaking in the final market. you got a different outfit tomorrow? >> different outfits for every day. >> i do, too. will it be warmer? about the same. >> i think so. >> i don't know. >> that's a thing to watch for. >> we have go. everybody stick with us later, because we have jamie dimon at 10:30. >> stay with "squawk on the street," that starts right now. great stuff from davos. good wednesday morning. welcome to "squawk on the street." i'm carl quintanilla with jim cramer, david faber at the new york stock exchange. pre-market under pressure as oil prices refuse to relent. heading lower. we look to open below august's flash crash low of 18.67. europe looking at losses of 2%,
3%. the nikkei down 4%, now in a bear market. and the ten years with a one handle have not closed like that since november. netflix and what reid hastings has to say about the company's growth. >> ibm shares taking a hit this morning thanks to a weaker forecast. apple under pressure as ubs raises concerns about iphone sales, how worried should you be? first, another selloff putting global equities on track for the worst month since '09. u.s. crude oil prices slumping below 28 to fresh '03 lows. earlier on "squawk box," ray daleo offered his take on the markets. ♪ >> i think that risks asymmetric on the down side. that's why i think the next fed
policy will be towards quantitytive easing, not tightening. >> goes on to say with all asset classes down last year, that can't go on for long without producing a depression. >> i wish he had not used the word depression, that's worse than the great recession. that means most banks fail and most people lose their homes. that's a loaded word. until he used that word i was in 100% agreement with everything he was saying. i would like to know where many people who came on our air over and over again, told us that a fed rate hike would be good. good for the economy. fed rate hike was like war. it was good for nothing. all that's happening is autos have peaked and housing numbers are disastrous. i thought we were going towards 1.4. i look at auto nation, carmax, falling off a cliff. auto sales are much worse than people think. everything that -- again, not
using the word depression, made a lot of sense to me. >> even the analogies to 1937? >> '37, yes. '37 is in my crosshairs. i was against the rate hike, but everybody had to bow to the pressure of the rate hike. what happened in '37, bernanke did. he said we slipped back, not to depression, but to bad numberses because everybody thought the worst were over. there were four years between when we were at the bottom and it seemed time to tighten and raise taxes. it was not. now, what happened to get us out of the recession/depression was war. and that's obviously not what you want. '37 was a disastrous change in policy by our government. and i think that if the fed doesn't come out and say, listen, we completely recognize the risks here, we're not going to unroll -- we're going to put more liquidity in the system. yesterday there were stories
about how liquidity -- gartman had a story about how liquidity is strong dramatically. fed doesn't want to say anything because they'll look like idiots. >> liquidity has disappeared to saer a certain extent because nobody wants to buy anything. no one wants to own stocks now or few people want to take new long positions. and we can talk all we want about earnings this morning, we will. they are important at least in terms of our coverage, whether it's ibm, goldman, netflix, but now it's all about the movement of one key commodity, that being oil. which you have said so many times. >> i wish i were wrong. >> it's still about china the slowing growth there and what impact will be, and other macro concerns. all interesting to me when i enter into conversations with hedge fund managers, i like to focus on companies and try to understand things, all they want to talk about is macro. or all the questions for me are
macro. what do you think? those periods, they happen. they're always interesting, but people are searching for answers. >> i'm getting questions from very good ceos that we would know on air, and they're saying what's happening. >> that's because it's like -- will we have the same conversation every day? it's going to be about oil? >> no, because they won't be on the other end of the line soon. we will be on the other end of the line, but they won't be. >> where will they be. >> they're playing in their pajamas trading the futures. the s&p 500 is down 11% from the 2015 high. that's not enough. we crashed through the -- we go through the august 24 lows, and that brings us to another level. the dow is down 12.7% from the high. that's not enough versus our trading partners. that's not enough versus china. that's not enough versus mexico, versus brazil. we're not that strong that we cannot succumb just to the overall downward push. the oil going down every day --
no one wants to believe it's because of supply. i got guys who are in the supply business. here's a term you have to get used to. you won't want to here it. bogo. you know what bogo is? >> no. >> bogo is buy one get one. i can tell you that iran is doing a buy one get one with its -- >> yes. but the timing of this deal and their ability to soak us in oil, just when things got critical is amazing. >> i think our president -- the next thing you will hear is the strategic petroleum reserve being drawn down. that will do it. but bogo, there were cereal wars between general mills and kellogg. >> that was back when he was stanford bernstein analyst. >> he said, jim, the bogo is killing us. i said bogo?
he said buy one, get one. i have to tell you, buy one get one is $13, okay? they got low costs there. >> oil is down more than 20% year to date. one of our friends this morning points out at that pace it would end the year at 19 cents. you're really not that far off. >> remember, the marginal cost for saudi arabia is about 1.50. iran, we don't know. you know, look, we have to face facts that there are oil companies in our country that where the debt is trading down literally every day in lockstep with the crude price. the debt is what you have to watch now the common stocks are very little reference points. you want to keep a close eye on the credit markets. not just oil and gas. high yield has been impacted, now the question becomes will it start to impact high grade, investment grade. from what i'm hearing it could in terms of issuance.
>> how did that keurig deal go yesterday. >> i don't know. but i'll have some other interestings going on in m&a related to the debt market. >> i have people who told me the distressed market, the keurig deal. it just happened yesterday! how can it be distressed? >> what ends the negative feedback loop? is it just oil bottoming? >> yes. >> all right. >> do you believe today somehow is critical? is this juncture critical? you came into the year looking at the august lows. here we are. >> look, why have i just not said get out like i did -- if you need money in the next five years, you should sell everything, a fabled "today" show thing i said at 10,800, i was right, but i have been -- it's not just me. get out now if you think there is systemic risk.
i don't think there's systemic risk. ray daleo thinks there's systemic reese. if fischer were to come on air and or bill dudley came on and said i gave a speech last friday and i should have agreed with james bullard -- let me go there. >> you two have a history. >> bullard's speech on thursday was brilliant. he said if oil goes to 20, the inflation expectations have to be reduced. also the consumer is not spending like the consumer was in mid 2015. bullard's comments were so considered and important and totally overlooked by the pollyanna that was dudley. the dudley i knew from goldman is no pollyanna. that speech read like it was fresh the day it was canned, which is the first day of december. he has to come back and change his campbell soup view, or velveeta view, which is you can do anything, it won't change and still taste good. that speech was devastating.
>> down to 50% chance of a june meeting. and the market pricing in one hike for the whole year, not four. >> i think the important thing is to try to get liquidity in the system. that is so contrary to what they were saying. but i think bullard's speech was about oil going to 20, the impact, which is a negative impact until we start seeing spending. i still wait for the retailer that says we're seeing more spending from gasoline other than at convenience store, which has helped monster beverage. there's a winner. monster beverage has been helped. >> yes. >> monster up. constellation brands, corona, people are just drinking more beer, something that happens when you're down. >> it does. >> i feel like i'm refreshingly positive because i'm not calling for depression. >> god. >> we have that. >> the paths are trading down huge. why do i call it the pasts?
because according to him there is no future. >> he's been calling for quantitative easing. >> but depression is not a word i want to invoke. i bought a farm in '89. >> you did. >> the farm changed hands three times. it was a pennsylvania farm. changed hands between 1929 and 1933. then they were bought by comerica. it was a detroit bank for some reason. a depression is a word you don't want to use. >> yeah. >> you don't want to use. >> doesn't belong in this conversation. >> doesn't belong. >> at this point. no. >> not with our banks so strong. >> no. and our credit markets -- >> banks around the world not as strong. >> bernie sanders would break up jpmorgan into 50 banks because they have a lot of reach? president bernie sanders what would he do to the banks? he would regulate them more highly. >> president trump, what would he do. >> it's unclear.
>> what would icahn do as treasury secretary? finish the chesapeake? buy the chesapeake. >> you're talking two guys from queens. >> i'm invoking my -- i gave both parties mention. if you listen to the candidates and you listen and take them seriously -- >> you bring up an interesting point. do you think it's having an impact on peoples psychology? >> how could it not. hillary clinton wants to raise the tax because she wants to show she didn't take money from goldman which did not have a good fic number. the rich people are doing bad. every candidate makes you feel bad. where do you hide from these candidates when it comes to both parties. when it comes to how they feel about our country. >> less than two weeks away from iowa. when we come back, a lot of earnings news. goldman, netflix, ibm. we'll get into those. and a live interview with jamie dimon from the world economic
forum. another look at the pre-market. with these losses that puts us back on track for a fourth week of losses. have not done that since october of 2014. we're back from post nine in a minute. ♪ they may want the latest products and services, but they demand the best shopping experiences. they're your customers, and as you strive to meet their digital expectations, they're enjoying more choice and greater power than ever before. at cognizant, we're helping the world's top global retail companies face the demands of today's digital economy by blending physical with digital to create more responsive, more rewarding retail models... ones that transcend channels and locations, anticipate expectations, and create new ways to engage consumers at every imaginable touch-point. it's a new day in retail,
pre-markets lower. oil back to the 12-year low. watching goldman and ibm, and netflix saying they added 5.6 million subs in the fourth quarter. earnings did beat the street. revenues in line. reed hastings talked about the growth prospects last night with analysts. >> i think we only scratched the surface. netflix is a tiny percentage of all video viewing today. we have tremendous potential growth ahead of us if we can continue to execute, continue to produce great shows, to have this global launch with no snafus. a lot of hard execution, but the market potential is quite large. >> of course domestic sub ads at 156 was below consensus.
maybe say maybe the conversation needs to be about pricing. >> it was a remarkable quarter. i urge everyone to read the letter to shareholders, which is explicit and the interview. this is about people liking the content more than you realize. it's about how people at one point like to watch tv -- netflix titles. they're willing to see titles they like. talking about "murder "murderer" played better than they thought. the first thing they hit on is content. content that makes people sign up seems to work much more than we thought in russia, in latin america. they sign up in italy. there's a question about someone said europe is not as fast growing. that's what happened with england. they have so many rebuttable
presumptions. it's about if you build it, they will come. it's pretty extraordinary. >> 600 hours of new original programming in 2016. >> it's success rate is so important. >> success rate is in the eye of the beholder, as shown in the recent spat. they don't tell you ratings. we don't really know how to measure success, except by subscriber growth which is how they want us to. i will say netflix is incredible in the fact they've been able to have people suspend disbelief in terms of such -- like amazon not worry about -- >> thank you. >> getting a pass in terms of the bottom line to a certain extent. ratings, they don't share them. they don't give them. tough luck on that. in those areas and the money they're spending on that. the last one is that they use everybody's network and have kept it clean in terms of the
capacity that's used from your broadband provider is enormous. they won that battle in washington as well. >> y they have. >> amazing success. >> the charter, he favors it. charter committed to keeping broadband open, so to speak, wi without additional tariffs. >> hundreds of millions of people, they underprice their offerings. there was a question of how it was doing in russia in russia it's doing well. why? the elites are taking it. it's a remarkable case study on how to build a business. i remember when i spoke to reed in san francisco, i said, you know what? "narcos," it does feel like a combination of "scar face" meets the two escobars. i said is it algorithmic? he said we know what works.
we know what works. he then said the networks don't know what works. they have a high failure rate. this is a conference call where you understand they have conquered -- i love that les moonves the guy who questions. les moonves has all these -- >> it's a different model what works for the network or doesn't work may work for netflix. i don't know where the -- it doesn't -- it's not -- fewer eyeballs may be success on netflix as opposed to if you have 10 million people watching some show, it's not a success. >> 47 billion market cap, but it plays incredibly well in russia. they're not in china yet. they were supposed to come out with crouching tiger hidden dragon in china. mid year. they said we don't know what's happening with china. they got a bass. >> they got 190 other countries now. >> how about if bob iger came out and said shanghai, disney? i don't know.
maybe 2017. this stock would be at 80. >> we should talk about disney later today. >> was terrific. it's anything that disney says is considered negative. netflix talks about how they got something in the pipe that you will love. 112 bid! crazy. >> by the way, last seven years netflix moved 15% higher on the january earnings. that's not going to happen this time. we'll get cramer's mad dash, count down to the opening bell after the break. look at the pre-market which is notably weak. more "squawk on the street" straight ahead. i think it landed last tuesday. one second it's there. then, woosh, it's gone. i swear i saw it swallow seven people. seven. i just wish one of those people could have been mrs. johnson. [dog bark] trust me, we're dealing with a higher intelligence here. ♪ the all-new audi q7 is here.
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it is that time on a busy wednesday. we have about six minutes before the opening bell. let's get to jim's mad dash this morning. we have not mentioned that many individual stocks. let's get to another one. >> no. my old friend steve milanovich, good analyst from ubs is talking about quarterly results unlikely to help the shares. this is important. because there had been a consensus building -- the c consensus was after the quarter comes out, you don't have to worry. don't worry about apple, everyone knows the numbers will be bad. he's saying here basically you don't know that it's not going to be really bad that it could be below consensus. in that case you have to sell it. look, do you sell apple? do you not look at the dividend or the cash?
this market is so bad, ibm, with the -- i don't know 5% yield by the end of the day, no one cares. i will harp back to something you said at the beginning, top of the show. no one cares. i think that milanovich is saying, no, they care if it's not good. they care plenty. they sell. >> they only care if it's not good. if it is good, the fact that the s&p multiple is closer to 16, nobody cares? >> i think it goes to 15, david. until the fed comes out and says we want raise rates, you have a situation where you have one foot in the grave, put the second foot in the grave. >> do i want to consider buying apple at $95 a share? saying i'll put it away and ignore the market? >> if i say yes to that, when it ticks at 91 people will say, hey, he told us to ignore it but the pain is too great.
i look at ibm, come home from a street meeting and study ibm, they did what you would hope they would do. it didn't matter. the stock is getting killed if apple does less, milanovich will be right. >> we will talk to him around 11:40. 15 multiple on the s&p. you see 110 bucks? that's an interesting nugget from you? >> yeah. i just think that that's where it could go based on oil and there would be too many people saying i want in. there's not enough stress in the system to make me not want to own general -- ge at 23. which is where i think it will go in this scenario. >> excuse me? >> you've been saying that for a while. >> 23? >> your point was don't try to time it to 23. >> yeah. you have to get in ahead of that. that was the flash crash. >> yeah. >> that's the only reason i picked that number. >> yeah. >> i'm not -- >> the flash crash warning -- >> companies -- the stocks one
by one are going through flash crash lows. we're seeing stress in biotech off of oil. did you see the way biotech reversed off of oil? >> i did. can you explain that relationship to me? >> do i look like einstein? >> i don't know. sometimes -- no. a little bit like -- >> psychology. >> chemistry is the only way to understand this market. when i saw regeneron trade down with oil, i said, i'm of no value here. i can't create value as a commentator when i see amgen get hammered because of west texas. >> there's some algorithm based on historical patterns that says that happens and it will happen again. that's what we do. >> where you're basically saying when does that relationship break? the answer is when oil goes to 20 and the s&p i calculate would be about 15 times earnings. that's why i came up with that.
i'm not doing an algorithm, i'm doing arithmetic. >> math, got it. >> not math. that's way too hard. i'm literally saying if the deviser is, then the dividend -- what is the top one? >> you mentioned ibm. beats by 3 cents. revenue down for the 15th straight quarter. a lot of talk about lower taxes. you think they did everything you wanted them do? >> thank you for asking. i have a new thesis. last year at this time we looked at two different numbers. we looked what would happen on constant currency and -- in other words, the adjusted, and what it was. that ended this quarter. we no longer care about constant currency. we have a 13.50 earnings number. we won't adjust it back to 15. we're going to put a 10 multiple on it, okay? then because they cut numbers we give it a 9 multiple. so they cut numbers, we cut the multiple by one point, we no lo longer look at currency
adjusted. it's a reality because the currency stays strong. on a constant -- no, pal. we got a constant currency. it's called the strong dollar. we'll use 13.50, get a multiple on that that's how you get this. cut the multiple and the earnings. >> that's hurt ibm, 1.2 billion, 1.3 billion this year. the stock will be hurt this morning, down almost $10. >> because we're no longer looking at the adjusted. now it's a fact of life. cfos, we don't want to hear if the dollar stayed the same. it ain't! it's going to get stronger. particularly if we get the defaults that people are talking about in the emerging markets off of loans. >> off of china. because their currency in relation to china, which is -- >> free cash flow -- >> they're clapping about that. >> free cash flow guidance is down 12 at the mid point. you are not seeing a turn in
software. >> i like the fact that software wasn't that great and that ibm got to 35% on the strategic part. i thought they would be at 32 part. i thought it was a decent call. it didn't matter. now we don't care about adjusted currency. this quarter is the beginning of when those numbers are not adjusted. the dollar is coming in. >> the s&p at the bottom of the screen. at the big board today, women in code, pencouraging women to pursue technology. and at the s&p, education in music. >> now, you know, there's two goldman reports, there's the unbelievable m&a and then i sit next to a guy who would tell me we no longer have unbelievable
m&a. then i have to default to the fixed income credit. i think the story here is david's story. how many deals have you seen this year? >> one. >> then people are saying peak m&a. >> baxalta and shire, something which was planted quite some time ago. if this volatility continues, each day that goes by it makes it less likely that new m&a in any near term, when you have price dislocations like this, that said sometimes you have the opportunity if you're looking at something as a buyer to potentially make an unsolicited bid for something, perhaps, when it moves to a level that you think is appropriate or even potentially on the part of the sellers now, they might think, you know what? i'm not getting my all-time high. i'm not getting that multiple. you can see m&a and results from
declines like we've had. volatility, no. >> i never thought in my life i would see this stock trade through this book value. 171 book. you know, so then what happens? you say, okay, net revenue, institutional client services, my old division, 2.8 billion for the quarter. 10% lower for the third quarter in 20156789 you s. you say that's what is going on. in this environment we look for little things we find. we find equity 9% lower than the fourth quarter 2014. and we realize morgan stanley was better. we find things to hate. that's what -- we find things to hate. that's another theme besides bogo and looking at the futures and calling them the past. the perceived wisdom i can offer this morning, which ain't much. >> got the ten-year, as we said earlier this year with a one handle. we'll talk more about the
volatility. we talked about fed pricing. are you waiting for corporate buybacks to kickback in? do you think that additional source of demand -- b of a says it is tracking to levels of last january. once that comes in, are we do you for a bounce? >> lower if you're a cfo. looking at whether it would be of value. some of these guys are automotons. they just give an order. there was a guy behind us, he had 500,000 shares to buy no matter what everybody single day. then people actually step up and run the buyback as they should, just looking at price. if you do that, if you're looking at that, you would not want to put money to work yet. you would say it's an uncertain environment. what they should do is be buying the break. i think they have to wait until the average stock is cheaper. you don't want to be the only buyer of your own stock. >> yeah. >> that's china.
china and you. >> yeah. >> china, they buy stocks back every day. what good does that do? you have to be careful if you're a cfo. the environment is not so good. they should be buying back because borrowing costs won't go higher. >> plenty of commodity names at the bottom of the list. chesapeake, williamwilliams, fr devon, usual suspects. s&p says more companies are at risk of a credit cut this year than any time since '09. would go along with that? >> there's an area where there's such dessimation. those are very much at risk. no one who was lending to them envisioned a $20 oil price. even the best oil people were not saying that the guy i deal
with, rusty brazil, said it is a fact of life. we can go to 20 without a problem. and the -- no one was lending on that basis. so they don't have any cushions. >> yeah. >> a lot of discussion today about the banks. we had them repeatedly say energy is a narrow sliver of our book. come april they will be doing a lot of reviews with the equity markets already shut. could credit get stingy when it comes to the names? >> they haven't done it yet because they keep thinking -- >> they have done it to a certain extent. they review every few months and have been pulling in the lines, lowering the borrowing capacity based on the fall of the commodity. that keeps going. the question is when will you finally see this restructuring that we talked a great deal about? not amongst the big guys, but the rid mange rand so many other names that we've also mentioned. >> carl mentioned the usual suspects.
there are banks right now -- remember when jamie dimon -- how long ago was it jpmorgan reporting? >> it was last week. >> he had a very, very cogent comment. and i think that -- >> jamie will be joining us in less than an hour. >> good plug. >> want to hear what he has to say. >> the banks are much better. you can't compare it to the housing crisis. these guys, they had so much loans that were done that were undocumented. you can say the collateral is disappearing. >> yeah. in a bogo world. >> >> it is disappearing. a key question for the credit markets, do you see it move out of energy, which we talked about a great deal, broadly speaking high yelled already seeing some impact, does it creep across into investment grade and start to hurt in that area where
spreads would widen and you would not see as much issuance. >> that budweiser deal and imbeimbe inbev. >> yeah. >> that's the deal they liked. 4%. people liked that deal in this environment people feel that inbev is the safest credit around. i thought that interesting that was the case. >> netflix briefly goes into the red after that big post earnings increase. after the bell last night. "journal" today says maybe u.s. subs never get to that 60 million to 90 million goal. that it's getting harder. >> there was a couple questions on the conference call, you said you had this credit card problem. there's some great verbiage in there about how the first 50 million is easier than the second 50 million. if they develop more for kids
and different audiences, it's a question of time. this is a great international story. it was amazing -- cbs, viacom, they don't have that great international story to tell. netflix does. you could say the u.s. peaked. this reminds me of when yyo youe companies -- remember when gap stores moved to japan. we all got exciteded. this plays much better than american clothes. vf corp, when they first started, pfh, calvin klein. this is like that. we are not right to be able to say if u.s. is peaking, therefore we should sell it. what we should say is it plays overseas. netflix is a hard stock to value. you can't value it on earnings basis, that cash flow number i'm sure you didn't like. >> no, but it gets a pass on that while it continues to grow subscribers at such an incredible rate.
we mentioned ibm before the bell, looking at it now. down about 6.5%, shares of ibm. warren buffett can't be particularly happy with his large investment there. >> they're buying back stock. >> currency will impact full year '16 by 1.3 billion. and last year the big investment shifting about $5 billion to her key areas of cloud, cognitive, analytics, watson, they have done aggressive advertising on security and mobile. >> weather channel. >> they have to get that moving. that's the key thing. will the growth there to be enough to offset. >> they grew business at 35%, strategic business. >> they did. >> that was much bigger than people thought. then software. watch goldman. goldman was a good quarter. you want to start looking at benchmarks. what is the book value?
the company has a lot of cash. they can come in and buy the stock. it would be additive. watch mcdonald's. >> chocolate french fries in japan. you saw that. >> i'm not -- new product. french fries drizzled with chocolate. >> i like the current fries. chocolate never hurt anymore. numura, a japanese box, is talking about mcdonald's having a 4.1 comp. i eat these egg mcmuffins -- of course the cleanse has eliminated that. i can't even have kale in my smoothies. i lost half my neck here. >> don't waste away on that. >> kale is too many salaries. have to make it with celery.
>> breakfast initially may have added four, five points. >> amazing. initially everybody pooh-poohed it, but easter book, you wait. >> chips and a fry? what? >> you have to park and go in, david. you can't -- sometimes that car -- the one you go to on exit 69 on the l.i.e., i'm not waiting in that line. i'm jumping out. >> wouldn't know about that. >> i sent easterbrook pictures about that. they cleaned that place immediately. >> you like clean bathrooms. >> i think easterbrook is the real deal. 4.1 is amazing. steve, come on our show. if you do 4.1, fly in here, but bring us some mcmuffins. don't you dare come in empty handed. >> dow down 300. ibm about 60 points of that. s&p below the august flash crash low, 30 points from the ebola panic low. let's get to bob on the floor.
>> 1867, the old august low for. we're at 1850 now. we have broken through that. it was a technically important level. asia quickly, wasn't a good night in asia. shanghai down. the hang seng down 3.8%. down 19,000 for the first time since 2012. the hong kong dollar has been weak recently. a lot of comment on that overnight. japan, no better. bear market territory, nikkei 21% from the recent closing high in june. the japanese yen strengthened overnight. 1.1%. that was a big move to the upside for the yen. no good news over in emerging markets. the etf for emerging markets, lowest level since may of 2009. looking at a five-year chart for that one here. not much help over in europe. banks are the weak sector. we have been talking about the
weakness in italian banks. unilever down 5%. deutsche, society generale, axa, everything down 3%, 4% over there. here in the u.s., normally we would lead on the down side with energy stocks. tech has been notably weak as well. that's because of ibm, and the weakness there. energy down 3.5%. materials, consumer discretionary, industrials, the whole board down 1% to 3%. >> one of the most frustrate thing for 2016 is the search for a successful strategy. the important thing is if you look at sectors, look at areas of the world, nothing works. so the s&p 500 is down 8%. everything is down 8%. eafea widely watched index is down 8%. all world index a basket of all the stocks in the world, down 8.5%. if you take the u.s. out of it and throw everything else in the world into it, that's down 9%. sector by geographic region is
not working. people wanted to argue value versus growth, that's not working. value is energy, autos, financials. growth is tech stocks and healthcare. they outperformed for a number of years. that's not working. one of the only strategies that i've seen has worked is high volatility versus low volatility. anything sensitive to market movements, high volatility down 16%. low volatility down 4.7%. that's an interesting trade. if you look at the high volatility names, sensitive to market movements, freeport, wynn, cameron, first solar, big declines. look at ones lower volatility, typically consumer names, campbells up. clorox is up. not down nearly as much. one of the only strategies out there is to stay low volatility. there's a game about intellectual versus
nonintellectual selling. nonintellectual meaning you got to sell when you don't really want to. i think we're in the nonintellectual part. >> thank you very much, bob pisani. getting to m&a, not a new deal but one announced last august getting recut. interesting to note because it was done quietly last night. last august when symantec agreed to sell veritas to an investment group. the price $8 billion. last night in a press release, that price was lowered, cut to 7.4 billion from what had been 8 billion. carlyle agreeing to double the off-shore cash in veritas to 400 million, and as well take a $400 million equity interest in veritas is symantec. interesting thing happened on the way to the credit markets for this deal after it was first announced which was namely that
morgan stanley was unable to place the debt to finance the go private or the carlyle purchase of veritas. or place it in a way that would have been amenable and acceptable to carlisle and the investment partners. it also takes the leverage ratio on veritas down below six times. it reduces the leverage ratio at least one turn, allowing this to come back to the debt markets to finance it and get it done. those debt markets have not gotten easier to get stuff in. it will be an interesting test. not necessarily reflected broadly of high yield at this point. it's a one off. i'm told as well that there may have been some softness in the business. it may not be just simply getting the deal done in the debt markets itself. all they said last night is they
amended the terms after uncertainties developed regarding the transaction. this is cybersecurity. >> yeah. >> that's the holy grail -- >> in part. i'm told the separation of veritas from symantec may have come along with additional costs, softness. not a lot of people talking about this. that said, they are hoping to be able to bring this back to the debt markets. morgan stanley getting a black eye. uncertainties developed regarding the transaction. >> uncertainties. >> you could put that in a press release every time you wanted to lower the deal price in a significant way. dell is coming with its deal, bank deal very soon. this is not believed to impact that at all. a far larger deal in terms of dell, accessing the capital markets to finance its enormous
purchase of emc. >> emc is probably not as good. >> dell is not as good. >> did you see hpe? >> yeah. shares down another 3% this morning. down 21% this year. >> it's called -- wow. geez. debt markets continue to ab focus. let's go to rick santelli at the cme group in chicago. >> thanks, david. two day of tens tells us a lot. tells us that we spent some time intraday under 2%. today. and on friday, having settled to december 1st you can see how much we deteriorated but have not settled under 2% since the middle of october. you see that chart starting in october. that was one session. if you wanted to stick with the appropriate nation of a violation of 2% you are going back to tax time of last year.
there's fantasy football. there seems to be a form of fantasy trading going on. many think that the european central bank, the bank of canada, our federal reserve can fix this. they primed the pump for years. is the water running without such a big prime? no. so treasury rates may be defrosting a bit, but it's because equity markets are melting into true fundamentals. let's look at bund yields. looking at a chart beginning december 1st, flirting with 50 basis points. you note tens are flirting with two. what do you think of the french economy? if you want to think about the french economy in fantasy ways, think about the qe that involves french securities. look at this chart starting december 1st. y they couldn't get through 1%, but they're at 84 basis points, less than half of what our
ten-year borrowing rate is. ponder that. now foreign exchange. pound versus dollar continues to set records in favor of the dollar. pound now at lowest levels on a closing basis since the spring of 2009. to counteract that to some extent, look at the dollar/yen. the dollar/yen -- dollar is giving up ground. the weakest level in one year, cause, short covering in the end. carl, back to you. >> rick, thank you very much. oil still down almost 3%. jackie deangelis at the anymore m nynex for us. >> prices are falling very fast. traders are shocked by the action they're seeing. the session low, 27.32. we're rebounding off of those levels, but almost down a dollar. this speaks to the fact that this is more than a supply/demand issue.
of course we have those concerns, but this is a lot of investors rotating out of assets, sitting in catch. they don't want to catch the falling knife on this trade. the dollar is taking a bit of a breather today. that's not helping either. weekly inventory numbers were delays because of the holiday on monday. we will get the d.o.e. number tomorrow at 11:00. api today at noon. we are expecting a build but that's not the only thing having an impact. look at year to date chart for wti, it's an ugly chart. down 20% since the new year, this is catching people off guard, even the ones who think we would rebound in the latter part of the year, say we were going lower here before that starts to happen. the only bright spot, gold. but it's interesting because it's not the safety trade it once was. gold hitting 1,100 and just getting stuck there. back to, carl. when we come back, live interview with jpmorgan's jamie dimon at the world economic forum in davos.
ibm taking its toll on the dow. chevron not far behind. every component in the red as the dow is down almost 300 points. close to session lows. time for cramer and stop trading. >> 1847 is where we are bound, next level, 1842, then it's ray daleo time. i like to look at companies whose stocks were upgraded on days like today to see if they can hold. goldman upgraded sherman williams, said this is a great play for lower oil, housing doing okay. let's stay focussed. if you want to see how the market is doing, the tone. that stock is going up because people feel, wow, i know that business is good. but, look, yesterday i -- you
know, i've been cautious. i remain cautious. i like stocks and want people to own them, and i want people to own them at right level. you heard jackie deangelis. this buy one get one thing, this is iran, they can do it at 13 bucks. canada selling that high sulfur stuff at those prices. >> they have a whole populous waiting for the spoils of this new deal and thil waey'll want rebuild market share in a hurry. >> and they want to crush the saudis, the saudis want to crush them, and our guys are caught in the middle. none of this was supposed to happen. none of it was supposed to happen. >> what's on "mad" tonight. >> oracle. mark hurd. oracle is a company very inexpensi
inexpensive. moving to cloud aggressively. mark hurd has a good story to tell on cloud. we have to hear about the legacy business. i look forward to that interview. real businessman in a real world. and neil bushery said he was a dinosaur. i want to know whether he's a tricerat triceratops, t rex -- >> tiny arms. >> or just running a good company. when we come back, jpmorgan's jamie dimon from davos.
good wednesday morning. welcome back to "squawk on the street," i'm carl quintanilla with sara eisen, simon hobbs, david faber at the new york stock exchange. another selloff to the tune of 310 points, oil remains problematic and the s&p is a stone's throw away from the ebola panic lows of 2014. >> markets deep in the red. global equities on track for the
worst month since 2009. how do you position now for the opportunity? >> and netflix seeing a huge beat for q4, but the stock now in the red. >> and goldman sachs reporting quarterly results. the company hit hard by legal cost. details on those numbers. >> coming up later on, an exclusive interview with jamie dimon, live from the world economic forum in davos, that's about a half hour away. >> let's get to the markets, dow down 324 points and oil is falling again. ray daleo was on cnbc earlier this morning from davos. >> i think that the risks are a symmetric on the down side. that's why i said before the next major move in fed policy will be towards quantitative easing, not towards tightening. the problem last year is that almost all assets in the world
went down in value. that can't go on long without producing a depression. >> pretty bleak. ben, you're the one who is rooting for the fed rate hike. we'll start with you. to hear ray dalio, one of the hedge fund titans come out and say the next move will be an easing, what does that mean for markets? sounds very disconcerting? >> from the perspective of markets, clearly the recession probability that risen considerably, at least insofar as what is priced in. i think probably mistakenly, but to understand why you have to understand the series of shocks that's been buffeting the u.s. economy. first is a big tightening of global financial conditions. second is evidence that at end of the year the u.s. economy slowed a bit. up until then it had been a relatively bright spot. the combination of those two
things and the supply glut in oil has decimated crude oil prices. so, i think the important thing to understand is each one of those shocks in isolation is probably insufficient to derail the u.s. growth story. clearly the fact they're happening at the same time has caused markets to price in that more systemic recession scenario a little bit higher. again, i think a few months from now, when we look back at this experience, it will be a false alarm. >> i mean, it's a good overview of where things are now. darrell, do you share that optimism that perhaps markets are overdoing it a bit when it comes to pricing in a recession? >> yeah. pricing in a recession, absolutely. we had six quarters in the recovery where we have been below 1% gdp for a quarter, and two which were negative. fourth quarter will be soft but we don't expect that to persist.
in the near-term equity market also trade off oil prices. i was looking at the eia data, actually supply is balancing out. demand growth has stayed constant. supply is at 1. if you look back at september of 2015, it was 3.5%. fundamentals are starting to turn now. >> it's interesting to hear you, an equity guy, saying we have to forecast the price of oil. do you see that as a bigger weight on the market than china? >> yes. it's trading off of more oil than china. certainly china is a concern. if you look at the yuan, it's stabilized. we didn't get overnight what we wanted which was a triple r cut. we got liquidity injection from china by right now it's all about oil. >> ben, news rooms are prone to gallows humor. one of the younger members of our team laughed this morning and said, hey, stocks are going
on sale. if you're 15 years away from retirement, this is great news. it's horrible if you're fully invested here and if you ignored the warning signals that this show has had for the last 18 months, but there is a truth in the repricing. i wonder where this repricing takes us, how far, now that we don't have for the moment whatever dalio says the central bank pushing -- suppressing that volatility and artificially inflating asset prices. >> there's definitely a kernel of truth in your colleague's statements. if you're look at valuations and investing over a 10, 15-year horizon, things have improved quite a bit. but if you're a bit more tactical, from our perspective, we're thinking about views that have a shelf life, tactical views over the next 12, 18 months. at that point i think you want to be more cautious overall when you think of choosing risk assets and nonrisk assets. that said, the way we're
positioned, even if this is not a market that favors the bold in big directional views is one in which you can express your views on the global macro through big relative markets. we like significant overweights in the u.s. and europe balanced by significant underweights in em and currencies. if you believe the u.s. is not heading into recession, as we don't believe that, i think you want to diversify your exposure to risk assets, not just in equities but other plays. so high yield for instance in the u.s. and europe, you know, after the blowout in spreads, you're getting equity-like returns with slightly different characteristics. so from a portfolio standpoint, that's compelling. >> ben likes developed world over emergingmerging world is f
pain. more than $730 billion came out of emerging markets, stocks, bonds, currencies. most of that was china it looks set to continue again. can you explain why that is such a big deal? why it impacts growth in many parts? most parts of the world? >> certainly we have seen those outflows. we have been underweight emerging market equities because the dynamics don't look good. it's a perfect storm of headwinds for most of the emerging markets. i think what we need to watch here going forward is some of the emerging markets that are commodity exporters, we need to start having conversations about is there a sovereign default on the table at some point at a mid 20 oil price, which is not good for the emerging markets and the economy as a whole. >> i wonder if that's the washout capitulation moment that
global markets would need to bottom? >> historically, you're right. it's been a moment where we have seen that before. you have countries in latin america that are heavy producers, argentina, brazil, those companies getting stressed by this. at some point the interesting thing to watch is watch and see if saudi or opec comes in and regulates supply in the oil markets. they may have pushed the marginal cost producers to the edge and said we need to stabilize here in the 20s or 30. >> gives us a lot to think about and worry about. thanks for joining us. goldman sachs is a big story today after earnings came out, beating expectations for the fourth quarter but those massive legal costs are weighing on the stock. mary thompson has some details. >> as you said, goldman sachs bottom line took a hit from the settlement from the government over legacy issues from the financial crisis. fourth quarter revenue of $7.3 billion did top estimates even
as it declined from 2014. goldman earned 1.27 a share, once you take out the legal share, the firm would have earned 4.57 a share, helped by higher than expected revenue from its lending portfolio and a jump in fees that the firm collect on advising in mergers and acquisitions. on the call, cfo harvey schwartz was asked about the decline in oil prices and whether or not they portend a recession. >> it feels at this stage that the market is taking into account the oil prices. >> goldman's return on equity or r.o.e. adjusted for the legal charge came in at 11.1%, ahead
of most of its peers. advisory fees rose 27%, and it's fixed income and commodities trading operation, revenue fell 8%, hit by volatility and commodities, equity trading revenue fell 9%. compensation expenses stayed relatively flat and that legal charge having a big impact on those results which, overall, analysts believe were pretty good in a tough market. back to you. >> thank you. netflix reported last night on the face of it a huge subscriber beat. the stock was higher in the after-hours yesterday. you can see that it has now plunged into negative territory. is it time to buy the stock? will it work this year despite doubling last. and an interview with jamie dimon love from davos when "squawk on the street" returns.
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big turnaround on netflix stock, despite being higher last night, it's now falling. the streaming giant added 6 million subscribers in the fourth quarter. here's how reed hastings believing original content is pulling in the viewers. >> the big driver is getting people excited about whatever title we have, and making it easy for them to join. whether it's integrating on the smart tv, integrated into the
set top or the apple tv, those things make it easy to fulfill the desire. but the underlying desire is for the new titles, which is why we're so excited about the year coming. >> okay. let's bring in mike olson from piper jaffray to review where we are on netflix. mike, despite what reed hastings says there, in this country subscriber growth is slowing, below their estimates and market estimates, despite doing better internationally. do you think that's why it is down? >> it was a mixed quarter, international was great, but we are bumping up against large numbe numbers. we have a saturation point that we may be inching closer to domestically. >> what does that realization
mean moving forward? is that something people can brush off as they accelerate internationally? >> i think they can brush it off, as long as the growth is there internationally. there are positives and negatives of being so early on in international markets. the positives are we're super far from saturation, mid single digit penetration, a lot of room to go on that side. the negative is we're at a point where we don't know what a lot of new country also look like for netflix, they don't have a brand, content. so there's a lot of spend that has to happen. they're shifting a lot of marketing resources into those countries which could also be negatively impacting the u.s. market. >> it's interesting that reed hastings would stress original content. what take do you have on this idea that international broadcasters are now banding together as the "journal" wrote up on monday in a prominent article, they're banding together in order to win the international rights in hollywood because netflix otherwise is basically cutting
them out around the world. in particular the penny dreadful series appears to have been a turning point, according to the "journal" on that argument. how serious is that moving forward? >> you will see a lot of competitors doing everything they can to make sure netflix is not taking over the world. they are a powerhouse, they have billions they're spending on content annually. they'll be in a good position to bid and win a lot of these content deals. >> how do you value the stock? is this an amazon, just trust us, we'll disrupt a bunch of industries and scale as much as we can? or do you to take a more prudent approach to the costs, margins and subscriber growth? how does that math work out? >> i think investors look at it different ways depending on what side of the stock you're on. we look out to 2020. we give them some benefit of the don't that there will be significant international
subscriber growth between now and then. we have them going from mid single digit penetration to 10% by the time we get to 2020. then we assume margins will continue to improve as they get leverage on the content costs and the marketing spin they're having to do. we discount it back a bit, by that point we expect them growing eps 40%. so there's significant growth over the next several years. >> what about the free cash flow? evercore has a sell on the stock. the cfo last need said there would be $1 billion of free cash flow burnt this year, next year and the following year as well in an environment where they have 2.3 billion on the balance sheet, leaving the question whether they have to raise cash at the end of this year or next year. if they raise cash what does that look like and what does it mean for investors? >> those are ominous numbers.
i can understand why many i investors are nervous about that kind of spend and negative cash flow. as you mentioned earlier you have to take a leap of faith that they'll grow internationally and that that will be there on the other side to make good on some of this spend. we have them starting to be cash flow positive from a free-cash flow perspective in 2017 and forward. we stayed at a neutral rating over the last few months based on the fact that we want to take a wait and see approach to some of the new markets they're getting into. >> good to see you, mike. mike olson joining us from piper jaffray. when we come back, oil prices weighing on stocks again. down 3% again today. that's 26% for 2016 already. we'll get an update from the nymex. and just a few moments away from a live exclusive interview with jpmorgan's jamie dimon. the dow down 333. at every turn...
let's get to the "squawk box" team with jamie dimon in davos. andrew, take it away. >> thank you, carl. we are live in davos, switzerland at the world economic form. and jamie dimon is here. we will a number of discussions this morning on this very set with steve swartzman, with ray dalio, i could go on. virtually every one of them had a very sort of pessimistic tone about the global economy and where this is all going. so i thought we would start by trying to get a sense of where you are. >> first, welcome, everybody. that's what makes markets, people don't agree. they buy and sell and do different things. when markets are this bad, it's reasonable to say it might be telling you something, but also reasonable to say maybe it's not. someone says markets have forecasted 9 of the last 5
recesses. my own view is you had four, five things very different taking place. china scared people with this bungling of the currency and their stock market. and the lower growth that changed flows around the world. commodity prices are down substantially. far more than a year ago. that has caused sovereign wealth funds -- it's helped people. it's helped india, japan, korea, it's helped the average consumer who we think is actually spending the money. it's hurt people. it's hurt commodity producers, sovereign wealth funds. a lot of big investors are selling. causing turmoil in the markets directly. at the end of the day, the economy, you have to separate the fluctuations in the market from the economy. the united states has added 12 million employees, household formation is growing, car sales are up. we're having slow growth. i wish it was more. china, they have the wherewithal
to grow at 5%, 6%. europe will grow a little bit. it will be worse than we thought, but it's possible that this is all a big adjustment and in a couple weeks we'll take a deep breath and say thank god that's over. i also think a fast adjustment is better than a painful, slow death. >> we watch what's happening, you wonder if there's a point where all of this pain makes consumers feel less wealthy, worry about things, makes ceos less confident, and if this leads to less investment. >> if you look at the last 20 geopolitical crises that caused all the ache and pain, only one caused a global recession. that's everything since world war ii, including vietnam, korea, if you look at all the last economic downturns, the ones i remember, '73, '82, '87,
'97, the age of currency crisis, the 2001 internet bubble. the only one where the market changed the economy was in '08. all the others was the markets went down, but it was really the other way around. >> we could be lucky, china's stock market is not china's economy, and oil may not be telegraphing a global slowdown, it may be horizontal drilling and supply which in the end would be a good thing. >> the structure of the oil markets is different because of shale oil. the consumer has a lot more money in their pocket. this issue about are they spending it? jpmorgan chase, we look at real accounts, real spending, debit cards, credit cards, people writing checks, it looks like they're getting the money, spending less money on gas, spending almost 80% of it on t &
e and a bunch of other things it is hard to figure this one out, larger ticket items. >> and enp firms going bankrupt -- >> that changes the cash flows, capital expe capital expenditures. >> banks will incur loss. i worry about solar, wind, $27 an oil. >> don't worry about jpmorgan chase. we are the rock of gibraltar. we have already told the world, if oil stays at $30 for 18 months, we'll have to put up another million dollars in reserves. >> where is your prediction for where oil goes? you did double the loan losses.
>> if i could have put up another 300, 400 million, i don't know. the forward curve of oil has oil trading at $40 at the end of the year. i would say that's the best guess, but i'll leave that to the oil experts. commodity prices, chicken, corn, cotton, lumber, soybean, you name it, interest rates, stocks, they all fluctuate. when they fluctuate we all try to figure out what caused that the misbalance in supply and demand in oil was not even 2%. and so commodity price could be very, very volatile based upon that. this will change. you see a huge rig count coming down, future programs being canceled but it has not stopped short-term oil. >> one of the other things is what's happening in the middle east, saudi raramco is going public. will you be underwriting that. >> i cannot talk about that.
>> we are still two-thirds a consumer driven economy, you have a really good idea of what's happening from credit cards, from what you're seeing in mortgages. is there anything that tells you -- >> when you say industrial, manufacturing is down, 12% of the economy. i was speaking to a bunch of ceos here. almost all of them say i'm doing okay. these are electrical people, commodity related people. not oil, but -- i think more people are okay. they don't see this collapse that people are talking about. >> why are ceos so nervous, thinking everybody is in worse shape than they are? >> as a ceo, if you're not nervous, you're crazy. you should always be worried about something. the bullet that will get you is coming from somewhere, but you don't know where. it's natural having look out and figure out what that is. >> i have jamie dimon moments in the past that are my favorites. >> i have some joe moments in the past. >> mutual. barely a democrat was a great
one. another one where you took shots at the government. i see you -- >> i learned not to take shots at the government because they shoot back. >> right. and you can't fight city hall. that's what i love about you. usually you say it first and ask for forgiveness later. politically it's kind of a -- it's down in the -- what hole is that? the alice in wonderland? it's weird now. >> i think it's causing a bit of a problem. geopolitical -- >> don't you think? >> and globally. what i would hope people would do is not be knee-jerk anything, knee jerk democrat or republican. read and listen to other people. a lot of smart ideas on the other side. almost no issue is binary. if you look at governments that are successful, it's almost always in collaboration with businesses, businesses have to collaborate with government. if we make it just democrat, republican, left, right, you will never get anywhere. >> i can give you three names on one side, and probably only two
to talk about on the other side, some people think, i don't know if i would call it spllim pickings, but not everybody is enthralled with the possible choices. that must be a terrible job. >> i think being president is a very tough job. we made it worse, how many people won't run because of what they have to go through to get elected. i talk to a lot of people and they said they would never run for office anymore. you used to be a business person, citizen, into office, out of office, that's almost totally gone. that's a huge mistake. >> the country itself, though, is polarized. all you need to do is talk to a republican about voting for bernie sanders or talk to a democrat about voting for donald trump, and neither one of them can, in their wildest dreams, fathom a country headed by -- we
all have our own -- i know i who i would prefer. >> this is one of those jamie dimon moments. >> you guys have spoken enough about it. >> over the years i've asked you where jamie dimon the individual, not the ceo, puts his money, besides the stock that you have in jpmorgan. what does jamie dimon do right now. >> i'm consistent. i probably have some of the same stocks. i'm so restricted, if i buy, i can almost never sell. i have extra money i put it in a stock that i think will go up in price over the next 5, 10 years. as warren buffett talks about, this mote that is protectable. i would not buy treasuries. i think if you asked me, some credit is actually in the price range, we start thinking about it. not the energy side, the other high yield credit is being priced like there is a bad recession. unless you think there is going to be a bad recession -- even there, you may get a semi decent return. the principal will drop for a
while. but i think buying great long-term positions is great thing to do. >> you won't give us any names? >> no. >> to be a risk manager, the classic thing about the financial crisis, you, lloyd and others saw what was coming, de-risked in certain ways which made it look like you were betting -- i don't know why you get fined for something like that. but you de-risk. anything you looked at in the entire world where you say, whoa this is -- >> the thing that would shock people is if you sat at a risk committee of ours, we spend time managing risk, not damaging the company and that's called syndication, hedging, limiting absolute numbers, stress test. we stress test major things a hundred times a week. >> if you tell me there's nothing to wrorry about -- back in '08 there was something to
worry about. is there nothing to worry about? >> the thing that worries me is badly designed public policy that has adverse consequences that could hurt us. it won't affect the economy in the next six months or not very much. so there's a couple thing like that that i look at. geopolitics always has the risk of expanding. the way we look at risk, everything we do, no matter what happens, we're okay. we could be dead wrong, we're okay. that's on single credits, trading, while trying to serve the client. in the oil patch, i want to go to houston in a year or two, walk in the room and have the oil folks saying jamie, you guys were here in good times and bad times. we are there in good times and bad times for our clients. if we lose extra money doing that, so be it.
that does not worry me at all. we'll be there in good times and bad times. i think we'll have our 75th anniversary in houston coming up. >> is the right move for the fed to go four this year or. >> i always said -- i personally think normalization is a good thing. i don't believe raising interest rates 25 basis points is tightening at all. technically is there tightening by taking reserves out of a system? not really. the first 25, 50, 75 does not have this tightening effect. as long as the american economy is strong, they should raise mo more? >> i don't know. >> they may not do it now. >> things calm down. inflation -- inflation has short-term things and long-term. let them make the decision. i think you can't make certainty around something that is not certain. forecasting interest rates is hard to do they should react to the events. i point out in some -- most of
you are not old enough to remember that. i remember when paul volcker raised interest rates 200 basis points in one shot on a sunday night. there was no -- no preparing people for it. no -- you know, he kind of knew what he was doing. ive i think we're too fine tuned about what the fed is doing. >> ray dalio is saying there's a possibility we revert back to qe. >> i know what ray is saying, he's very smart, but i still think the economy is chugging along. as long as it's chugging along, you will see another rate increase this year. by the way, if we go into recession, he's right. they'll do something like a qe. i'm not sure reducing rates is as effective as qe. zero rates have a huge unintended consequence. >> does the ten-year below 2% signal anything to you? >> yeah. the ten-year is both a risk off trade, but you also have a lot of people selling it. the two biggest buyers of the
ten-year were foreign exchange managers and the u.s. central bank. in some part the banks couldn't meet liquidity requirements. all three of those have stopped. once that happens again, they'll go back to where they were if people are confident we're not heading into global recession. >> how do you look at the auto market and specifically auto loans? >> auto loans -- they perform better than any class in '08 and '09. keep that in mind. it's getting stretched. people are going to seven years. it's getting stretched. if you're careful in how you underwrite the person, the car, the lease, the lease residual, you'll be okay. auto loans are a trillion dollars. mortgages are 10 trillion. just keep it in perspective when you talk about systemic effect. >> electronic currency. we had glenn hutchins on, the
ceo of paypal here. two, three years ago i asked you about bitcoin. you said it's going nowhere fast. now it seems to be emerging. >> there's bitcoin, the currency, which i think won't go anywhere. not because of technology. governments when they form themselves form their currency. governments like to control currency, there is nothing behind a bitcoin. if it was big, the governments were stop it. that's my own personal belief. i may be dead wrong. the blot chain is a technology which we have been studying, yes, it's real. it can probably reduce the costs of real application in certain things. it's keeping a single file as opposed to keeping our opwn files. if it's cheap and secure it will be adopted for a whole bunch of stuff. it's not usable in certain things. >> are you surprised by the lack of adoption of apple pay, android pay? >> no.
apple pay, they will be adapted more. only so many people at nfc, as ma merchants put in more nfc, these will get used. we see it going up. not a hockey stick like this but a lot of people don't have. >> jamie dimon, thank you. >> thank you. >> we'll send it back to the new york stock exchange. carl, back to you. >> andrew, joe, becky, jamie, thank you very much. jamie dimon of jpmorgan off-setting somewhat the caution that ray dalio brought to our air earlier this morning talking about the guesses on oil, forward curve takes to you 40 by the end of the year. more interesting, mick santoli, is his crew that we're in a classic growth scare in a couple weeks maybe we breathe a sigh of relief and say thank god that's over. >> he's basically arguing with the idea that the markets are telling us something disturbing. this is the main debate.
are the markets handicapping some scary event or economic outcome. jamie said it looks like the markets are pricing in a pretty bad recession. i'm not sure about that. >> but he's pushing back on this idea that there's something sinister to worry about. >> as the markets drop 400 points, in contrast to the positive words he said, he also broke the myth that consumers are not spending their gas money. they are. they may be buying big ticket items. >> i think he said they're spending 80% of that. where are they spending it. >> television. >> buying bigger cars. you will gross up the car you can buy and whatever you can afford in your payment. i think he's been consistent in the message. he has a tremendous window on
the consumer economy, that's not really where the pain is being felt yet. >> the point is well taken that markets do not usually cause recessions apart in 2008. that's an important point he's making. it's also rare to have somebody on the television whose business interest is on higher interest rates. most people on television have to explain why the markets are falling and say we're led nothing recession. this is a man who is arguing the opposite, that zero interest rates are bad for the economy, he would like to see further hikes from the fed. that's absolutely normal. we are the rock of gibraltar. >> yes. >> not owned by the british. >> that's right. he on voice sama bin ladn obvio fears that there is a contagion moving through. jpmorgan touches every market, maybe you can take some comfort from that. >> didn't he say in the middle of that he would released 300 million, $400 million worth of
reserves? >> he would have done more. >> he personally would have done. >> yeah. >> as he was speaking, the s&p 500 crossed the mark for the biggest point loss for a month in history. 205 points. gopro below $10 here. sun tech ni some technicians saying we couldn't hold friday, and we're below the august lows, we're in something more than a correction. >> right. the fact that the market was so oversold, the fact that investor sentiment has gotten so negative, that has not gotten any traction. the other thing about it is the nature of this selling this month has been this oppress iiv across the board liquidation. it's not just about reacting to headlines. '08 was reacting to headlines, you had observable pain in institutions. this is, no, we're taking some off. we're exchanging what we own in stocks and bonds to dollars. >> in fairness to what you said about a week ago, at the end we
did see buying. >> you have attempts. when crude oil closes, you can look at something else. everyone is seeing how stretched we are to the down side. you know, you are sort of having this subjective judgment, have we panicked enough? have we had enough fear in the market? >> it's also interesting to see the reversal on futures which we saw yesterday when we saw them up more than 200 points, lost all of that and gave back, today it holds. you only trust futures when they're up? >> pre-market bounces in this kind of environment are generally suspect. that rule is bearing out. didn't work yesterday. the common wisdom is you would like to see a big down open and see if you can rally from there. >> capitulation. maybe he's right. maybe in a couple weeks, thank god it's all over. we are in the midst of a huge selloff. more on that when "squawk on the street" comes back.
dow is down 377. oil a big part of that story. falling again today below 28. jackie deangelis is live at nymex with the latest. >> as equities make new session lows, so does crude oil. 27.03 is the new low for wti for the february contract. this will go off the board this afternoon, when you look at the price action for march, similar momentum. which tells us this is a momentum play and not happening because of expiration. traders say they think this is straight selling here but that some people are getting in to short. we'll see as we gets to the close today around 2:30 if some of the shorts cover. right now we're falling very far and very fast. while traders say this is not
the typical pattern to move lowers like this, in some ways they just want to get it over. they are looking at support levels of 25, some are saying 22. the dollar taking a breather today, not helping the crude trade at all. we will get inventory numbers after the close today from the api, setting us up for the department of energy tomorrow. we expect to see builds across the board. don't anticipate those numbers to be helping the crude picture out at this point. the only bright spot today, gold. carl? >> i'll pick it up, jackie. thank you very much. more pain for the energy companies as well. worst performing sector in the s&p right now. s&p down 2.6%. the dow down nearly 400 points. michael santoli is with us. murphy oil, devon energy, kinder morgan at the bottom of the s&p 500. talking a lot about how to find a bottom in stocks what about finding a bottom in oil? relentless selling pressure continuing. >> it's essentially the same question. for every dollar that crude oil goes down, that much more
capital is stranded somewhere. that much more capital is in the wrong place. that much more pressure on dividends. i think that's the chain, not to mention the pressure on currencies around the world. to me it's oil through credit, then a matter of what -- how stocks react and the earnings picture. i don't know how to call when that process ends. >> darrell cronk was on at the top of the hour saying we may see sovereign default stress for one commodity producer and maybe that's your ah-ha moment. >> it seems like the markets are probing for something like that. i don't know if it's a massive dividend cut by one of the big oils or a commodity producer -- >> i find the other parts of the market interesting, starbucks, tiffany tiffany's, home builders, down 5%. either that's all overdone, or your contagion is spreading to a
bigger market selloff. that binary option is where the opportunity lies. >> exactly. that's a sell what you can reaction. you have flows reversing out of stocks generally speaking. then once that subsides, that process of selling subsides, yes, you look and say what's been unduly punished here. >> or forced sellers. maybe people are forced to sell quality stocks because of what happened elsewhere. >> sara mentions cronk. he said maybe the saudis feel like they finally washed out, and u.s. producers are saying we'll protect that, whatever the number is. >> if unhedged producers in the next several months will get shut down, it's not a tomorrow event. >> it's also interesting that you have other cross-counts going on. you mentioned currencies. the pressure on some currencies that have been pegged for decades, like hong kong, and like saudi arabia. is that about mistrust of central banks here so much that they don't think they can hold up the longstanding pegs.
>> it's mistrust or at least doubting the power to sustain them. looking for stress points. right now markets just look for vulnerabilities. i loved it doesn't mean the pegs break. it is what are you willing to pay to preserve them and defend them? >> we haven't gotten your take on the comments this morning? this story is a continuation of his long-time thesis of the debt super cycle, right? nothing has changed. >> it is. obviously the markets are trading as if the fed fund was a potential error. you have to extend that out i think a few chapters before you get to qe happens any time soon. i think we've been correct.
23u talk about fewer than four or three, it all of a sudden sounds like easing to the market. >> also, you just had the co, jp morgan on the network, saying it's not necessarily, in the same way you have bill dudley, the third moss important member of the fed on friday, not mentioning anything that's happening to the markets. you can get caught up in this world of people that own asset spz what they are doing and what they are thinking, and that may be very different from the real economy. >> up next, we're looking for value plays in the middle of this on squawk on the street.
specifically which ones could be potential candidates possibly looking at things like dividend yields and relative valuations on things like earnings. here's a simple screen we put together to illustrate the point and kind of incorporate aspects of both here. now, of the s&p 50000 stocks we took out all of the stocks that trade above the current market price to earnings ratio. that's 17. of those remaining, we then look at only the stocks that trade with above 2.2% dividend yields. only three stocks out of the 500 have passed all of those screens. ppl, it's a pennsylvania-based
company that trades at 12 times earnings. it has a yield of about 4.5%. also, an insurance company, cincinnati financial, passes that screen. property casualty, that's what they do. it trades at 14 times earnings. has a yield of about 3.5%. then there's nisource. this is an indiana-based utility that serves a lot of places in the midwest. it trades at 16.5 times earnings. it has north of a 3% yield. there's this huge debate about whether there's a crisis in the stock market. jamie dimon spoke about whether or not this is an orderly decline or revaluation of assets. now, while there's no telling how much lower stocks can go, some are, sarah, looking for the relative safety of certain types of these types of stocks -- some are also looking at a price of crude. we're below $27 a barrel right now for oil.
let's have a look at what's coming up on squawk alley. >> what do you think is coming up? that's quite a setup that the dow and s&p down that much. we're going on continue to track these markets. also, netflix, it was tough after hours. now it's down more than ibm. what does that say about what's happening in growth stocks in this market selloff, and ubs has a new survey out tracking iphone sales. doesn't look good. part of the reason why apple is down more than 3% most of this morning. "squawk alley" is coming up. >>got it. we slow, we die. >>what about cashing out? no! i'm trying to build something here. >>how about using fedex ground for shipping? >>i don't need some kid telling me how to run a business! i've been doing this for 4 long months. >>fedex ground can help us save money and deliver fast to our customers. not bad, kid. you remind me of a younger me. >>aiden! the dog is eating your retainer again. let's take a short 5-minute recess. fedex ground is faster to more locations than ups ground.
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it is 11:00 a.m. on wall street. big selloff continues on the dow. down about 431 points. the s&p down 55 to 1,826. there's literally six points away from the ebola panic low of october 2014. a lot of this is due to the price of oil. crude dropping below $26 a barrel now, and some of your top losers on the dow, chevron, ibm, cisco, and boeing, at one point a couple of minutes ago there were two, count them two, gainer