it's tuesday, august 25th, 2015 and squawk box begins right now. ♪ >> live from new york where business never sleeps, this is squawk box. >> good morning, welcome to squawk box right here on cnbc. i'm andrew ross sorkin with joe kernen. becky has the day off. our guest host is bob dahl. he's going to help us try to figure out what to make of this roller coaster ride in the markets. that's where we will go right now. let's get right to the markets after yesterday's crazy ride on wall street. stocks look to recover today as joe just mentioned. futures are pointing to a huge pop at the open but if yesterday was any lesson no one knows what will happen over the course of today's session. we should tell you the dow travelled nearly 5,000 points yesterday. that's not from top to bottom but throughout the day with

nearly 3,000 coming just in the first 90 minutes. the blue chip index closing down more than 500 points for the second straight day and over the last three sessions the dow and s&p are down nearly 9% and the nasdaq is off almost 10% yesterday alone $685 billion is lost among market cap in s&p 500 companies. that's $100 billion more than apple's market cap. if they don't tell you enough about the volatility check out the vix. moving above 50 intraday for the first time. check out the front pages of some major newspapers around the world today. you're looking at sort of a full list of what's going on in virtually everybody touches on the market above the fold. >> like the bear there on the new york post? >> wild. >> and the guys -- a lot of

times the photographer is waiting and he may have a scratch here on his eyebrow and looks like he's stressed. >> i think they pose for them now. they see the photographer coming and they're like that and just do that look. they want to be in the paper. come on. >> have you noticed what we talked about yesterday, how we keep talking about a thousand points in a week? it's not that much. it's 6% and i said the market is going to let us know that that's not and we did 1,000 in 5 minutes at the open, but all said and done i think we're getting acclimated where we need to recalibrate a big move because it was like wow, we made it back to only down 600. >> did you believe -- >> when it comes to percentage moves it doesn't rank very high. >> but yesterday when we were

done, down 600. didn't you think that was a pretty good showing? >> i thought things had gotten better but did you think that the open, was something that was a terminator style future. >> with hair like that. >> don't knock the hair. if nothing else don't knock the hair. >> he's a technology guy. >> i hear that wasn't ka pitch y -- capitulation. >> didn't everybody hah v to ha recount the risk. >> that 1100 point decline in the dow had a lot to do with that. you couldn't buy a whole lot of stock down there. >> it was a five minute window. you could get one or two pieces and that was it. >> netflix was down like 18% or something. >> ge was like 20.

>> there are quantitative models. none of us forget 1987, selling begot selling. this is different but when the market goes down some are forced to sell and we saw some of that. >> i don't know if you have any comcast stock but key employees do get some comcast stock. did you notice yesterday where comcast -- >> i did. 54. >> it was trading at 50. >> i didn't see how far it got. >> you don't watch it that closely. why would you? but that was down at $50. >> yes but hit 50. >> i'm a long-term bull on comcast. >> better be. >> some day they may award something to you. i think so. you keep it up. keep it up. >> so u.s. futures look positive this morning and sharply positive. >> i'm a proud owner of comcast stock. let me just say. >> you also have that now which is easier to sell. the commission costs are less.

>> true enough. >> so it was another ugly session in china even though we see the u.s. futures higher this morning. the benchmark shanghai composite index above the key 3,000 level accelerating into the close. investors pointed to disappointment about the lack of policy action to beijing so it declined once again to more than 7%. nikkei closing down sharply. stocks tried to rebound early in the session but turned negative in afternoon trading. the rest of asia seeing green arrows. as for europe in early trading we're seeing positive moves there across the board germany is higher by nearly 3%. france is higher by more than 3%. ftse higher by more than 2 and greece up nearly 7%. just a thousand to go. maybe they'll be back to even. more coming up in the next half hour to talk about more of what happened overseas. >> where were you in 1987?

>> the oppenhiemer funds. i remember tuesday. tuesday morning is when it almost fell apart. i sat on the trading desks. >> futures were down and at 2,000 that was a lot but the reason i brought it up i had a machine and i took a picture of that at the end of monday and that's when you saw like regular stocks, real stocks at 4 and $5, like american express and the big names were at numbers where you saw them yesterday and it's like that's crazy and they came back. that day they never came back. most of the dow was like single digits and i have a picture of it. >> did you bring a camera to the office? back then you didn't have your cell phone. you would have had to think about having a camera at the office. >> how it actually came to pass

but you would. i spent most of the day under my desk and the phone would ring and i'd pick it up and i'd go joe who? kernen. no, i'm just cleaning up around here but that was some day. >> i think it was classic technical selling. you got the panic low on monday on the huge volume. you got the turn on tuesday, a lot -- miss a lot of turmoil, closed up nicely on the day. the valley continued but then we had the test of the low in early december and went back almost to the low of october. >> is that going to happen this time? >> it took three years to come back. >> no it was back fast. >> we went down to what level? we were at 3,000 almost and we went down to -- >> i thought it was 2700. >> and then that was -- we didn't get back up to 3,000 for awhile. >> took it awhile to get back there. do we follow that pattern again? i think we do. >> i hope not.

>> those days it took a couple of months to retest. things are telescope now. they happen much more quickly. >> how many days? nothing. >> are we going to go straight up from here? i don't think so. do we get a reflex rally from here? >> do you think the bottom is in? >> there's a chance the bottom is in. it's at least 50. >> what about the basic idea, correction or crisis? >> to me they're the same. is it correction in a bull market or the beginning of a bear market. i think it's a correction of the bull market and the fun mentals of the reason i say that which we can talk about. >> andrew, we used to walk to school both ways, snowing, and if you weren't here in '87 you really don't know anything, right, bob? and we were allowed to not do twitter and facebook because we have all of this other vast

knowledge. >> merrill lynch owned them for awhile. >> i called my dad and asked if we could afford to keep me in college that day. >> did you? >> did he? >> yeah. >> despite the way eight piers now. >> let's check out oil which is rebounding today. $1.17. dennis will be on a little bit later to talk about the prospects for crude. it's gotten to the point where we need crude to go up for equities to stabilize which make nos sense long-term. there's the ten year 205 that got under 2 again as people thought some day it will get to three. we've had more false starts than you can imagine. 115, the euro really got much more expensive to take a trip to europe in the last week. back to 115 which is down a little bit.

check out gold which people that have been long-term gold bugs are starting to say this is the time and you can see a little bit of a move on the right but that remains to be seen. i don't know. i don't know. you have to pay to store it. >> love it at 2,000. >> unless the world changed big time in the last week, i don't think so. >> i have a little. got to have a little. >> to bribe the border guards. >> these days we don't have border guards. >> andrew, can i throw you a bone. there's no border. >> there's a donald joke in here somewhere but i don't have it. >> how about my ode to trumpster. is it homage. >> focus on everything above his forehead right there. >> if it's working for him and he never shies away from -- yeah this is my hair and it looks great. >> but you don't do a comb over.

yours is real. >> he does a comb over. >> no he doesn't. it's growing there. >> he's not bald. >> you met him. >> have you met him. >> i know him and it's not a comb over. >> what do you mean in of course i've met him. it's not a come over. do you have a comb over? okay let's go. >> the recent market volatility leading nearly everyone on wall street to rethink forecasts and a note to clients goldman sachs argues the global economy is not alt risk of recession. still the firm is lowering it's short-term outlook for global stock markets to neutral. they remain overweight over 6 to 12 months and expects the s&p though to rise by 11% to reach 2100 by the year end. the firm now expecting the asset class to underperform. the analysts say they quote, see a meaningful risk that markets are overinterpreting the collapse of oil and commodity

prices as a negative growth signal. they believe it's excess supply rather than weak demand. that's a debate we're having every single day. and having ripple effects on the ipo markets, historically a slow period for market sales but it's worth noting that radiance technology cited market conditions for companies that have recently gone public. check out share of alibaba. shares dropping below the ipo price closing below $68 for the first time. twitter and etsy all dropped below their offering price. the average gain for 2015 ipo compares to last year when ipo's delivered an average price jump of 20%. this is going to go down into the private market crazy unicorn situation and who knows what's going to happen. >> as we have been discussing

the market turmoil sparking all kinds of questions about the fed and possible rate hike time line. here's what former dallas fed president had to say about the markets and the economy. >> we went through a substantial correction in 1962 and 1987. it wasn't harmful to the economy. people are jumping like the last comments you had from several people a little bit too early here. we'll see what prevails. the u.s. is strong. our numbers are moving in the right correction. >> let's bring in the portfolio manager and our guest host bob dahl. can either one of you explain, the china market goes down 8%. we go down 1,000 points on the open. so the next day the china market goes down another 8% and we're up 400. are we decoupling? maybe we should have been all along. >> the key is is the china economy going to get bad enough

to effect the global economy. the reason we had the big correction is the fear of the possibility. >> so we're not worried about it anymore? >> no, but i think if you look at the effect of the u.s. economy that there is a decoupling. in other words, the united states economy is not that dependent upon china. in some ways the devaluations might actually help u.s. consumers. so i think that the u.s. economy is better able to weather the storm than say germany is because they're more dependent on the exports to china. so is this the bottom? i don't know. but we think that stock offer pretty good value. >> was there any -- do either one of you think that the september rate hike which seemed to be a certainty two weeks ago, did that start to come into play over the last week or was it all china? >> it's a secondary issue in recent days but it's in play and

it's not so much are they going to do it or not, it's the confusion around it and disunity in the fed. if they told us they're not going to raise rates or they are going to raise rates, either way would be better than have no clue what they're going to do. when you're in a period of uncertainty and confusion more uncertainty and confusion just muddles it. >> what if they don't have a clue? >> they probably don't. >> the reasons they were going to do it in september are probably still there if the world settles down. if the world is messed up like this they won't go in september in my view. >> the rate of inflation is likely to go lower because of the drop in the price of the oil and the strength of the dollar. >> it's basically 2%. unemployment, you know, you have employment of 5.3. >> if inflation is falling to 1%. >> worried about deflation at this point. >> i don't know that nobody is worried about it or at least some people should worry about it because we do see deflation

in many parts of the world. >> this piece says this is paying the piper for deflating assets. >> see, i know that that narrative is out there but if you look at the fundamentals of earnings and what interest rates are you could make a good case that the united states stock market is fairly priced. >> when you see a snap back or correction, whatever in this short of a period, is that a good sign or a bad sign? >> well, it's a normal sign first of all. you get about one correction. maybe more than one correction on the year. it's a normal thing that happens there. >> it's hard to ever say when a correction is going to come. >> go back to the issue of china. go back to japan and when japan fell out of bed and you said that economy second largest in

the world isn't going to do anything for 30 years, do you think the u.s. stock market would have done as well as it has? okay. so china has fallen out of bed. maybe it's not going to achieve the growth levels we've seen for a long time, we can handle it but china is much bigger and much more influence in commodities. so what is it? can we survive or can we not? >> we have to separate this into economic effects and financial effects. if the economy in china slows which it is. >> for sure. >> i agree with that. >> gdp is 0.7% to export to china. if it slows enough where there's a financial problem or financial accident, the world's financial system will have a problem. that's the fine line. i don't think we crossed it but we have to keep our eye on it. >> we can't be complacent because there's a possibility that things slow much more than

we're expecting but that said you look at the data, we have pretty good data out of germany today. in the united states it's not booming but consistently showing growth at 2.3%. unemployment rate is coming down. labor market is good and there's still a lot of positives. i'm not saying that we couldn't go lower. we could. but you're getting good value on the stock market and 2.2% dividend yield. >> what takes us lower and does he have anything to do with it? will the fed take us lower? >> i personally they will won't. partially because we're talking about the rate hike for so long they'd have to surprise us a lot for the fed to be at these levels. >> all right. so the high in 1987 started the year at 1895. so closed december 31st and went

from 2700 and closed at 1938. december 30th, 1988, 2186. wasn't until december of 1989 it went up. >> i remember it was a time when we weren't getting -- i thought we were going to get back to the highs in november. we didn't in 88 or 89. >> since this bull market started in '09, this is the 5th double digit percentage decline. the other four, it took 57, 16, 18 and 92 days toob back to an all time high. that is quick. i don't think it will happen that fast this time but i would have said that the other four times and that came back. >> i'm getting it in my ear. >> this is what we've been waiting for. >> i saw that earlier.

that they added more reserves than they have in the past. >> i got this from mark grant at 2:28 a.m. they added the most funds in the open market operations in six months it's also cut the benchmark lending deposit rates by .25%. >> and take a look at this the futures just moved another 100 points. >> china is done. >> but this came out of 2:28 a.m. here. >> i think you're talking about the stuff from mark grant is slightly different than what we're talking about here. this is pboc cutting interest rates. central bank cutting interest rates. >> this is hitting the wire

within the last minute and a half. >> you're talking about liquidity. >> right. so now they're trying this. maybe that is helping our future. >> look at that 300s and now the 400s. >> 477? >> yeah, why not. >> what is that? 2% or something. >> you know. >> it's good. it's good. >> if people combine themselves 1% these days they're happy campers. i'm sorry. >> that's a term that -- >> jerry seinfeld. >> there's a term that's not used enough. happy campers. >> all right. >> can't use that going forward. >> an increase in the rally. >> are you cautiously optimistic going forward? >> i'm constructive on the market. >> i heard people say all eyes

are on. >> all eyes on the pboc. >> so listen, we had big breaking news in the last few minutes relating to china and efforts to stabilize the markets this. we'll talk more about it on the other side of the break and see what that means in terms of stocks and the price of oil. how hedge funds are trading we'll talk that as well. first as we head to break, here's a look at this day in history.

welcome back. we have news just crossing from china moving these markets. dow will open up about 100 points higher than before. that's in large part because we're finally getting some policy measures out of china that we've been waiting for for the past couple of days. going to cut the benchmark interest rate and lower banks reserve requirement ratio and cut it's lending deposit rate. people have been trying and waiting over the weekend to see if china was going to try to stabilize the markets. the chinese market closed at this point but we're seeing the market here in the united states move on this news. in the meantime, let's get to kate kelly who has been tracking what hedge fund managers have been doing during all of this

market mayhem. good morning. >> it's hard to generalize but the sense i got from talking to folks yesterday was while two days of market carnage prompted hedge fund selling with many believing u.s. economic fundamentals are still strong it may have been a continuation of the strategies funds had in place than bailing out of things because there was a panic mentality. the stock market was down big, especially in the morning but commodities in emerging markets are sustaining the more long standing, long lasting pain here in the hedge fund books. with china's weakening now clearly a story line, some are shorting baskets of emerging market currencies versus the u.s. dollar expecting a rim effect to occur soon as china unwinds but not clear where that starts and wanting to make a generalized bet. oil taking a beating among many commodities including copper and aluminum. at last check money management players in the market were still

considerably net long crude. now that data is a little bit lagging. cft puts it together on a weakly basis. the hedgefund community has gone predominantly short according to a friday credit suisse report marking the least optimistic outlook for nearly a year in crude. some looking for farlower levels on stocks as they continue to fall. a signal for the strong correlation between china and raw materials. one person showed me a chart of the shanghai composite versus crude saying they expect it to go farl lower. some like gasoline here versus the more commercially driven diesel thinking there could be a very valuable trade going on there. hedge funds favoring internet names as an attractive secular play as opposed to names like software and services also doing a lot of shorting in the media

sector. >> the media sector has been hit hard. continues to be hit hard. >> it was across the board. movies and interstainmeentertai >> but netflix down, what did you say? 18% at one point yesterday? >> at one point. >> there were moments yesterday at the open where if you could get in there were incredible bargains but it was tough to buy in size because there's not that much liquidity. >> some people thought the trades weren't real or might get reversed or something. >> i know. >> meanwhile, who could explain some of the green. you were on the 12:00 show with me and i remember you looking at micron technology which someone of the worst performers in recent months. >> he had to be happy for half a day. >> before we talk oil who has been sitting with the most cash on the sideline waiting for this moment? is anybody jumping in?

>> hedge fund managers positioning well for the moment. >> to the extent this is a dip or to the extent they think over the next couple of months there will be a moment. >> i don't know. it's hard for me to say who it is here i know some that can't figure out which way we're heading. i also know macro managers saying we're the best looking house on a tough block and that would seem to continue to be the story. yesterday was all about china, wasn't it? and the european reaction to china and then the knock on effect in the u.s. markets. now already we're poised in a better position today. we'll see what happen with the latest intervention. they don't have an endless supply of tools to pull out. bob would agree i'm sure. >> yeah. what's the key one. what's the short list you're looking on? one policy reaction from china and number two, stabilization of the commodity pit so we don't have this deflation concern.

>> but here's the issue with commodities. they don't tad like a stock. they factor in what's happening today and not in the future and traders like to point out to me there's no standard floor so they can go to single digits before you know it. >> can we just show the board one more time? one of the things that's interesting is in the past couple of minutes we got this news out of china that they would be lowering that benchmark interest rate and changing that ratio which would be good for the markets yet you're seeing the dow come off of its high. >> if you believe you're stabilizing the stock market in china. >> they have done bigger things on the way down. they've done a bunch of stuff. they even stopped sellers from selling. >> do all kinds of things. >> felt like yesterday they had

almost given up and said we're not going to intervene anymore. in fact there's columns you can read on certain newspapers that say great china finally didn't intervene. they're finally learning. you have to let the markets go to work and just do their thing and so much for that. >> i'm not sure even the u.s. market is going to. >> just cutting rates. >> but they didn't announce what the ratio change was going to be. >> that's the interest rate. we really went to see are they going to buy stocks, right? >> yes. even when they do that but i'm not sure that's a good sign either. >> let's talk about oil. joining me is yeajamie webster. let's show you real quick by the way, good morning to you, just a board on wti crude for a second so everybody can see what's going on there.

you're looking now still below the 40 handle. 39.56. how low can it go, sir? >> you can still have a couple of dollars. this china news will help some things but we still see china demand as bearish this queer. we don't think -- we think that most of the growth has already happened in the first half of the year so china is not going to be able to deliver the sort of demand needs that we need in order to balance this oil market and bring us any rally. >> we have a supply problem or a demand problem? this has been one of the great debates -- i don't know about our time but the past six months. >> we've had this debate as well. i hold it as a supply problem. you have an enormous amount of production out of saudi arabia. increased production out of iraq and the u.s. production is still up relative to last year. it's very much a supply problem. >> you're predicting wti crude where in about 12 months from now. >> 12 months from now we see it up in the higher 40s now but a

lot of down side risk to that. it depends on how much the u.s. producers end up cutting. >> and when you say down side risk how down side? we had john in hearsaying we could have a 20 handle on it. >> on a day by day basis it wouldn't surprise me if you end up seeing a 20 handle. you could easily see that for a very short period of time but that's not a sustainable level. >> we appreciate your perspective this morning. thank you for coming in. >> china cutting rates in the last 20 minutes, a live report from asia when squawk box comes right back. but you're armed wy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school.

gear up for great.

good morning, welcome back

to squawk box right here on cnbc. breaking news had hour, china just cutting it's rate and lowering reserve requirements for banks. our global cnbc team has it all covered. we want to get over to sri in singapore. good morning to you sri. >> good morning, andrew. so here comes the cavalry. i've been saying throughout this week that we ought to see a policy response from the pboc. it's come earlier but on the face of it it does look quite bold and i think what the authorities in beijing are trying to do is trying to avoid misallocation of capital. it seems to be quite aggressive, especially when you consider this 300 basis point cut for the financial leasing companies and auto leasing companies. perhaps that's directed at the

smes. the banks with the high proportions of lows. the question is whether this will be enough to restore confidence to the broader economy to really rekindle growth in the broader chinese economy and by association restore some confidence into the stock markets as well we had silence up until now. we closed at 7.6% today lower. that's the lowest since december 2014. let's see what happens tomorrow. whether it will rekindle and lift the animal spirits in mainland china equities. that's where we stand. seema, back to you. >> in the meantime, sri, european markets are responding positively to the recent measures announced by china to stimulate their economy. stocks at session highs right now. xetra dax up 4.5%. similar gains in france and italy. we did get encouraging german

sentiment data which signals china not impacting german confidence. so investors responding to that data as well but we should point out market participants are become cautious when it comes to european stocks. goldman sachs downgrading european equities to neutral from overweight. a lot of concerns about china. the euro gained about 5% over the u.s. dollar over the past one month. not good news from the european companies that rely on exports and have significant international exposure. keep an eye on the euro at 114 against the u.s. dollar. also despite the rebound today we're up about 4.4% over the past three months. michelle, we're down about 12.3% here in europe. back to you. >> been a tough time. coming up, u.s. equity futures are soaring this morning. we'll talk buying opportunities when squawk box comes right back.

i hate cleaning the gutters. have you touched the stuff? it's evil. and ladders.

sfx: [screams] they have all those warnings on 'em. might as well say... 'you're gonna die, jeff.' you hired someone to clean the gutters. not just someone. angie's list helped me find a highly rated service provider to do the work at a fair price. ♪ everyone can shop, but members get more with reviews, live customer support, and better pricing. come see what the new angie's list can do for you.

i wish i was in school. [overlapping chatter] if only i had a math test today. i'll stay after class. i'll clean the chalkboard. i wish i was in school.

man: school ends, but free lunches for your kids don't have to. find your local feeding america food bank for help. welcome back to squawk box. let's talk more markets. joining us is jeff dennis, ubs head of global emerging markets equity strategy. good to have you here. >> good morning. >> so we have been talking about how bad it's been in the u.s. but it actually looks good compared to the epic underperformance that we've seen going on in emerging markets. your reaction in this news coming out of china that they're going to cut interest rates for the fifth time since november and cut the reserve requirements ratio as well. >> it's helpful. it's 24 hours or one market day anyway later than people have

anticipated. perhaps two in market terms. it's going to be happening in the weekend and the fact that it didn't happen contributed to the heavy losses on monday. it's helpful and it's conventional economic policy to support what is a slowing economy. i don't think it should be viewed as something to support the stock market generally. it's conventional economic policy. they need to keep cutting interest rates to simply maintain real interest rates fairly stable for them to fall but inflation has fallen so much this year. >> so it's incredibly difficult to buy china correctly. is there anything you're willing to buy at this point? what about brazil? what about russia which have been hit so hard.

>> we do think there's things to buy. we have a report where we highlight some pockets of interest i think out there. india, certainly, which remains a good story in emerging market terms. we would even buy into china. our investors are looking at more the hong kong listed chinese stock which is pulled back as well. nothing like the shanghai composite. we continue to like the mexican story although peso is weak at the moment and also we do have an overwait russia. we called the bottom in oil prices early and we think the economy is slowly beginning to be on the mend. we think it's way too early to buy brazil because there's a good chance that brazil will be downgraded by s&p to investment grade stages so too early to buy brazil. the general thing, if i can say this as well, emerging markets

have a pretty nasty global growth scare which has come from around the world. we think it's overdone given the reasonable strength of the u.s. economy and the pick up going on in europe. >> well, if that turns out to be true then there's going to be area of opportunity in emerging markets for sure. thanks jeff. good to have you on this morning. >> thank you. >> coming up, the yield on the ten year back above 2%. what that might tell us about the economy and the broader markets. that story is next. plus what bob dahl, just a man, you know it, i know it, the american people know it. that's what bob doyle used to say. you're bob dahl. might be buying at the open, great american hero by the way, bob doyle and bob dahl and whether there's still time for investors to buy the dip. squawk box will be right back.

there's ten-year, 2.8%, which all of a sudden is high. managing director, frequent guest, he talks about fixed income strategy at janney. >> good morning. >> i don't know what you said last time, but you'd be excused

if you didn't forecast below 2% because no one saw this coming. what's our trading range now, 2 to 2.5? >> yeah, i think so. yesterday i think we hit the bottom of the range and i'm not looking so much at the ten-year note as what euro markets have priced in for fed funds at the end of 2018. that number bottomed at about 180 give or take in the midday selloff. janet yellen has basically said herself that number shouldn't be below 1.80. i think the high end is probably a little higher than we're thinking right now, but given the global economy market turmoil for the moment, i don't we get too, too much higher. so pretty tight range for the short term. >> i don't know if the fed wants to look like they react to every break in the stock market. i think they were sensitive, i

think they got a lot of criticism for the taper tantrum. yesterday they said they had feet of clay, doesn't take anything for these guys to wimp out. and lockhart said we're set up to do something this year. what are the chances september is still on the table? how much of that diminished? >> the way the fed reacts to movements in the equity markets isn't necessarily for the valuations themselves. it's for, a, what that implies about financial conditions and, b, what the market thinks about the economy. i can look at the libor ois spread, despite what's happening in asia today, there's very little turmoil so financial conditions are still solid. the other question about what this implies the market thinks about the economy is still a little open-ended. at the july fmoc, participants admitted in the minutes they're on the fence. if you're on the fence, it only

takes one nudge to push you over. on balance i would say this reduces the odds of september to nearly nil. >> feet of clay. >> yeah. >> nearly nil. >> did you read larry summers yesterday? if i believe him, i should never sell the ten-year. i should own it forever. >> he -- >> he says the reason they are where they are is because we're stuck in slow growth and that's the interest rates of the economy will need, like, forever. >> yeah. larry summers, of course, a person who kind the idea -- or the term, i should say, of secular stagnation. by all accounts and measure, slow population growth, low returns to technology, they're coming true from day to day. that's impacting not just today's economic growth but the maximum growth the u.s. can achieve and, therefore, interest rates as well. i think saying it has to be zero because of secular stagnation is a little of an exaggeration but sub 2% interest rates for the foreseeable future, that's definitely in the cards.

>> yeah, you connected so many dots. so, the fed looking to see whether china's selloff in its stock market could affect its economy which would affect the global economy which then would be imported to our economy which might affect our economy -- see, don't think they do that. i think they say, the stock market's going down. we can't raise. i don't think they use any of that analysis. i think they feel personally responsible for every tick in the dow jones, which is a cynical view. they shouldn't do that but that's the world we're living in right now when we all depend on the fed for everything. sad. >> yeah. i mean, the last two, three years of market performance, be it fixed income market performance, equity market performance, so much -- you hear just listening to the guests on your own program, what we're talking about right now, so much has come to hinge on the fed's policy rate in a way that wasn't the case in the last sickle 10, 15 years ago. >> okay. thank you. bob, what's the -- if you depend

on the -- if the government can -- if you depend on them to give you everything, then they can also take everything away from you. and that's the same way with the fed, right? >> look, the fed -- i'm going to make it simple. the employment situation and inflation. if they believe the economy in the u.s. is continuing to improve, and i think they will continue to say that, check. the question is, do they believe the recent events are a long-term deflationary effect or transitory? if they're transitory, they'll find a reason -- not necessarily september but maybe september, to raise rates. it's the inflation rate of the two-part equation they need to see some light at the end of the tunnel heading toward 2%. >> help us with this. if you're waking up, you're at home, have you a brokerage account, what am i supposed to do? did you miss the bottom yesterday? are you supposed to get in today? if you are, what are you supposed to do? >> i don't like buying markets up 500 points.

i would rather buy on weakness. let's let it settle out a little bit. i don't think we're going straight up from here, andrew, but i do think values are being sxreetd we saw a much. if we get back in that zoerngs i'm buying stocks again. >> quif us a quick list. >> gilead, aetna, apple, target, maes's, home depot, boeing, bank of america and delta. >> is that mostly because of the exposure to the u.s.? >> yes. >> thanks, bob. thanks, guy, as well. coming up, china cutting interest rates for the fifth time in nine months. we'll talk to former secretary treasurer larry summers, about the global chaos and what he thinks the fed needs not to do. stay tuned to "squawk box." first in business worldwide.

breaking news -- china stocks down but china bank cutting interest rates and european and u.s. markets getting a big bump. what you need to know. equity and oil straight ahead. a september rate hike would be a dangerous mistake for the fed. that's according to former treasury secretary larry summers. he's here to tell us why jobs could be in jeopardy. one trader called yesterday's market turmoil 1,000 flash crashes. bob greifeld tells us how they will perform. the second hour of "squawk box" begins right now. live from the beating heart of business, new york city, this is "squawk box." welcome back to "squawk box" right here on cnbc, first in business worldwide.

i'm ross sorkin, becky quick has date off, with joe kernen. the markets are the lead story. the dow closing 600 points lower after what was a roller coaster session. let's tell you what happened overnight. the shanghai composite falling more than 7.5%, but just out in the last hour, we got news out of china on the policy front. this is moving markets here. china central bank nunsing a cut in interest rates and lowered bank reserve requirements. we're looking at the dow looking to open 41 points higher. we should tell you, it was higher an hour ago when china released that policy news. there was sort of a knee-jerk reaction to think this was great. i think we've now spent some time trying to get our heads around it. >> the fifth time since

november. >> and who knows whether it will really help the cause. you could look and say, it's another sign of panicking. >> not panicking, but still they think they can go lower and try to stimulate what is -- they're realizing their economy is weaker than we thought and they thought probably. >> what they did was emblematic of so many issues. they cut their deposit rate and lending rate. in this country banks decide what their lending rate and deposit rate is this. in china they say, this is your net interest margin and that's emblematic of their belief they can surgically control this animal underneath them. >> many westerners that are capitalists have somehow forgotten what they believe -- usually -- >> it's amazing. they admire the chinese for doing it. >> about capitalism and the state can't allocate capital effective effectively. people think it comes home to

roost because it's that hard to be that -- >> i remember being on this show three years ago, barry stern, he would say china is a company masquerading as a country. that's how you have to look at the entire thing. that's what they're doing. this is just another example of their ability to sort of pull on all the strings in a way that most other countries can't. >> for now. >> for now. >> companies get in trouble if they shoot their employees in a square typically. the law -- there's a law against that. >> in some places. >> where if you're unhappy about something and you say it -- >> if you're the company and the country, you can do both. >> as we know. although if you google it on, i think, alibaba, it's like tiana what? >> didn't happen. >> joining us to break down the

market's wild ride, dom choo. >> i just know it's a big government. let's talk about the dow industrials. most of the losses since record highs if you want to look at it mathematically, they happened over the last week, down about 9%. this move down lower here could be set to rebound if these futures really do indicate how we end up trading throughout the course of the day. 9 first 90 minutes yesterday, that's where the real action was. we went a long way in terms of point move. down almost 1100 points to open. in the first half hour or so, up another 547, up 619, down -- you get the idea. all told in the first 90 migts of trading we traveled stepwise 3,000 points in the first 90 minutes. the carnage yesterday left the

s&p in rather frail shape. as of yesterday's close, 436 members, 87% of the total s&p 500, has fallen by 10% or more. correction territory or worse. of those, 205 stocks, so out of 500 or about 40%, are now in bear market territory. down by 20% or worse. a lot of big names there. mostly in energy. we've talked about that before. and the only two sectors right now that are in bear markets in the s&p, energy and materials. so, the commodity side, energy side of the picture very much in focus for a lot of investors especially in a day, joe, when you have a possible rebound for the markets. which ones will go up the highest? maybe the ones beaten down the most. we'll see. >> dom, we have retailers posting in the middle of all this, best buy out with second quarter numbers, profit of 49 cents a share, well above estimates of 40%. it was a 2.7% increase in same

store sales and we'll get a nice rebound in those shares indicated almost 10%. the financial drama and fed are the subject of larry summers' latest column in "the financial times," saying the fed looks set so make a dangerous mistake. mr. secretary, good morning. what are you doing between now and 9:00? we're talking fed right there. given what happened yesterday and in the last week, we could spend a couple hours just on china and whether you think is the beginning of something significant. why don't we start there and we can get to your comments about the fed itself. in terms of having seen financial situations, where does this rank? how do you think this in hindsight will play out? >> look, no one -- what we know

is market estimates of volatility have increased faster in the last week than any time historically. we know the so-called vix is suggesting historically by historical standards levels of volatility. we know we have been through a period of substantial market tranquility and up markets over the last few years. and that has to be a cause for concern. add to that the obviously problematic situation in china and its scale relative to the global economy, particularly global commodity markets. add to that the more generalized

stress that seems to exist in many emerging markets. layer on that the fact that the underlying rate of demand growth in the major industrialized countries, japan, europe, the united states, has not been what people expected. and i think you've got a situation that has substantial risks associated with it that there is the kind of moment when surprises, ltcm, the kind of thing that happened in asia in 1997 and 1998, not on the same scale but the kind of thing that happened with subprime in the 2008 period, when those things are more likely to become very salient and cause significant

instability. i'm not prepared to predict we're in the midst of a crisis, but certainly the risks feel greater now than they have at moments in the past. and i think the orientation of policy, which had been towards resisting overconfidence now has to again shift towards providing confidence. >> you know, mr. secretary, there's a big debate going on about the fed's role in all this. and there's a lot of different ways to look at it. yesterday, someone i speak to and listen to, stan said, the fed should not raise now because of what's happening, but they should have in the past because they're complicit in getting valuations to a point that were not tied to the economic underlying realities. and moring out the risk curve to

junk and corporations doing things they wouldn't normally do because the money was so cheap. you think the fed should stand pat as well, but do you assign any blame to the fed policies for getting us into this position where we have to worry about this? >> joe, as you know, i've been on your show before talking about the idea of secular stagnation. >> right. >> the idea that given how our economy is structured, we've needed needed excessively lower interest rates for reasonable growth and the fed has given thousands low interest rates. i think that was probably the appropriate choice, but it would have been much better if through some combination of measures to promote investment, either private investment, through tax and regulatory policies or public investment, through infrastructure investment, it would have been much better if

we had adequate growth impetus and not had to rely on such low interest rates. that would have been the safer path from the point of view of financial stability. you know, that's a moot debate now that was a reasonable debate to have. i was on the side of wanting to support the economy given the choice, given how weak the first quarter was, i think it would have been difficult to raise rates. i understand the financial stability case for increase of rates. today with a vixx at 40, it seems you have a quite different argument. today the only argument you really have is, well, it's uncomfortable to be at zero. it is uncomfortable in some ways, but my fear is the new reality in an economy where the

labor force isn't growing very fast, where productivity growth is slower, where capital goods are much cheaper, where the nature of production has shifted, is that you may need those low kinds of interest rates to be able to maintain a reasonable level of growth. that's why i come back to doing other things. to be the accelerant for the economy. but in the absence of those, i think it's very hard in the midst of the current financial turmoil to imagine the prudence of a rate increase. >> larry, if i could just say one other thing -- >> this is andrew sorkin here. marty feldstein in "the wall street journal," a friend of yours, writes postponing a 25 basis point rise from march would not have any significant effect on aggregate demand and employment. market participants know that the economy is now essentially

at full employment and that the consumer price index is close to 2% and there is little risk of deflation. i assume you disagree on every count there. >> no. i don't see it the same way matter does. i look at the index bond market and break evens and inspected inflation, and i see expected inflation even over a five to ten-year horizon as being well below 2% as the market reads it. i look at the cpi and i see more than half the components actually in deflation territory over the last six months. so i see the risk of sub 2% inflation as much greater the risk of above 2% inflation. i look at past tightening cycles and i see much more evidence

than marty does, that there tend to be unpredictable consequences that head off and contribute to financial distress. >> so, on that note -- >> i don't understand -- i think it's impossible to argue in a convincing way that when ten-year break-even inflation is well below 2% that somehow the dominant problem to which policy should be responding is we're going to get inflation expectations out of control. that's not the risk we should be worried about. seems to me the risk we should be worried about is financial instability, is continued very substantially slow growth. >> so, on that note, mr. summers, it's michelle

caruso-cabrera here. when i think of actually investing based on what you're talking about, we've been waiting so long for the ten-year yield to rise. the fed basically controls very short-term interest rates. should i be comfortable owning a ten-year here at 2% or less are for the next decade and not worry about rising interest rates? >> michelle, i give policy advice, not investment advice. but i would say that the logic of the secular stagnation theory that we need to think about interest rates differently than we have in the past. that the levels of interest rates consistent with a well-functioning economy are going to be significantly lower. than they have been in the past. look, the people who are making the kinds of arguments that you're putting to me have been

wrong every year for the last five. they've been overly optimistic about what was going to come for the economy. they've overestimated the likelihood of inflation accelerating. they've foreseen an increase in long-term interest rates that didn't come. and they thought that the fed was going to have to get off of its current posture. and those views have been very strongly articulated again and again on your show and others. and they've been wrong. now, there will come a time when they're right, no doubt, and conceivably it's this time, but i think any degree of certitude that because rates are low, they have to rise, would seem to me to be quite badly misguided. >> larry, finally, last question, if we were to do a big public infrastructure plan, or make it a public/private

partnership f we were to cut corporate tax rates and look at regulations that weren't working, all the things you just said, if we did all that, can we shake off secular stagnation and could we even lead the world out of secular staying nation or are we just stuck? >> i think it would make a very large difference. i think it would increase growth. i think it would reduce inequality, be a shot in the arm for the world economy. and you know, at a start, we can get off of a mindless debate about shutting down the government this fall over fiscal issues. >> you see, that was a bipartisan -- >> surely deterioration of confidence no one needs. >> that was abipartisan wish list i gave you, too. i gave you supply side and the stuff you want. why can't -- >> joe, you and i -- you and i were very -- you are i are, for once, in sync on that. >> no, it's not the first time. this happens a lot. you forget -- >> i've always -- i've always

talked about -- >> i know. >> -- the importance of both public and private investment and i believe confidence is the cheapest form of stimulus. >> put us together and we're purple. this should be a model, a model for washington. thanks, secretary summers. appreciate it, as we always do. >> good to be with you guys. >> great to see you, larry. coming up, wild volatility and heavy trading volume in u.s. stocks, the question this morning, can the trading platforms handle it. we'll have nasdaq ceo bob greifelt and gartman admits his call was early. later, southern company tom fanning joins us, chairman of the atlantic federal reserve banks. stick around with us.

when you're not confident you have complete visibility into your business, it can quickly become the only thing you think about. that's where at&t can help. at&t's innovative solutions connect machines and people... to keep your internet of things in-sync, in real-time. leaving you free to focus on what matters most.

we figure you probably don't have time to wait on hold.

that's why at xfinity we're hard at work, building new apps like this one that lets you choose a time for us to call you. so instead of waiting on hold, we'll call you when things are just as wonderful... [phone ringing] but a little less crazy. we're doing everything we can to give you the best experience possible. because we should fit into your life. not the other way around. welcome back to "squawk box" this morning. stocks around the world swinging wildly. the question is, can the trading platforms handle it? bob freifield joins us on more of the mechanics of the market after a wild open yesterday. >> yes, it was. >> your particular market was down 8% like that. >> like that. >> one of the questions we've all been asking is, were homes responsible for that, was

everybody calling their brokers saying, sell, sell, sell, or a function of the robots? >> i would say it's both. obviously, we knew that that kind of volume, you have every participant in the market really fully engaged. we were processing 1.5 million transactions per second during the first half hour. i should say messages per second. i remember back when we would test for a million in the lab, and now we're doing more than that in real life. we obviously have upped our -- >> how does that compare day to day? it's obviously more but -- >> yeah it's definitely more. i would say it's four to five times what we see on an average day. so, that was -- everybody was involved with the market. what was interesting is, the internalized and dark bulls really showed off their gaits and showed that into the lit markets and got a lot of volume that way. >> in terms of attribution to those trades, what percentage of that do you think was somebody making a legitimate decision,

meaning andrew sorkin or bob is calling their broker saying, do this, and what was -- what percentage of it was a computer? >> i would say this. there's always a person initiating a decision even if the computer executes it, right? there's always a person involved, even if it's level setting up the code. if you think about the large buy side asset managers today f they want to sell a million shares, they don't just sell a million shares. they put it to an algo who will piece it into the market over time. somebody is making that decision to sell the million shares and the computers take it from there. it's really man and machine involved with the function -- >> i guess the spirit of the question is, was the selloff exaggerated, overdone or not correct because there were too many computers? >> the way i look at this is, it's such a large psychological aspect to the market. to me, this really got to the zeit gichlt ts of the moment.

you had level a fear and uncertainty, going off for moments, even though the data didn't directly support it, so it came together at one point. you could feel it building but it really reflected the spirit, the essence of the moment more than anything. >> you have a number of big chinese companies -- >> yes. >> -- that are listed with you. >> yes, we do. >> when you look at what's going on in china and you look at what the banks -- rather, what the government is doing to the banks today, do you think it's worse than we think it is? do you think it's better than we think it is? >> i think it's not as noble as we would like it to be. what they did is put total control on the marketplace. so, right now if you want to buy shares in china and not know when you can come out because the government might intervene, that's a bad outcome. as we went through yesterday, i said, okay, are our circuit breakers tight enough, right, because we tightened them in

2013 where we would halt the market after a 7% or 13% decline -- >> did you think that was coming yesterday? >> i thought we were getting close to it. yeah, we were definitely prepared for the circuit breakers to trip. i think the philosophical argument is you want the circuit breakers to be the pause that refreshes but you don't want the circuit breaker to prevent someone from buying and selling. one of the problems with the chinese market is they put in these extreme circuit breakers where you know you can't sell when you want to. that's going to have, you know, basically a bad long-term impact. and i think we're seeing some of that in that market. >> as someone who runs a stock market, how would you feel about the chinese government f they decide to, as part of one of their stability measures, decide they're going to go whole hog and start buying stocks? >> they have already done us. >> they told us they've done that before. >> you think that's a good sign or bad sign? >> i think it's a bad sign. it shows a lack of confidence in the market working.

as tough as yesterday was, and you can say, bob, other exchange operators, cue have tougher circuit breakers where you don't have that 1,000-point swing, you can, but that's the wrong answer. that doesn't give invest confidence in the marketplace. >> was that a rhetorical question or was that just working at "the new york times"? working at "the new york times" so long, you're asking whether government should buy -- was that just a rhetorical question? >> no, but he runs a stock market. >> do you think the country should be buying stocks to proper them up when they're falling? >> he runs a market. there would be more volume. i'm trying to understand how he thinks -- >> market forces are to be -- >> i agree with you. >> you got to believe in the market forces coming up. >> are you satisfied with the performance of the markets yesterday? >> yes. i think when you think about the volume that we handled and the time frame we handled, it it's a credit to us and other operators of the marketplace. we're very happy there. i think we do reflect upon the 1,000-point swing in the open and say, can we tighten circuit

breakers during that period of time? i think us in the industry will have to reflect upon that. >> bob, i still get e-mails on twitter about the plunge protection team at u.s. government that buys s&ps. >> the ppt. >> is that -- >> come on, you can tell us. during the break. >> that's not real, joe. that's not real. >> are you sure? >> this is like an nsa thing you can comment on? >> i am commenting. that's not real. >> all the fat cats benefit from us. why would you tell us the truth?

more data means more freedom to do..whatever. that's why at&t is giving you 50% more data. that's 15 gigs of data for the price of 10. because the more data you have, the better. and right now at at&t get $300 credit for every line you switch when you trade in a smartphone and buy any smartphone on at&t next. seven out of ten power outages in the us are caused by weather. but utilities can now predict where the power will go out, within a few city blocks. working with ibm, they're combining micro weather forecasts with detailed data from local sensors. to predict where outages are likely to occur. and send crews exactly where they're needed, when they're needed. ibm analytics from the internet of things is making energy smarter every day.

i'd like to put in you're quitting!?. technically retiring, sir. with a little help from my state farm agent, i plan to retire in 15 years. wow. you're totally blindsiding me here. whose going to manage your accounts? this is a devastating blow i was not prepared for. take charge of your retirement. talk to a state farm agent today. ♪ ♪ if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end august 31st. share your summer moments in your mercedes-benz with us.

dow looks like it would open up very big, about 440 points high higher. the s&p is higher and mr. bob gr greifeld, they would open up 138 open. a 2.7% increase in same store sales. electronics winning, if you're selling clothes, not so much. >> but for best buy, what

percentage of sales are in the christmas quarter? >> a huge percentage. >> they mick their year -- is 15 cents material in this quarter -- >> due to the larger story? i don't know. >> they make 49 cents. what do they make during the -- $2 or not? >> there was a time electronic retailers were going to survive. >> it's like textbook. there are certain companies -- or -- >> h&r block. >> q2. >> that was a good quarter. >> let's tell you about starbucks, and joe's favorite guy, howard schultz, he's feeling the market pain. he sent an employee -- an e-mail to employees yesterday after the market plunged, urging them, he said, to be kind to any customers who expressed concern about the volatility in the markets. he also reassured employees that the company's growth plans wouldn't be derailed by market turmoil. >> congratulations. >> so, hopefully if your barista

was nice to you yesterday -- >> congratulations on reading that who a straight face. >> thank you. >> i could not have. >> because you're cynical -- >> i'm a fan of starbucks. >> i know. >> i enjoy -- >> i like starbucks. >> i like some of their products. >> i enjoy the pumpkin -- >> like the feta cheese wrap. >> you shouldn't be a fan when they raise coffee prices with it going down -- >> improving their profits. >> he still doesn't have a monopoly on all the coffee routes as far as i can tell. most of the corners in new york city. >> i think there's plenty of competition in the airline business. >> by the way, you missed it. prices have come down. i did a little mea culpa. we should talk about that, but not today. >> you will never mea culpa with me. never happen. >> a cup of coffee right here. big moves in equities rebounding from the global selloff. did you miss your chance to get

in? we'll discuss. dennis gartman and anstasia am ro amrosa joins us. two streetlights. the only difference: that little blue thingy. you see it? that's a sensor. using ge software, the light can react to its environment- getting brighter only when it's needed. in a night, it saves a little energy. but, in a year it saves a lot. and the other street? it's been burning energy all night. for frank. frank's a cat. now, two things that are exactly the same, have never been more different. ge software. get connected. get insights. get optimized.

a wild start to the trading.

today dow futures are indicating a huge bounceback after the dow tumbled 600 points yesterday. crude prices are around 6 1/2 year lows, although they rebounded a little bit. joining us global market strategist at jpmorgan funds and more to talk about energy and precious meltses, dennis gartman, founder and publisher of the gartman and cnbc contributor. huge selloff yesterday. we're getting a lot back today. where do we go from here? >> well, i think we go the way china goes. when you think about the pullback we had the last couple of days, it's all been made in china. this is not about u.s. weakness. this is entirely about china is going to slow or not. today the breaking news you had this morning is the fact china cut interest rates and is going to add lick witty into the market, that's significant. that's the catalyst for the bounce back. >> why is it significant when it's the fifth time they've done it since november, hasn't

appeared to work yet. liquidity, they've done a lot before as well. >> you're right. it depends on what metric you look at as far as it's working or not. if you look -- if you look at the housing market, what we had in the chinese housing market is the fourth month over month consecutive increase. >> in prices or -- >> in prices. that's an important distinctions. if you had price increase, that doesn't do anything for the commodity markets. if you have eventually additional housing infrastructure, that's what matters for the commodity markets. my point is, if you look at the mortgage rates in china, they have come down. prices have popped up. so, i think eventually by the end of the year, we will see a pick up in activity. >> sounds like more credit on more credit on more credit on a country that doesn't necessarily -- >> but mortgage credit is not the issue for china. the local government debt is the issue for china.

mortgage credit is not. so, if you think about what part of the economy you still have to stimulate, still have left to stimulate, housing is it. >> so, dennis, she says the market goes the way china goes. i have to think it's the same for commodities here as well. no? >> it's been that why for quite some period of time and will continue to be that way. i think the chinese made the right decision by cutting reserve requirement this is morning. i think it was a very important decision they injected reserves permanently into the system. those were better things to have seen done. clearly that has had an importantly beneficial impact upon the chinese market, upon chinese psychology and upon the global markets generally. >> so, we're looking at wti this morning at 39. you admitted you made a mistake last week when you said you were going long oil and took another leg down. what do you think now in terms of the price of oil? >> well, first of all, let's get it straight. i turned bullish on friday for the first time since last year. i've been overtly manifestly

continuously bearish of crude oil for a long period of time. i turned bullish on friday simply because the term structure had begun to change. that was an important change in a markets demeanor. i had no idea we would be walking into a 1,000-point decline in the dow yesterday morning. 3% was all that i was willing to risk. it quickly gave me 3% risk on the downside. next thing you know, it turns around. had i had any idea, and i don't think anybody else had any idea we would walk into 1,000-point decline in the dow, we would walk into 120-point decline in the s&p on monday morning. so, i was wrong for one day. am i still wrong? i'm on the sidelines. do i think i'm going to be bullish of crude oil from this point forward? yes, no question. now it comes -- is that difficult point when a trader gets out of a trade and has to come back and buy it at a higher price than where he got stopped out at. that's the hardest thing in the business. we'll see if i have courage and convictions to do that.

>> so, what are you telling people to do if what you think is china is what's going to drive the u.s. markets, you wait to see what happens there, do you put money to work, do you raise cash? >> i don't think you raise cash. hopefully you had cash on the sidelines at this point because the markets have rallied as much as they have. the investors have to ask, this is this a pullback, or is it a pullback and just a pullback and not an up trading cycle. based on what we've seen in the last housing market, the payroll market, i think you want to add to risk here. if china is not going to slow down as many people anticipate it will, that bodes well for risk assets. look across risk assets. whether you look at emerging markets or commodities, all of that has been hampered. i have a question for dennis or

discussion point. wti, you know, there's two forces that are weighing down prices. the first one, of course, is the demand, which is why we've seen the slump yesterday, because of concerns about china. the second one is supply. do you see that supply turning around any time soon? >> no. that supply's not going to turn around any time soon at all. supply is going to continue where -- it's surprised the number of people how -- how steep has been the decline in rate counts but how strong has been the continued supply of crude oil here in the states. that's not going to change. but what has changed is the demeanor, the manner in which the futures market has responded to that. under normal circumstances in a sustained bear market, the contango continues to increase, going to the deferreds. but a week and a half ago it began to narrow. when the term structure shifts,

but to your point, is the supply of crude here in the united states going to change? is the supply of crude around the world going to change? no. if anything, it's going to get larger and not smaller. >> and if folks aren't sure what you mean by term structure, what does it cost to buy oil now, today, delivered today versus how much does it cost to get it a year from now, two years from now, five years from now, ten years from now. as that shifts around, that signals different to those within the commodity market. thanks for joining us. coming up on a deal you may have overlooked during yesterday's selloff, southern company making a $12 billion acquisition. those details next from ceo tom fanning. i think it was more like $8 billion. we'll weigh in on the fed's rate hike timeline. take a look at toll brothers, under pressure after posting a 32% drop in quarterly profit. third quarter orders did rise by 12%.

southern companies strike a deal to buy electric and gas utility agl resources for $66 a

share this week. that's about $8 billion in cash. a deal that would create the nation's second biggest utility company based on customer base. tom fanning set to join us. chairman and ceo of southern company, also chairman of the federal reserve bank of atlanta. it doubles your customer size, too. >> yeah, it sure does. >> i thought you were just buying, diversifying more heavily in natural gas. >> we talked a lot in the past about this notion of southern is the only company in america doing truly all above, we newables, energy efficiency. what this deal does for us, we're already the third or fourth, depending on what day it s largest consumer of natural gas. this is a big bet on infrastructure. we need more pipes as we see more regulation going forward, as we see more penetration of renewables, we will need more gas infrastructure to support those growth initiatives.

>> you pointed out in some of the analysis in the journal and other papers today, you have tried to do the clean coal. you've tried to do nuclear in georgia. you've run into regulators again and again in terms of not getting the rate increases you need, not getting permits you need. is this backing away from some of those and just admitting that the future is going to be more natural gas? >> in fact, the nuclear project in georgia is going great. i know sometimes things get portrayed in print a different way. in fact, from when that project was improved to where we are now, cost to customers have actually been coming down. >> so, this -- why do you think this deal is going to go through? why do you think regulators are

going to improve it given the int intergy deal, for example? >> i get statements from regulators in georgia, the public service commission and everything else. at the end of the day, this will help customers. if we move away from carbon-intense resources, we need by definition to move more towards natural gas. even with this clean power plant that's been kind of put forward, we're going to need to expand our gas infrastructure in a big way. the joining of agl with southern is going to allow us to do that. >> did you do this deal despite the news coming out of the epa when it comes to the collecting of the methane or is this going to help you actually fend off the increasing kos of higher regulation? >> so, remember the methane deal is really about producers. we have nothing to do with producing natural gas.

the epa stuff i talk about is the clean power plan where there's this kind of overarching move away from carbon-intensive resources. that's really why. it's the old wayne gretzky skate to where the puck is going to be. when you think of greater penetration of renewables, what do you do when the wind doesn't blow and sun doesn't shine, have you to follow those resources with something and that something is likely to be natural gas. >> who would put something where the sun doesn't shine? that's an expression. >> that's rhetorical. >> yeah, right. >> is fed going to raise? you know about the fed. is fed going to raise in september still? >> you know, who knows. but i've said a million times on this show, what's more important than lift-off is trajectory. i think we had jay powell on, what, three weeks ago -- >> that was before what happened. >> yeah, yeah, yeah yeah. >> if you listen to larry summers, it sounds like you could have the ten-year yield, 2%, for a decade. >> look, you know, i don't get

all that excited about when lift-off occurs. i really think, you know, there's enough good data in the united states that they could probably go forward in september if they wanted to. they may delay to december. who knows. >> some people said -- you don't need to get excited when but what if it's 2017? >> i think they'll move before. my opinion, don't have a vote, but -- >> isn't that why you're on the board in atlanta. you don't get to decide anything? >> no, you know what the boards do, though, and i think the fed does a darn good job of, this by virtue of their districts all across the united states, they are really focused on trying to be in touch with what's happening, boots on the ground, what's really going on in the economies locally. it's not just a room full of economists. it's people that are really trying to understand the real economy in the united states. >> did you see a bump in the georgia economy in the last two weeks when i was -- i'm sure did you, when i was down there. no? >> no. actually, no. i didn't. >> that's probably going to be

in the numbers that you haven't seen them yet. >> well, that's good. that's upside, right? >> all week, i was hurt very badly with fishing. it was very expensive. >> joe, i can't believe i forgot it. a friend of mine lost a golf ball you lost. true story. >> that doesn't make him unique. it's taylormade with my name on it. >> yes. >> ocean forest? >> no. what's the -- >> fredericka. >> fredericka. >> fabulous fredericka. >> i can't believe i forgot it. >> he didn't want it as a souvenir of a famous tv anchor? >> no. had a big cut on it. it was awful. no, just kidding. >> true story. you're not kidding. anyway, thank you. >> absolutely. >> tom fanning, ceo. >> good to see. >> you good to see you. >> great being with you guys. when we return, u.s. stocks look at a rebound. your list of today's biggest premarket movers. in the next hour, market experts to help you decide where to put

your money. take a look at shares of apple. they're rebounding in the premarket. you totalled your brand new car. nobody's hurt,but there will still be pain. it comes when your insurance company says they'll only pay three-quarters of what it takes to replace it. what are you supposed to do, drive three-quarters of a car? now if you had liberty mutual new car replacement, you'd get your whole car back. i guess they don't want you driving around on three wheels.

smart. new car replacement is just one of the features that come standard with a base liberty mutual policy. and for drivers with accident forgiveness,rates won't go up due to your first accident. learn more by calling switch to liberty mutual and you can save up to $509. for a free quote today,call liberty mutual insurance at see car insurance in a whole new light. liberty mutual insurance.

take a look at stocks today. up nicely 7%. look at the chart of this

commodity-centric company, bhp billiton. the company's underlying profit being the worst in a decade. revenue did top estimates. the company says it's going to cut spending to shore up dividend, which at this point with the price all the way down there is a $2.48 dividend so yielding just under 8%. >> wow. do you believe them? i mean, it's a great dividend. >> they're cutting expenses to shore up the dividend. the company went on to predict 7% in china. i assume that's gdp growth. that's their prediction. what is it? >> it's a mystery. i think the question is absurd. it's whatever they make up. in the wikileaks, number two guy in the government told somebody at the state department, listen, the chinese gdp number is man made, so you got to look at at

electricity consumption, railroad freight. you can't look at the number. we make it up. give me a break. >> it matters to bhp because that company says they have a lot of exposure. ceo andrew mackenzie will join "squawk on the street" later this morning. >> i imagine if it holds, it will be -- and eventually that underlying asset might turn around. >> almost a convertible bond you can buy. much more on the wild swings in the stock market. did you miss your chance to get in? in the next hour, rebecca patterson, scott sterling, will will ross and martin sass.

♪ no student's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling.

you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great.

investors could be in for another wild ride. china central bank cutting interest rates. global markets are rallying after one of the worst days in the history of wall street. the latest on the global markets straight ahead. man versus machine. high-frequency trading under the microscope this morning. did computers send investors into a panic in the closer look at hft is coming up. is the worst behind us? we'll hear from marty sass and

billionaire investor wilbur ross on yesterday's move and where they're putting their money to work this morning as the final hour of "squawk box" begins right now. live from the most powerful city in the world, new york. this is "squawk box." welcome back. you've been with us all along, unless you're in california, you're just getting up and it's 5:00 a.m. you should join us earlier because we are first in business worldwide. breaking news this morning, if you haven't seen it, the futures have been adding to earlier gains after china central bank cut interest rates and increased the amount of money available for lending. the futures are up 451. the way this played out, it's been kind of interesting. china was down another 8%. we were up 350, 360 points on the dow.

then these rate cuts were announced. so, we've added 100 dow points after the rate cuts, but we were already up as we had almost decoupled -- as if europe and u.s. were bouncing despite china having a horrific session. now 8%. they were flat on the year as of yesterday after huge gandz and now they're down. here's what's happening in europe. that has picked up steam as well, the gains there. back to 2.07, surging after prohibitively expensive, rich yield holding at only ten years. you get only $20 -- >> that's amazing. >> crude is coming back. for some reason, it helps equity prices when crude is up. there's the euro. for more on this morning's breaking news on the policy moves in china, those interest rate cuts, let's go to hong kong

with susan lee. susan, good day. >> yes. a surprise from the central bank. i think markets will take this positively tomorrow because for the last two sessions you've seen those declines in china. it seemed like the signal from the central bank is they would like market forces dictate but not today when they cut interest rates. they usually do this on a friday night or weekend when people are not at their desk. this seems like they want full market impact and trying to add liquidity to the markets. they've been doing that in different ways as well. today we saw 150 rmb, so they're trying to grease the wheels. if you cut rrrs that effectively spreads 160 billion rmb in the market. so, i think people will take that positively during the wednesday session here in the

asia-pacific. so, we're looking at four interest rate cuts since november 2014 to these rrrs since that time period. and as you see, china is really trying to get the money flowing once again. i spoke to goldman sachs today. they say china is not broken. they're still staying overweight on china equity, saying buy good quality names that have been sold off and look at state-owned enterprise reforms as well. >> susan li with breaking news out of china. thank you very much. we have big market cap names looking to gain back most if not all losses from yesterday. let's go to dom chu. >> there are a few names here in the dow jones industrial average having big upside moves in the premarket right now. the entire market, the futures picture is going higher. ge, jpmorgan, apple, up 3.5% to 6% for apple shares. it's impressive not because we're saying these are outsized moves for stocks given what

happened yesterday, but if you look at what really happened yesterday, take a look at intraday charts. right after the open, you can see that mini flash crash type, off 20% off the get go and rallies back to close up 20% off the lows for the session. also take a look at jpmorgan, same situation there as well. a huge intraday spike right after the opening bell yesterday. only to recover most of those losses and get back more in the premarket then there's apple, also a dow component these days. we say not maybe the same degree of a move to the downside but on the left-hand side of your screen, the big move to the downside after the opening bell, apple did manage to close positive here, at least moving again to the upside here in the premarket session. so, three dow components to watch today. all three had outsized downside moves yesterday, got back most of those losses and are now up big, andrew, in the premarket.

back to you guys. >> dom, thank you for that. all morning we've been talking to market pros about yesterday's wild drop in the markets and what investors should be doing with their money now. if you missed any of them, here's your "squawk sound check". >> are ge going straight up from here? i don't think so. we get a reflex rally? we have to watch the quality of the rally -- >> do you think the bottom is in? >> there's a chance the bottom is in. >> is this the bottom, i don't know. >> i'm not prepared to predict we're in the midst of a crisis, but certainly the risks feel greater now than they have at moments in the past. >> for more on the markets and more nebulous predictions, we're joined by rebecca patterson and our guest host for the hour is scott sperling, co-president of

thl partners. have you found a way to dance around the -- nobody knows. i don't take anything away from someone that won't say definitively what's going to happen. just the overall feeling you get from watching this play out with china, seeming to seep into, you know, our mentality. we don't even know if it's going to eventually come and hurt our economy, and yet our stock market has been hurt pretty badly. >> well, i think it's right that people are being neb lou ining their predictions. anyone who says, you buy oil at this level, second decimal point s talking garbage. it's not that easy. but what we told our clients yesterday morning was, stay invested, enjoit end of your summer. we think this is a correction. not the beginning of armageddon. i thought the german data overnight, the ifo service confidence, continuing to improve.

you had a guest on earlier talking about chinese home prices rising from lower levels. we can talk about the longer term credit issues in china but in the short term it looks like the cumulative similar lus starting to stabilize the economy in a structurally slowing path. the u.s. customer is doing great. i say great, that's not nebulous. 2.07 for the ten-year. energy prices may go up a tiny but but they're staying low. consumer confidence, housing data is expansion highs. joblessness is at expansion lows. this is a pretty good picture for the consumer. that's what drives our economy. >> weren't you the star of our currency shows friday? >> i was the co-star. melissa li is the star. >> she'll definitely tell you that. no, kidding. but, how about emerging market

currencies, why can't that be the thing that comes home to roost. >> it does keep me up at night. the world is so much more integrated than 1997 and '98. what happens in china and thailand does affect us more. i think those economies are in much better position structurally. they learned their lesson. they built up foreign exchange reserves, free floating currencies. when we panicked last week, not me, we, the world, over the kazakhstan and vietnam, that was one of those anecdotes that told me, this is stupid and we should be buying, not selling. >> it was a 20% move in kazakhstan. >> most people can't find this country on the map. >> did you say, we should go long the dong? >> no. i have never said that and i will avoid it on air. >> have you recommended that currency? >> no. >> in "sixteen candles" it was

long duck dong. >> we're avoiding emerging currencies where he can can in -- >> you smiled briefly. do you have a cold? >> do i sound like demi moore? >> yeah. i was thinking, wow. >> i'm reaching. it's early. >> you have never said -- >> i've never uttered any of those words. >> as a guy that is in the trenches in terms of -- you said you never know what to expect. i got to try to come to new heights every time. >> i love it. >> or lengths. >> exactly. have you -- does this impact anything that thl is doing right now? >> if this market correction sustains itself for a while, i think there will be more buying opportunities. it's always hard to say i agree 100% with ra deck ka. there are so many different nuances and forces moving in different directions, many hard to predict because of the ability of governments to

intervene in some way, some rational, some not necessarily clearly rational, it's always hard to call these things. i would say that as we look at the u.s. market, it continues to show strength largely because the consumer is great. i think all the data would point to the continued strength of the consumer for the foreseeable future. most of the underlying fundamentals in terms of consumer debt relative to spending power, certainly the significant drop in energy-related -- not just commodities but what people buy. that's gasoline, first and foremost, air conditioning, home heating, but also a lot of products that use feedstock, crude feedstock, are, if anything, the costs keep going down and the ability to not see price increases continues to be there. so, i think strong consumer. as we look at what happened in china and how it rolls back into this market, let's keep in mind, china has been slow now not just

immediately. china's been slow for quarters. and if you look at the earnings of many of our multinational corporations, it already reflects a relatively significant slowdown in china relative to what they probably were growing two years ago or maybe even as recent as 18 months ago. i don't think you'll see a major shock to the earning streams of u.s. corporations because of what we're seeing going on in china. also, you know, let's take another step back and remember that the chinese -- the shanghai index, you know, basically more than doubled over the course of, what, a 12-month period, 18-month period. and it's still up 50%. so, you had a lot of speculation going on in china that was driving the stock market. and you're seeing a lot of that eat back. the fact our markets have reacted so strongly to these things, i think, is more because there are some people in the financial markets that may have been overbought into china emerging markets. >> it's been a tailwind for ten years now, right? if we're at a moment where it's no longer that, and the fed is

raising interest rates, you have two things working against markets -- >> again, i would point to, i don't think china has been as strong a tailwind for a year now. i think that's already incorporated in earning streams -- >> the market is only figuring that out now. when the auto industry says, you know what, for the first time ever we think we might see sales not go up in china, right? >> you're exactly right. the market awareness is there. but i guess what i'm saying is, if you expect there to be significant declines in corporate earnings all of a sudden because of what's going on in china, that, i don't think will happen. and the fact that they're using stimulus -- remember, china has lots of bubbles. so, they use this stimulus and it's a little bit of a two-edge sword. i agree with you, long term they have lots of issues they have to deal with. near term it's going to help create demand that will help u.s. multinationals. >> is the yuan -- i think they were justified.

artificially high or low? >> i think it's artificially high. >> because with the dollar. >> yes. >> so we shouldn't blame them -- >> no, we can't ask them. treasury secretary lew and others asked for a free floating currency for years. >> be careful what you ask for. >> bingo. >> thank you. >> scott will be with us for the rest of the show. the dow plunged more than 1,000 points yesterday, surpassing the flash crash of 2010 and making it the largest point loss ever during the trading day. how much of a roll, though, did high-speed trading play in yesterday's big move? we'll find out next. next, wilbur ross is sounding off on china investor fears. "squawk box" returns in a moment. ♪ ♪ if you can't stand the heat, get off the test track. get the mercedes-benz you've been burning for

at the summer event, going on now at your authorized mercedes-benz dealer. but hurry, offers end august 31st. share your summer moments in your mercedes-benz with us. yup, we're constantly making thinkorswim better. here at td ameritrade, they're always working. like a custom screener on your desktop, that updates to all your devices. and you can share it with one click. wow. how do you find the time to do all this? easy. we combined every birthday and holiday into one celebration. (different holidays being shouted) back to work, guys! i love this times of year. for all the confidence you need. td ameritrade. you got this.

i'm a senior field technician for pg&e here in san jose. pg&e is using new technology to improve our system, replacing pipelines throughout the city of san jose, to provide safe and reliable services. raising a family here in the city of san jose has been a wonderful experience. my oldest son now works for pg&e. when i do get a chance, an opportunity to work with him, it's always a pleasure. i love my job and i care about the work i do. i know how hard our crews work for our customers. i want them to know that they do have a safe and reliable system. together, we're building a better california.

♪ i think when you think about the buy-in we handled in the time frame we handled, it it's a credit to us and other operators of the marketplace. we're very happy there. i do think we reflect upon the 1,000-point swing in the open and say, can we tighten circuit breakers and i think us in the industry will have to reflect

upon that. >> nasdaq ceo on whether the markets worked the way they were supposed to yesterday. the big market selloff in the early minutes asking questions about high-frequency trading in the markets. >> the wild swings yesterday, within a couple minutes we saw the dow down 1,000 points and rallying back minutes after that. the question, was this just a flash crash in the midst of all this other activity or was there something more fundamental going on? you talk to the folks who say it was a flash crash and they say there was a high amount of automat automated, high-frequency trading going on. eric said one thing he washed for in that first minute was that more than 50% of trading was in odd lots. he says that's an indication,

based on his experience -- they tend to open open accounts and buy tens and thousands, odd lots are an indication you might have hft activity in that first minute. he said it's a flash crash. i talked to modern markets initiative, those folks are lobieses for high-frequency traders. they said, no, actually odd lots are an indication of retail to them. they said, no, this was not hft activity in the first minutes. people are pointing their fingers at each other. the question of whether it was a flash crash is a debate ongoing. it might have been a flash crash-ish because it didn't come out of nowhere. there was a lot of sentiment, investor worry, headline going into the day. so it didn't come completely out of the blue like other flash crashes. >> futures were down 800 points going into the open. if anybody wanted to readjust or do anything, they had plenty of signals something was coming. >> absolutely. the pro flash crash side of this debate is how quickly it went

down, how disconnect we had got at some point from the real fundamental values of the stocks in companies being traded here. at some point when you see these huge disconnects and say these companies are not worth that much less than they were a minute and a half ago. that's not real price formation. what you're looking at here is just panic selling, automated selling. on the other hand, the people who argue this was not a flash crash are saying, hey, look, there were a lot of headlines here. this is exactly what we expected going in. when you look at those futures and the big heat map on cnbc and all of that red light going into the trading day, you saw that something might be about to happen. >> all right. eamon, thanks so much. let's talk about man versus machine. we're talking to co-author of a book about high frequency trading, joe. >> hi. >> i anchored "half time report" yesterday and the guys thought this was about lack of lick witty in the stock market and not high-frequency trading. what do you think? >> i think they're tied

together. people like nasdaq have changed to fit the high-speed, high-frequency trading market. they've changed to fit this. but what it's created is this lack of liquidity you're talking about. what you have now is you don't have diversity of limit books anymore. you don't have diverse orders coming into an order book like ge or whatever it may be. all you have is a thin crust of liquidity on the top. once the top is pierced, a machine can easily move quickly. that's why you get these rapid moves like you had yesterday on very thin books. then it bounces back like we'll see today. you have the same problem today like yesterday. just today is to the upside and everyone is happy about it. >> doesn't this become self-correcting, someone who ended up -- >> let's talk about this for a second. >> there were a lot of retail orders yesterday that did get burned because they put a stop

loss in there, which converts into a market order. that got really bad, specifically in the etf area. if you want to talk about flash crash, it happened yesterday in a number of etfs. that hasn't been reported that much. the reason why is because etf market makers weren't making the correct price. in other words, there were some etfs that traded as low as $42 and ended up closing as $70. you look in your retail account and you say, i sold them at what? that's right, because the arbitrage function wasn't working. they supply that liquidity when they want to, but they don't have to. there was a problem at the opening yesterday. etfs weren't being priced properly. >> one thing i hear con plated, panic selling and algorithmic trading. >> everyone uses algorithms on wall street. there's strategies,

market-making strategies, all different types. >> i'm just talking about whether or not what happened yesterday was intentional or by mistake at the open. that people didn't want certain things to happen and they got sucked in because they had to set up the computer to run. >> some of the trades that went off -- if there's no market maker there, if there's no bid and you place a market order, same thing that happened in the flash crash when stocks traded at a penny. a stock that traded at 5 bucks, it was a $40 stock. that happened. you can't put a market order in when there's no bid. >> i think what you're basically saying is people intend for certain things to happen. the technology enables to to happen in ways that are magnified and that's what you're seeing with all this. you're not seeing the machine go wild. it enables these kind of very wild -- >> the market structure has changed to allow that. that's where regulators have been so lax and letting this go on. that's where you see dark pool finds and exchange finds because the system is still deficient and needs to be fixed.

they still won't look at the real issues. >> great to have you on. much more on the markets and the bounceback this morning. we'll be hearing from wilbur ross on how concerned investors should be on china. a check of the futures. the dow up about 386 points. it's been a bit of a wild ride this morning. we'll see where things open up at 9:30. nt's ever been the king of the campus on day one. but you're armed with a roomy new jansport backpack, a powerful new dell 2-in-1 laptop, and durable new stellar notebooks, so you're walking the halls with varsity level swagger. that's what we call that new gear feeling. you left this on the bus... get it at the place with the experts to get you the right gear. office depot officemax. gear up for school. gear up for great.

having a perfectly nice day, when out of nowhere a pick-up truck slams into your brand new car. one second it wasn't there and the next second...boom, you had your first accident. now you have to make your first claim. so you talk to your insurance company and...boom, you're blindsided for a second time. they won't give you enough money to replace your brand new car. don't those people know you're already shaken up? liberty mutual's new car replacement will pay for the entire value of your car, plus depreciation. call and for drivers with accident forgiveness,

liberty mutual won't raise your rates due to your first accident. switch to liberty mutual insurance and you could save up to $509. call liberty mutual for a free quote today at see car insurance in a whole new light. liberty mutual insurance.

still to come, we'll head to the cme for a check of markets and mattrty sass, why he says housing plays is where investors should be putting their money after yesterday's big selloff. take a look at u.s. equity futures which are looking quite up. (trader vo) i search. i research. i dig. and dig some more. because, for me, the challenge of the search... is almost as exciting as the thrill of the find. (announcer) at scottrade, we share your passion for trading. that's why we rebuilt scottrade elite from the ground up - including a proprietary momentum indicator that makes researching sectors and industries even easier. because at scottrade, our passion is to power yours. the only difference: that little blue thingy. you see it? that's a sensor. using ge software, the light can react to its environment-

getting brighter only when it's needed. in a night, it saves a little energy. but, in a year it saves a lot. and the other street? it's been burning energy all night. for frank. frank's a cat. now, two things that are exactly the same, have never been more different. ge software. get connected. get insights. get optimized.

welcome back to "squawk box." let's look at stocks to watch. jpmorgan was upgraded by mike mayo at clsa to buy from outperform. points to resilient balance sheet and stability. to be positive, that's something. also best buy beating estimates by 15 cents with quarterly profit of 49 cents per share. revenue and same store sales beat street forecasts. shoe retailer dsw matching estimate with earnings of 42 cents per share but revenue sell short of forecast. same store sales increased less than expected. let's go to the cme group in chicago.

where have you been? has it been a while since -- >> i think it's you. >> i was out. but you -- we didn't see you yesterday, did we? good day to take off. >> no, i was here yesterday. i wasn't here monday -- well, i've taken a few days off. it's great to be here. we don't have a number. we could talk about anything you want. we could talk about the potemkin villages know as etf. we could take a look at what -- >> we just heard the stuff about etfs, which gave me another reason. i think that's one thing we're allowed to do, right? i think we're allowed to use those things but -- >> i think that's on the safe list. >> but they're, like, booby-trapped or something, aren't they? i'm afraid -- i would never do that, i don't think. >> i don't know if they're bo

booby-trapped, but when you clone it, every clone becomes a little less real, not as see-through, less tangible and that's etfs. you have cash grain, grain futures and the further up the der rivertive chain they go, the more real mccoy. i know we'll get a lot of e-mails but etfs creates islands where a lot more investing bodies can hang out. only when you get sessions like yesterday do you realize how tenuous true pricing is. when you're dealing with yields, it's pretty easy. 278 on a yield on a 30-yield bond. yesterday it got down to the 2.60s. you understand how that process works. but when you start making etfs, they're supposed to be pricing off something more tangible and lower on the food chain, but with sessions like yesterday, you realize the vulnerabilities and just the fact you have a

crowded theater with a lot of doors doesn't mean you'll empty out into the correct parking lot. >> rick, we're six, seven years into a recovery. god forbid we charge anything to lend money because our recovery is still not -- we're not sure it's above stall speed enough to do any type of rate increase. >> larry summers on this morning. >> again, again, we can't possibly take the training wheels off the greatest economy in the world and yet i saw -- it's the parody of a left wing site. media matters. it's so ridiculous. i think it's a parody. >> like the onion? >> yeah, because it can't be serious. right-wing whacko journalists were saying they were avoiding the selloff to say we need pro growth initiatives. they were using -- >> yeah. you want to know why the country's in trouble and we should end this conversation here. i mean, come on.

this is how far down the rabbit hole we've gone. seven, eight years, if this goes on anywhere near as long as many of us think, we'll have basically a generation that is going to be disconnected from the free market even farther. they're disconnected from things they don't teach any more like civics and history gets revised just like the 1937 impact the fed gets revised. everything we're talking about today is going to get revised. but in the end, the reason they're writing these parodies is because deep down inside they all understand that something isn't right with the u.s. economy. and the sad part is that it's one of the few economies in the world where a couple of patches and we're going to hold the air again, unlike having communist leaders. i would love to listen to that conversation behind closed doors. we talk about china like it's a world class economy just because it's big doesn't mean it's smart when it comes to how it's going

to deal with itself after the easy part. you know, hundreds of millions of people that will work for nothing. >> i had no idea you felt that strongly about that. i would have never -- >> joe, we have to do this more often, buddy. >> i didn't know i was going to open up a can of worms. wow. >> on that note -- thanks, rick. on that note, it's a global selloff. nowhere is it getting hit as hard as emerging markets. s >> we saw some relief in emerging markets. stocks rebounding from the lowest levels of 2009. some stabilization of currency. still, it's going to be an uphill battle to any recovery. look at russia as a proxy for the kind of stress that these countries are under. the chart here is the dollar against the russian ruble. this is a wild chart. you can see it go up. the ruble has absolutely tanked. it's lost 50% of its value in

one year. it's one of the hardest hit currencies. it's an example of the currency getting hit the hardest in the cross-hairs and that's a commodity exporter getting squeezed by falling oil prices and an emerging market whose fortune is tied to china. brazil is another example of that. also representative of the policy dilemma these central banks are facing. they're short on tools to stop they're free-falling currencies. how do you stop a currency from plummeting? you raise interest rates but that could hurt the already weak economies or you let the currencies fall even further and that risks skyrocketing inflation or consumer prices going out of control. it's a policy dilemma. it's scaring investors there's not much emerging market policymakers can actually do about it. but for many investors, guys, this all comes back to how it's going to impact the u.s. economy, of course. here's a stat out of soc gen. the u.s. exports 30% of gdp. we're only exposed to the outside world in terms of the

global economy 13% of our economy is exports. only a third of that is to emerging markets. according to soc gen. the concern is they aren't trading off the fundamentals. it's all about the fear factor and emerging markets. that's still pretty elevated. >> thanks for that. we're talking about the panic in the markets and investing environment with some of the biggest names in business this morning. joining us right now at the table, wilbur ross, ceo and chairman of ross. where are we? >> i think we're in the sixth inning or the seventh inning. >> that's better of the ninth. >> of the selloff or -- >> of the selloff. >> of the selloff. >> yes. >> so you look at yesterday, the bottom or not really? >> no. but it's near there. i think the average investor should pick a stock they really

like. >> you tried to buy stuff in the early morning trade? >> yeah, we did. it moved too fast back away. >> what were you looking to buy? >> after we buy it, we'll be glad to tell you. >> you missed it the first time around. when you think about china, would you invest in china right now? >> we are investing in china right now. as you know from prior discussions, we felt there is no 7% growth. there's maybe 4%, maybe 5% at best. why? electricity consumption nowhere. natural gas consumption, nowhere. comment consumption, no where. steel consumption, nowhere. >> all the china supporters say that's because they're shifting from investment growth, industrial growth, and now going to consumer growth. >> it would be a great theory if it were true. the only problem is that investment is still something like 44% of the entire economy. consumer is a much smaller

fraction. plus, the anti-corruption, believe it or not, has hurt consumer spending. not just the high rollers. there are these tales about waitresses in restaurants taking an e-mail photo of a guy wearing expensive -- wife with expensive jewelry, e-mailing it to the police, cops come and arrest them in the restaurant. >> can we go back to the innings issue because i think there's some confusion. i'm trying to figure it out, looking here on twitter. you think we're in the sixth or seventh inning of a correction or -- >> yes, that's correct. >> okay. but -- >> if you ask the question so he knew what you were saying, then we'd all -- >> we'd all be together. >> we wouldn't be going back to this. >> then joe asked a follow-up to clarify. >> just to put a fine point on it, you think we are -- you think the market's going to continue to go down? >> wilbur ross here. >> i'm just trying to understand. >> i don't think it's going to have a very serious downward direction from here, no. i think there will be lots and lots of volatility around

whatever is the mid-point. partly high-frequency trading, partly you don't have the high-tick/short sale rules anymore, partly institutions are all trigger happy. >> can we understand the china slowdown you're talking about here? >> we don't export very much to china anyway, other than airplanes and a few things like that. >> and our technology. >> well, that's inadvertent exporting. >> are you occupy that greek bank yet? >> no, we're not up on it yet. we still have to get through the election. we have to turn out to be right -- >> how much have you made back? >> oh, we're down. we're down a major fraction. >> are you ever going to be able to get that? >> they will have to delight you, won't they? >> we'll delight ourselves. i think the most likely thing is a sort of rights offering to raise capital. >> you ready to ask him a question? >> yeah. we're going to ask the question more broadly.

by historical measures, we've been in a nonrecessionary environment for a long time. and so given the slow growth, i think many of us assume that will continue. would you agree with that or how long do you think we have before it's not just a correction but we're subject to a sustained recession. >> i would call it a nonrecessionary environment. i would say it's an environment limping out of recession. and i think that's going to continue. i don't see what's on the horizon to suddenly propel growth. and i'm a little surprised frankly the decline in oil prices hasn't helped us more. that transferred a $1,300,000,000, that's a big number. and especially frightening about china because they're the largest beneficiary, being the second largest economy but the

first largest importer of oil. so, it should have had a disproportionate effect on them. >> who are you backing for 2016? >> i think at the moment we should leave the position vacant. >> you don't have a favorite? >> you've had some contact with jeb. >> oh, sure. >> how about -- you're friends with donald, aren't you? >> i am. i am. >> do you support donald? >> i think donald is a wonderful thing for the republican party. we never would have had 25 million viewers at the big debate. and it even spilled over to the junior varsity debate, something like 6 million. >> but would you vote for him? >> well, we can only vote for people who are actually on the ballot. >> if oe was a nominee, would you vote for him? >> if he were a nominee, i'd vote for him, sure. >> a little nominee about -- it's going to be hillary or biden on the other side. >> you could have put son of sam

probably or -- >> i'm not sure that's true. >> that might be a stretch. >> i actually think there's a lot -- anyway -- >> that's what i'm saying. >> depends on how dyed in the wool you really are

. it's a stock market gone mad but not an economy gone market . welcome back to "squawk box." toll brothers down a percent in premarket trading. you can see after the home builder reported a 12% rise in

third quarter. profits were down from the same time a year ago. those shares down about 10% over the last week. netflix surging 7% premarket. this is a stock that's fallen by 16% over the last week. the best performer in the s&p 500 on a year to date basis. according to cnbc.com, one of the most loved and hated ticker lookups in that site. apple shares, it was outperform from market analyst citing overvaluation and reassurances about china from tim cook in an e-mail to our very own jim cramer. back to you guys. >> thank you. for more on what wr to find value after yesterday's big selloff, let's bring in marty sass, ceo and chairman at m.d. sass, also a "squawk box" platinum portfolio member. i talked about 1987 earlier. i had already been familiar with you for seven, eight years by the time 1987. marty was in the business back

then. >> he was what, 25? >> right. he was an intern. an intern. do you care about macro stuff? >> i do. >> and what -- have you changed or shifted any of your viewpoints about any of your individual investment -- >> the only thing i've done lately is buy some more of the things i like. >> is that what -- and you think that makes sense? >> yeah. when things go on sale, i like to go in and buy. >> so were you buying like crazy yesterday morning? >> not crazy but nibbling, because, you know, you never know where the bottom is. but capitulation presents some great opportunities. and there was capitulation early yesterday. >> you do think -- so, that was -- you would -- >> i'm not saying it's the bottom but -- >> that's a good word. >> -- definitely capitulation when a stock goes down 20% for no reason. >> you don't buy it's the algorithmic trader -- >> i do, but also investors were just throwing in the towel.

you know, the emotions of investors are such that they can't take the pain of loss. they don't have the stomach for it, so at the bottom of markets, you look at '09 or '87 crashes or '72 crash, the bottom were made when they threw in the towel and said, i can't take the pain anymore. the retail investors capitulate at the bottom, and if you look at intrinsic values because of china, emerging markets and commodities plunging and the like, that's a great opportunity for investors who are not thinking about the next day but the next 12 months to a year, three years, and i think wonderful opportunities are rising during periods like this. >> so, in your -- this is not a platinum portfolio appearance, but would you be buying those? >> i have, in fact, bought all of them.

there are four sectors in the stocks. >> yeah, let's -- >> that i'm a buyer. health care is my number one. has been for four years. got a wonderful opportunity in stocks like alergan, mylan, which is down, by the way, from $75 to $49 yesterday. mckesson and shir, all have come down. fundamentals are as strong as ever. lower stock prices are good for them because there's a consolidation going on in this industry, that's ongoing. they can buy things cheaper. these are un -- underlevered and they'll use this as an opportunity. they have strong secular growth drivers unaffected by china. >> keep going. >> housing, i think we're in the early innings of this housing recovery. it's a multiyear play. the obvious ones are the home

builders. i've owned lennar. but new ones i bought were whirlpool, which is derivative of the leading global appliance manufacturer, 10.5 times earnings, and eagle materials which is a leading cement and gypsum wallboard producer. >> we have to wrap. we'll see you again soon. we'll see whether in hindsight that this capitulation was the final capitulation or not. sometimes you don't know when it is. >> exactly. and i don't know. >> thanks, marty. when we return, jim cramer joi joins us from the new york stock exchange. check out oil, rebounding slightly. looks like it was reapproaching 40, but 39.42, higher by $1.18.

my name is jamir dixon and i'm a locate and mark fieldman for pg&e. most people in the community recognize the blue trucks as pg&e. my truck is something new... it's an 811 truck. when you call 811, i come out to your house and i mark out our gas lines and our electric lines to make sure that you don't hit them when you're digging. 811 is a free service. i'm passionate about it because every time i go on the street i think about my own kids. they're the reason that i want to protect our community and our environment, and if me driving a that truck means that somebody gets to go home safer, then i'll drive it every day of the week. together, we're building a better california. let's get down to the new york stock exchange. jim cramer joins us now. did you have a quick answer as to why the chinese market was down another 8% and we were called up about 300 points and europe did well. it mattered yesterday but not today? >> i think the clowns in the

communist party who have been trying to keep it up have turned into more serious individuals. they could give 1,000 to every family over there and be better served in terms of what they're doing. this shows they realized it's not working. it was trick. they should listen to marty. they should be buyers of high-quality stocks when it comes down but they've been buying the worst stocks. maybe they'll stop the buy program and do something about the economy which shows they're grownups. >> we've had someone say i don't like buying a market that's up 500 points but we're down still, i guess we must be down in correction territory for most of the averages. it's not too late if you believe that this is just a respite. >> well, i don't like the buy. most of the stocks i follow that i like are up $2 and $3. if i were a hedge fund and bought the stocks yesterday, those guys are going to hit the bids. a better time to buy. if not, you missed it.

if you buy up here, you're going to look foolish. >> really? >> yeah. because you're going to get picked off. some of these prices are so insanely high that you have to say you missed it. it's okay. just say you missed it, because you cannot come in and buy up 3 and up 4 and expect that you're going to make a lot of money. you're not showing any courage. you're coming in on top. look, could they make some money buying goldman sachs up six? i don't know, maybe it will work. i prefer to say i missed it, and i'll hope for lower prices but if i don't get them, you know what? i kept my bat on the shoulder too long. >> so you think we're in the late innings of the correction but not -- or middle innings. >> middle innings. i think what will happen is let's say lockhart or my friend buller comes out and says he's sanguine. then we give up 3%. we're gripped by federal reserve

officials who are trying to stay out of the tent. offensive linemen coach who disagree with the head coach. we're so vulnerable to a head coach saying we need to tighten that we'll give up these gains and i don't trust the federal reserve people, the presidents and governors to do the right thing for this market. >> you didn't get any e-mails today, did you, jim? >> no, not today, but you never know. you send out a lot of them, you get lucky sometimes. it's just like having a lot of lines out in the water, you catch a 23-inch bass, maybe you get to keep it. >> when we return, we'll wrap up the show and talk about what has us buzzing this morning. "squawk box" returns in a moment. ♪ every auto insurance policy has a number. but not every insurance company understands the life behind it. those who have served our nation.

have earned the very best service in return. ♪ usaa. we know what it means to serve. get an auto insurance quote and see why 92% of our members plan to stay for life.

welcome back to "squawk box" this morning. our guest host this hour is scott sperling. what did you do yesterday in the public markets? anything? >> i watched it. >> are you going to do anything today? >> we don't participant in the public markets directly. >> i'm asking about the family,

the sperling family. >> we have people who manage money and do whatever they do. >> are you worried about the impact of your private investmen investments? >> near term, it makes it harder to sell things in the public markets, whether it's an ipo or selling stock. we think it's cheap, but we do that there will be lots of opportunities and if this correction extends, i think there's lots of buying tun opportunities. we talked about health care. i think traditional media, content companies. there's enormous value there with consolidation. >> do you have any exit strategies with that that you'll have to wait on? >> the nice thing act our business is if you correctly structure the investment, you can hold it for a long time. >> we've been wondering about the private markets, especially in vc unicorn land.

>> we've had a difference in how we carry private companies. i think we're pretty good on that. in terms of public securities, we mark them as they get marked at the end of every quarter. >> thanks for being here. >> i'm here tomorrow. >> i'm not. >> make sure you're with us again tomorrow. "squawk on the street" is next. ♪ >> after the worse three days for the dow ever, the oversold bounce appears to be here. good morning. welcome to good morning. i'm carl quintanilla with jim cramer and fdavid faber. the dow is set to pop at the open but not enough to rally yesterday. shanghai dropped