Cuban: When markets go straight up, folks get overconfident

Billionaire investor Mark Cuban weighs in on Monday's dramatic market sell-off, urges investors to do their homework and pay attention to what they are buying.

This is a rush transcript from "Your World," February 5, 2018. This copy may not be in its final form and may be updated.

NEIL CAVUTO, HOST: Taking stock of a walloping in stocks.

Welcome, everybody. I'm Neil Cavuto.

And you're looking at something that, in history and in point terms, we have never seen at the corner of Wall and Broad, the Dow Jones industrial average falling more point-wise than it ever has in history.

The only consolation I can make here is, for a while, it was worse. All the major averages down, all 11 sectors, including financials and energy, defense and homebuilders, pharmaceuticals, health care, food, beverages, even fast food chains, slammed and badly.

And a lot of that on the notion that things are improving. Now, I distinguish that strikes you as odd, but for the Dow down about 4.6 percent today, it makes 8 percent from its highs. So, a 5 percent correction handily in tow. For a while, we were appreciably beyond a 10 percent one.

Be that as it may as well, we should posit that it's now underwater for the year, the Dow underwater. In Japan, its market underwater, all the major European indices underwater. That would mean that the gains that they experienced as the year ensued -- and it was and has been an incredible year -- gone. Now gone.

Now, as we look at this in fast-forward motion here, a lot of this was fueled by interest rates backing up. For awhile, a 10-year note, which is sort of a key borrowing rate, one that a lot of mortgages are paying to, a lot of your own borrowing costs, a lot of car loans are pegged to, that got as high as 2.9 percent or very, very close to it.

But something remarkable happened in the last two hours of trading. A lot of people took money that they had had in stocks or looking to add in stocks and said, you know what? That is now approached a level I feel safer with the backing of Uncle Sam than stocks that don't have any backing at all.

So, an unusual development in the middle of the day when traders shifted from stocks into bonds. The price of those bonds went up and the yield went down, so much to the point that a 10-year that was fetching almost 2.9 percent, as I said, by day's end was down to about 2.79 percent.

Our dollar remained a very big draw across the world today. If in doubt, you park it there and usually the instrument they park it in are in Treasury notes and bonds.

Now, I should posit again that a lot of the news that this was based on was better-than-expected economic news. And we certainly got a lot of that. For example, the services sector now advancing to a 12.5-year high. Consumer confidence in and out of four-year highs. Earnings from the seven -- the Fortune 500 companies, the S&P 500 companies, eight out of 10 better than expected.

Revenues sales better than expected. Earnings better than expected. But here was the bugaboo we telegraphed for you last Friday with the employment report. Not only was that news better than expected. It was the wage growth, ironically, at close to 3 percent, that alarmed some of the financial community that maybe we have inflation to worry about.

Maybe that was going to be a problem. And wouldn't you know, Jerome Powell took over as new the Federal Reserve chairman. And he, of course, watches that very, very closely. The prevailing view being, well, if things are going so great, all of a sudden now, we have to factor in more rate hikes.

Sometimes, it doesn't even to be the Federal Reserve doing it, my friends. Sometimes, all it has to be is market forces fearing that that could be case.

Now, let's step back from this for a second before I get to my key guests, that, in percentage terms, we're still up a lot over the last year. And percentage terms and point terms, gains are still heady. Bull market heady. Now, some people will look at this and say you need some sort of a cleansing process. You have heard that a good deal and that bull markets add to their life when more people invest after a dip like this.

Now, of course, we didn't see any sign that they were hurrying to invest in an environment like this. For example, all Dow 30 stocks were down, and down appreciably. To put it in perspective, stocks like Apple down a percent, Alphabet down 2 percent, Wells Fargo, the banking sector, down north of 2 percent, Berkshire Hathaway 2 percent, Microsoft 2 percent.

But, again, I stress, this is the volatility of the moment. We always keep that reminder.

If we can put it back up, Sam, because I do want to just step back from this a second to let you understand that though today and the last couple days have certainly been volatile, this is where the market has been since the very, very beginning.

I know 1924 can seem a bit disarming here. So, the more likely -- is to look at it since the 1970s. But even with those jagged reminders in the middle there, through oil crises, banking crises, financial meltdowns, the '87 crash, all the way to 9/11, in the moment, they are big hits. And I will not ever minimize those hits.

But, as you can see, the overall trend is the friend. Now, in pointage terms of today, this is the record to beat; 777 points was the fired record. Remember when they had the failed TARP vote in September of 2008? That led to a big hit. They quickly regrouped. Congress had another vote on it, voted again for the TARP.

But being at the market's mercy, the Dow would still fall from those levels another 6,000 points. So whatever tonic is applied to the markets to ease tantrums like this, they tend to be short-lived.

Today's point drop, though, at about 4.6 percent, is appreciable. But let me put this as well in perspective for you, covering, for example, the 1987 stock market crash. That day, stocks fell 508 points. It was a big deal because, back then, that represented about a quarter of the Dow's value. Today, an 1,175-point hit, that represented about 4.6 percent of the Dow's value.

Now, I should also posit it here that just because we shaved off 500 points from our worst levels of the day doesn't mean that -- 1,175 point is still severe, nor does it's mean that with the better than 2,000 points we have lost from our highs that that is, for example, nothing to sneeze at.

But it is a testament in fast market conditions that anything can and will happen. There was no flight to quality here outside of briefly in things like bonds and copper and very, very briefly gold.

But, again, that is an interesting development. You're going to see a battle royal now between parking your money in the safety of Treasury notes and bonds -- and that's what was going on -- or even in energy-related stocks, on the belief that that they gotten beat down too, too much.

We're going to bounce around any and all of these markets and put in perspective and where you stand in this sell-off and what you can do now. There's a prevailing rule of thumb that you sort of, I don't know, breathe out the market hits. That, of course, is easier said than done. You don't lose money until you sell something.

But from the view of the New York Stock Exchange, they do have that eerie feeling that they have been here and done this before.

Fox Business Network's Connell McShane is outside the New York Stock Exchange, where all of this, as well as the stocks were going down -- Connell.

CONNELL MCSHANE, FOX NEWS CORRESPONDENT: Well, to your point, Neil, it may be nothing like it was in 1987, but volatility really did come back here on Wall Street today and following up on what we saw Friday.

It was remarkable to watch it throughout the trading session. Remember, Friday, the Dow was down by 666 points. Today, at the open, it plunked by about 350 points. But then don't forget it turned around and came roaring back to just about break even.

The Nasdaq composite index even turned higher for a brief time in the middle of the day today. And then those sellers came back. And when they came back in the afternoon, they really came back with a vengeance. At the low today, the Dow point-wise was down 1,597 points.

Now, these types of sell-offs, when you're in the middle of them, of course, can be unsettling. But many of the pros that we have been speaking to about this type of thing insist to us that it's really quite healthy.

Listen.

(BEGIN VIDEO CLIP)

TIM ANDERSON, TJM INVESTMENTS: Stocks grinding higher for a long period of time and then some sharp, steep sell-offs that flush out some nervous money, some traders, and some people that maybe got in a little bit late, and then you find a support level and the rally continues.

And I think that's what we will see this time.

(END VIDEO CLIP)

MCSHANE: We will see.

And to that point, it has been quite a while since we have seen anything like this. In fact, the Dow had not pulled back by more than 5 percent off of a high in more than 400 trading sessions.

Well, it has now. And as stocks were going up, as you talked about, Neil - - stocks were going down, interest rates were going up. And that led some to at least started talking about fears of inflation.

But, once again, listen to this.

(BEGIN VIDEO CLIP)

ANDERSON: I think I the market can handle rates going higher gradually. But it will get a little bit nervous if rates spike higher.

(END VIDEO CLIP)

MCSHANE: All right, so, finally, Neil, for some perspective on all of this -- and maybe on a day like this perspective is what we all need -- take a look at what the market has done since President Trump was inaugurated.

And you still see some strong gains of more than 20 percent. The Dow Jones industrial average still up a lot. And that, in and of itself, may be the issue. A stock market that simply may have come too far too fast -- back to you.

CAVUTO: All right, Connell, thank you very much, conservative.

Again, we will be rifling through all the major sectors today. We will be showing you how they did today. We will also show you how they did from their January 26 highs.

Most of those sectors are down double digits, not all of them. But we're just putting that in perspective. But it's fair to say that since the inauguration of Donald Trump and the election, it's understood that they're still up appreciably.

So, I didn't want to confuse you going back on forth on this. We will still show you the levels at which they declined today and the drop from their recent highs. That is something by which we judge things like correction in all the major market averages and these various sectors.

And then we will widen it out as the show ensues. I didn't want to confuse you. Some of you might have seen some up arrows and then say, oh, well, this sector was up. Some of those we were showing you since either the election or the inauguration.

This will give you a good peek at how the last six trading sessions have gone. Remember, it's picked up considerable steam over the last three, including today.

We have NYSE trader Stephen Guilfoyle, senior portfolio manager Kevin Caron, and market veteran Art Hogan.

And, Art, you and I have been around this track a few times. How does this compare? In pointage terms, of course we have never seen anything like it. In percentage terms, it would barely crack the top 10. But -- but it is the trend that worries folks.

Are you worried?

ART HOGAN, MARKET ANALYST: It's interesting. I'm not worried, because I don't think the fundamental picture has changed that much.

But I think, to you point, people start looking at interest rates going up, maybe a hint of inflation. And that's not something that we have seen in years. Right?

The yield on the 10-year broke out of a three-year range, start moving closer to 3 percent. People start thinking, at what point does that start drying money out of equity markets and into the bond market? I don't think we're anything close to that right now.

But once that started, once that conversation started, we started seeing momentum come out. And this is agnostic selling. They're selling everything in the market. If we're concerned about higher interest rates, you wouldn't be selling banks. The financials are off some 7 percent in the last three trading days.

So, I think this is just agnostic, vertical and indiscriminate selling. We will find a level of support probably about the 100-day moving average, which is just about where we closed on the S&P 500 today.

CAVUTO: I like that, agnostic and vertical.

Kevin -- and, by the way, you're seeing things based on a comparison of January 26. We have picked that date as the market averages' high. So, we have attached that to a lot of the big names which were in and out of highs at that period.

Well, that doesn't mean that these individuals, that was their all-time high back then. But we find this to be a convenient sort of a trigger point by which we can make comparisons between all the major averages, which, in the case of the Dow, are down close to 8 percent from those highs and some of these other averages as well.

But the Dow itself now, given that drop-off and given the fall in the case of the S&P 500 down 7.8 percent from its high, all of those major averages are technically underwater. In other words, all the gains that they had in this young year have been reversed. Not the gains that they made last year. Not even close.

But I do want to say that is kind of why we're using that January 26 date. You will keep seeing that. That is a market high.

So, Kevin, to that point and what happened, I do notice sort of midday a lot of money found its home in bonds and Treasury notes, particularly the 10-year, because that had gotten as high as almost 2.9 percent. Now it's around 2.79 percent, so obviously a flight to quality there. What's going on?

KEVIN CARON, WASHINGTON CROSSING ADVISORS: Yes, I think it's just a market that has gone very strongly up for a long time now and then got really supercharged as we came into the year.

We have had a really big improvement in the level of values for the U.S. stock market. I think we got up to something like $33 trillion, give or take a couple trillion dollar. And that's just a big valuation relative to an economy that is closer to $20 trillion.

At some point, the market has to take a breather. And that's what we're doing. I wouldn't worry about very much at this point, unless there was a change in attitudes that lasted for a while. And we don't see that. Most of the data is still very good. And unless we saw a change in attitudes that changed behavior, we would buy this dip and expect to see improvement as we move down the road.

CAVUTO: Is there a rule, Stephen, when you pass a 5 percent correction, something we hadn't seen in at least a year-and-a-half, that you almost inevitably see the 10 percent one? Because that's something that we haven't seen in many years. And that would be sort of a cleansing process that smart guys like you might seize on or buy on.

What do you do?

STEPHEN GUILFOYLE, FOUNDER, SARGE986: I think you have to be buying in this.

Even Friday. I bought late Friday. I bought today. I got into energy late. I think you have to be, if not aggressive -- you can't be aggressive.

CAVUTO: What else were you buying? What else were you buying?

GUILFOYLE: Oh, today, you know, I didn't go into financials.

CAVUTO: Interesting.

GUILFOYLE: Which I was waiting all day to get a shot. But I want to see the spread between hit the two and the 10 hit 80. It got up to about 75, 77. Or at least that's the highest I saw.

(CROSSTALK)

CAVUTO: You're talking about the gap between a two-year yield and a 10- year note yield, right?

GUILFOYLE: Right. It came back into about 65 basis points by the time the market closed. I never got the shares I wanted to get into the financials.

But there were plenty of shares in the Apache, the Schlumbergers, and the Exxons that I could go get. And that's what I did.

CAVUTO: Interesting.

GUILFOYLE: And I also got the sort of tech names like Nvidia. Nvidia, high-flier, it's coming right in, right? It's coming earnings this Thursday.

I have already been in Nvidia. I already had a nice year in Nvidia. But I really couldn't pass up these prices. So, as a trader, yes, I got involved.

CAVUTO: I see.

GUILFOYLE: And you want to know what happened? You want to know what happened when the Dow hit 25000 and the S&P hit 2,700? That's when the stop orders came off. That's when the algorithms in the electronic trading traded kicked in. And that's when you need these guys most of all.

These guys need to be re-empowered.

CAVUTO: No, that's a very good point.

We should explain to a lot of people why volume all of a sudden spikes dramatically as they have these algorithms that just kick in en masse. And that's what happened.

Art Hogan, there are a lot of people who say that, even with this today and comeback -- I say comeback -- from our worst levels of the Dow, down close to 1,600 points, that it's still like catching a falling knife. Are you brave?

HOGAN: Yes, I think you have to be.

And when you think about the conversation that we have heard the most -- and you brought this up a few times -- I'm waiting for a significant pullback in this market to put new money to work. Well, it's happening right now.

If you're in that cohort of people that thought we had gone too far too fast. Remember, a week ago Friday, we were trading at 18-and-a-half times this year's earnings on the S&P 500. We closed at 17 times. You have gotten a turn-and-a-half of valuation that has come in your favor. And that's being presented to you.

(CROSSTALK)

CAVUTO: So this market is more affordable to you.

Kevin, is this market more affordable to you? We just showing the VIX index, which -- I don't like to quote it too much, because it's so volatile. It can swing wildly within a day. I mean literally within seconds.

So, I seized on it as sort of a snapshot of terror in the moment, but it can quickly calm down. So, I show that only to show how crazy volatile it was today.

But what about you?

CARON: Yes, so valuations are clearly better. The returns from here would be much better.

If you think about the last month, month-and-a-half months, think about Bitcoin. Think about all the craziness we saw there. There was this period where investors were chasing momentum. This was a very big emotional rally in a lot of ways.

And at some point, you just can't keep going. So, this kind of correction is really not all that unusual. There's been corrections of 3 percent, or 4 percent, like we saw last week, many times in the last number of decades. So, all of those corrections, by the way...

(CROSSTALK)

CAVUTO: You're right about that. No, no, you're quite right about that, about the expectation that it doesn't go up forever and all.

Normally, there's a telegraphing event, something of trouble. This seems to be a telegraphing event of good news, but normally good news.

CARON: No, not -- no, no, no, not always, not always.

CAVUTO: Interesting.

CARON: Think about 1999. Everything was great. Think about 2006-2007. Everything was great.

Bear markets are things that don't necessarily telegraph themselves very well.

CAVUTO: Well, wait a minute. Are you calling this a bear market, Kevin? That is this the start of a bear market?

CARON: No. No, no, no, no, no.

CAVUTO: OK.

CARON: What I'm saying is, it's very difficult to just look at the data and say everything is great, so therefore. What I'm saying is that attitudes and behavior have a lot to do with this.

And behavior and attitudes have been very strong, very positive, a lot of optimism. We're seeing a lot of pickup in investment growth, which takes confidence. We're seeing a pickup in expected growth in the global economy. That takes confidence.

The lift in equity values takes confidence. The closure of the spread between corporate bonds and Treasury bonds takes confidence. And the steeping of yield curve all takes confidence. That's the big story.

CAVUTO: Got you.

But you don't see like a black swan development? I just want to be clear.

Stephen, actually, I will pick up with you on this.

You don't see a black swan development or something unexpected that a lot of this has been in response to or at least a quick excuse has been that we have got a confluence of very good news, the economy improving, more jobs, the unexpected robust nature of the tax cuts, of corporations sharing the wealth, this pickup in manufacturing activity, retail activity, that that is combined with the expectation rates, which have been very, very low, ridiculously low, are not necessarily going to go skyrocketing, but certainly higher, and that that is one thing that unnerves the markets.

Do you agree with that?

GUILFOYLE: Well, yes.

But you know also what unnerves the market? I think the Treasury estimating that they are going to have to borrow a trillion dollars every year for the next three years, when just last year they only borrowed $600 billion, this when we just cut taxes.

So our deficit spending planned going into the future is only going to grow that much more. And then if you lop in an infrastructure bill, building a wall and defense building, which I'm all in favor of, by the way, it's going to make it all that much harder.

But there's positives. All right. We have all of this money abroad, right? All of a sudden, that money is worth more because the dollar is worth less. So now at these cheaper valuations with prices lower, guess what? All these big multinational firms, they can bring corporate repurchases back to the fore, because they really haven't been here since year.

Now it's going to get interesting. There is a bid.

CAVUTO: All right, guys, I want to thank you very much.

We're following some fast developments here, waiting for a statement from the White House on all of this. On Air Force One, a spokesperson had been saying the they're always worried about these type of developments and valuations, but the president, of course, made no mention of this in Ohio.

But they did talk a lot about it at the corner of Wall and Broad, where this is still considered very much an enviable market.

Fox Business Network's Nicole Petallides at the New York Stock Exchange with more on that.

NICOLE PETALLIDES, FOX BUSINESS CORRESPONDENT: Neil, what is interesting now is not only what we saw this afternoon at 3:11 p.m., when we were down nearly 1,600 points. The biggest point drop in history today is what we made.

But what the traders are also watching right now is further selling after the bell. Right now, traders are standing in their booths watching the technicals, watching the support levels. And, in fact, the S&P 500 futures, 40 points down from that 3:11 level.

That tells me and you and our friends at home that ultimately we're going to likely see some selling abroad. When I asked about tomorrow, they said likely to see selling in the morning and maybe they will pick them up.

I will say, to Sarge's point say, that at that point, did it feel like capitulation? We certainly had heavier volume than usual. We sold off 1,100 points last week. We had another 1,100 points today.

So, if you loved them where they were, you were looking for a place to get in, you get in. But, ultimately, there's certainly that feeling, that nervousness when we cross that 1,000 point mark.

And, Neil, it was so fast. At 3:11, it was at 762, negative-762, 3:11, 1,600, basically. It was fast, it was furious. And then they picked them right back up and took them off the lows. But that's the big picture. And you still have the rising rate environment.

But it's been a great economy. You have had rising wages and you have corporate earnings doing better. So, the big picture here is the feeling is that the trend is more likely to still head to the upside. But it was a tough day on Wall Street to see it sell off this quickly.

CAVUTO: Indeed. We're showing it in fast market time here. Imagine if it really did this throughout the day. You would be like, oh, my God.

(LAUGHTER)

CAVUTO: Anyway, it was not that, but again where we finally finished for a while, when we were down 1,595, finishing 1,175.

Again, we also showed you a map of the world there. Going into today, all the Asian markets were down. I remember even before the Super Bowl game when we had the first read of the futures, and they were down more than 100 points, the staff and I were communicating and saying, uh-oh, this could be an interesting Monday. And sure enough the Asian markets tumbled first. Japan now back in negative territory for the year.

That extended through much of Asia, carried on into Europe. All the world's major markets are now back underwater. Now, remember, some of them had been appreciating faster than we had this year. Now, does that mean it's over?

Far from it. But history is an inconsistent guide on this subject.

Let's ask Scott Martin, chief investment officer at Kingsview Asset Management.

So, Scott, let me ask you. Young investors who were just getting into this market see a day like this, and their heinies get burned. And they wonder, oh, my gosh, what do I do?

What do you tell them to do?

SCOTT MARTIN, KINGSVIEW ASSET MANAGEMENT: Yes.

I mean, there's no doubt, Neil, they're getting rocked a bit. But I'll tell you what is interesting. You look back -- and you talked about with it the panel with the guys beforehand. You look back at 2017, which was a great year by many stretches. Right?

And you have the S&P 500, Neil, that moved over 1 percent intraday or during the day, rather, finishes, closes, eight times during the year, right? That's not a normal volatility environment with respect to any historical average.

And so when you look at the fact that the S&P 500 was so quiet last year, and so those new investors that have come in almost expecting things to continue like so are getting a rude awakening.

And the reality is, I hate to say that this is normal and to be expected, because these numbers are a little bit extended. But when volatility does come into the market, that's the market being the market. And you have to, as an investor, especially being a long-term one, as I am, as a lot of my clients are, you have to take these as opportunities for the longer-term investor who wants to accrue stocks here.

CAVUTO: But let me ask you about that, Scott.

Normally, in every downdraft in the market -- I'm not saying this is at all like an '87 experience, because it's not. That was the Dow losing a quarter of its value. And that was in a single day. It had actually been cut in half if you included the sell-off that was going into August and September.

Leaving that aside, normally, you wait to see some big brave names come in or companies buying back stock. IBM was a buyer back then. The famed investor of Fidelity Peter Lynch was a buyer back then, Warren Buffett a buyer back then.

Then if you go, fast-forward to 9/11, when airline stocks were pummeled, and then Warren Buffett and some of these other big names dove in to buy them, George Soros, among others.

We don't see that yet, or probably we don't get reports on that yet. Probably too early. But would that be a reassuring event to you?

MARTIN: Yes, it would. '

Now, Scott Martin is doing it. But I say that kind of joking. But it's partly -- you're right. It's partly some of those names that come in. And usually -- you're right, Neil -- it's after the fact. You hear about a couple of buys a couple days later that come in and say this is where market valuations are appropriate.

Now, I will tell you, if you look back in January, which was a great January, we have wiped out a lot of those gains, depending on your favorite index. The market valuation if I was to rate it on a one to 10, my friend, it's about even.

It's really not that much overvalued. It's not undervalued. So it's about where the market should be. But you guys talked about in the previous panel the great commit data that is out there, the health of the banks, the strength of their balance sheets, the fact that we have this great tax cut that is now in place for 2018 and beyond.

There's a lot of reasons that there's winds at our backs still and not winds at our face like there's been in previous market corrections.

CAVUTO: All right, my friend, thank you very, very much, Scott Martin.

I want to take a look at this with just average folks who want to step back from this and say, gosh, I have had some appreciable gains, I'm looking at my 401(k), I'm looking at my pension, I'm looking at what has been an inexorable run-up where it's made me look like a genius just sticking with this market, is that still a wise strategy here?

It really depends on your perspective. I know I repeat the obvious here, but the younger you are, the less urgently you need the money right away, the better you are sticking with markets for the longer term, let's say five, 10, if you're really, really young, like my crew here, 20 years.

(LAUGHTER)

CAVUTO: But, again, if you measure long term like me in terms of what we're having for lunch tomorrow, that could be a very different perspective.

All kidding aside, though, I do want to raise this with Charles Payne, who sort of picked apart what's going on here and maybe offers a little bit of wisdom that he provides to a lot of his investors.

What are you telling them right now, Charles?

CHARLES PAYNE, FOX NEWS CONTRIBUTOR: I had everyone rally -- I rallied the troops and had everyone come in early. And we tried to get in touch with all -- as many people as possible before even the open, Neil, because...

CAVUTO: So, you knew about the futures, what happened. You knew about what was going on in Asia, so you were preparing them. Right?

PAYNE: Right.

And to your point, a lot of people have echoed that this is -- feels very similar to 1987. I had been a broker for a year at that point. And I remember in the middle of the session just leaving the session and going to the nearest bar.

(LAUGHTER)

PAYNE: But the lesson that I learned was that it wasn't the end of the world. It was actually just the beginning.

And, of course, we went on a decade-long run after that. But it was tough to go through it. And this is what you really have to do. You have to explain to folks that -- especially the late comers -- I think Scott Martin mentioned -- there's a lot of people who missed a lot of this rally, just got in, feel like they're snake-bit, they lost again and they were sellers.

You had a lot of weak hands who were selling. You had a lot of programmed selling. You were joking about that time-lapse thing. At one point, it was real-time.

CAVUTO: I'm telling you. I'm telling you.

And, by the way, that's another little footnote here. You know, we have these circuit-breakers where they curb trading and outright stop trading. But they're based on percentages, not points. So you would have to wait awhile, like almost 6,000 to 7,000 points, before trading would be halted in any way shape or form. So, that gets a little scary.

PAYNE: It does get a little scary.

And it just underscores where we are -- 4.6 percent, that will put us maybe, to your earlier point, in the top 10 all-time losses. But it's tough.

I keep urging people to look at the underlying fundamentals, which continue to get better and better and better, and also to put it all in perspective. This is a rally that went parabolic. We went straight up after November. I mean literally straight up.

CAVUTO: We did.

PAYNE: Like a Roman candle, we finally blew. We're filtering down now.

And now what are you investing in? Are you investing in the hype, the momentum, and you really investing and do you want to be an owner of great American companies? Because right now, we have companies that are firing on all cylinders.

And if you want to be an owner of those companies, now is the time you start looking at this. I suspect that this is the week that some investors should want to get aggressive and start to at least populate their portfolio, if they hadn't done so yet.

I know it's frightening, but this is the time to do it, when it's on sale.

CAVUTO: A lot of people look at this -- and we're going to be brief here - - but just since the election, some of these sectors that got hammered today are still up appreciably.

Now, whether that continues based on the optimism about regulations being cut, corporate taxes being severely hacked in a good way for them and they're sharing the loot, that that will save the day, do you buy that?

PAYNE: Yes.

I love them, materials, industrials, technology and consumer discretionary stocks. People are out there spending money. Those $1,000 bonuses, those extra paychecks. I looked last week at MasterCard and Visa's earnings numbers. People are spending on their credit cards now because they have confidence. That means they're buying bigger-ticket items.

So, those are the names that have worked out. Those are the names that I think will continue to work out.

CAVUTO: All right, there is a thought to dollar-cost averaging. It's an age-old market saw that people don't try to time these markets, but they put in the same amount every month or quarter or year.

What do you think of that? You buy more stock when it's cheap and beaten down, buy fewer shares obviously when they're pricier, but over time you do OK.

What do you think of that?

PAYNE: I love that idea.

And if you can do, even take it a step further. Make sure you're buying according to the fundamentals. We're halfway through earnings season, Neil. So, 50 percent of companies have reported; 80 percent beat on sale, 75 in earnings.

CAVUTO: That's right.

PAYNE: And guess what?

If you have a company that just two weeks ago reported and the stock went up 10 percent in those earnings numbers, that news is still valid. If it's pulled back with this wide pullback, you actually have a gift.

So if people can do a little bit of work, they're going to find a whole lot of great names that we know they're great because just a week or two ago, we saw what happened when they told the world, hey, not only are we doing great, but they gave us guidance for the rest of this year.

The buying list should be easy to put together. Pulling the trigger obviously is a lot tougher.

CAVUTO: You know, Charles, you mentioned the point about being patience with this and everything else, not trying to lose it.

The fact of the matter is, you and I both were through that '87 market experience. Funny. You went to a bar. I went to a bakery.

(LAUGHTER)

CAVUTO: But that's a whole 'nother thing.

But I'm wondering if people look at this as sort of a reminder, because history does repeat itself in this way. We hear from authorities the economic fundamentals are still sound. That was kind of what we heard from a Trump spokesman on Air Force One today.

We used to hear that from George Bush Jr. right before the meltdown was hitting in a big way, that the economic fundamentals were sound, from Ronald Reagan after the '87 crash. Stocks go up and down, but the fundamentals are sound.

We have heard that line before. Do you think the economic fundamentals, whatever is going on with the market, are sound?

PAYNE: I think they're not only sound, Neil. I think they're extraordinarily strong and getting stronger.

The last three weeks, all the economic data that has come out, including today, by the way -- the ISM report on servicing, we have record unemployment, a record in backlogs. In December, we spent a record amount on construction, $1.25 trillion, a lot of that on residential.

This economy is as strong as it's been in a long time. In fact, we're stronger now than many people thought America could get ever again. Keep that -- that is something people need to keep in mind. The data itself is phenomenal.

CAVUTO: All right, my friend, thank you very much, Charles Payne.

PAYNE: You got it.

CAVUTO: On the phone with us right now is a very successful billionaire, Mark Cuban, et al. So much we can get into with him here.

But, Mark, are you nervous after today?

MARK CUBAN, CO-FOUNDER, HDNET: No, I'm not really nervous.

I think it was necessary. I still think there's uncertainty about what the market does next. But when you have a run-up like we have had since the election, markets don't go in a straight line forever. And so something had to happen. It was just a question of what and when and how much.

CAVUTO: All right, now, there are a lot of folks who are saying trying to find a buying opportunity is akin to trying to catch a falling knife. Would you be dabbling in any sector, stocks, groups, even aggregates, based on today?

CUBAN: Yes.

I bought some SPX. My two biggest holdings are Netflix and Amazon. And they have obviously done really fell. And so if they fall any more, I will probably buy some calls. But I'm a long-term holder.

(CROSSTALK)

CAVUTO: When you said STX, are you talking about Seagate Technology? What are you doing?

CUBAN: Oh, no, no, SPX. I'm sorry.

CAVUTO: Oh, I'm sorry. I misheard you. I apologize.

Go ahead.

CUBAN: Yes, the S&P 500.

(CROSSTALK)

CAVUTO: All right, so that's representative of the 500 best companies in the United States. So, as a reflection of that, you want to buy that entire average?

CUBAN: Right. Yes.

And so I didn't make a big -- didn't take a big position. But it's there. Look, the market could go down a lot more. I don't know. But, over the long haul, I think we will be OK.

CAVUTO: All right, but let me ask about OK.

Now, there are a lot of people who look at today and say, well, we have got a more affordable market, but is it historically an affordable market? Because others were telling me, no, Neil, it's still pricey, by price earnings and all that stuff that guys like you look at.

CUBAN: Yes, it really depends what your personal financial situation is.

And so if you have to look at mark-to-market every day, then you shouldn't be in the market. And as interest rates go up, maybe you consider buying TIPS, which are inflation-protected securities, or buying something else that is basically safe.

I think part of the problem today and why we had the biggest sell-off ever is when markets go straight up like they have the past 14 or so months, people get overconfident. And there's a saying, everybody is a genius in a bull market.

(LAUGHTER)

CUBAN: And when they get overconfident, they start buying on margins.

And that works until it doesn't. And so you have had people -- I think I saw something recently that there were a record number of retail accounts set up recently. The amount of money coming in from individual investors was at records.

CAVUTO: Right.

CUBAN: And a lot of that probably was being borrowed.

And so if all of a sudden you get an alert on your phone or you get a call from your broker and your stocks are down significantly, and you bought on margin, then you're -- you're pretty much forced to sell. And I think that contributed a lot to today's declines.

CAVUTO: That's a very good point, because you think about, Mark, I can remember with the '87 crash, to a lesser degree after 9/11, what compounded the selling was margin calls.

CUBAN: Absolutely.

CAVUTO: You either had to give your broker cash or you had to sell some stock to make whole. And that sort of started a new wave of selling after the event.

Do you envision something like that? Because a lot of individual investors, the default has been to buy additional stock on margin, in other words, borrow money.

CUBAN: Exactly right.

And also it's been to buy on the dip.

CAVUTO: Right.

CUBAN: And so it's also feasible that people saw a big sell-off early, and then the market started to go back up. And everybody is like, oh, here it comes. I should have bought on the dip.

And so when it went back down, they started buying and then they got whipsawed. And so I think, again, it's really going to depend on your personal situation. If you have got cash on the sidelines and you're a long-term investor, then, yes, it's OK.

But I do -- I do think the market will be OK over the long haul,as I said earlier. But there's some risk. As beneficial as the tax cuts have been for the short-term, there's the risk that people are going to spend all that money, which in a lot of respects is good, but that is going to increase the trade deficit.

Who knows how the administration is going to respond to a bigger trade deficit. It might also increase interest rates.

(CROSSTALK)

CAVUTO: Or it just might increase the GDP.

(CROSSTALK)

CUBAN: Yes. No, I'm not saying it won't. It just depends on how that money is spent.

CAVUTO: Understood.

CUBAN: But the key is, we don't know what is going to happen one way or the other.

CAVUTO: Mark, the mood of investors has always been that this bull market knew no bounds, they kept buying. They have been rewarded richly for buying on these dips. I don't see a lot of people diving in.

You could make an argument when we got down as low as south of 1,600 points down on the Dow, that someone came in, because we finished down 1,175 as if that is a bargain. But I don't see that.

You're the first brave soul I have heard from, a big-name investor, who said, I plunked some money in an S&P fund here.

But, by large, you need to hear a lot more of that, don't you, that other people are imitating what you just did today. And short of that, people are going to be skittish. Right? They need...

(CROSSTALK)

CUBAN: Yes, they should be.

CAVUTO: I remember you doing this in prior market downdrafts. I can remember the Peter Lynches and some of other big names, the Warren Buffetts, the Carl Icahns all of a sudden.

And we might found out later on that is exactly what is going on. But don't we need to hear more of that?

CUBAN: Well, you just got to be careful and know your own situation.

Look, I obviously was wrong when I thought after the election the market would go way down. It didn't. And I have been right by -- Netflix and Amazon are my biggest holdings, and they have exploded.

And so I'm able to buy because even if it keeps going down, I can keep on buying more and pushing my average costs down. The key is, if you're an individual investor, don't be in a position where you're borrowing to buy.

Be in a position where you're in solid -- you have solid financial footing. And if you can nibble a little bit here, don't spend all your money here. If you have got cash, play it down. And if the market goes down further, you're still OK, because at some point it will go higher.

CAVUTO: You know, the White House, of course, has attached much of its success to the markets. You can't blame them, they have argued. I know you might slightly disagree, that the media doesn't give them a fair shake when it comes to this market run-up.

Now the argument is, if you talk about it on the way up, you own it on the way down. Do you agree with that?

CUBAN: No, because they shouldn't have owned it on the way up, and they don't own it on the way down.

Look, when people are excited about their situation or about their companies, the tax benefits certainly accelerated things and got companies excited. That's all good.

But markets don't look just at current quarter. They look further into the future. And the thing I try to remind everybody of is that, when you're buying something, the person who is selling or the company that is selling it to you, they're not selling it to you thinking that they're going to lose money.

They're selling it because they think they have got a good reason. If you're going into the market, do your homework, understand what you're getting into and understand all the risks.

Where people get hurt is that they don't really do their homework and they don't understand what is involved, particularly when a market has gone straight up for so long, and it feels like it, and you have people saying day after day that it's going to keep on going straight up.

That's when you have to really, really be careful. And tomorrow it could be up 2,000 points, it could be down 2,000 points. I don't know. But what I do know is, if I do my homework and pay attention to what I'm buying and know why I'm buying it and its impact on my personal situation, then I will be OK in the long run.

CAVUTO: All right, now you bought a representation of the S&P as it is now. So obviously you have a longer-term view that that is going to appreciate. Right?

CUBAN: Right. Correct. Correct.

But, again, as I said, as much as I think it will go up two years from now, five years from now, if it's down for the next 12 months, if it's down the next 24 months, you know, I have positioned myself -- I didn't participate in the entire run-up let's say from the time of the election, but that allowed me to put a lot to the side in cash.

So, I have got a lot of cash on the sideline. So, I can buy on the way down and be OK for the long run. So I will keep on saying again, everybody has got to know what their own personal situation is, whether -- regardless of what I say, what other market pundits say, what other investors say, it really matters more about what your personal financial situation is than what anybody says about the market.

CAVUTO: Are you going to run for president?

CUBAN: I don't know. We will see, Neil.

What do you think?

CAVUTO: I don't know. I just thought I would get you on a weak moment.

(LAUGHTER)

CAVUTO: All right, Mark Cuban, thank you very, very much. Good seeing you again.

CUBAN: Always a pleasure to come on, Neil. Thanks for having me.

CAVUTO: All right, with us now is the House Judiciary member and Ohio Congressman Jim Jordan.

Congressman, always a pleasure to have you.

REP. JIM JORDAN, R-OHIO: It's good to be with you.

CAVUTO: I do want to raise this memo issue with you in a different sense, if you will indulge me, Chairman.

JORDAN: Sure.

CAVUTO: And that is that I heard one market watcher tell me over the weekend -- I have this live show. It's a great show. You should catch it some time.

Anyway, one of the things he was saying is, just the possibility that this memo seems to telegraph the investigations and the counter-investigations and the follow-up investigations are going to go on longer than thought is another element of uncertainty that I don't like.

What do you make of that?

JORDAN: Maybe.

But, look, more important to me is, did top people at the FBI engage in behavior they're not supposed to engage in, in the United States of America? Namely, did they take a disproven, salacious document and make that the basis to get a warrant, a secret warrant at a secret court on a fellow American citizen?

And it sure looks like they did. And when they did that process, it looks like they didn't tell the court pertinent, important information, like who paid for it, like the fact that they discontinued their relationship with Christopher Steele, the author of that document.

So, to me, that is more important or most important when you think about fundamental liberties we're supposed to enjoy in the United States of America.

CAVUTO: Congressman, there had been much talk about eventually getting this Democrat memo out which apparently disputes the Republican memo. Where does that stand?

JORDAN: Yes.

Well, I think they're moving in that direction tonight. There's a House Intelligence Committee meeting this evening. Maybe they will vote to make that public going forward. Of course, then it would have to follow -- my understanding is, it would have to go through the same process, go to the White House, and the president is ultimately responsible for whether he declassifies it and lets it come forward.

I'm all for that. Transparency is a good thing. I called for it seven weeks ago, when Christopher Wray was in front of the Judiciary Committee. I said show us the application. Show us the actual FISA application, so we can know for certain what exactly happened.

Of course, they're not willing to do that. But a couple of people have been able to see that application. One of those individuals was Congressman Gowdy. And he was one of the chief authors of the memo we got last week, which lays out what they did wrong.

CAVUTO: But Congressman Gowdy says none of this means the president is off the hook with Bob Mueller and that separate investigation. What did you think of that?

JORDAN: Well, I mean, Mueller has got his investigation. He's going to go through with it.

What I do know is this. To date, not one bit of evidence to show any type of coordination between the Trump campaign and Russia to influence the election. But we know, just as sure as you and I are talking, that there was -- the Clinton campaign paid the law firm who paid Fusion, who paid Christopher Steele, who paid Russians to do what?

Get information to influence the election. And what did we also learn? His work product, Christopher Steele's work product was taken to a secret court to get a secret warrant to spy on a fellow American. And we know that work product was salacious and unverified, Jim Comey's words, not mine.

That is a problem. So, we know all of that. Mr. Mueller, if he is going to continue his investigation, so be it. What I'm focused on is getting the truth and reforming this FISA process that I think was terribly abused.

CAVUTO: Congressman, among some of the nerve-racking factors with traders today -- and it's easy to point to this like a Monday-morning quarterback - - is the this notion that we are going to have another continuing resolution, I believe our fifth, to keep the government lights on, so to speak, but that dealing with immigration, the DACA thing, that could be delayed another year.

And it was a frustrating bit of news and maybe weighed on stocks. I think that's a leap, the latter point. You what do you make of that?

JORDAN: Yes, and it could be even more fundamental than that, Neil.

It could be the fact that we're getting ready to run a trillion-dollar deficit this year.

CAVUTO: Yes.

JORDAN: It could be the fundamentals like our debt-to-GDP ratio is one to one.

So, one of the things we have been focused on in the Freedom Caucus is to stop the crazy spending, particularly on non-defense discretionary spending, spending that just Democrats love because it just grows government. That is not where we need to go and, frankly, not what the American people elected us to do.

So, that's a fight that we're in the middle of right now.

CAVUTO: All right.

JORDAN: Let's do what we need to do for our defense, but let's hold the line on everything else.

CAVUTO: Jim Jordan, thank you very much, sir, House Judiciary Committee, House Freedom Caucus.

JORDAN: You bet.

CAVUTO: There's a lot of things he's doing these days. All right.

All right, let's go to Fox Business Network's Deirdre Bolton, a chance to catch up to average, who are feeling a little bit more than average angst, I guess, huh?

DEIRDRE BOLTON, FOX BUSINESS CORRESPONDENT: That's right, Neil.

So, you remember that point earlier this morning it seemed like some of these losses could be contained. The Nasdaq was even higher. We talked about Apple at one point in the day rebounding from Friday's loss.

But as we know the storyline today, the Dow closing down more than 1,000 points, biggest drop in point terms on record.

I did come out here. I spoke with a few people and asked them how worried they were about this three-day market sell-off. Here's what they told me.

(BEGIN VIDEO CLIP)

UNIDENTIFIED MALE: I think it's just a normal correction. It's been rising too quickly for the last couple months. I think it will stabilize out. This will be good for us.

UNIDENTIFIED MALE: No, it doesn't concern me because I know it's going to go back up.

UNIDENTIFIED MALE: It's been up for, what, the last three years constantly. So, eventually, it is going to go down.

UNIDENTIFIED MALE: No concerns whatsoever.

UNIDENTIFIED FEMALE: I know my family invested in stocks and stuff. I'm sure they're concerned.

UNIDENTIFIED FEMALE: It hasn't dipped low enough yet for me to be concerned.

(END VIDEO CLIP)

BOLTON: So, as you can tell, Neil, some pretty relaxed philosophical responses, if you like. Most of the people that we spoke with really taking this longer-term view, which is to say that if you bought stocks about 12 months ago, you're still on average still up better than 18 percent -- I'm just doing a rough average -- between the returns on the S&P, the Dow and the Nasdaq.

The forces that you have been speaking with, with your guests this hour are really there. On the one hand, these strong underpinnings to the U.S. economy, this 17-year low for unemployment, the wage growth showing strength.

But then on the more pessimistic side, these concerns about inflation, will the Fed have to act in a more aggressive way than most market participants were expecting? And in that case, as we know -- and we have seen it already with the 10-year -- yields going higher making all kinds of borrowing more expensive.

That's true for businesses. It's true for consumers whenever they apply for mortgages or car loans. So, these kind of push and pull forces are playing out in the markets. And obviously these past three days, pessimism has reigned -- Neil.

CAVUTO: Yes, they don't find a middle ground ever, do they?

BOLTON: No.

CAVUTO: All right, Deirdre, thank you very, very much, Deirdre Bolton of FOX Business Network fame.

BOLTON: Sure. CAVUTO: So, OK, there you are hearing all this and saying, Neil, I have heard all your guests just numbing me with all this information. What do I do? How do I play this going forward? I'm saving for my kids' education. I'm just saving, period. I'm looking forward to retirement. What the heck am I going to do?

Let's go to Larry Winget. He's a multiple bestseller. "Grow a Pair" is one of my favorite books. He just talks about taking control of your life, taking control of your kids' lives and just taking control, period.

Larry, what do you tell average folks? I'm sure they hit you up today and say, gee, Larry, I'm nervous. What do you tell them?

LARRY WINGET, AUTHOR, "GROW A PAIR": Well, Neil, I have been watching Fox Business and Fox News all day long. And I have heard nothing but experts. And I'm certainly not an expert, but we have experts that are saying the sky is falling.

We have experts who are saying this is great and we should have expected this. Then we have experts who are saying it's just a blip.

And so what I have learned, as a regular guy, is that experts pretty much don't know much of anything, that every one of them will give us a different answer.

So, for a regular guy, I would say, let's not panic, let's not do anything, let's not make any emotional decisions. I'm an emotional guy. But if we get emotional about our investments and about our money, we're not going to make the right decision.

If I go to the craps table every time expecting to win, well, I'm a fool. But if I come into the market every day expecting to win, I'm also a fool.

What I have learned over time is, if you play craps all the time, you end up a loser, but if you play the market in the long-term, just like Mark Cuban said, eventually it is going to go back up and you will win. So, everybody should take a breath.

We should be heartened by all those interviews that we just saw. These people are calm. And we all need to stay calm.

CAVUTO: I think you're right about this.

And I kind of adhered to a nerdy strategy inspired actually by my late dad, who just said, you know, Neil, the only way to appreciate capitalism -- I'm paraphrasing here -- is to steadily back it, to steadily support it.

And so he was a big pusher, if you will, of just investing in the market every month, every quarter, ever year, even down to when we were kids with our allowance. And the idea being that you buy more stock when it's beaten up, and you buy fewer shares when it's rich.

But this so-called dollar-cost averaging, which seems like an old saw, rewards you over time, that anyone who follows that over the years -- and we were showing -- maybe, Sam, we can show this again -- a chart of the Dow from the beginning of the last century.

It shows, if you step back -- and I keep a similar chart of this in my office, oftentimes to impress my bosses that I know what I'm talking about.

(LAUGHTER)

CAVUTO: And one of the things I try to see when I look at this is that it goes up.

And from the beginning of the last century, it goes up. Now, I keep that across from my desk, the other side of the office, where you can barely make it out, outside of the fact that it's going up.

And the closer you get, Larry -- and you and I have talked about this so in times -- if you're in the middle of the period where there's World War II and a depression later on, a presidential assassination and Watergate, and two oil crises, and, of course, the meltdown and 9/11, when you're right in that period, and you're getting shellacked, you feel it.

And I'm not minimizing it. But, again, drifting back from it, that chart is going up. This is a good representation of it right now.

And I always like to remind my own kids of the power of that over time, that I'm not smart enough to know the peaks and valleys and the exact moment. But I am smart enough to know that the trend is your friend.

Capitalism over time is your friend, and that that is one thing that you can count on, because that has been its remarkable consistency through tragedies and far, far worse. What do you think?

WINGET: Well, I know that six years ago -- you just looked at the last 100 years, the last century.

Since years ago, the market was at about 12000. Now we're double that.

CAVUTO: You're right.

WINGET: So, just in the last six years, I have made a lot of money. Anybody in the market has made a lot of money.

CAVUTO: Come on. You have to be honest, young man. That's based on your book royalties. But don't play games with me.

(LAUGHTER)

CAVUTO: But, no, one of the things you talk about is just don't get too smart for your britches. Just use a little bit of common sense and a little bit of consistency, right?

WINGET: That's absolutely right, consistency.

And I think what Charles Payne said a few minutes ago is something we all should pay attention to, is that the rest of the economy is really doing well. And, again, I have got regular guys who read my books, regular guys who follow me.

And those folks, regular folks, they do have more money right now. Celebrate that. And the wages are up. Celebrate that. And unemployment is down. Celebrate that.

Those are all things about our economy that we should be excited about. And if we get emotional about a few days -- and, yes, it's probably a correction, but, again, the experts, they are all saying it's probably a correction and a good thing.

But if we get overly excited as the regular guy, this is what I know. We will make a mistake. So, just take a breath, wait it out. You can always count on capitalism. Your dad was right. And everybody needs to stay calm, especially the individual inspector.

CAVUTO: You're right. My dad also said, Neil, stay humble. In your case, it will come in handy, so two bits of advice I didn't forget.

(LAUGHTER)

CAVUTO: Larry, thank you very, very much.

We will have a lot more right after this.

(COMMERCIAL BREAK)

CAVUTO: All right, a rare event where the markets weren't going be president's way.

In fact, all the major networks left his speech to concentrate on what was a big, big hit, at the time close to 1,600-point hit in the Dow, finishing down about 1,715.

Fox Business correspondent Jeff Flock was with the president today in Ohio.

Did he ever mention the markets at all, Jeff?

JEFF FLOCK, FOX BUSINESS NETWORK CORRESPONDENT: Not once.

And that's something. I have been to a lot of these events, and he always mentions the markets and touts the fact that the stock market has been flying high under his administration.

He left it completely out today. But you are right, Neil. This sort of took me back to the Obama administration, when you never took the whole -- the president's whole speech. You might take a little bit of it. Today, I think may have been the first time we didn't take all of the president's speech.

But I would make the point. That's Sheffer Corporation back there behind me. They make cylinders for hydraulics and big, heavy equipment. A lot of the people that he spoke to on Main Street here today, believe it or not, are not invested in the stock market, not either with individual stocks or ETFs or even with a 401(k) plan.

A lot of these people live paycheck to paycheck. They did get a $1,000 bonus, though, as a result of the president's tax cut, and they are getting a break in their take-home pay. They're going to less tax money taken out of it

Those folks didn't lose any money today. While Wall Street was on fire, these folks on Main Street, many of them didn't lose a thing, for perspective.

CAVUTO: Yes. On paper, my friend.

You always provide that, always calm.

Jeff is always, always calm. It's one of the many things we love about him.

Jeff Flock, thank you.

FLOCK: I'm broke anyway.

(LAUGHTER)

CAVUTO: Thank you, my friend.

All right, you know, tomorrow is going to be interesting, because I keep telling you about margin redemptions. A lot of folks -- and you probably don't even know this -- but you are on default with your investment banker to buy stock on margin, in other words, the value of the stock that you have, and using that as collateral or leverage to buy more stock.

But if the stock is plummeting, you have a couple of choices. Your banker is going to either ask you for more money or sell some of your underlying stock, which could propel the self-off even further.

Is Gary Kaltbaum worried?

Gary, are you?

GARY KALTBAUM, KALTBAUM CAPITAL MANAGEMENT: Neil, margin is your best friend in a bullish phase. It's the worst enemy of the market in a bearish phase, because that's just plain old leverage.

And the leverage is going to come off as the greed turns into fear pretty quickly. So, I think we're seeing some of that today. And I suspect we're going to see more of it.

I don't think you just get this type of move down and everything is A-OK. I think we are going to see lower. But how much is anybody's guess right now.

CAVUTO: A lot of people need to see or want a 10 percent correction, as if there is something magical to that. It normally goes beyond that if you get to 10 percent.

What do you think? KALTBAUM: I'm going to guess we are going to get half -- we're going to give half back what we got out of the election.

CAVUTO: Really?

KALTBAUM: Which may be another couple of thousand points.

Last Monday, I said I thought we were going to see a 2,500-point drop. I didn't think it would happen in five days. And it just tells me sellers are plentiful -- and January looks like, with some sort of climactic move after a big 14 moves up -- 14-month move up.

And just realize, we have had a monster move. We are way overdue. And when you don't have any corrections on the way there, you get little uglier moves to the downside. So, I suspect that's what we're going to see here.

CAVUTO: Interest rates got a little lower today, after backing up obviously off flight to quality and things like Treasury notes and bonds.

KALTBAUM: Yes.

CAVUTO: Do you see that continuing, that that is sort of like the new cool place to put money?

KALTBAUM: Oh, yes, flight to quality. When markets get scared and get defensive, they buy defensive.

You will probably see utility stocks act a little bit better here, real estate stocks, as interest rates come down a little bit. That is a normal course of business when you see something like this.

And, again, my worry is, is that with all the leverage out there -- and, again, we haven't even had a bear market in nine years of consequence because of the Central Bank. So, I think that could be all in play right now.

CAVUTO: All right, Gary, thank you very much, my friend.

KALTBAUM: Thank you.

CAVUTO: We have been through many a bull and bear market alike, Gary Kaltbaum.

All right, just couple of things to look for, folks, and we will keep an eye on this, how Asian trading opens up tonight, going to lead the roost here. So, you can count on at least the beginning of a sell-off over there. That normally extends to Europe. Then we will look at our own futures and how they are pouncing on that or whether this stabilizes at a certain level here.

It's hard to tell. But all the world's major markets, including our own, are now underwater. By that, I mean the gains that they were experiencing that got as much as close to 7 percent, certainly on the Dow, are now gone, but not all the gains of this administration or the past year.

Perspective, crucial.

"The Five" now.

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