Transcripts For CNBC Squawk On The Street 20240713

Heavyweights cat cuts earnings outlook. Boeing sticking to the timeline for the return of the 737 max. Softbanks massive wework bailout. The latest deal details and the golden parachute for adam neumann. Mark zuckerberg goes to washington were going tostart with that pair of dow components, boeing erasing earlier losses despite a big earnings miss. Revenues slightly above consensus. Company still sees the 737 max getting back to service in q4. And then there is caterpillar, missing with quarterly results, cutting full year guide, hurt by weaker demand in china the first decline in quarterly profit since 2016. As they had sales down in every region which you just talked about. My travel trust owns it does that mean im an idiot . No it means you have to take pause and say they continue to buy back stock, they said would no longer be episodic cash flow remains really good. I didnt think i could make this much money with this decline in revenues all that said, so what 400 other companies in the s p 500, doing better than cat and cat has a lot to do with the fact that the world is slowing and it is our probably most accurate barometer of how the world is slowing tough stock to own why wont it go back to 118, 119 . There is still a lot of where it was before the last round of trade talks. There is optimism that if youre short this thing, and we get a trade deal, you get your face ripped off, it wasnt good it just wasnt good. Energy was okay. It wasnt a good quarter i think you have to own that not all quarters are dove tailed with what Texas Instruments said last night, guiding down on the december quarter. Weakness throughout the quarter. Bespoke says the worst warnings reaction since 08 if you go through the quarter, theyre abject in saying on the Conference Call, the ir and cfo, look, this is every single business line we have they became the default semiconductor to own had we got too concentrated on communications, specifically apple. I take it with the grain of salt they became the internet of things, automotive, industrial, Semiconductor Company to own not unlike that nxp is doing on semi talking about communications being great, 5g, take a look at what tr said last night, excellent company, communications, thats a very strong business. Im saying Texas Instruments, bad read through if youre going to be selling some of the big tech stocks, want to dump your qualcomm, sell your micron, drams are strong, youre making a major mistake. Txn up more than 30 , why . It wasnt related that much to cell phone this is a move out of industrial, like cat and into Cell Phone Communications like taiwan semi, like qualcomm, like, by the way, nvidia, congratulations to jensen huang, the number one ceo in hbr, Harvard Business review, yesterday. I think you look at teradyne Texas Instruments is a big company. I didnt like the call it seemed like the fault is in the stars, not us. Not only that, can i tell you the april read through, april 2019 Texas Instruments call, they with so gloomy. Give me a break. They are, like, hey, listen, we are not seeing good things at all times. 30 year history, the down cycles are four to five quarters and they are four quarters into declines four to five quarters of year over year declines, already four quarters in. The depth may be greater due to the trade tensions. They were gloomy. Cant blame them for being gloomy. Cant blame them. I also can say their mosaic of business heavily lent toward industrial, they didnt want to be hostage to the apples of the world. And to the curse word of all, huawei yeah. They still talk about having 100,000 customers, 100,000 skus, you dont think it is a good macro plan, you want i think too gloomy, too gloomy and business is too weighted toward the broader Analog Devices what do you sell you sell on semiconductor, you can sell microchip, Analog Devices. Ill sanction all those. Ill sanction selling nxp. On this on this i will not go the broad, you got to sell micron those who sell amd on this, shame on you shame on you what have you no shame, david this is not the mccarthy hearing. It is have you no decency, short seller remember the republicans were the conscience of the senate i think it is that micron is the linchpin once again. If micron holds, here, plus or minus a dollar, bingo. We didnt get to boeing. We didnt we have to. Pushing back 777. They think four quarter on the max. Negative operating cash flow, 2. 4. Where do they say that look, very true, they did ring fence. It is true to open up the deck and first thing you see is this thing is not going to sink us. If it was up to them, yeah, it is still clearly out of their hands. I would like to have seen two decks. Presentations. One of if things dont come back, and, by the way, if you look at united technologies, fantastic quarter yesterday, if things dont come back, and they do stop production, then companies will be losing hundreds of millions of dollars a month. So i would like to see an either or. But if youre a pure optimist, you never show the or. It is like am i asking for them to say, okay, here is the patriots with brady, here is that we like without brady no in this case, belichick has control of brady there. Glad we got to football within the six minutes, seven minutes regulation have you seen the numbers have you seen the numbers . It means more than ever. Even the Fourth Quarter matters more these days. Those negotiations are going to the dolphins playing with ten men, really hard cleveland is playing with ten men. Jets play with ten men right . The jets can play with 15 men and still copt stuldnt stop tht rush really the season is over. How about lily versus biogen. Thanks for nothing moving on, i just discovered seven companies. Move on, nine more companies he knows i love him i love you you know i do. Wework, Public Market implication if youre a softbank shareholder. The deal was done, press release out late last night, detailing many of the things we have been telling you br to almost two days softbank takes control or will take control when it is all said and done, everything is closed of wework with this. We first reported back on monday, early afternoon, 80 stake in the company the companys founder, of course, adam neumann will largely be monetized, if you want to call it that, as will any number of potential shareholders who choose to participate in what is going to be a tender offer worth up to 3 billion for all nonsoftbank shareholders the price is 19. 19 a share. They will commence thatfairly soon and expect to close it pretty quickly also extending net debt of some almost 5 billion 1. 75 billion is a letter of credit 2. 2 billion of unsecured notes. This is a company, im told, by people who were involved obviously in all of the negotiations going to run out of money by next friday. Come on. They were really they have certain cash, but they have hurdles on it that they havent met, they were unable to use that cash. They were going to be running out of actual money they could use to fund their business by next friday. The money cant come soon enough for wework the question now is for softbank, of course, and its leader masa son and the man who thing work and reacheeing it profitability, softbank will have put in some 13. 5 billion the billion and a half in accelerated warrants theyll do now. Add that to the 9 plus they have already put in and another 3 for the tender youre getting up there, arent you . 13. 5 billion for an 80 stake in an 8 billion pre the new money not that new money, pre the money valuation. 80 of 8 billion for 13. 5 the math doesnt look so good. The question is what can you do . And how long do you have to do it it is not as though this is not a company that is still burning through a lot of cash. In the press release, ma masa s said hes a Firm Believer the world is undergoing a massive transformation in the way people work and the companies at the forefront of the revolution, he says it is not unusual to experience growth challenges, but the vision remains unchanged. David, let me just flip it for a second had they not bailed them out, would we not be talking about a commercial banking crisis . It is that big. I dont think so. We would be talking about a black eye for jpmorgan, personal loans, the stock, we would be talking about, certainly some questions in terms of space and the leases and real estate area in new york and other large markets. I dont think it would have gone to that level. Thats important. A lot of people are scaring the heck out of me. I dont think so. I could be wrong. All right we got to move on. Markets certainly not spooked by todays results when we come back, as we said earlier, Mark Zuckerberg on the hill, testifying in front of House Financial Services well bring you live coverage all morning long Musical Chairs in the c suite. We know kevin plank is leaving parker will be succeeded by john donahoe. Sap chief Bill Mcdermott chosen by service now as its next ceo well talk to bill after the break. Take a look at futures here, alternating between gains and losses for eight Straight Days well get to chipotle, snap, coke upgrade, new street high on apple in a moment. What do you look for when you trade . I want free access to research. Yep, td ameritrades got that. Free access to every platform. Mhm, yeah, that too. I dont want any trade minimums. Yeah, i totally agree, they dont have any of those. I want to know what im paying upfront. Yes, absolutely. Do you just say yes to everything . Hm. Well i say no to kale. Mm. Yeah, they say if you blanch it its better, but that seems like a lot of work. Now offering zero commissions on online trades. We charge you less so you have more to invest. Service now announcing Bill Mcdermott, former ceo of sap, will take the reins of service now, following john donahoes departure to nike, a Musical Chairs story that has a lot of people buzzing joining us, exclusively, Bill Mcdermott, the i guess the ingoing ceo of one of the best performing stocks around, service now. Bill, congratulations, service now on fire, what are you going to be able to do to augment the worknike john has done a great job with service now this platform, the way we take care of customers, and build trust, there is so much going on in the form of Digital Transformation and service now is at the center of it all so it is a matter of now how do we expand . And there is so many ways to do that in the way we care for our customers, the way we expand geographically and industries around the world so im excited. Bill, do you think well be able to use your globally from d add more verticals than the Current Service now because service now even though it is a Terrific Company is still in its infancy when it comes to the enterprise. Youre right, jim were in the dawn of a new era of software. For sure, i think the global context with heads of state, commissioners of leagues, ceos around the world, many of them dont know just how pristine the service now platform is. And just how extensive it is to solve it issues, Human Capital Management Issues because we built it on a fully integrated wholistic platform that drives real productivity in the enterprise and it works so collaboratively with all of the other big platforms. So were kind of the platform of the platforms and youre absolutely right, on industry, we can add many new industry plays to this formation,and really continue to kick this growth into high gear. Bill, personally, when you wrap things up at sap, i said, maybe bill will take it easy, family guy, does a lot of things in life you want to do, i never thought you had 28 hour days Frank Slootman slept on a couch in his office. In terms of people, is this the right job to uproot your family, go and become the world wide traveler i thought you might want to get away from . No, jim, this is what i do. And this is what i love to do. Im already moving my family to california my wife julie is all in with me. Kids are excited im totally ready to go. Im not a guy that wants to make a tee time i want to go out and meet some ceos and help transform the businesses this company was built on the idea of fred ludis vision for tremendously satisfied and loyal customers. Thats what we have at service now. We have a fired up team. Im super excited about our leadership team. The board of directors here, jim, is so uplifting, everybody is rowing in one direction, so no matter where i sleep, i know im where i belong, leading service now into the future. Bill, it is david faber we just mentioned slootman at snowflake, hes getting a lot of his old band back together. Head of north american sales, are you worried that what donahoes departure, youre not going to have much of a Senior Management team left judging from the amount of emails and social media hits im getting right now, for people that want to work here, i think we pretty much have our pick of the litter there is no doubt we have to hire a cfo and john was very kind he knew that bill was coming on, so here i am, and he didnt want to select the next cfo we have three very serious candidates, meeting with all three of them today, and that decision will be forth coming very soon. And now you have a ceo in waitdoes the same at service now, where were perfectly good friends and were work on a smooth transition. So all the leadership things are handled. We have a pipeline of great folks. Not to worry about the Human Capital issues on the contrary, our toughest challenge is picking out the best ones of the hundreds if not thousands that want to work here right now. And, bill, when people look at your career at sap, and the strategy pursued there, some of it was based on m a. Side bay, success factors, concur is m a going to be a more important part of your toolbox so to speak at your new employer as you look at the future . As you know, you have to form your strategy based upon the conditions and when i look at sap scenario, we didnt have any cloud revenue in 2002 and now theyre well on their way to 20 billion. So m a was a key concept in getting that company where it needed to be in this company, were a pure play, born in the cloud, Market Leader already growing faster than all the others and were doing that or began aborg organically. We have great expensability into our applications and were looking at mostly an organic play here. Should we choose to do tuckins to complement what our customers need to get us somewhere faster, well do that very carefully because our customers love that we have a fully integrated cloud offering and we will not sacrifice quality for growth we want both growth, we want margin expansion, and we want quality for our customers so they love us and they stay ever loyal as service now dont forget, we have the highest retention rates in the Information Technology industry and we want to keep it that way. Absolutely, bill, i know that the announcement was extraordinary. Total revenue up 34 thats great nongap up 28 . Let me say this, last week, you and i both know, a rather downbeat world view when he was talking at workday, basically saying, the world has become a tougher place and harder to close deals. What you hearing about the ability to close deals and what companies are saying, look, suddenly i think the operating environment out there has been stated by some is rougher. But i can only go by what i see at sap and what i see now at service now. And at sap, when you have a good brand, in a strong market position, you saw the Third Quarter earnings, bigger Third Quarter earnings than ever we beat our operating plans by 100 million and the stock is way up if you look at service now, it is steady as you go. As i look at the pipelines and compared it to the revenue growth, against historical norms, thee forecast, which supports what just happened in q3. So this coy steady one of the things, jim, you know this very well, companies that have kind of a one dimension focus, whether it is hr, or just one thing in crm, they tend to really feel the head winds of the Global Economy when things turn a little tough. This company, like my former company, they have a plethora of things that they can do in the enterprise to satisfy customers. I think this wholistic platform play is going to Serve Service now very well. One last thing, just want to point out personal basis, we lost a man, mark herd, last week, from oracle. One of reasons i loved him, can you say a few words, i feel like this stuff happens and it is like we forgot he ever lived i think about it every day so do you. Mark herd, what did he mean . He mt. Eant a lot, megaaccomplishments in the enterprise i respect selfmade leaders. Mark was a selfmade leader. It was interesting, jim, when he announced that he was taking off for health reasons, i had a very nice text session with mark, me to him and him back to me and it was heart felt on both sides when i woke up one morning, and he was gone, i just realized, wow, you know, what a meaningful moment that was for both of us we competed vigorously in the marketplace against each other but always had a serious form of professional respect i feel bad for mark and marks family and i can only say im just honored that i had a chance to know him i thought oracle did a great job of saluting his life and his contributions to their company, and im sure his wife and family must have been very proud of what he achieved in his professional career. Well miss mark and im super proud that i call him friend. I join you and wishing his family the best of all it is hard to have best of grief, but you and i both know his family had to deal with a lot here because this was going on for some time i thank you for the kind words bill, thank you for everything please dont miss the other half of this announcement incoming nike ceo john donahoe on mad money. How about all these guys great to see bill on the air. Well get cramers mad dash, count down at opening bell, look at the premarket, a lot to get to that we havent watched so far. Also, were watching zuckerbergs appearance on the hill today House Financial Services and what is turning out to be an eventful morning for pricing of crypto were back in a minute all right, lets squeeze in a mad dash before we get to the opening bell this morning. Norfolk southern, the feature. One thing that confounded people, the transports have been holding up here in the last few days why would that be . One is the rails, csx, pretty good Quarter Union pacific, really good quarter. Norfolk southern, not as good quarter. But, you know what, they suffer from comparisons if they had gone first coal down 13 . Coal is i think the stick in the fork in it cargo the operating ratio, so important for the rails, not as good as the precision rail at csx or Union Pacific it is the one to watch because this group held up a whole group of other stocks. So lets watch this. It might be the key to this market might be the key to this market i diabednt feel as though yu have to put it in perspective. It was a good quarter based on the operating ratio. Right not because they are seeing it is autos. It is coal it is energy down i know. But the operating ratio, 65. 4, the lower the better, people should understand that but i think Norfolk Southern is a Great Railroad i think the rails are a terrific place to be. Again, not unlike cat, do we talk about the Companies Making much less at this point in the economic cycle, but Norfolk Southern too linked to coal, some people say too linked to autos, others say i think that csx and Union Pacific are doing better. Burlington, owned by berkshire. It is an exciting market because you got these cargos, if you look at Norfolk Southerns cargo, the only cargo that was any that was good that surprised us, 1 plus auto, ag is very interesting, plus two. If we got a chinese buy, you could see every stock fly. The rails will fly if china does something that President Trump wants. If they dont, i mean, it is hard to cheer rail traffic had this year. Yeah. Green arrow, dont know how long. Precision railroad does take a lot of hedge turns people felt it was going to be bought out of the stone, the stone out of the stone is not bad. The opening bell here, s p 500 at the cnbc real Time Exchange at the big board, american express, celebrating the launch of its reinvented Corporate Card program. At the nasdaq, interactive brokers, buyer of automated trade execution. Talk about companies that are on the hot sheet i thought a very good quarter, people didnt like it. They started coming back there is reversion out of fin tech into exfin because of jpmorgan the stock went up after this big decline on the free no commission these two stocks are emblematic of what we do now. The customer keeps winning is that good or bad for the companies . Going to potentially affect cpi, financial services. I was going to ask you, you mentioned transports, the russell, banks, semis. Which of these shortterm rebounds that we have seen means the most it will be transports and thats only because what were really worried about is are we going you want to take this recession you walk the table and the semis cant do that theyre too worldwide in many secular issues the reason why i focus on the transports is because they really are still a great measure of commerce and that is moving and when you look at the negative categories, that you get, right here, right now, when it comes to all these different commodities, versus where we were in the first quarter, were seeing a very big slowing in this country very big amazing we keep trying to bump against this resistance on trend. Remarkable. The companies that are boring the brunt of this, weirdly are the Companies Like service now people dont want to be in these Software Service companies, cloud companies, they want to be in the cybersecurity companies, they want to theyre look for industrials. They found honeywell, they found united technologies. I swear, honestly, if caterpillar is up today, it simply doesnt matter. One stock that goes up, feels like almost every day. Tmobile . Apple did you see katy hubertys ode to ode to apple tv i dont know what shes this is a good one. 53 pages on the economics and accounting of apple tv plus. I would have told her, pick your best five can you imagine being an analyst, having to write this. Did you try to read through this i got to the battle of borg and i threw it away. Everybody is coming in with their streaming reports. It is very important were six days away from warner, of course. Unveiling its service. Hbo, max, well get a price point, well understand what new shows they will have, a lot of a lot of Different Things there. Apple, we kind of know that they got. We all keep laughing. Theyre all laughing about how little apple has we have the terrific opening the morning show. My wife says i want to meet Jennifer Aniston you watch what i do, no, i follow her on her blog over 10,000 hours of library. Apple has 4. 99 price target. Not price target, a price price price target. Which is great. The fellow yesterday, that big scoop yesterday, hans hans vesper. That was good. That was good good booking. Thank you i tried to book alex gorsky and john donahoe is a good booking too. Used to be a friend of mine. David, i live to steal your people apples market cap, by the way, once again the highest in the and. It is above microsoft. She is saying this apple plus is meaningful now. This is the first time ive heard anyone say it could be meaningful. Shes saying boosting Services Revenue by two points in fiscal 20 on average, one point eps. Not unlike what happened to procter gaen ga gamble. Netflix will spend over 14. Cbs viacom, 13 on content. Warner is up in that range amazon over 7 or 8. Expensive. Do you know there is a contingent within amazon that says at least that i hear set tells bezos just folds it up, get rid of what . We spent 7 plus billion on content. Do you think anybody wouldnt take prime if 7 billion. Remember the people who felt it was really good for the working person to not have amazon go to queens . Maybe we give them the amazon prime video. That would have been the greatest thing that ever happened to new york i swear to god how much did they pay . What did they pay Economic Development thing. We dont want that. The people with the the Congress People were in charge of it. It will be something that lives on. Jobs are bad if theyre from bezos. Failure of leadership, failure on amazons part to a certain extent to not is that something and that has nothing to do with what im talking about here what happens if amazon said, no more movies. Were shutting it down selling it off somebody else will buy all this stuff and we have 7 billion will you stop getting prime . No, i love prime. Right you like the deliveries. Are you kidding i love it. I just ordered sense dine. I get three every months it is not going to happen. It is important to point out until ubhubertys piece, the ax, morgan going to cost, i never heard anybody say buy it because more capital intensive, more probability of generating a positive return, thats not her view only people who cant make money on tv are viacom and cbs. Ouch. That was mean. Want to see mean . Stick with me. They make money they do questions about their ability to continue to actually make more money youre allowed to say his name. No, youre not. Remember george carlin, seven words . You add that partner. Lets rip through snap down 3. 5. Narrower than expected loss. Revenue ahead, but tepid outlook is the read . Buy it. Listen to me, listen to me, listen good, david snap has an unbelievable did you read, the hold they have, they have 90 of the 13 to 24yearolds are on snap and youre going to sell that stock here 90 . That is that hard to reach demographic. True. If i were the russians and want to win an election, i would stop with the facebook stuff go to snap. Snap . I have it. I didnt put it on here. I have it i dont belong to it. Do you think i remember when i asked preet barea if inside traders use snap. Thats a good question. That competes with us. A good podcast. Very nice. His book is good. Is it yeah. It is good chipotle is down 2. Comps up 11 digital up 88. Digital is now almost 20 of the business crazy listen to me they did 11 comp, by the way, 7. 5 of it was traffic. If 7 Million People had just joined in the customer, you know, in the loading program, since march, they can triple that, easily, they got this chipotle, where they do more than much more business when they have a drive through, this selling this stock down 40 this is nothing about louisiana pacific. Comps get hard here but the carne asada itself, it will hurt the progression of the progression, september was good, october was great. And how about this did you see they look at this they sourced avocado from peru, no longer hostage to mexico. Thats major there is Mark Zuckerberg going through security on the way to House Financial Services, hell face questioning on libra. Hard to get a read on his testimony. He does say according to some that his statement will say we know were not the best messenger for this right now. The best line in the whole thing. I would have emphasized more about empowerment when i look at some of the things hes got to say. Hes got to say, listen, this is about empowering the not just the wealthy to bank on by cell phone the poor people hes coming with an empowerment message, very positive, but at the same time, i think a lot of selfadulation, the selcorrect approach to take i think the long knives are out for him. Okay. You see what bitcoin is doing this morning back down below the 200 a day. If you want transparency and you think bitcoin is run by organized crime, by og, organized crime, ocg. Original gangster. You have to watch line of duty amazon prime, by the way thats from acorn. Hes going to be able to say empowerment, hes going to be able to say transparency and theyre going to be saying we hate you, facebook there is i think he prevails in the end a kinder gentler Mark Zuckerberg he went im listening to you. Continue. You dont see that . Kinder, gentler Mark Zuckerberg. I have. What do you think im still assessing. Assessing yes like a lot of people. You dont like the sweater . You want the hoodie . I like the hoodie. Hes become more of a tjmaxx buyer. Hes in his mid30s now how old is mark . What does that have to do with where you buy your clothes . You dont wear i hoodie as much. Service now, the whole cohort doing splunk is up big. People keep asking me, is there a bottom in the sales forces in adobes . Today is the day it has to bottom or else you are talking about snap. Devotee. In light of facebook, and instagram, it is worth coming back to why is the stock down 3 a lot of garter . It did run. Over 50 in terms of sales and acceleration. The market is stupid. The market is stupid they have costs obviously, but the people are throwing away maybe they didnt read through the Conference Call. They had the same memory as a snap okay they got the may fly ever see how long a may fly remembers things thats the people that own snap. Finish the Conference Call it is good jpmorgan took it to overweight 20 target they see positive ebitda in q4. I agree with them deec devin spiegel on monday. With julia boorstin. I fought for that interview. She has the edge on that. L. A. Too. Cant win them all. I was willing to fly out there. China town. Forget it forget it, jim sister, mother, sister, mother we mentioned nike, the long time Ceo Mark Parker stepping down, replaced by the ceo of service now john donahoe parker spoke exclusively with closing bell yesterday and elaborated on that move. We spent a lot of time over many months working on succession planning. So this is not something that happens in a matter of weeks so it is really unrelated to any other issues this is about me and the board, really wanting to make the build on the momentum that we have got add the horsepower, accelerate against our strategy, and do it while im here and in a position to lean in and make this as successful as possible donahoe has been on the board, mark is going to stay executive chair here did talk about how he wants to work with him for a while. Yes, absolutely really smooth transition big shoes to fill, teniyear total share on return. Five years, 125 , donahoe at service now fiveyear, 225 . You can argue, listen, it is just tough that nike to lose parker, a visionary, but donahoe is no slouch real deal. Hes the real deal. First met him during the fight with carl icahn over ebay, he said no, and then yes, and split the companies, which created a lot of value still chairman of pay pal too. Wow which reports tonight. People are thinking pay pal will mackke a move. A merger with pay pal and someone big in the payment space cannot be overlooked big in and of itself. Short list. Thats your short list. My short list, my Investment Banking short list. Got it. Every day i mackke a lot of cal to get the deals done. Youre instrumental in the workings of Financial System overall. We have to move on. Boeing and cat were leading the dow. Thats crazy. For now boeing is to bob pisani. Bob . Were about a quarter of the way through earnings season, more than 100 stocks in the s p have already reported. Let me just show you the sectors. Earnings stories very much impacting the sectors today. Semis down a lot thats primarily because of what were seeing with Texas Instruments. Talking about a company with 110 billion market cap. That big it will move the indexes it is in it is down 9 . Thats influenced. The transports influenced a little bit by Norfolk Southern, a bit below expectations consumer discretionary, a little weakness in whirlpool and latin america, we had some other issues going on with under armour, chipotle on the weak side banks, industrials flat. Thats very interesting. We had three very notable outliers, real disappointments for the earnings season so far fedex, mcdonalds, caterpillar, something really big going on here or are they sector specific . Fedex is sector specific Company Specific mcdonalds may be sector specific, a lot of chicken wars going on at the time of the reporting. Could account for the lower than expected u. S. Same store sales caterpillar, i dont think you have that excuse this is the poster child for Global Growth and they indicated that in their numbers. And here is the question why are we only down fractionally thats what everybody is trying to figure out. These numbers dont look very good on the surface. Here is the three big sub sectors of caterpillar mining, down 12 construction down 7 and energy you can say, thats at least not that bad, only down 2 these are pretty notable numbers on the down side overall i think the question now is does the stock reflect those low expectations and in the earnings. I think they do. I think that explains why were not moving that much on caterpillar. The Company Specifically told us what the problem is. They said were seeing reductions in inventories and were seeing end user demand flat and they anticipate this will continue into 2020. So lets take the companys word at it. End user demand flat going into 2020 whats going on with the company . The stock this year . Earnings are up 4 thats better than some companies, but not anywhere near spectacular. Revenues are essentially flat on the year and where is the stock gone . Way underperformed so the Companies Performance is reflected in stock price, and it is earnings and revenues here i want to show you something, this is a chart going back 7, 8 years now on caterpillar. At one point, this year, we were at 115 or so we were back at levels back in 2012, this is 2012 right here, for caterpillar. You see this stock jumped all over the place this year it has gone up and down with every twist of the tariff wars. My point is that caterpillar has essentially gone sideways, big spurt here, on the tax cuts, last year, i dont think it is outperforming at any particular way. I think thats indicated the company. Thats why were seeing flat here my point is going to the 2020, you may see this company as long as you got a paradigm where you get flat growth or 1 to 2 gdp growth, modest amount of fiscal stimulus in europe and just a truce on the china wars, you may have this stock going flat back to you. All right, bob, thanks. Good insight given what cat said earlier today. As we mentioned earlier, zuckerberg getting ready to testify on capitol hill. We saw him go through security a moment ago and elan mui got caught on camera for a second. Good morning good morning, carl. Well, we did see Mark Zuckerberg walk down this hallway here as he prepares for his testimony. He didnt answer any of the questions we tried to ask him, though, including whether users can still trust facebook, and whether the platform is safe however, he will be facing a long day of testimony and i can tell you that hearing room is going to be full, both members of the media and the public have been lynned up for hours in order to get into this hearing they even had to open up an overflow room because there is such intense interest among the public and also intense scrutiny of this company from lawmakers well see if zuckerbergs attempts to build relationships with lawmakers over the past few weeks will pay off when he faces them in just a few minutes all right, thank you very much well keep an eye on that. Jim, 29. 99, 3k like a magnet. A poll biggest lead since april in that poll, biden. Healthcare, a gigantic part of the s p, it gets ignited. You have anthem, worth very little under a regime from sanders, right, or from warren you want to buy that stock and the same set of numbers you want to sell it this is what is happening in stocks, biden coming back. Warren way behind on moderates. Way behind thats the you buy you buy humana, the worst of the best all right, guys make sure to check out our podcast, by the way. Listen to the openin squawk on the street cnbc. Com podcast. David is making faces ts r wherever you listen to wednesday. Dont go anywhere. Let me tell you something, i wouldnt be here if i thought reverse mortgages took advantage of any american senior, or worse, that it was some way to take your home. Learn how homeowners are strategically using a reverse Mortgage Loan to cover expenses, pay for healthcare, preserve your portfolio and so much more. A reverse Mortgage Loan isnt some kind of trick to take your home. Its a loan, like any other. Big difference is how you pay it back. 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She was the one. Post a job today at linkedin. Com grow time for crammer and stop trading. Theres a quiet market going on in devices, medical devices, whether it be thermal fisher, dannaher or boston scientific. Theres a Great Division between Drug Companies and these companies. The devices are very much the way to go. Intuitive surgical, one of the best quarterbacs. Device companies are favored whats on the rail some of it is a big tease jim foot e from csx, how do you like that booking and john donahoe. Subject of much of the news. Can i say because mark parker is going to move on i learned more from mark parker than any ceo about how a company runs it wouldnt be bad if he answered my email once in four years. The Conference Caller, what you get. Theres no more to parker than that. When we come back, as we said, Mark Zuckerberg on capitol hill, his testimony begins in a monts with the dow up 50 retireu want to follow your passions rather than worry about how to pay for longterm care. Brighthouse smartcare℠ is a hybrid Life Insurance and longterm care product. It protects your family while providing longterm care coverage, should you need it. So you can explore all the Amazing Things ahead. Talk to your advisor about brighthouse smartcare. Brighthouse financial. Build for whats ahead℠ brighthouse financial. I wouldnt be here if i thought reverse mortgages, took advantage of any american senior, or worse, that it was some way to take your home. Learn how homeowners are strategically using a reverse Mortgage Loan to cover expenses, pay for healthcare, preserve your portfolio and so much more. A reverse Mortgage Loan isnt some kind of trick to take your home. Its a loan, like any other. Big difference is how you pay it back. Find out how reverse mortgages really work with aags free, noobligation reverse mortgage guide. With a reverse mortgage, you can pay whatever you can, when it works for you, or, you can wait, and pay it off in one lump sum when you leave your home. Discover the option thats best for you. Call today and find out more. Im proud to be a part of aag, i trust em, i think you can too. Live pictures of capitol hill where in just a few moments facebooks Mark Zuckerberg will testify before the House Financial Services committee on the companys cryptocurrency plans. Well take you there live as soon as that begins. In the meantime, good wednesday morning, welcome back to squawk on the street. Market hanging in there despite some negative news out of cat, boeing, and Texas Instruments. A lot of shares rebounding as we alternated between gains and losses for the past eight days. Lets go to capitol hill. Reporter as karl mentioned, we are expecting Mark Zuckerberg to begin testifying in just a few minutes before we does well hear Opening Statements from the chairwoman, maxine waters. This hearing is supposed to be about libra, we know theyll have a range of questions for Mark Zuckerberg, including one which is antitrust we saw the stock take a hit yesterday when 47 attorneys general are part of the investigation, how will Mark Zuckerberg respond to that thats part of the question. In his written testimony he struck a humble tone one lawmaker who met with him one on one before the hearing told me he was receptive to the ideas and suggestions that lawmakers had. This is an opportunity for Mark Zuckerberg to show that facebook can change and convince lawmakers it can be a force for good on the lawmakers side this is a chance for them to show they understand facebooks Business Model and they are aware of the challenges and benefits the platform prevents and it can be smart about trying to regulate the companies. Guys how do you expects todays testimony to compare to the last time he sat in front of congress in april of 2018 i think this time lawmakers have done their homework they tend to ask detailed substantive questions on not just libra and housing but things like election interference and political ads and antitrust as well i think some of those things will dominate the hearing. Zuckerberg has learned a lot, he put a lot of time into this hearing from lawmakers, and understanding their concerns that goes a long way to defusing tension on capitol hill. Well get closer to the testimony and q a. Lets bring in roger, early facebook investor. The first few paragraphs, the financial industry is stagnant, theres no Digital Financial architecture to support the innovation we need it goes on to say that, i understand were not the ideal messenger right now. What do you make of how hes framing this in the early going . I give him credit for selfawareness they are clearly not the correct messenger. I think the fundamental issue we have to face here is sovereign nations, whether its the United States or any other country, really derive their legitimacy from control of legitimate means of force, like military and police and from their control of currency thats really where their power comes from so the notion of a corporation with their own currency that would compete with the dollar or euro is contrary to the system of governance we have around the world today. And in my mind, it isnt appropriate. Im in favor of having a stable crypto, but i want it to be inside the Monetary System that we have now, as opposed to a corporate thing on the outside its not just facebook i oppose. I dont want to see any cooperation doing this because i think eventually this leads to a lot of Financial Transactions moving outside the Financial System, outside of taxation, any regulatory control and in the end that would be harmful. What do you think his appearance today says about libra being a priority for him and this company to my mind, the fact that theyre persisting on it, given all the blow back theyve gotten on it is exactly what you said, he believes this is the next big thing. I get why that would be true if you think about the Business Model they created, which is advertising for the most part, clearly theres a lot of pressure going against the surveillance capitalism Business Model and at some point its going to have drag if he can move into a cryptocurrency that is, in fact, a currency, the scale is likely to be bigger than his ad business, immensely profitable and outside the regulatory framework, which from his view would be a fantastic outcome, and for all of those reasons we shouldnt let it happen. Roger, when you think about a currency, our willingness to give somebody a piece of paper and their willingness to accept it, trust obviously is everything yeah. Is there a complete lack of selfawareness on the part of this company in terms of how theyre viewed david, i dont know what it is, to be honest with you. Because you know, they they believe so much in their mission justifies any means necessary to get there. I mean, thats theyve said that out loud in the context of murders on Facebook Live they said it outloud in the context of myanmar and other things so they obviously have a fixation on their own Business Plan and a willingness to disregard all other factors, including common sense and so, i dont want to pretend i know whats going on inside their head but im personally mystified. What i hope happens here is the first person that interviews them puts a bullet in the head of libra, says nfw, and they move on to talking about any one of the other 150 things that congress should be dealing with respect to Mark Zuckerberg today. Zuckerberg talks about the risk of not innovating namely china is having something similar in the next couple months do you believe libra is about the dominance of america in the Financial System or something about facebook to be clear when companies talk about competing with china, the piece they dont mention is china is doing massive behavioral manipulation. Clearly facebook and google do a lot of manipulation today, and they aspire to have the level of freedom that china has to implement behavioral manipulation on its population and chinas effort to integrate a cryptocurrency is going to do that, itll have surveillance and data gathering possibilities. If i were facebook or google of course i would rather have that than operating under heavy regulation from government but we as a country should look at behavioral manipulation and say thats unamerican and we shouldnt allow it for anyone, let alone internet platforms in the first place. And their surveillance capitalism is driven by that basic outcome, this notion you want to control peoples behavior with data in my mind thats unamerican and we should just not allow it. John ford joins us on set as well he does go on to say well hear him in a second here people are concerned were moving too fast. His view is theyre being deliberate with the white paper and this long window into libra. I fee feel obliged to take t other side from roger. I think Mark Zuckerberg is right. The Financial System has not moved ahead on currency and digit tuesdayi digitizing it the way it should. Theres a question on how facebook and others should do it, they could do a stable coin, including the dollar, and bring more modern banking capabilitie to more people but at the same Time Facebook as we know does not have a great track record of thinking through the down side of digitizing things and when it comes to money, the potential havoc that could be wreaked if you get it wrong. I think this is higher than even with information its interesting that Mark Zuckerberg is taking this sort of apologetic tone coming in i think in his interview with lester holt he set this up where he said its more important to be understood than liked he seem seemed to have argued in the past everyone should like facebook now hes arguing for more understanding. So well think about that when he gets in front of the lawmakers. The down sides here are tremendous if not thought through in its entirety. What i want to understand is what is the upside for facebook if this goes through especially given, as roger mentioned, all the blowback they received in the last few weeks why are they still pushing forward with Something Like this why is he sitting through a fullday testimony with congress whats in it for them exactly . I think whats in it for them in developed markets like the u. S. Is attribution in the ad world. Its hard to know which advertising leads to a purchase. But if facebook controls a wallet with your currency in it and they show you an ad and you open your wallet, even if they dont know what you spend, they can say we showed an ad, you opened the wallet and we got a sale, that can help the process for them but then more broadly places where Facebook Messenger theyre trying to go, whats app is strong if they can bring commerce to people who arent banked in a traditional way, if they can control at least a piece of the currency action, if not libra itself, the wallet, thats a powerful thing they can do theres one more piece, john, that i think you want to keep in mind imagine this is a Payment System for the facebook marketplace i mean, facebook, if it had a Payment System that it controlled, would be allowed to open up the marketplace to compete directly with amazon or with retailers, and i think thats a huge draw also. But i want to push back on something john said a moment ago how fossilized currency is i think thats true. But we need to recognize this is not a place where you can experiment without risk. That messing with currencies has huge, huge impact. And so i just believe we want to be super careful about it and whatever we do should be done under the auspices of our existing banking framework i want to update it as badly as john does, but i want to do it in a way that doesnt result in a tragedy with longterm economic consequences for the whole world. So i just think facebook is a known you know, theyve just never thought through secondary consequences of anything they do they dont prepare for any downsides. I dont think theres any reason they understand this market better than anything else theyve gone into. Its way too important to let any corporation go in there and do a move fast and break things. Roger explain to viewers what you mean by disaster of global proportions if they got this wrong. What would that look like . Imagine a situation you turn this on and the first person who use it are not unbanked people but, in fact, are rich people that would like to move their money around without any scrutiny, taxation that would be disasterous. Imagine the top 1 move everything out of the tax system because they want to go this way. That would be a problem. You can also imagine because this is going to be way more stable than bitcoin so almost all criminal stuff would have a refuge here. It seems it would encourage masses of the actual economy to move from open markets that are regulated and fair to black markets or gray markets. Again, i dont know that would happen for certain but it might. Yeah. Of all the scenarios to pick, i think facebook has more methods of attribution around profiles and real identity. If people want to do that, they can do it with bitcoin but i think the danger is, as i think you were alluding to earlier, certain countrys ability to regulate their currency, stabilize economic situations, could be undermined if this Digital Currency option is around. Certain cases thats really good for people you can look at venezuela and other places and say, boy, there are people who might retain value, not lose their life savings with these options but then think of other scenarios that governments cant rescue themselves if they cant devalue their currency in a smart way. As we watch zuckerberg get ready here lets sneak in boeing, which is adding about 80 points today phil is watching that. This is the best day for boeing shares in about two months with the stock rising more than 3. 5 the q3 earnings are worse than expected but they reaffirmed its guidance on return to service, basically a recertification on the 737 max by the end of the year the ceo will be talking on the Earnings Call that starts in about 15 minutes guys well obviously see if that q4 target sticks boeing is an important story today. I apologize, john, back to you your point being this is an emerging market story. Early on in his testimony today well talk about people around the world having problems in this day and age sending money home to their families. I think the political problems facebook is having in the u. S. And other countries are important but facebook has its eyes on growth possibilities in other markets where theyre not in the same kind of political hot water. I dont want to minimize what facebook is dealing with here and needs to deal with, but i think for the investor whos watching this, and for other companies and Digital Currencies in general, this is a vector the companies are looking at to expand commerce into places you dont have credit cards, traditional ecommerce. And theres possibility and opportunity to build wealth into that the question is how do you do it the right way. It coincides with the time that antitrust is front and center for lawmakers its an uphill battle for zuckerberg to be expanding into areas where lawmakers are clamping down on big tech being too big. It seems the timing is really difficult for him. No matter what Mark Zuckerberg is supposed to be talking about, its really facebook on trial for being facebook and yeah, libra is kind of the excuse for getting him up there. Dont think for a minute ever question or every other question of zuckerberg up there is going to be about cryptocurrencies theyre going to be talking about interference in elections. Theyre going to be talking about political bias theyll be talking about whether facebook is selling peoples information to others. And then occasionally somebody might throw in something about currencies, but i dont expect a lot. There was a great quote yesterday by silvia garcia, she said, if mr. Zuckerberg wants to be king he can be king of the social networks but i dont want him to have the additional arsenal of Financial Data on people do you think thats what hes collecting, a Financial Data arsenal on people here thats really important keep in mind he also gets paid for holding the float on the basket of currencies that sit behind the you know, behind libra. The core issue for me, i agree with john on the end point, on almost everything he said. My concern is that this stuff really matters to the Global Economy, it matters to democracy, it matters to peoples individual lives. Therefore we should take due care the Tech Companies have not taken due care on anything theyve done in the recent years, at least not google, facebook, amazon and microsoft and as a consequence, i think we need to be really careful here because this is not a social network. Were talking about the Global Financial markets. We have no idea what effects are going to happen from this. This is not bitcoin. This is designed to be a stable coin its likely orders of mag any tut impactful and thats why its an exciting idea. But i think its the idea i would rather see implemented inside the current structure of the Financial System rather than outside with an independent player. Roger, do you have theories as to why their partners have distanced themselves in recent weeks . Yeah. Yeah i mean, give me a break. I mean, this is like, if youre one of those partners and something goes wrong on this thing, what happens to your brand . Why adhere themselves early on i dont know how tightly they were adhered again, the first thing that my understanding is all they were asked to do is sign a press release saying they were going to come to the meeting and learn about it, right, and facebook touted it like everybody was already in i think a lot of these guys were sitting there going whoa, whoa all weve seen is your press release, we have to get inside once the heat came up to be clear, carl, these data issues go to the banks, too all these guys are under the same microscope as facebook because theyre getting hacked, leaking and trading data like crazy, and theyre subject to a lot of the same pressures. And i think being in facebooks lifeboat is a terrible p. R. Strategy. I think theres a good idea in there somewhere, thats what gets the companies to sign on. Who, other than facebook, has a digital tie thats as close to reallife identity thats how facebook got big in the first place. Love them or hate them, plenty of reasons for both, acknowledge the way they mismanaged the personal data. So if youre going to do Digital Currency, tying it into facebook is a good idea when it became apparent that facebook has such reputational damage that the conversation isnt going to be about currency, its not going to be about commerce, its going to be about facebook thats why everybody not everybody but so many had to back away. John is right on here, i believe the initial pass was 20 minutes in lets hear, Mark Zuckerberg. As we sit here, there are more than a billion people around the world who dont have access to a bank account but could through mobile phones if the right system existed that includes more than 14 Million People right here in the u. S. Being shut out of the Financial System has real consequences for peoples lives and its often the most disadvantaged people who pay the highest price. People pay far too high a cost and have to wait too long to send money home to their families abroad. The Current System is failing them the financial industry is stagnant and there is no Digital Financial architecture to support the innovation that we need i believe that this problem can be solved and libra can help the idea behind libra is that sending money should be as easy and secure as sending a message. Libra will be a global Payment System fully backed by a reserve of cash and highly liquid assets i believe this is something that needs to get built but i get im not the ideal messenger for this right now. We faced a lot of issues over the past few years, and im sure there are a lot of people who wish it were anyone but facebook helping to propose this. But theres a reason that we care about this. Thats because facebook is about putting power in peoples hands. Our Services Already give people a voice to express what matters to them and build businesses that create opportunity. Giving people control of their money is important too and a simple, secure way of transferring money is empowering over the long term this means more people transact on our platforms, thats good business. Even if it doesnt, i still think this could help people everywhere before we move forward there are risks that need to be addressed, questions about Financial Stability, fighting terrorism and more im here today to discuss those risks and how we address them. I hope we get a chance also to talk about the risk of not innovati innovating while we debate these issues, the rest of the world isnt waiting. China is launching a similar concept in the coming months libra i believe will enhance americas leadership around the world. But if america doesnt innovate our Financial Leadership is not guaranteed i actually dont know if libra is going to work but i believe that its important to try new things, as long as youre doing so responsibly. Thats what has made america so successful so we wrote a paper to put this out in the world and todays hearing is an important part of that process what were discussing today is too important for any company to undertake on its own thats why we helped to form the libra coalition, 21 companies and nonprofits working to give access to financial tools. Even though the Libra Association is independent, we dont control it, i want to be clear, facebook will not be part of launching the libra Payment System anywhere in the world, even outside the u. S. , until the u. S. Regulators approve. Last time i testified before congress i talked about taking a stronger view of our responsibilities making sure our services are used for good instead of harm, and i want to discuss that today as well people shouldnt be discriminated against on any services we have policies in place to remove hate speech and violent content. Weve banned advertisers from using age, gender or zip code to target housing, we limited interest based targeting for these ads, too i also know we need more diverse perspectives in our companies. Diversity leads to better decisions and services for our community. We also made a commitment, within five years more than 50 of our workforce will be women, people of color and under represented groups. We made some progress here, but i know we still have a long way to go. Chairwoman waters, Ranking Members mchenry and members of the committee. This has been a challenging few years for facebook i recognize we play an Important Role in society and have unique responsibilities because of that i feel blessed to be in a position we can make a difference in peoples lives for as long as im here, im committed to using our position to push for big ideas that i believe can help empower people. Thank you. Im looking forward to answering your questions thank you very much i now recognize myself for five minutes for questions. It is no secret that facebook allowed russia to undermine and divide ourou through divisive online ads, the senates investigation discovered that africanamericans were targeted the most by russia, specifically in places where black lives matter groups were the most active despite your technological experti expertise, russia and iran are at it again for the upcoming election then last week you announced a new ad policy that gives politicians a license to lie so you can earn more money off this division, i suppose. Facebook changes the rules when it can benefit itself. Last year facebook banned all cryptocurrency ads on its platform because, and i quote, they are frequently associated with misleading or deceptive promotional practices. Quote unquote. Seems fair then earlier this year facebook rolled back the ad ban, bought a company and announced its own cryptocurrency so tell us what changed, how did it go to being misleading and deceptive last year and then a means for Financial Inclusion this year. It seems to me that you shifted your stance because you realized you can use your side and your users data to dominate the cryptocurrency market. You change your policy when it benefits you you reinstated cryptocurrency adds because you had plans to start your own cryptocurrency. So this brings me back to your new policy on political speech my question to you is, how does this new policy benefit you . Because it seems that a policy that allows politicians to lie, mislead, and deceive would also allow facebook to sell more ads to those politicians, thus making your company more money but you can tell me, how does facebook benefit chairwoman, thanks for those questions. Id like to address all of the things that you mentioned in there. On elections, youre right that in 2016 we were on our back foot in terms of preventing russia from attempting to interfere in our elections. We spent a lot of the last few years Building Systems that are more sophisticated than any other company has at this point, and frankly a lot of governments too for defending against foreign interference this monday we announced we had proactively identified a network of fake Russian Companies and a if few iranian fake accounts that we took down. Which, as you say, signals these nation states are still attempting to interfere, but i also gives confidence that our systems are more sophisticated to identify these things on your question about political ads. Look, from a business perspective, the very small percent of our business that is made up of political ads does not come anywhere close to justifying the controversy this incurs for our company this is really not about money this is, on principle, i believe in giving people a voice i believe adds can be an important part of voice. I think especially in the political process for challenger candidates and for localr advoc whose message might not otherwise be covered by the media, having ads can be an important way to inject your message let me interrupt you for a minute i think as you said to me before, are you telling me you plan on doing no Fact Checking on political ads chairwoman, our policy is that we do not fact check politicians speech. And the reason for that is that we believe in a democracy, it is important that people can see for themselves what politicians are saying political speech is some of the most scrutinized speech already in the world do you fact check on any ads at all yes describe what you fact check on chairwoman, actually, thank you for the opportunity to clarify. Facebook itself does not fact check. We have feedback that people in our community dont want to see viral hoaxes or kind of so let me be clear, you do no Fact Checking on any ads, is that correct chairwoman, what we do is we work with a set of independent Fact Checkers somebody fact checks on ads you contract with someone to do that, is that right . Chairwoman, yes and tell me, who is it that they fact checked on chairwoman, what we do is when content is getting a lot of distribution and is flagged by members of our community or our technical systems, it can go into a queue to be reviewed by independent Fact Checkers. They cant fact check everything, but things they get to, if they mark iis line of qug i now call on the gentleman from north carolina, the Ranking Member mr. Mchenry to be recognized. I think there are bigger challenges and opportunities facing america than your ad model or even the question of libra. Lets start with your speech last week. Have you changed your view in terms of technology in china from before your speech on friday to what we read and heard from your speech on friday congressman, i have not changed my views in the last week no, ten years ago versus today on your view of china and technology versus your speech on friday congressman, i think its fair to say that my views have evolved. I probably, ten years ago, would have been more optimistic that trying to work in china could have contributed to making a more open society. And today it seems that, in some cases, working in china not only does not do that but compromises american companys ability to promote our values abroad and around the world i think weve seen that in the last few weeks in a number of cases. So you mentioned, in your speech, you said a decade ago ten of ten of the Top Companies on the internet were american. Now six of ten are chinese so the question i have for you is, why are we seeing emerging technologies driven by block chain at projects and Digital Currencies being developed elsewhere, such as the case of libra . Well, congressman, we have a lot of competition around the world. Youre right that over the last decade pretty much all of the major internet platforms have been American Companies with strong, Free Expression values and i think theres no guarantee that that is the state of the world going forward. Today six of the Top Ten Companies are coming out of china and do not share our values on things like expression. On that, why switzerland for libra . Why not the United States . The Libra Association is an independent association. Were trying to set up a global Payment System switzerland is where a lot of the International Organizes are. Greater regulatory certainty in switzerland than here in the United States for this type of technology i think switzerland has certainly been forwards leaning on wanting to work through systems like this. I dont want this to come across and the United States does not . Congressman, one of the things i want to be clear on is that the independent Libra Association is, its independent, were part of it, we help to stand it up, we dont control it i want to make sure its 100 clear to everyone today, my commitment running facebook were not going to launch anything thats a product or part of this until we have full support from u. S. Regulators so the project of libra before you handed it over to the association lets think of this, why would you have a project like that . Is it about competition with your peers globally . Is that a component . Sorry, i didnt hear that. So you have no payments platform on Facebook Facebook is not a payments platform, is that correct . Yes. So in seeking to develop a payments platform, erinternally before you handed the Technology Association for libra, was that because of examples globally of creditors creating payments platforms. Congressman, it was partially that and partially because i view the financial infrastructure in the United States as outdated so there are two sets of work that we do on payments one is being Payment Systems that allow people to send money on top of the existing Financial System that exists that work is relatively less controversial. Were doing it around the world, in different countries, on top of existing Payment Systems. Theres another set of work were trying to do with libra, which is trying to help rethink what a modern infrastructure for the Financial System would be. If you started it today rather than 50 years ago on a lot of outdated systems i just look at the fact that you can send a text message to someone around the world let me just drill down on this ally pay has 900 million users that is a global competitor, in my view, to facebook you see ally pay and we chat pay working. Why not just do a facebook version of ally pay in order to level this congressman, youre right that theyre competing with not just us but all the Americans Companies on this. Part of the infrastructure theyre building on is more modern than what we have to build on here. As soon as we put forward the white paper on the libra project, china announced a private Public Partnership working with Companies Like that to extend the work theyd done already as part of the belt and Road Initiative they have. Theyre planning on launching that in the next few months. Thank you the gentle woman from new york, mrs. Maloney, whos also the chair on the committee to protect entrepreneurships and capital markets. You said, and on page 3 of your testimony, that facebook will not be part of launching libra anywhere in the world until all the u. S. Regulators approve. Which are you talking about . There are many financial regulators, such as the fed, the fdic, the occ, sec, cfpb, hffa and many more. To be clear, libra would affect all of those leg rregulators so which do you believe need to approve libra before you support the launch and which approval do you believe is necessary do you need to see written approval from each regulator will those approvals be public congresswoman, thanks for the question my understanding is probably all of them for Different Things different regulators focus on different areas, whether its Financial Stability or fighting crimes and fraud and terrorism, different areas of the work need to get done and are overseen by different regulators, i think the processes with each might be a little bit different but were committed to getting all of the appropriate u. S. Approvals before launching the libra Payment System in any country in the world, even where those might not be required. Will you commit to waiting until you get approval from every u. S. Regulator that libra affects before you support launching libra . Yes or no . All of the regulators that have jurisdiction over part of what were doing, were working with them and will seek approval from. A bill of mine passed the house yesterday, which would crack down on Anonymous Shell Companies in the United States, which has become a nightmare for law enforcement. They are the perfect vehicle for laundering money and for Terrorism Financing and criminal activity. Now with the creation of various Digital Currencies, we face a new challenge with Financial Transactions being anonymous thats why im concerned that the use of anonymous wallets would make libra attractive to those looking to launder money its my understanding that the libra wallet wont be anonymous, but i havent heard anything about competing wallets. Will you commit to not supporting any other anonymous wallets for libra . I consider this a National Security issue congresswoman, thank you for this question. I think it builds on a question the chairwoman was asking before about our position on cryptocurrencies overall we see a range of different cryptocurrency projects out there, from decentralized and deregulated things to what were trying to do is build a safe and secure and regulated alternative. We think the Digital Payment space needs that as a big company were in the going to do something unregulated or decentralized well work with the government to get something that gets to the same standard on antiMoney Laundering and cft, that all of the other world class Payment Systems has, or exceed those standards. Sorry, i forgot the actual question, i was caught up in answering the chairwomans question p p. I dont think you have you can have strong antiMoney Laundering controls and anonymous wallets. Right. So i see this as a new loophole for criminals looking to hide and launder money. So what is your position on anonymous wallets . Will you commit that you wont have anonymous wallets, that it be transparent otherwise well face the problems we have with the llcs where they are hiding trafficking money, Terrorism Financing, criminal activity of all kinds . Its a huge problem for safety for americans, and its a huge problem for law enforcement. This is their number one concern was this bill we passed yesterday with bipartisan support, but youre creating a whole new currency that could potentially be anonymous and could hide all types of criminal activity, which is a huge concern to the safety of americans, and National Security yes, congresswoman, i will commit that facebook will do what you are saying. Our version of this, our wallet is going to have strong identity, is going to work with all the regulators to make sure that we are at the standard of aml and cft that people expect or exceed at i cant sit here and speak for the whole independent Libra Association, but you have my commitment from facebook thank you very much i yield back the gentleman from missouri the gentle woman from missouri, mrs. Wagner is recognized for five minutes. Thank you, madame chairwoman. And thank you mr. Zuckerberg for being here when libra was announced, 28 companies joined as founding members by signing a nonbinding member of intent to join the association. But in recent weeks many of the founding members have dropped out of the association perhaps theyre not so sure its going to work either paypal, visa, master card, stripe, bookings holdings, ebay, and mercata, you lost these stable partners i would say and i find it highly concerning. Very briefly, what do you make of the sudden departures from the association . And why do a number of these founding members have concerns whether youre up to the task of meeting our Money Laundering and regulatory standards congresswoman, thanks for the question this project is too big for any one company to do on its own, which is why we set up the independent Libra Association with a number of other companies and nonprofits its very its a very complex project and as you say, its risky. Why have they departed . Scores of stable partners have dropped out. Why . Well, congresswoman i think youd have to ask them specifically why do you think they dropped out . I think because its a risky project and i think theres been a lot of scrutiny. Yes, its a risky project so let me move on to something near and dear to my heart. As you know i wrote and passed the fight online sex trafficking act. I am committed to rooting out online sex trafficking and believe that what is illegal offline should indeed be illegal online three weeks ago, the New York Times ran a report titled, the internet is overrun with images of child sex abuse ive submitted this for the record without objection. 16. 8 million, 16. 8 million as confirmed by the department of justice of the 18. 4 Million Worldwide reports of child sexual abuse material are on facebook 16. 8 of the 18. 4 million these 18. 4 million reports from last year included a record 45 million photos and videos. These are absolutely shocking numbers. Moreover, its estimated that 70 of facebooks valuable reporting to the National Center on missing and exploiting children would be lost if facebook implements its endtoend encryption proposal mr. Zuckerberg how much is this figure growing year after year if you enact endtoend encryption, what will become of the children who will be harmed as a result that theyre not reported congresswoman, thanks Child Exploitation is one of the most serious threats that we focus on what is facebook doing . 16. 8 of the 18. 4 million congresswoman, those reports come from facebook the reason why the vast majority come from facebook because i think we work harder than any company and report it and make it ks what are you doing to shut this down . These peddle content that exploit women and children, what are you doing to shut this down . We built sophisticated systems 16. 8 million and growing of the 18. 4 images. I dont think facebook is the only place on the internet where this behavior is happening i think the fact that the vast majority of the reports come from us shows we do a better job of finding it and acting on it youre right that in an endtoend encrypted world one of the risks im worried about, among others to safety, is it will be harder to find some of this behavior. But you said you want endtoend encryption. Whats going to happen of these children they wont be reported then, and you are responsible, facebook is responsible for 16. 8 million of the 18. 4 that are out there last year alone again, i believe there are probably more than 18 million out there, i think were doing a good job of finding this but i think youre right what are you doing to do to shut it down, mr. Zuckerberg wereworking with law enforcement, building technical systems youre not working hard enough, sir. And endtoend encryption is not going to help the reporting process. Im over my time i have many more questions ill submit for the record but were going to talk about this and i yield back thank you. Gentle woman from new york, ms. Valess kez thank you mr. Zuckerberg, libra said it will not share information with facebook or any third Party Without consent however facebook has had history of having problems guarding user data, in july they were fined by the ftc, the largest penalty ever for violating consumers privacy rights as part of a settlement related to the 2018 Cambridge Analytic scandal let me start with asking you a very simple question why should we believe what you and libra are saying about protecting customer, privacy Financial Data congresswoman, i think this is an important question for us on all the new services we build. We certainly have work to do to build trust. I think the settlement and order we entered into with the ftc will help us set a new standard for our industry in terms of the rigor for the Privacy Program were building were now basically building out a Privacy Program for peoples data that is that is parallel to what the requirements would be for a Public Company on peoples Financial Data, in terms of audits internally, any manager verseeing a team that handles to certify quarterly th theyre meeting their commitments and that goes all the way up to me ill have to certify that on thank you for your answer it has been publicly reported that when you acquire whatsapp, facebook officials coached the companys founder to tell European Union regulators that it will be, and i quote, really difficult to merge or blend data between facebook and whatsapp and that there was no desire to integrate the two systems. Mr. Zuckerberg, 18 months later, the platforms were linked. The European Union fined facebook for providing incorrect or misleading information. So let me ask you, do you understand why this record makes us concerned with facebook entering the cryptocurrency space . Do you realize that you and facebook have a credibility issue here congresswoman, i understand that we have work to build trust on this, and that means making commitments. And even if we learn new things in the future that could change our mind on how we should operate, that i think were going to need to make sure that the commitments that we make so have you learned that you should not lie congresswoman, i would disagree with the characterization of that as lying. Well, you went to the european regulators and you said that it will not linked, it will not that it will be impossible and yet 18 months later it happened and you were fined for that. Congresswoman, im so lets continue i hope that you learned something about that, about not lying. Facebook internal motto was for a long time move fast and break things mr. Zuckerberg, we do not want to break the international Monetary System. Last week the g7 released a report stating that global stable coins could have significant adverse effects both domestically and internationally on Monetary Policy as well as Financial Stability. Given the g7s concerns and the concerns voiced by us here today, would you commit to a moratorium on launching libra until congress can develop you said before that you will not move until all the regulators sign into and support for you to move forward. Here, congress, the peoples house needs to have the opportunity to work on a Legal Framework so that we provide the guidance to the regulators would you commit to that, yes or no congressman congresswoman, my understanding is that congress exercises significant oversight over the regulators through these committees so that would seem to me like the appropriate way for that to happen. So that is a no thank you. The gentleman from oklahoma, mr. Lucas, is recognized for five minutes. Thank you, madam chairwoman mr. Zuckerberg, the problem of addressing underbanked and unbanked individuals is both real and important however, a significant portion, and i know the libra project is intended to reach this population however, a significant portion of the underbanked simply do not trust banks. I suspect they may not trust captains of industry or members of congress either for that matter do you see this as being a major hurdle in the wide adoption of libra . Congressman how do you persuade those people that youre trustworthy and to use the system . Congressman, weve certainly had a lot of issues over last few years, but i think its worth remembering that every day billions of people come to our services because they trust that they can share content, messages, photos, comments, with the people they care about and more than 100 billion times a day people do that they share something with a set of people because they know that content will just reach the people that they want it to. So i think that if were able to move forward with this project, there may be some people who dont want to use it because they dont trust us or dont like us, and thats one of the values of having an independent association where through other competitor wallets and other approaches too, but i think this is an area where being able to put ideas out into the world and letting the market work and letting People Choose for themselves what they trust and what services they use is probably the right approach. I just suggest that it will take a lot of energy and effort to reach that group, the underbanked, the unbanked, and its real and growing more substantially. Lets shift focus for just a moment i also serve, along with congressman posey, on the science, space and technology committee. Those of us who have worked on that committee know, as all of us do, that the digital images can be altered to make it nearly impossible to distinguish between what is real and what is not. Facebook recently launched the deep fake detection challenge in collaboration with microsoft and others to address this problem this seems like a step in the right direction on behalf of the Technology Companies involved. From your perspective, how great a threat is the deceptive use of deep fake technology, and in what ways do you anticipate that the detection challenge will be successful thank you, congressman. I think deep fakes are clearly one of the emerging threats that we need to get in front of and develop policy around to address. Were currently working on what the policy should be to differentiate between media that has been manipulated by a. I. Tools like deep fakes with the intent to mislead people and compare that to just normal content that might have been an interview that might have just been cut differently and someone might not like the way that its cut but is not a deep fake and is not kind of misleading manipulated content in that way. So were working on that policy. I admit, this is a very important area the deep fake challenge to technically figure out how to identify these things will certainly help inform the policy and this is one of the areas that i do think is quite important going forward. One final question. Many experts have suggested that we need to educate the public on how to consume trusted information. Facebook recently announced that it will support Media Literacy can you elaborate on these projects and what you see as facebooks role given your critical position within the industry yes, congressman. This question may be premature to ask, although later this week we actually have a big announcement on launching a Big Initiative around news and journalism where were partnering with a lot of folks to build a new product thats supporting high quality journalism you know, i think if theres an opportunity within facebook and our services to build a dedicated surface tab within the apps, for example, where people who really wanting to see high quality curated news, not just social content, but from high quality publishers can go and consume that content and that could create a place where we can form new business partnerships to help funding high quality journalism as well. Im looking forward to discussing that at more length in the coming days give back the balance of my time, madam chair. Thank you the gentleman from new york, mr. Meeks, whos also the chair for the subcommittee on Consumer Protection and Financial Institutions is recognized for five minutes thank you, madam chair. Mr. Zuckerberg, you came in and your Opening Statement sounded great. I think that your advisers advised you to what we wanted to hear and what the members of congress on various sides wanted but words are different than actions, sir one of the first things that i heard you say when you were testifying was that you were interested in the unbanked and underbanked. I chair, as the chairwoman said, the Consumer Protection and Financial Institutions subcommittee we had a hear yesterding yesterh what we call facebook is a trillion dollar company. Your concern about the unbanked and underbanked. How much of facebooks money is in mdis that would provide services and help to the unbanked and underbanked have you invested in any of the Minority Development depository institutions in the world . Any money sitting in those banks . Im not sure the answer to that question. What i do know is a lot of the people we serve around the world is unbanked. This is beyond the u. S. As well. I understand this is beyond the u. S. , but were here right now. Youve just indicated that you want to work and you would not move any place else unless you were in compliance with u. S. Regulators, et cetera. What im saying is, for example, i dont even know when you talk about internationally whether or not going after the unbanked and