Decision easterbrook, of course, took over as ceo in march of 2015 before todays move, the stock was up 96 under his leadership since he took over under that tenure, the company sold off many of its company own stores to franchisees and previeded over the launch of alldaybreak fast and mcdonalds named usa president the new ceo of the company but a lot to talk about there. Joining us to have that conversation right now about leadership change at mcdonalds, jeff simonfeld and cnbc contributor. This was a huge surprise, jeff clearly made a mistake but it was a consensual relationship and we now had a handful of these situations how do you read it well, we do see a trend here that of these roughly 90 ceos who left office last year is 40 of them was for misconduct we havent seen numbers that high 40 for misconduct and most of that misconduct was had to do with improper relationships at work but you make an important distinction, this was consens l consensual we say Harry Stonecipher at boeing quite a number of them at best buys and intel last year its just really a shame great news here, though, is that this is a board thats been prepared for the unexpected crises they had seven ceos over the past dozen, 13 years and theyve come off the bench whether or not its been two unexpected deaths of young ceos to other unfortunate events. Theyve had the bench strength ready. Most companies go to interim in a time like this steve kempczinski is ready to go it was a relief when easterbrook got in there and since were just talking amongst ourselves privately, i dont want to throw out any names that implicate anybody, the intended successor before thompson came in had this same problem. Interesting. It was Ralph Alvarez was lined up to be the ceo and in fact he had been forced out of the company years earlier for this kind of misconduct. They brought him back in i think jim skirn was the ceo brought him back in, thought he learned his lesson, brought him back in and two pretty profound strikes against him. Thompson had been the default candidate. And it was about three and a half, four years on the job. Wilting store performance and things i think they were down 4, 5 under thompson they had to bring in somebody new, but these transitions have been pretty smooth, even though they have been way too frequent for this amount of time. Its unfortunate how its unfolded but, not to confuse with any metoo issue. A major lesson here. Becky wants to get in just by definition, its an oxymoron consensual sex with an ceo is impossible because of the relationship. It is impossible. For what its worth but i looked the first thing i looked hes divorced, a single man i know that may not matter in this, but i looked at ceos have power over everyone. 100 . Thats the point in this environment, youre the ceo of the company you cant have a relationship with anybody below you no matter whether youre single or whatever the situation is. Jeff, can i just tell you about two views on wall street today see which one sounds right to you btig is maintaining its price product and buy rating for mcdonalds but if you listen to piper, theyre downgrading to a neutral from overweight, cutting the price target to 195 from 224 recommending people buy chipotle instead. And they just say, look, changes of this magnitude tend to be disruptive what do you think . Well, chipotle used to be part of mcdonald its ironic they should say that, they pulled off a very successful change of relationship from its founder. That is a good bet i wish i made it myself. I didnt however, in this case, if you liked what mcdonalds was doing, theres no reason to panic there is great continuity. This successor has been very well bathtle tester been at procter gamble, kraft, very senior roles. At pepsico, he was head of the uncarbonated beverages so and he shares a lot of the technology and strategic stlags easterbrook had, but there was blow back that easterbrook was experiencing the stock did about double as andrew pointed out but at the same time, there had been some blowback from i think some of the franchisees about some of the kiosks, some of the technology being pumped down them they had a bit of a roll back on some of the strategic fronts and its flat in north america i think the store traffic volume. Jeff, i have a philosophical question for you im wading into a very sensitive area i know ill get in trouble for this i want to ask you. Steve easterbrook, would you hire him at another company after this and the reason i ask you the question, im thinking of mark herd, so many other executives who will get effectively i dont want to say slapped on the wrist, be forced out of the company and i think, maybe im wrong, in a year from now, two years from now, somewhere else this otherwise relatively talented executive will get hired somewhere else and some other company will be the beneficiary of their services. What do you think of that . We have seen ceos resurface a ceo several years ago had a problem on this front. He surfaced again running harrys and davids. That didnt work out but that was performance reasons. Mark herd, Larry Ellison said it was the dumbest move Larry Ellison brought in to oracle brought in mark herd. With mark herd, the issue wasnt the relationship, the sexual relationship, in fact, apparently there wasnt anything consummated despite his desperate efforts to do so, and it was the company money, right. Yeah, it was theish shoou of Company Resources was the issue. And lying to the board, which is a big issue. You have to tell the truth here. One of the critical lessons. But in many of these cases, harry stone at boeing and others f you create the policy, which is the case in every one of these situation, the ceo has to li by the own policy they created or nobody will believe it some people in europe may think this is too puritanical or whatever i agree. You shouldnt mix your personal relationships with your work relationships. Some may remember Mary Cunningham situation she was brought in to work under him. Turned out literally so. It was quite a problem 1980, but it was not harassment. Its not part of the metoo issue but does blur. But is there life after this for Steve Easterbrook, particularly given the performance of mcdonalds while hes been there . Yeah, i this i so you saw mark herd. He performed very well essentially a coceo and hes a very talented guy he admitted he made a mistake. He lost his legitimacy where he is and can learn a lesson. The ceo of intel very highperforming ceo, similarly made a major mistake this way. And sometimes these relationships, as in the case of intel, it had ended before he became ceo, but their policy is very specific that your direct reports and you cant have a relationship he had that under the policy that had forbidden it, even though he wasnt ceo when it happened, the relationship ended in 2013 when he became ceo, still he was held to those standards but he landed. He was doing a great job there i think people if you havent killed anybody and youve shown genuine contrition, there is a path to getting a new start, but it often isnt quite the same pr innocence and power as the position you had previously. Theres a bit of a shadow that hangs over like mark herd there is k be resilience and been no abuse theres a big lesson here. Board has to demand truth and you have to live by the policies at the very top you expect to cascade. There was a stumble, a little hiccup in mcdonald most recent report, jeff that doesnt play into this. No, thats why i say if you like the direction, great point, joe. Not in beyond meat. Theyre slow to move on burger king has the impossible burger ready to go. Im not saying thats part of it, but he was i wouldnt say the bloom is off the rose, but there was a stumble. That probably they just found out about this, right . Its not they just found out friday and they filed with the s. E. C. Oops. Wow i hope hes okay just looked like he im sure hes fine. We lost him on the camera. Nonetheless, you got another story thats fascinating. That is one way to hit if we needed a hard break or anything. Oops, satellite. Airbnb is changing some policies after five people died in a shooting at a Halloween Party at a Northern California home rental. The party was advertised on social media as the airbnb mansion party. Police were called to the house twice that night even before the shooting was reported and then airbnb Ceo Brian Chesky tweeted the company will ban party houses and working to get rid of abusive host and guest conduct company is expanding the screening of high risk reservations and creating a party house Rapid Response team. Chesky said we must be better and this is unacceptable. This has been a problem for years, though. We have done our own cnbc investigation looking places in miami, neighborhoods where they were just sick of these houses being turned into party houses and advertised. And advertised and then the street becomes a chaotic place there have been neighborhoods and municipalities pushing airbnb for a long time. They will start monitoring these advertisements. Ill be talking to brian chesky on wednesday at the conference well bring you live on tv. Well ask him about this well timing for you with. Is it time for that again it is once a year the most wonderful time of th year and its could i come if i wanted to for free no. No. You have to know somebody to get a comp somebody i get along with. Youre not allowed. And how much is the ticket for me if i want to just pay retail theyre sold out at this point. If i had bought one earlier, how much would i have paid can i go on stubhub. You have to be approved can i go on stubhub you cannot go on stubhub. Do you know what the price . Im trying to get at it because its really quite an amazing youre allowed to charge the lineup is so impressive and the interviewer is so well prepared. Yeah. That the prices are very high for the tickets. Youre such a kind soul why dont we talk about under armour you dont want to talk about how much. I like to be egalitarian. Except yeah, exactly lets talk about under armour, shares falling sharply this morning the Company Confirming sit the subject of a federal probe by the Justice Department and the s. E. C. Over its Accounting Practices. The company says that it began responding in 2017 to requests for information and says that it believes its practices and disclosures were appropriate under armour is set to report Quarterly Results around 7 00 a. M. Eastern time but that stock is down by 15 big news, following the news, that kevin plank. Reporter recently said he would step down as ceo staying on as chairman but of course it puts that entire situation in a new light, too. Were waiting to hear more about this today from the company during earnings. And ate peers or sounds like he would have known about these issues prior because responding in 2017. Little unclear what questions were asked at that point. And what transpired between now. And how it then progressed. I imagine there will be lots of questions today separately the national highway Traffic Safety investigation launching an investigation into the possibility that battery defects caused tesla cars to burst into flames. The investigation specifically focussed on battery fires that arent related to collisions or impact battery pact. Siting Alarming Number of car fires that have occurred worldwide. I dont know we used to show video of these spontaneously come busting tesla cars. You remember there was a vehicle in a parking lot at one point. That was in china. In asia or china people didnt know if it was a hoax or if the way the video was shot in a specific way people say, wait, you dont show a car fire every time a ford catches on fire or chrysler or something along those lines this is also manipulated by the longs and shorts in these situations, but this is actually the federal government stepping in to do its own investigation. Yeah. Do you need to apply to get to go to i understand you need to apply. Yeah. And then you need to be approved you do. Would my voting record, i voted for reagan, would that probably im done im out no way would you go back and look at my voting record . Card carrying capitalists are a big part of it. Capitalists are allowed at the New York Times. Not you not this capitalist all right. When we come back. Maybe next year. Hope springs eternal. Stocks on space to set new highs at todays open. Well talk strategy right after this. Later, dont miss our interview with neel kashikari. Well be right back next what do advisors look for in an etf . I tell clients, etfs can follow an index, but which ones target your goals . Its not about quantity. Its about quality. No trendy stuff. I want etfs backed by research. Is it built for the longterm . My reputation depends on it. Flexshares etfs are designed and managed around investor objectives. So you can advise with confidence. Before investing, consider the Funds Investment objectives, risks, charges and expenses. Go to flexshares. Com for a prospectus containing this information. Read it carefully. Can you take me higher can you take me higher we are on record watch for the dow this morning the futures gain 51 points indicated right now would point to a new high. Youre talking about the dow futures indicated up by 111 points, s p futures up by 14 and joining us right now to talk more about this is mark grant, chief Global Market strategist at b. Riley fbr. Mark, we said you were going to tell us where to find value, but in a recent report hello. Good morning. Good morning. In a recent report you said that this is an investors hell and borrowers paradise. Explain what you mean. I have two things to say, becky, that i heard almost nowhere to share with you with squawk box this morning. Yes. One, its a borrows paradise, record low Interest Rates. Anybody thats borrowing money, corporations, individuals or one of the sweetest spots in decades. For investors, fixed income investors, theyre in an investment hell because they cant get any yield Senior University endowment, pension fund, youre facing massive problems matter of fact, becky, and here is one point i want to make, one of the reasons that the stock market is doing as well as it is because money is flowing out of the bond markets because people cant get any absolute yield and its going into the equity market the second thing i would like to share with you is that theres all this talk about buying equities with 5 or 6 yields, buying etfs where, of course, the manager gets more money, the more money flows into its fund, the secret place, get double digit yields, you can get checks and thats by far the best sector in the market for anybody that needs cash flow and some kind of investing. Theyre complicated. You need somebody really to help you, theyre very complicated. But as far as im concerned, thats the best place to put money to get cash flows and yields right now. Mark, thats something you have been saying i want to say for more than a year, maybe two years going back. Right and it continues to be true. Becky, with Interest Rates falling even further, 1. 75 or so on the ten year, you know, im seeing im coming up to new york matter of fact in mid december to talk with the Cornell UniversityInvestment Committee because all kinds of institutions, seniors and retirees are having to adjust their portfolios so they get cash flow and yield. Its very problematical. This one of the major reasons the stock market is performing relatively well right now. You have said you think theres a catastrophe waiting in the wings. What does that catastrophe look like well, i think the catastrophe is going to be that people, especially retirees and seniors and Pension Funds cant find any yield, so that forces them to speculate. In other words, it forces them to make riskier bets and i think eventually this is going to turn out badly, especially if we see at some point some kind of downturn in the equity market. People are going to take it on the nose so i, as you know, talk to a lot of very large Financial Institutions and this has been the main part of the conversation what are we going to do with not able to get yield. When youre in town, we would love to see you in studio. I would be delighted to come in the studio, becky. Well see you soon and thank you for your time this morning. Thank you very much coming up, the rise and fall of newman, adam newman well talk about the qualities that allowed the former weworks ceo to fail spectacularly and walk away with the potential billion payday f you want to call that failing. Sign me up squawk box coming right back gasps and screams i got in yes woah oh yes yes yes yes to start a College Savings plan, find an advisor at massmutual. Com by the way, shes the it wasnext mozart. G day. As usual we were behind schedule. But sophies enthusiasm cannot be dampened. Not even by a runaway donut. We powered through it in our toyota prius. Because a stars got to shine, no matter what. Its unbelievable what you can do in the prius. Toyota lets go places. Danafarber Cancer Institute discovered the pdl1 pathway. Pdl1. They changed how the world fights cancer. Blocking the pdl1 protein, lets the immune system attack, attack, attack cancer. Pdl1 transformed, revolutionized, immunotherapy. Pdl1 saved my life. Saved my life. Saved my life. What we do here at danafaber, changes lives everywhere. Everywhere. Everywhere. Everywhere. Everywhere. Was a more secure diaper closure. There were babies involved. And they werent saying much. Thats what we do at 3m, we listen to people, even those who dont have a voice. We are people helping people. Theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Is that pgim, we see alpha emerging in the trendsete . Cool. Driving specific sectors of outperformance. Where a rising middle class powers a booming Auto Industry. A leap into the digital era draws youthful populations to mobile banking and ecommerce. Trade and travel surge between emerging markets. Every day, our 1,100 investment professionals around the world search out opportunities for alpha. Partner with pgim, the Global Investment management businesses of prudential. Now its time for the executive edge there was an interesting piece the New York Times over the weekend titled adam newman and the art of failing up. Report detailed how adam newman was able to create and build wework, fail spectacularly at an attempt to go public and still walk away with a potential billion dollar payday. It sites his ability to read people, his persuasive charisma and taste for risk and also sited the partnership of softbanks, an investor who famously trusts his instinct and tries to see into the future this lays out to date the emperors wearing no clothes. Theres a real business i think its harsh. He was given 4. 4 billion after a 12 minute meeting. I have it trouble calling it a failure. It really has changed the way you think about the work. Failing up is right to lose 7 billion or more. There are still people who think he was pretty i dont know innovative and charismatic to get this far. He may be charismatic watching how he was entrusted with so much, cavalier attitude with it, flying some other charismatic ceos that have been seen smoking pot. I dont think well be able to know, probably for a year or two, whether theres actually a real business underneath. Really . That to me shared space is an idea. If i told you that you had created a call it an 8 billion business or 10 billion business, if i told you that it is a failure if you spend 18 billion. Buy high, sell low. Quite remarkable. How do you its not taking the little drop of blood and doing all the blood tests. Its not that kind of business. No. If it costs you 20 billion, 24 billion whatever it is. Whose fault is that its the incredible excess, he had installed i didnt understand, a chill tank in his office along with some sort of sauna. The hardest part is the juxtaposition between a guy who for a very long time represented himself as somebody as a humble leader who was trying to build this community that was sort of the he ripped off everybody and left all the employees bad. Obviously hes not only taking all this money, hes spending a lot of money. Spending it all and left the employees who worked with him along the way high and dry. And attracted people i talked about this a lot on the show, the kind of people who went to work to work for this Company Another competitor in the same industry. The kind of talent that was flocking to this company, they were flocking to this company because there was this promise of this great valuation and promise that it was beyond just a real estate company. Right. Honestly how do you feel about that the people who were the followers, got left holding the bag. The ipo didnt work. It was the people who worked for him. Its about the 4,000 employees who are leaving the company in the next couple weeks. Right. I feel terrible for them. You know you could not buy a black turtle neck all the stores are sold out because of the halloween kos fucostumes as eli holmes just Walking Around in a black turtle neck. Just put sweater on you. When you said black turtle neck i think of steve jobs and think of her. She coopted it. Yeah. Did you see the eight or nine people went as a roller coaster. Did you see that they all had the seat in front of them and they were all together and they would all go like this at the same time and go like that and go down like that but they all had to go together. Is this something i should suggest . Google roller coaster halloween costume. It was actually pretty creative. Since this is supposed to be a visual medium, we should work on it. I wasnt planning we get to a lot of places without knowing how were getting there. Yes. Some were glad we get to, others we wished we had never. You have to get up at 3 microsoft japan tested a fourday workweek and saw wait a minute, a productivity jump of 40 . That means you actually made money, right in the month of august the company gave employees every friday off to assess the merits of a reduced workweek. Meeting times were capped to 30 minutes. And the use of remote conferences rose what would managers do if they didnt have meetings they would have absolutely nothing to do. Sales per employee during that time rose by 40 compared to the prior year costs fell during the month. Microsoft used 23 less electricity, 92 of employees said that what about the other 8 . Who said they didnt . What idiot said geez i miss work they said they like the 40 workweek 92 , andrew. The other people are, what i guess. Those are the people who dont know that mike pence is the Vice President , right the once you always talk about. 12 you love that. Lot more coming up on squawk box this morning. Coming up, what would you do with 128 billion pile of cash that is the question facing Berkshire HathawaysWarren Buffett. We have details what he may or may not do with it right after the blaek. Break announcer coming up, under armour expected to report later this hour. Stll bring you the numbers and inant reaction from wall street squawk box will be right back. Through the at t network, edgetoedge intelligence gives you the power to see every corner of your growing business. From managing inventory. To detecting and preventing threats. To scaling up your production. Giving you a nice big edge over your competition. Thats the power of edgetoedge intelligence. Good morning, u. S. Equity futures solidly higher this morning. The nasdaq indicated up 45 points this morning. S p would open if it opens there. You never know one tweet away from these things reversing. But, up 14 points this morning on the s p Warren BuffettBerkshire Hathaw hathaway operating profit was up more than analysts expected berkshire also says it ended the quarter with a record 128 billion of cash on hand. That was up from 122 billion i think last quarter and also came after the 10 billion that berkshire pledged to occidental. Just shows you if youre a market watcher and sit and think, they have been looking and looking for acquisitions he and Charlie Munger would both like to do acquisitions but only at the right place he has said for a whool he doesnt see the right price. Hes been loading up, putting additional stock into the company of shares of companies he likes including apple which is now the companys Berkshire Hathaway number one holding. The other big story of the weekend, after years of planning and several stops and starts along the way, saudi aramco formally announcing its ipo. They announced yesterday with the aim on trading saudi arabias stock market by december there are very few details we should tell you other than that this is happening. Aramco could still be the largest ipo ever with a float worth more than 20 billion. Indicative value of what . 1. 5 little less than 1. 5 trillion. Obviously they wanted 2. 2 is the number to beat for a very, very long time well see where this all lands the goal here from what i understand and ive been talking to people about this now that are involved in this for several months is even if they dont get to that 2 trillion on moment one, which they wont if they can sort of set a floor here kre credentialize is p proce process, they will try to bring a larger offering to new york, london or elsewhere. The idea is especially if they can get u. S. Investors involved in saudi it also has a secondary effect which it could potentially get more u. S. Investors just interested more broadly in Saudi Companies and the exchange on to itself. So theres a lot of moving pieces to watch. We are so back to business as usual, that you should be going. In saudi . Yeah. It happened last eek. Oh, it did. I think its over yes, we missed it. We missed it this is the conference. Next year next year. Let me ask you, sit more or less to attend that conference than the deal book conference i think it costs more. To go to deal book . No. I think it costs more to go to saudi. I dont think theres money involved in the actual invitation. You have to be morally bankrupt to go to the saudi conference and to the deal book conference no hey, let me ask you about saudi aramco my question has always been youre buying a stake in the company. Are you actually buying the reserves that are there, too, or does that revert back to the state . No no ostensibly this is the fundamental question but ostensibly youre buying the company. They tried in their own way to separate the company from the country. However, theres all sorts of different subsidies and things that are provided by aramco ba to the government and the Government Back the aramco how this will work is one of the reasons its taken as long as it has and whether theres enough transparency is the ultimate question but well see. Coming up, ryanair out with Quarterly Results. Well break down the numbers but really we want to talk about the 737 max and remember last time we had the ceo on, cfo, he said they had a rocky relationship with boeing then later more on the mcdonalds shakeup what the leadership changes could mean for the company as well as its stock straight ahead. And under armour shares plummeting on word of accounting investigation. This was not that long after a week or two. That company set to report in the next 20 minutes or so. Stay tuned youre watching squawk box on cnbc mini is a different kind of car. Ladies and gentlemen for a different kind of drive. Ladies and gentlemen for the drive to create a new kind of family car, that became a new kind of race car. For the drive to rebel, zag. For the drive thats inside you. And inside us. Thats the drive under the hood of every mini. Because every mini is. For the drive. But in my mind im still 25. Thats why i take osteo biflex, to keep me moving the way i was made to. It nourishes and strengthens my joints for the long term. Osteo biflex now in triple strength plus magnesium. Dont get mad. Get e trade, dawg. Welcome back to squawk box. Theyre looking at me, joe, but theyre really supposed to be looking at you. I dont know. I dont know i think so, yeah. I think theyre supposed to be looking at you, not me. There they are there they got it. Sausage being made as we speak. European Airline Ryanair reported better than expected profits for the first half of the year joinings now to talks about the numbers and the impact of the grounded 737 ryanair cfo neil sorohan. Youre here at the nasdaq pretty excited about that, joe first time here. The company is here as well, right . No. Ryanair is a european airline. No, i know. Quoted on the nasdaq. You have some business here today. Oh, yeah. We have a lot of meetings around town today meeting a lot of our big shareholders. Saw it on our big billboard out there that ryanair is here geez, i wish we had the cfo, and here we are. Absolutely. Absolutely the numbers well start there and get to the issues with the 737. But in general, how was capacity how was business business relatively solid its difficult market at the moment, but we saw our traffic, our capacity grow by 11 to 86 million customers in the First Six Months of the year and on track for 153 million on a fullyear basis. Average shares were weak they were down 5 . Not as bad as originally anticipated. Revenue, our teas, our coffees, priority reserve seating that performed exceptionally well costs and usually are important in ryanair, costs are in good place. Unit cost up 2 . Primarily higher staff cost and higher maintenance due to the delays of the max aircraft coming in. So pretty good performance indeed, we were able to narrow our guidance this morning to a tighter range of 800 million to 900 million euro for the full year and maintain our cost guidance which was pretty important. What kind of discussions are you having i remember last time we had michael on, Michael Oleary said the relationship at this point was rocky. You have over 200 of the we do, yeah its a bit of a problem not having the aircraft in the fleet at this stage, but safety is obviously one, two, and three on everyones priority list even though were looking forward to the faa here in the United States hopefully before christmas signing off on the aircraft and we think yasa will probably come some time in early january. We have a slightly different variant of the aircraft, the max 200. That will take another month before thats certified by the faa. So we would anticipate to get our first aircraft around march or april relations with boeing are relatively good. I think theyve done everything that they have to at this point in time in relation to fixing the aircraft. Do you trust the leadership of bowing . Yeah, i do. We have a long relationship going back many, many years. We have 470 boeings in our fleet at this point in time and were proud to be a boeing customer and looking forward to taking delivery of this aircraft. The reason i ask is obviously Dennis Muilenburg had a tough week in washington last week i think theres a question between the balance of is there a mistrust issue, whether with the airlines themselves or with regulators in washington and other regulators throughout the world, and whether theres more benefit to having a Dennis Muilenburg sitting in that role, especially given and trying to get this plane in the air because people like you trust him relative to the issue of where regulators may or may not sit. As i said earlier on, safety is obviously every airlines first, second and third priority its important that the hard questions are asked. Its important that the hard question are answered. I think in fairness there were two difficult days last week for dennis he is work on trying to get those aircraft back in the skies. Thats whats important to his customer. Is that all you want is the aircraft back . Do you need or expect compensation for what happened i think its reasonable that airlines like ourselves would receive some kind of reimbursement for directly attributable costs but our what is that . Its cost me 1 million customers in the first half o this year and going to cost me customers in the second half of this year. Im looking at potentially 20 aircraft next summer in the fleet as opposed to originally 58 so its having an on going impact on the business how do you put a valuation on that in terms of what you expect boeing to compensate for you im not going to negotiate my boeing contract here around this table here this morning. Were having conversations were having discussions with boeing, butour prime objective just like theirs to have return to service of the max aircraft which to be honest is a phenomenal aircraft. Its got 16 lower fuel. I was going to ask. You care about costs safety is one, two three but you do care about costs. That was the appeal to go all in were the lead customer in this aircraft. Its rare to get an aircraft with 1 lower fuel, 40 lower noise and these are bigger issues in europe at the moment where where carbon and ets is front and center on customers mind ryanair has a very good story to tell in that front with the youngest aircraft and 96 load factors. We have the lowest co2 per passenger kilometer. We nicknamed these aircraft the game changer its not just customers concerns but regulators looking at this very closely, too. Regulators we wont fly any of these aircrafts but our senior pilots have been through a similar tor. They like the aircraft but there are things to do and the process has to happen. We will obviously respect that and follow it. You know, one of my roles apart from cfo is i look after safety as well. And safety is going to be hugely important and always is within ryanair. Neil, thank you. Pleasure. Thank you, guys. Do you have tickets to stop it. Coming up when we return, Riverwood Capital cofounding partner and one of silicon valleys top deal maker will join us after the break. His take on te, chm a, and new book well talk all about it. Squawk box returns in a moment for farmers here, this is our lifes work. But when a recall happens, perfectly good food goes to waste. Now, weve got away around that. Looks good. Were on target. Blockchain on the ibm cloud helps pinpoint a problem anywhere from farm to shelf. Its used by some of the biggest retailers everywhere. A nice wedge. So more food ends up on your table, is that daddys lettuce . Yeah. And less food goes to waste. Welcome back to squawk box this morning as investors wait for ubers Quarterly Results at the bell, its a Good Opportunity to look at valuations in the public and private markets. What is going on with all of it. Joining us is chris verellis from riverwood capitol hes the culture czar at citi . And the banker responsible for brokering some of the biggest mna deals. He has a book out titled how money became dangerous. I want to talk about the book in a moment, in part because theres a little bit of like, you know, youre sort of going after the hand that feeds you a little bit with this book in terms of how you describe finance. I want to go to the private Public Market issue first. People are looking at ubers valuation and so many other companies now. It feels like there was a shift sometime earlier this year, i dont know if you think it was around the Uber Lyft Ipos but the growth do you think there was a distinction between private and public investors or do you think Something Else is going on the lines are definitely blurring between public and private. Theres no doubt right hope and reality never travel in lock step, right . Hope sometimes gets way out in front of reality in the private sector with no market, Public Markets able to calibrate, that can happen, you know, more often than most this time feels different though and the reason this time feels different is i feel that management teams are having to be more accountable to more than just the technology. What do you mean . So the internet turns 50 i believe this week, but i feel Like Technology is i think its best described as a pet two lent teenager, right weve stopped asking the questions of what is the technology doing for us and were starting to ask what is the technology doing to us so were seeing a situation where management teams are starting to have to answer these questions of its not just about the technology, its about what does this Technology Mean for us how do we walk in the world . What does that technology do for our communities . Im not there yet i like it. Whats that not doing anything to me. I like it. You like it yeah. How have i been harmed at this point . Were in a social media experiment that is quite extensive. Overall, netnet i like most of the things that have happened im having trouble really past 50 negative versus netnet for technology. Technology is clearly doing a lot for us, no doubt about it. The worst thing is, left to the wrong guy, is that what youre saying . Not at all. My privacy has been compromised. People think that. I know, but im talking netnet. Its definitely impacting youre not ready to get rid of everything because of absolutely not. Technology is doing great things. With your health and Everything Else. Lets get to the financial piece of this. As a venture investor, there used to be a view of growth, growth, growth almost at all costs. Right. And it feels like that has now shifted. You had masa son, we were talking about wework in the last half hour and how that changed the game is the Game Changing all over again . Its a pendulum swing back and forth. Ive never seen venture capitalists more upset than by the disruption of the ecosystem and disrupting the valuations. So weve seen these valuations extended hope got out in front of reality and as a result weve seen this correction its a natural swing to go back to cash flow. Real quick because were going to run out of time this book. This book bites the hand that feeds you. You have lots of critiques of the world of wall street. Absolutely. What are your colleagues telling you or what do you think theyre going to tell you . Theyre telling me the financial world is in a challenging were at an Inflection Point were starting to see people question money they feel like its controlling them they dont know how to control it weve seen complexity rise weve seen accountability drop and the leadership isnt keeping up and so the hope is that this book explains how weve gotten to this place. You need some of these new air pods im going to get you totally back on board. I love it. See, three different sizes, noise canceling. The book is called how money became dangerous. Back on board. Its a spectacular read money, too. Thank you for coming in. Thanks for having me. When we come back, weve got more on the ocngshki ceo ouster at a dow component, Mcdonalds Well be right back. With Portfolio Managers focused on the long term. Who look beyond the spreadsheets to understand companies, from breakroom to boardroom. Who know the only way to get a 360 view is to go around the world to get it. Can i rely on deep research to help make quality Investment Decisions . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Steve easter brook ousted at mcdonalds a closer look at the companys culture is straight ahead. Watching under armour. The company reporting results. Medicare for all how will Elizabeth Warrens plan be funded. Well ask the architect of obamacare as the second hour of squawk box begins right now. Good morning welcome to squawk box right here on cnbc im Andrew Ross Sorkin along with becky quick and joe kernen. Take a look at u. S. Equity futures. 2 1 2 hours before we open up. Right now you are looking at green arrows across the board. Dow looks like it would open up 106 points higher. Nasdaq 44 points higher and the s p 500 looking to open about 13 points higher. Heres whats in our headlines at this hour earnings just out from under armour the Athletic Apparel earner Beat Estimates on the top and bottom line theyre cutting the full year revenue outlook. That was already under pressure on news that the company is the subject of an accounting probe its down 14 . It was down by that same amount before we even got this earnings news well continue to keep an eye on this trading down almost 3 to 18. 15 automaker ferrari also out with its Quarterly Results this morning. The Company Reported better than expected revenue and profit for the Third Quarter and it raised its outlook for the full year. Vehicle shipments were up by 9. 4 from a year earlier that stock is up by 4. 5 saudi aramco has officially launched the long delayed Public Offering thats set the largest ever share sale theyre hoping to sell shares on the Domestic Exchange next month. Mcdonalds parting ways with Ceo Steve Easterbrook by having a consensual relationship with an employee. In an email to employees he said this was a mistake given the values of the company. I agree with the board that it is time for me to move on. Kate rogers joins us she has more on the streets reaction to this story this morning. Reporter hey becky mcdonalds announcing Steve Easterbrook was out Effective Immediately after having a consensual relationship with an employee hes also off the board of directors. Kempczenski has been with the board since 2016 most recently running the u. S. Business running fresh beef and the experience of the future upgrades playing a key role in the companys turn around plan he was hired by easterbrook who he referred to as a mentor in an email to employees he does face a challenging environment in the fast food space. Mcdonalds recently report the its first miss and hell have to continue to build on Technology Momentum and the Delivery Business under his new leadership so far this morning wall street is divided piper jaff fri downgrading the stock. Changes can be disruptive while btig maintained the buy ratings. They believe the mcdonalds system is more than just one man. Back over to you. Kate, thanks. Fast food workers rights group which has been critical of mcdonalds in the past saying in its words its clear mcdonalds culture is rotten from top to bottom based on this, i guess. A lot of employees are there not sure we really need to anyway joining us with more reaction to mcdonalds firing its ceo, Eric Dezenhall of dezenhall resources and cnbc commentator mike santoli. Thats a little bit of a stretch, i think, eric, but it does tarnish the company to some extent lets talk about what it means for shareholders and in general. I go back a long way with Jeff Sonnenfeld talking about all the ceo turbulence at mcdonalds and there were a couple of unexpected deaths, if you remember. Right. People that didnt seem really to fit into the longterm strategy of the company, that didnt succeed as ceos the company does keep plugging away thats right. In terms of results. Is that what we should assume . Its not about one person. He was a pretty good executive, this guy he turned it around. We have to talk about what kind of crisis this is this is a human frail at this scandal not a corporate crisis its one of the easier type of scandals to get out of which is you bounce the person who caused the problem. I mean, one of the questions i get a lot is why dont these people fight and the answer is in this climate, you can fight but if you fight, there is only one story and thats the scandal and so what you find is you have chief executives and spokespeople on tv saying things like, let me explain to you why the relationship happened. Well, that doesnt go anywhere good so you bounce the ceo and that story is out of the news so ultimately it ends up becoming a story of corporate results because as much as we all are looking for something historically significant, very few of us are. If a new executive comes in his place and the results are good, its really the end of the scandal. What do you think, mike yeah. I mean, the question right here is how much of an easterbrook premium was there in the stock i think there has been a significant one, but probably waning over the last couple of years. I think the strategy thats been put in place has gotten enough results. Stock, you know, also benefitted from just being one of these quality steady american brand names, dividend and all of the rest of it yes, its outperformed the stock market by double since easterbrook has been there it was under performing under don thompson he had some initiatives that went nowhere this guy came back in and said im going to do faster, fresher, the digital ordering just the ps and qs. Right. It wasnt yogurt and fruit lattes. That was it, done way too many things. That was two years ago. That was the stuff in place two years ago. Now arguably youre getting to the harder stuff values driving so much of volume in fast food and the relationship with franchisees. Amazing. Theyre kind of the customer. There are two takes on wall street today youve got btig maintaining the price target, still loves it, over weight the stock. Piper says its cutting its rating to neutral, cutting the price target to 195 from 224 says any time theres a transition like this, it runs a big risk and tends to be pretty disruptive. I think for piper, its almost more of a read on how investors are going to absorb it than it is whats exactly going to happen at the company obviously this is not a methodical Succession Plan even though a median tenure is five years. He was there four years. It wasnt teed up the way you would expect i think there will be a little bit of a i guess friction in the transition. Eric, we were talking about this in the last hour with Jeff Sonnenfeld do you think another cpg some kind of Restaurant Company or other business can and will or should ever hire Steve Easterbrook . Oh, i think that you see evidence that when time goes by somebody can come back you see that happen with mark herd to great effect time is a variable here. If you go away for a while, i do think that that has a way of cooling things down. What you cant do is go from one hot situation to the other, but i think if he takes a few years time away, i do think that theres a chance he could come back in some other form. But you also have to keep in mind that were dealing with a climate where in the me too era people just dont want to take risks. But i dont think that it sounds like these allegations, even though i dont know how serious they are, they dont seem to be terribly exotic in the way that would be a complete career ender. Exotic. Well probably find out pretty soon. I think we will. That story. You know, if its on face value then, yeah, its really just about broken corporate policy. Policy. And be you have to stick to the policy if thats the way it works. I was going to tie it to me too but i do remember stone seiffer and that was more than 15 years ago it wasnt that different ceos have to think about that theyre at the very top so they have some power over everyone beneath them theres just no way that it cant be a harassment issue i dont cant really be consensual, can it there is no spectrum now. The difference between preme too is there was considered a spectrum of behavior now there is no spectrum acknowledged if you simply set your toe into the me too world, nobody wants to have the debate nobody wants to be the spokesperson explaining why this is different from Harvey Weinstein even though it is different, who benefits from having that conversation nobody and ive been in these Corporate Board room situations. They dont have the stomach for even having the conversation yeah. What about rank and file employees . A lot of people meet at work is that are there going to be corporate if youre the manager, then then theres another problem. Theres a corporate policy. If youre exactly equal are you allowed . If you have the same job title this is whats being defined. If you dont report to each other. If you are in a position of power, that is the variable. If you dont report initially. The problem is even if you dont report to the person, maybe one person has more power than the other and theres a view that you can ultimately its complicated. And be trans parent about it. Once its actually in place, tell somebody and then they can decide what we dont know is whether they i dont think theres evidence or even accusations that they were not telling the truth. I dont think so. No. No it seems to be on face value not terribly as i said a minute ago, exotic and when things get exotic, when theres voicemails, texts, and theres marriages involved it becomes a whole different thing. That doesnt seem to be the case here superficially okay, eric. Thank you. I have a story i wish i could share it. I cant. Thats i know. Yeah very funny ill tell you in two seconds. Its unfair to the viewers. I know. Its the way it is ive got a great story and a big secret and im going to tell them. Get to hear this fabulous story, i want to take a quick check on the futures at this hour dow looking to open up close to or above record territory this morning. Youre looking at the dow up 104 points s p 500 looking to open up 14 points the nasdaq looking to open 40, 41 points higher coming up when we return, were going to talk about under armour facing a federal investigation into its Accounting Practices. The company reporting results. We will speak to an analyst in a couple of minutes about all of it squawk returns in a couple of minutes with that and more in just a minute. When it comes to your customers expectations, theres one thing you can be sure of. Theyre changing by the nanosecond. Thats why cognizant created a unique engineering approach to design and build new digital products. Learn how cognizant softvision designs experiences and engineers outcomes. Cool. Thbecause with nband after thleague pass on xfinityr. You can watch the out of market games you want all season long. And with the allnew xfinity sports zone, you get everything nba all in one place even notifications about your favorite teams. Watch the dropped dimes, monster blocks, and showstopping dunks. Plus get instant access to your teams with the power of your voice. Thats simple, easy, awesome. Say Nba League Pass into your voice remote to upgrade for a great low price or go online today. Welcome back to squawk box. A new atwork survey from cnbc and survey monkey. 78 of americans say they are more hopeful about the changes that technology mabrey over the next five years versus 21 who say they are more fearful. 38 say they are not worried at all that the job they have now could be eliminated by robots or Artificial Intelligence but 1 4 are at least somewhat worried that could happen. For the full results you can go to cnbc. Com work this is very much the issue that Christopher Ellis was just talking about because there is an issue about what technology does for us and now what technology does to us. And thats a little bit evolved. Overstated if you have a book out. No, he was not over stating it all. Okay. The issue there is youve had people who are optimistic than pessimistic. You have a lot of people who are raising you you remember the luddites were in the 18th century about this, too. You dont want everyone ever replacing you but it happens now it used to be we were 50 rural and egrarian. You need to help during the transition yeah. Ill tell you where you really want to worry about it is what we are figuring out how to do with medical science and with genetic engineering and developing thats something if you develop something that could be a Global Pandemic and you dont think about that beforehand, thats a much bigger problem than, oh, my god, the you know what, we all have kids and people are bullying people believe me, i know. I told you the story so theres real issues here. There are but there are also we dont realize how Much Technology has improved all of our lives and the way not just our health but the quality of our life and our leisure time and Everything Else. Just be helpful. I would say my own personal efficiency. Id trade all of my privacy for google maps. I told you that before what time are you going to be there . Im going to be there at 4 31. Maybe 4 32 or 4 30. Still to come on squawk box this morning, airbnb stepping up bans to close party houses weve got that story and what it means for the companys reputation straight ahead. Then Elizabeth Warrens much anticipated medicare for all plan is out. We have reaction from the architect of obamacare zeke emanuel. Thats coming up in a little bit. The september jobs report looks to support the rate cuts we will speak to Neil Kashkari squawk box will be right back. Under armour just reporting results beating on both the top and the bottom lines but the company did cut its full year revenue outlook. The earnings per share will be at the upper end over the weekend the company confirmed it is the subject of a federal investigation by the Justice Department and the sec over its Accounting Practices. Under armour began responding back in july of 2017 to request documents and information related to the Accounting Practices and related disclosures. The company says it is cooperating with both investigations and that it believes its Accounting Practices and disclosures were appropriate. Lets bring in jamie merryman. Theres a lot to sort through this morning what do you think . Good morning. Yeah i think if we were only talking about the q3 earnings the story might be different they did beat expectations on both top and bottom line like you said cutting full Year Revenue Guidance but expecting earnings to come in at the high end of guidance for the full year but i think unfortunately thats going to be over shadowed this morning by the questions about the accounting investigation thats what ive been hearing from investors so far this morning. So what do you think just in terms of this investigation . Are you concerned at this point . Do you change your rating as a result do you change your price target . Or do you just wait and see . Well, i think the first thing to do is to talk to the company. They have not yet responded to our requests for any more detail than whats been in the press. There is a Conference Call with management at 8 30 and i expect this will be one of the key questions for them i think its difficult externally with their public reports to assess whether or not the numbers have been accounted for appropriately, but i think it will just over shadow anything that they say today until theres more information you know, i think the question that ive heard from investors is this investigation has been ongoing for, you know, over two years at this point so its hard to assess just over, you know, one night whats happened, but thats quite a long time for this investigation to still be continuing. Lets talk about some of your own thoughts before you got this news i know back in september you actually upgraded the stock because the stock had come under pressure and you thought the goals were achievable at that point, but i also know that in october you took a look and said that the brands resilience with people under age 35 had come under pressure since 2017. Talk us through a little bit where you think under armour is on this journey thats its been undertaking as they ran into trouble with consumers. Yeah, thanks. I think the big question for under armour from a fundamental perspective has been performance in north america the revenue has been declining in north america, down about 4 in q3 and thats really been where ive been more skeptical i think than some of the street because were starting to see cracks in terms of Brand Perception as you said specifically with consumers under 35 thats a problem when, you know, thats a key part of the demographic for under armour with the stockstill trading, you know, in the mid 30s on an earnings basis, i think there is an expectation that Revenue Growth has to accelerate in north america again to justify that multiple. As you said, we upgraded the stock in september because it had come down by 30 but, you know, we remain cautious on the mediumterm outlook. I think today as we expected they hit the bar in terms of what they had set, maintained guidance for the full year, but id say the question mark around revenue remains, right north american revenues still declining. Direct to consumer revenue still under pressure and wholesale revenue down as well i think from a fundamental perspective, thats still a concern. Stock down 11 . It was down by close to 15 before the earnings came out would you say step in and buy here because of this discount . Do you wait and see . I think at this point youve got to wait and see. You know, i think youve got to hear what management has to say on the call at 8 30. You know, i dont think that the earnings have will have changed anyones mind this morning. You know, the street was already at the high end of the full year guidance anyhow so i dont think theres really much incremental there. I think you need to hear from management. Thank you its good to see you. Coming up, a shooting at an airbnb rental forcing the company to change its policies well talk about that after the break. Futures reporting to another record close or open record area for the dow and for the s p. Squawk box will be right back. I can shine, i can shine, i can shine. Imma do what im made to do. Built for excellence. You start from the foundation up. The excellence is reaching dreams and chasing them at the same time. Man how can i deliver superior longterm results . It begins with a distinctive approach to managing money. That for over 85 years has focused on keeping confidence up when markets are down. An approach where Portfolio Managers work well independently. And even better together. Who dont just invest, but are personally invested. Can i find a proven approach designed to deliver results . With capital group, i can. Talk to your advisor or consultant for investment risks and information. Welcome back to squawk box. Over 7 million listings on airbnb and this weekend the Company Listed they will ban, quote, party houses after a deadly shooting in california. The home had been rented through the service. The company says it will create a Rapid Response team and will expand manual screenings of high risk reservations. Joining us to discuss this, airbnb apple other tech news joanne litman is here. A cnbc contributor and andrew morance, senior staff writer at the new yorker and writer of the recent book antisocial. Airbnb is based on trust uber is based on trust when things like this happen, it creates mistrust the question is, can you actually police all of this kind of thing well, its really difficult google, facebook, theyre all based on trust the problem is the reason i have techno utopianism in the subtitle of the book is what i am worried about this, well put it all out there and it will work itself out. You see it on social media, airbnb, were going to disrupt, innovate, well let the chips fall where they may. Sometimes its tragic, gross, weird. I think the first thing we need to get rid of is this notion of whatever happens, innovation will renowned to the good. You dont have to be a ludite to think things will go in the wrong direction. There are those rare instances. I just would not like to in any way slow or dampen innovation. I mean, its almost like by definition you cant anticipate everything that can possibly happen if you had to choose, do we not innovate because something might happen or, you know, the expression, am i going to ask permission or ask for forgiveness afterwards, theres some truth to that in a 51 49 world, i want to err on the side of innovation. Im most worried, honestly, andrew about biotechnology and genetic engineering and we havent thought of any of these things i think thats the main point, joe. The other stuff ill deal with theres going to be these situations that are bad, but the one that really scares me is a Global Pandemic that we have no idea how it gets out of the lab. What youre pinpointing is the single most important issue here which is lack of imagination on the part of the innovators, on the part of the engineers and technologists of how these new innovations can be abused, how social media can be abused, for example, but also the abuses that weve seen just even within the gig economy, right . Weve seen this with uber. There was just a lebanese driver who was just accused of murder of a british woman and theres been hundreds of these examples. Right but netnet uber is an unbelievably positive force for society netnet. I would agree with that at the same time though youve got to say that we need i really think we have a lack of imagination. We need to understand and think ahead much more clearly than we are. We have this sort of tendency to just think about the good, how this is going to change the world for the better. Thats me right yeah. That is the Technology Industry all that is terrific but we have to start thinking about you cant point to any part of modern living where there arent some things like, oh, my god, look just what happened auto deaths. If youre a young person, whats the most likely way you can have your life cut short . Doesnt mean that were not going to have an Auto Industry. Doesnt mean you dont have seat belts. I understand. Thats the point. I understand. It did take a while to get seat belts everywhere obviously and airbags and Everything Else but in the airbnb case, why were they allowing party houses in the first place . These are simple things. You like to party. Kick off the survey. Very easy one of the other issues airbnb has had have been with Carbon Monoxide leaks people have been killed. Something very, very simple to identify and to there have been complaints from neighborhoods and municipalities for a long time right. Cnbc investigations has looked into that. Thats right. Exactly. I want to pivot the conversation to tiktok thats the other big tech news at the moment. U. S. Government looking at this company. This company even though its a Chinese Company has u. S. Investors heavily involved so how do you think this all pans out this is another one where, look, i dont think the position should have to be every company should have to foresee every future catastrophe or future way people can be injured on their platform, but you dont have to be a psychic to know that this massively growing Chinese Owned Company that discloses nothing about itself, there are a lot of things hiding around the corner that could go wrong. If you change the way peoples brains are operating, if you change the way theyre taking in information, if you change the way news works, if you change the way Music Industry works, of course theres going to be some good that comes from that. Theres going to be massive displacement, confusion. I dont think any government body decides how you get your information, but key can take the cautionary note that, hey, if we dont have newspapers in ten years and people are getting their news from six second clips, that might not be good for democracy. The bigger issue is obviously china. Its owned by china. Youve got issues of potential censorship what do you do, do you shut it down . Theres a federal investigation. Lets see what that comes up with lets be realistic tiktok is in the cross hairs not just of the federal government, not just caught up in the trump administrations issues with china and trade but also with its u. S. Rivals. Facebook, twitter, google, they all have an interest in saying, hey, lets like shut these guys down or push them out. Final issue i want to talk to you about, facebook and freedom of speech and these paid ads youve written a lot about this issue. We had kara swisher on she has a view, Mark Zuckerberg is going to change his mind. Hes going to flip on this hes going to say hes going to police the ads or hes not going to accept them at all ala jack dorsey do you agree with that i would tend to agree with that i think hell do what jack dorsey did and outlaw them wholesale. Its interesting you mentioned the rivalry with facebook and tiktok. Chinas the best bet he has. If you dont let us grow china will grow and displace us. He sees his bid to argue that facebook is all about freedom of expression. Part of the issue is hes not running political ads in the United States but theyre all over the world how do you police those ads in all of these different places . He is policing all sorts of other speech in other countries because there are rules in other countries stricter than our own. The way i come down on this ultimately is, look, to the auto example, where are we installing seat belts of course we have an Auto Industry its too late for that we built this massive vehicle thats flying at top speed the question is how do we build guardrails and there isnt a cliff coming up. If you just completely let it go and say the marketplace of ideas will take care of it we know that doesnt always work out. One potential answer or partway to a solution is to get rid of the targeting one of the dangers with facebook political ads is they are very narrowly targeted just to the believers. So others who might be able to sort of disprove the claims in the ads are not even seeing them thats the whole appeal of it though. Thats the model. I know. Their ads and they are transparent about it, that might not be enough. Joanne, andrew, thank you. Appreciate it. Check on mcdonalds and other morning movers at the top of the hour. Neil kashkari will join us he probably doesnt want to pause. Squawk box will be right back. When you look at the world, what do you see . Where others see chaos, we see patterns. Connections. Relationships. When you use location technology, you can see where things happen, before they happen. With esri location technology, you can see what others cant. Welcome back to squawk box, everybody. Happy monday morning watching the futures things are looking up pretty significantly. Dow futures up by about 100 points s p futures up by 12 and the nasdaq up by 40. If we were to open at these levels the dow would be at a new high. Lets get to dom chu who has this mornings top movers. Dom . Good morning, andrew. Were going to kick off our morning movers with shares of mcdonalds Steve Easterbrook out after getting dismissed for an inappropriate relationship with another employee being replaced by Chris Kempczinski. They cited a possible disruption to momentum and suggest a rotation out of mcdonalds and into chipotle stocks those shares off 2 right now. Next up are shares of verizon which are down just about half a percent or so roughly 2,000 shares of premarket volume due in part to analysts at nomura they say neutral instead of a buy rating it goes to 65 bucks. It was 67. They cite Competitive Pressures in wireless from the likes of at t and t mobile. Then were going to end on shares of Bausch Health. This is the Company Formerly known as valiant pharmaceuticals. It posted better than expected profits and revenues it boosted the fullyear forecast for both of the measures Bausch Health was brought along with drugs that treat digestive problems and more robust vision care sales including those for contact lenses those shares up 3. 5 premarket. Coming up, Elizabeth Warren doubling down on medicare for all, but how will it be paid for . Were going to ask the architect zeke emanuel and commissioner dr. Scott gottleib after the break. Squawk box coming right back dont forget to subscribe to our podcast. Youll get interviews, original content and behind the scenes access look for us on Apple Podcast or on your favorite podcast app and subscribe to squawk pod today. What i love most about being a scientist at 3m is that im part of a community of problem solvers. We make ideas grow. From an everyday solution. To one that can take on a bigger challenge. We are solving problems that improve lives. First off, right, were going to cut military spending so immediately dead in the water, right two, jeff bezos is going to go from paying no tax to a tax. Im going to tax the banks duh. What would you think i was going to do, hold up a gas station come on. Theyre going to pay for it and not one penny from the middle class and all weve got to do is convince jpmorgan to operate like a nonprofit Elizabeth Warrens 20. 5 trillion plan to provide health care for allamericans being attacked by republicans and fellow democrats even parity on saturday night live. Joining us is dr. Zeke Emanuel University of pennsylvania vice provost and architect of obamacare and Scott Gottleib hes on the pfizer board at this point. Gentlemen, thank you both for being here. Thanks. Good to be here. Good to see you both. Zeke, lets start with you. This makes obamacare look like a flimflam plan. What do you think of this . I think senator warren put it in the right context over the next decade were going to spend in the Current Health care system 52 trillion 20 billion 20 trillion is what she needs to come up with the question isnt are we going to spend that much money, the question is who do we pay . Who pays for it . And she correctly points out, you know, shifting it from the private sector to government, thats a shift of who pays not a shift of how much is paid. Zeke, come on. Well, thats true. Lets be true about the numbers. Youre right you could shift a lot of things and go through but if youre going to offer health care for all having states and localities continue to pay, raising taxes on financial transactions, a penny on 10 taxing people who make 50 million and more no, its taxing anybody who is a 1 percenter. Thats her mechanism. The middle class will pay something because their incomes will go up they will pay some more not because tax rates go up but because they have more income. She also says go ahead. Scott. Its such a big sum its hard to put in perspective. To put this in perspective, she needs 20 trillion in taxes. 6 trillion will come from the states if all the Bank Deposits in the United States combined are 14 trillion she could sweep all of the banks in the country of all of the money she still wouldnt be able to pay for it. The entire market capitalization is 25 trillion. She could socialize all the companies in the s p 500 and sell them to china she still wouldnt have enough money its an astronomical figure. Its hard toput into perspective. One more point, it is true that the companies are now paying for health care, but theyre paying for health care with a tax advantage. Its a net tax increase on companies and thats an employer tax. Look. Wait, just on that point. Let me just say one thing and then ithese are ten year numbers but lets just put a point on it. In terms of whats going to happen with, gosh, what were you just saying, scott, with the tax shifting going through that, i think what the intention is to get employers to say, forget it. Were going to put everybody into the public system thats the intention, zeke the goal is to have one system for everyone. You may not agree with that goal the question is whether shes legitimately financed that goal. And your answer is . Oh, i think she has she has come up with more detail than any candidate has now i may not agree with all the detail and i may not agree with all the taxing but, you know, having employers maintain effort, thats essentially what it is. What they paid in the past is what theyre going to pay in the future, thats not a new tax that is exactly continuing what we have had all the time its shifting it from employers to the federal government. Can i just ask you a couple of questions about some of the assumptions we have. Prescription drug costs are going to come down 70 she believes that hospitals will now be paid i think 110 of medicare even though they receive much higher than that from private insurance which helps many of them operate by accepting medicare patients currently. I think a lot of hospitals would be in a position where theyre operating at a loss. What do you think of some of those assumptions, zeke . Heres what i would say first of all, you have to combine that with administrative costs coming down from 12 she says 2. 3 . Thats probably too low. They will save on administration and they will save on drug costs. I think 110 may be aggressive i think 120, 125 she would not get an argument about that drug costs, brand names will come down 70 because on her scheme you can have only 110 over the international market. Again, i think thats probably too aggressive but i do think getting drug costs down and getting hospital costs down and administrative costs down are the core of any cost control mechanism. I think scott would agree with that you have to get those prices down. Scott at 110 you have to get rid of a lot of academic overhead. People say medicare is inexpensive to administer. They dont do a utilization review they dont hire people to look at patients and cases. They impose rules on private sector, on Health Care Services and they back them up with civil and criminal penalties the cost of doing medicare is borne on companies to say it costs less, yes, they spend less money on sg a because they can shift the costs onto the private sector one of the things, this is the final point, one of the things we have to look at is how medicare has reimbursed technology over time if you look at the segments of Health Care Services like dialysis, we see no innovation medicare hasnt been able to accommodate the costs of new innovation you see them take it out of the sectors that they pay for. Thats one of the risks here youll see capital come out of areas where medicare is the primary payer. Scott, look, lets be very clear. Not all innovation is good or actually progress. You and i know the Da Vinci Surgical Robot has not been a Great Success and in some camps or operations actually causes harm we have to be careful about innovation, but one of the things warren does do is push hard on alternative payment bundles like alternative payment which will shove more Decision Making on to providers, hospitals and doctors. That should actually breed i think more innovation. Well, what weve seen in medicare, zeke, i think youd probably agree with this, what weve seen in medicare is the nature of innovation in medicare services, in Hospital Services is geared towards trying to improve productivity, lower costs, not improve outcomes. I think youll see more innovation in improving productivity. Is that a bad thing, scott . No, its a good thing and weve seen that in the medical device space you want innovation geared towards improving outcomes even if it costs more money youve seen that kind of innovation come out of medicare reimbursed sectors like dialysis weve seen no innovation in dialysis, you would agree with that thats because medicare is a primary payer in that space. Im not sure its medicare. We have a duopoly. Medicare grew that duopoly. It consolidated because medicare is the payer you have to do it at scale to make up margins. Zeke, i have a question for you as a doctor. Yeah. How do you feel about all of your peers and colleagues in your profession, who i imagine are going to be paid ultimately less well, they look, i find that a little surprising on this bill is that all the physicians get medicare rates i think thats probably going to be too low and what i think actually has to be done is we have to look at primary care and reimburse it more. And pediatric specialists. How do you think this is going to change the incentive structure for people to become doctors in the United States doctors are still going to do very well and there will be sick people and we have to care for them i think compared to other industries its still a very attractive place to be by the way, at this moment certainly i think Going Forward if you want to be a entrepreneur and innovate, combining technolo technology, ai with helping people, health care is the place to be in my opinion. Zeke, just to put a fine point on it. Its clear that most doctors on average are going to be paid less than they probably are today and the ones that have shot the moon wont be able to do that anymore, right yeah. Look, i think if you have done tremendously welby, you know, doing lots of hips or lots of pros states, this will be a different story. One of the advantages i see, however, is if you go to bundle payment and valuebased pricing, doctors should continue to do well because look under bundle payment, one of the things that happens is doctors actually figure out how to be more efficient. They actually end up with more money. They save money by, as scott said, innovating on efficiency, not sending people to rehab hospitals or Skilled Nursing facilities. Zeke, we dont all have to like die at 75 anymore, do we . Like you wanted us to do before. Im not dieing at 75. You know, shatners 89. Hes still in the amazing race over in europe Clint Eastwoods new movie the mule. Youre getting closer. I think youre changing your tune. He wrote the article ten years ago. I went out and ran six miles at about 7 40 a mile perfectly fine second of all, there are some outliers you keep mentioning the outliers. Outliers . You dont talk about everyone else. Zeke, you ran that listen to me. I ran a 7minute half mile yesterday. Way to go, joe. Damn straight damn straight. Keep it up. Just in termsof how difficult this would be to pass, the American People, you know how difficult obamacare was. This is a much more extreme plan what are the odds that americas ready for Something Like this. Becky, what happened to obamacare and why arent we letting that work . I dont understand why the democrats need to remake health care again it was supposed to solve our challenges a question that andrew raised, this reimburses drugs at medicaid rates thats going to have a profound impact on investment. So, zeke 20 seconds before they roll a break over us. Let me say, politically its going to be a challenge. On the other hand you think its quite clear the public is upset i would say i agree with scott obamacare has had some major impact there are six states in the District Of Columbia that have greater than 95 coverage. They have been able to succeed thats a triumph. Come back i would love to discuss this again. Thanks. Bye. See yeah, scott. Coming up when we return, minneapolis fed president Neel Kashkari is going to join us after the break. Change healthcare is the leading independent Healthcare Technology company that provides data and Analytics Driven Solutions and services. Change healthcare is thrilled to be joining the nasdaq family. Every day we are working on behalf of those who expect more from the Healthcare System. Our customers and partners push us, inspire us, and make us better. Together, we make the Healthcare System better for all. Most people think of verizon as a reliable phone company. woman but to businesses, were a reliable partner. We Keep Companies ready for whats next. man we weave security into their business. Virtualize their operations. woman and build ai customer experiences. We also keep them ready for the next big opportunity. Like 5g. Almost all the fortune 500 partner with us. woman when it comes to digital transformation. Verizon keeps business ready. Ive been a caregiver for 20 years. No two patients are the same. Predicting the next step for them can be challenging. Today were using the ibm cloud to run new analytics tools that help us better predict and plan a patients recovery. Ultimately, its helping thousands of patients return home. And who doesnt love going home. More under pressure. The estimates. The news and accounting probe. Minneapolis fed president , Neel Kashkari the final hour of quack box. Good morning chairman and ceo of aperture investors. Welcome. Not everybody questions to cis t sit gets to sit here. You have to have a matching watch band you can run even faster than a 7 minute half mile. I cant run faster than a 7 minute half mile. Cant do that. You told me you do 9 minute for five miles not 5 miles in nine minutes. Mines a 14 minute mile. Im faster than that. Youre much faster than that. But whos counting. U. S. Equity futures are indicated sharply higher triple digits on the dow s p indicated up 13. Nasdaq indicated up 42 treasuries this morning, we will have minneapolis fed president Neel Kashkari coming in a little while. Should be interesting. At 175 on the ten year. Lets get you caught up on some of the stories that investors are going to be talking about. Mcdonalds has fired Ceo Steve Easterbrook after it determined that a consensual relationship violated company policy. The dow component is down by 1. 8 decline of 3. 49. He will be replaced by mcdonalds u. S. A. President Chris Kempczinski. I cant say it thats four to one. Thats a rare thing. Coach k. Theres a reason for that ceo k. Under armour beating the top and bot come to line it cut the full year revenue its off the lows. It had been down i saw at one point 15 . Still down by 13 . Its been down on news that the company is subject of a u. S. Accounting probe that investigation is set to center around whether under armour shifted sales from quarter to quarter to improve financial metrics. Saudi aramco has launched the initial ipo. Its the largest ever share sale the company is hoping to begin selling shares on the Domestic Exchange next month. October jobs report showed a surprisingly strong position of nonfarm payrolls the feds Decision Making on recent potentially on the next market moves. Joining us now minneapolis fed president Neel Kashkari. Great to see you i said earlier, just having seen your comments in recent months, you probably dont agree with the pause right now or at least if you do, are you at least leaning towards maybe further cuts well, first of all, good to see you, joe thanks for having me im really happy with the way the committee has moved over the past year. This is a pretty substantial change from raising last december to now having three cuts and effectively being on pause for a while. To me i still think the balance of risks are somewhat to the down side. I think the costs of cutting unnecessarily is much lower than the costs of not cutting if we, in fact, need to im comfortable where the committee is im heartened by the jobs report we are heart jind by how Many Americans want to work we are not yet at maximum employment we need to keep the expansion going and bring as Many Americans back into the work force as possible. So you are someone that looks at the Participation Rate and thinks that thats the number that we need to look at more than the nominal employmen rate i think the nominal Unemployment Rate is basically meaningless. It only counts people who selfidentify of actively looking for work and yet many people who enter the job market, the last month many people who took jobs this month in the prior month said they werent even looking and so this is just a flawed measure to me we need to look at wage growth until wage growth picks up more, mid 3 , high 3 range, net of productivity were not going to be at maximum employment yet were not there yet. We should let the labor market continue to tighten. We are seeing some progress there in terms of wage growth. We have this debate a lot, neel, and i have made the point, if theres no inflation and if youre confident that theres no malinvestment and keep the pedal to the medal and keep going. You pointed out savers cant save no ammunition for future slowdowns. Two very compelling sides of what we should be doing here well, we have a dual mandate. Stable prices, which is redefined as 2 inflation and maximum employment under optimal Monetary Policy those two things should be intentioned like a seesaw. Basically since the financial crisis weve been low on inflation, below 2 and slack in the labor market that means theres been no tradeoff on average Monetary Policy has been too tight throughout the recovery to me, im with you, joe we need to allow the economy to grow allow wages to grow net of inflation as fast as possible while keeping inflation in check. We should allow more americans to participate in this recovery. Neel, inflation seems to be a little bit low and the fed hasnt been able to get inflation up to its target over the last, you know, five or six years. Whats your view on that is that going to inform future rate cuts or rate changes . I think thats an enormously important view because a big determinant of future inflation are Inflation Expectations and what has the central Bank Actually achieved over the last few years. If you look at Inflation Expectations by Market Measures and survey measures, they seem to be drifting lower and lower thats concerning. That is another reason why i think the Federal Reserve should err on the side of more accommodation to boost Inflation Expectations to get inflation back to our 2 target. We dont want to follow the path of europe or japan and have Inflation Expectations unanchored to the down side. Our tools will be very limited. That is the concern of the marketplace. What other tools does the fed have to actually combat that well, one that ive been calling for for the past few months is what we call Forward Guidance make an announcement today that we will not raise rates until we get core inflation back to our 2 target. Thats not a commitment to cut rates, thats not a commitment to hold forever, its simply saying were not going to raise rates prematurely. Since the financial crisis the Federal Reserve has repeatedly forecast Interest Rate increases, hawkish rates to come that ended up being unjustified and ended up being contraction naryury simply by forecasting them youre putting a dampening on inflation i think we ought to police ourselves and make that kind of commitment i would note the ecb announced almost exactly this policy in august to try to check themselves from raising rates prematurely. Weve got these incredible what seem to be low, nominal Unemployment Rates starting to see some wage gain weve got a strong consumer. What do you attribute the deceleration in gdp growth to from last year is it europe is it global phenomenon . Is it the trade war . Is it the fed was too tight for too long what do you attribute it to . All of those things . I think all of them have something to play, a factor in this i would mostly point to Global Economy is slowing we know europe is slowing. We know china is slowing were not going to be completely immune from that we hear a lot. I hear nervousness about the trade war and tariffs and thats caused them to pull back on some of their investment. I think its hard to separate or point to one all of those have come together and put this slowdown in the u. S. Economy hopefully, you know, if there is a clean brexit, so to speak, not a harsh brexit, if there is a resolution to battles with china over tariffs, hopefully that can renew Business Confidence and we can get the u. S. Economy growing even faster. Neel, of course the u. S. Fed has focused on the band aid of stable prices and strong employment, but in europe as weve noted over time, that negative Interest Rate world is actually quite significant and its across almost all countries and pretty far out in the term structure. How does the fed think about that does it worry about that does it think it can do something to be useful to change that well, i think as you pointed out, negative rates far out in the term structure thats not being set by Central Banks. Thats the Global Economy or local economy dragging Central Banks down to zero, the zero lower round and maybe even negative territory i think most of my colleagues have said publicly that we dont think negative rates is a tool we want to use here. We think if there were another down turn we would have quantitative easing, Forward Guidance i dont want to rule out the possibility of negative rates. If there were a downturn imagine this, if there were a downturn and the u. S. Treasury got dragged down to zero, the 10year treasury got dragged down to zero, its not inconceivable that we would have a positive slope that would be a scenario where i can imagine having negative rates on the federal funds rate. Its not something im forecasting. Not something i think is likely. Its also not something i want to completely rule out as impossible. Neel, do you think we are at normal right now are we below normal . Are we a long way from normal as someone once said that the markets didnt like . Do you think that the cuts that we have are enough to perhaps cause a reacceleration in gdp and i guess even corporate earnings do you think were there now are we on the up swing i think were pretty close, joe. The notion of where is neutral is a tough concept we dont know exactly. One very simple rule of thumb is the federal funds rate now is somewhat below the 10year treasury i cant give you a scientific reason why that needs to be so but were essentially uninverting the yield curve. I think thats very positive my best guess is were around neutral, slightly accommodative. I think the rate cuts have been very positive. If you look at housing, Housing Starts have absolutely responded to the Federal Reserves shift in policy, going from a hike last december to a pause and then cutting youre seeing a rebound in housing in large part because of the Federal Reserves moves. It is translating into the real economy in the sectors that we would expect it to, the Interest Rate sensitive sectors of the economy. Is it enough to make up for trade wars and the global slowdown by itself, probably not but i do think its doing some goods. How many of the Interest Rate hikes did you disagree with . All of them while ive been here i formally dissented against three of them in 2017. All three of them he was voting again next year. Do you kind of your case was well known or your comments were, and i think maybe some of your colleagues and some people in the media thought you were i dont know what you were smoking but do you view now at this point think youre vindicated and think youre right all along . Do you sort of strut around in there and demand a little more that people listen to you . Well, im really pleased that the job market has exceeded our expectations its even exceeded my own expectations the reason why i dissented, i didnt see any evidence that the labor market was overheating that was true for two or three years Going Forward. I think chairman powell has embraced the view that theres still slack in the labor market. That is resoundingly good news for the American People and i hope it continues. Youre certainly in the minority i even remember thinking, wow, what is kashkaris deal. I think you told me that, joe, by the way. Neel, im curious you probably saw Elizabeth Warrens plan announced last week, also her plans for a wealth tax and the like. What do you think about what kind of impact do you think that would have on the economy . You know, i havent studied any of the candidates plans in any detail and i dont think it would be appropriate for me to opine on different candidates fiscal plans. Oh, come on come on. Neel you can at least say something. The reason i ask you specifically about Elizabeth Warren, she wants to break up the banks similarly in the way that you do so i would think you have a lot in common. Ive said that i think the biggest banks need substantially more capital which could lead them to choose to break themselves up. I think we ought to protect the taxpayers from future bailouts if any candidate wants to endorse higher capital for the banks, i would applaud them. Can we get you to say you support capitalism over socialism. I do prefer capitalism. You do . I do prefer capitalism. In your best estimate, are we done on cutting . The truth is, i just dont know i think as of right now the data looks pretty good if the economy continues to perform as we expect, i would expect that were done for a while, but we need to see. I think things can change pretty quickly. If there continues to be more nervousness or more down legs in global trade or Global Growth, that could have an effect we would need to factor in. Any bubbles that we talked about malinvestment. What area if you were to look right now where you think that there is a negative consequence to the rates being this low globally, where do you see it . Well, you know, its hard to know, joe, whats the difference between reaching for yield and investors pricing in a lower neutral Interest Rate . So weve got low rates your guest hopes to comment negative rates around the world. We have low rates relative to history here in america. If thats our new normal of a low rate in the environment because of macro forces, it makes sense investors are repricing them, rediscounting them on the lower neutral Interest Rate. That could justify higher valuations one person might see that and say thats reaching for yield and another person might say thats pricing in a lower Interest Rate environment. The argument back on that, neel, is investors and consumers and people need a certain level of income relative to inflation and their standard of livings. As you drop the Interest Rates, you drive people to actually reach for more yield and take more risk. And that is clearly happening across the investing universe. That is a consequence of these lower rates. So i guess the question i would ask is how does the fed think about that their costs are going up well, but hang on we just talked about our Monetary Policy in the labor market that wages now net of inflation are finally growing and so through our Monetary Policy stance we are hopefully helping more workers have more buying power to put food on the table and to provide for themselves and their families. So i think that wage growth net of inflation is a positive development that weve seen over the last few years again, i would point you to longterm Interest Rates around the world. Lets say theyre at zero or even negative. Is that being set by Central Banks . I would say no youre giving Central Banks too much credit. They are controlling the front end of the curve but if the front end is artificially low, you would expect inflation to be high on the back end of the curve. The fact that long rates are very low, i dont think thats being driven by Central Banks. I think thats being driven by broader Macro Economic forces such as demographics, productivity, savings, et cetera. Just to wrap up as joe points out, i think the conundrum is Central Banks dont set the long rate. They are low they set the short rate. Thats good for the economy. But the paradox of that is that you create a misalignment of allocation of resources. Now we dont know, you dont know, i dont know, what thats going to look like over time but theres definitely a risk that you create an outsized pricing of assets when rates are this low. Fair enough, and thats why we have economists at the Federal Reserve, a whole dedicated division focusing on Financial Stability looking at different Asset Classes trying to look for signs of Systemic Risk if you go back to my earlier point about the banks, the single best thing we can do to protect ourselves and the economy against potentia financial instability is to make sure the biggest banks have capital to endure losses if they face those losses. You and i, neither of us know where the losses are going to come from. Capital is the best defense against all of those uncertainties. Are you worried that the m malinvestment is occurring in the federal budget well, again, thats the 10year treasury you get lulled into a false sense of that everything is fine running trillion dollar deficits im just wondering enough is enough at some point, no or thats fine well, im certainly not an mmter. I dont think you can keep printing money forever. Whatever gives you that idea. Pardon me it kind of enables people to look the other way on what we would have been very concerned about five, ten years ago. But i would just say two points, joe. One is i think theres a difference that the u. S. Government is making a legitimate investment in lets say infrastructure, broadband, something where there is a reasonable return that one could expect versus ongoing spending programs i think thats an important distinction. You said the ten year is at 175 today. The Federal Reserve is not setting the ten year i wish we had more control over the ten year if the ten year is at 175, then they think the u. S. Government is a good credit risk, a good place to invest their money and get a safer return thats what investors are saying i think thats a good thing. Hopefully congress and the white house can make good longterm fiscal decisions. Neel, thank you for all of your time this morning. Thank you for having me. It was great. Thank you. 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Plus get instant access to your teams with the power of your voice. Thats simple, easy, awesome. Say Nba League Pass into your voice remote to upgrade for a great low price or go online today. To me, i still think the balance of risks are somewhat to the down side. I think the costs of cutting unnecessarily is much lower than the cost of not cutting if we, in fact, need to im comfortable with where the committee is that was minneapolis fed president kNeel Kashkari joining us here on squawk box is the one and only krause we want to talk to him about the state of the fed i want to know how youre actually positioning yourself. Weve had so many conversations sitting on the sideline, cash, this and that. Yeah. Yeah yeah. Where are you now i do think things have changed a bit to the up side to joes constant drum beating. You know, the i just didnt think you should be negative at 2400 on the s p. Im not beating any drums. Its probably not a good idea to be out of the market. Thats just me. If i were your client i didnt say i was out of the market. You wouldnt go back in at 2700 that is correct thats what i said. Here we are i stand by that. You stand by that here we are. What are you doing now i do think the markets going to run a little here. You do . I do. Run a little hot here i think is this the last leg . Look, you never know that i would argue, yes, its becoming a lotteries beingier. If you look at whats going on inside the market. The faster growing companies that had actually higher valuations have topped out theres no positive connectivity to the up side when they report earnings. Right. The companies with lower multiples are growing in value so, you know, thats a shift inside of the market now how much higher can the market go if the only thing thats really going up is the lower valued companies not that theyre bad companies, they carry lower valuations. So i think youre reaching a point where the markets going to sit there and say, okay, is there reason for a leg higher . Am i going to have a change in Global Growth . Right now we just heard this from neil, you know, Global Growth is slowing. Global growth is slowing in manufacturing all over the world. Japan, germany, china. The good thing about the United States today is manufacturing is 12 , 15 of the gdp and so were having a manufacturing recession but it doesnt really matter in the United States. What matters in the United States is a consumption economy and the fed dropping rates juices the consumption economy in housing, cars, other aspects of the consumer how does the fact that we are entering an Election Year play into your thoughts given the debate if Elizabeth Warren is the nominee good question. Most administrations over history when theyre in an Election Year and theres an incumbent president will find ways to spend money. A trillion dollar deficit that were having this year would certainly fit that bill. So you would expect thats not republican versus democrat, they all do it. You would expect to see continued spending we can see the deficit continue to be at that level or even rise if that happens, its sort of unlikely that youre going to get a slowdown in the consumption economy. That doesnt necessarily mean, by the way, that the market wouldnt anticipate the end of that and an election and actually faulter, but it does mean the economy continues. We all want to do something with entitlements, too the unfunded liabilities that doesnt even go into our calculations and yet were talking about a huge expansion of medicare, not a not a means testing for certain people or i mean, sooner or later we need to face these issues. I am 100 , believe it or not, joe, in your camp. I think responsibility matters. What about for entitlements, entitlements which we dont talk about. Theres a whole political tradeoff about where you cut that could be entitlement discretionary, you have nothing to cut. That is the way weve set up the system we need to make political decisions. Is spending another 50 trillion the way to go thats a political question im agreeing with you. We need a way to reduce were not talking about entitlemen entitlements. Either has the president not a word. Not a word. That was part of the populus approach. That was look, most president s will not cut entitlements most congressing will not cut entitlements thats why we are where we are to have it with very little if rates rates will go up, by the way, at some point they will go up inflation will be in the marketplace and its going to be very expensive and i think we have to pay that price when it happens. Youre worried about facebook im worried about a lot of things you are i cant get in the conference. Anyway, coming up, rejected. Im going to get an what about the s. A. T. If i get a tutor and reapply its not your intelligence that keeps you out, joe. A sudden shakeup in leadership at mcdonalds what does easterbrooks ouster mean were going to talk about that just ahead when squawk box returns. You should be mad they gave this guy a promotion. You should be mad at forced camaraderie. And you should be mad at tech that makes things worse. But youre not mad, because you have e trade, whos tech makes life easier by automatically adding technical patterns on charts and helping you understand what they mean. Dont get mad. Get e trades simplified technical analysis. Oh, wow. You two are going to have such a great trip. Yeah, have fun thanks to you, we will. Aw, stop. This is why voya helps reach todays goals. All while helping you to and through retirement. Um, you guys are just going for a week, right . Yeah thats right. Can you help with these . Oh. Um, were more of the plan, invest and protect kind of help. Sorry, little paws, so. 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We learned the federal deficit hit nearly 1 trillion Spending Plans dont seem to be shrinking either under President Trump or the 2020 Democratic CandidatesSteve Liesman joins us with that. Good morning, andrew. Not a sunny topic. Republicans passed a largely unfunded Corporate Tax cut and increased spending they proposed Massive Health care plans that claim theyre paid for but many analysts say thats not really the case whatever the case, no party is campaigning either on their record of reducing deficits or on their plans to do so. The deficit probably the most unloved political story in washington or of the time. This is the fiscal year where the federal government deficit will rise to 1 trillion dollars and it will stay there for the next decade. There seems concern in this number in washington the big numbers dont matter what matters is the percentage its growing at 4 for at least the next decade. Some years it will approach 5 now theres a robust debate about how much deficits really matter fears of economic collapse and all kinds of nasty things happening from growing deficits they have not panned out so far markets signaling to finance the deficit at very low rates. Whats clear is that when both sides boost federal spending in good times, there is less or even no space in the event of a downturn for the government to help the economy that might matter some day but not much to either party right now. That makes you a fiscal conservative if you care about fiscal space in the future which is a the whole thing gets moved because nobody is out there screaming reduce the deficit now. We have a problem. And i think the facts maybe bear out dramatically less apocalyptic view the idea of fiscal space in the future is probably the most extreme end of the debate right now. So, steve, we were going to talk more. We were talking about this and if rates ever do go up. Yeah. What does that do to our debt service if we had a it would go up a lot. What could we what can we handle . It we handle a point and a half . Additional . A point and a half rise in rates. What about a 4 rise in rates. That would be a large amount. Joe, i was talking to people that you know well and i know well about this issue. Can you give me some initials no. Ive been talking off the record. Can you give me one initial. I know who it is. Is it in a bread basket. Let me just say what the person said. Okay. More importantly, i think, which is this. Lets say all of these things are true, the deficit doesnt matter there is some chance of what youre talking about happening, and that would be catastrophic its the tail risk or the black swan when it comes to the deficit that would be so costly that you would at least take some steps to guard against it the idea of essentially pro cyclical deficits, in other words, adding to the deficit in good times, thats the thing that doesnt make a whole lot of sense. Plus i was going to ask you, the other thing that bothers me is the projection of what the deficit was supposed to be in a strong economic environment missing that projection, having an accelerated deficit, wanting more inflation, being worried that longterm rates are too low and that expectations are too low and youre financing into that theres a higher probability that that black swan event could actually occur that doesnt mean it will but theres a higher probability and theres no flexibility to it. I think it makes sense to sort of adjust yourself to a new reality which is that you can run higher deficits that is not catastrophic dont put every single egg you have in that same basket which is kind of where we are. Can i see lets talk more about how the 2020 candidates and the economic plans that theyre proposing would impact the deficit and the debt joining us is phil klein, Washington Examiner executive editor author of the new book fear your future, how the deck is stacked against millennials and why socialism would make it worse. And jared bernstein, economist to Vice President biden. Hes a senior policy fellow and cnbc contributor weve disclosed that youre close with Vice President biden, jarrod, so if i ask you about Elizabeth Warren and some of her plans, are you going to be pushing your friends candidacy or can we get an honest answer out of you what do you think of Elizabeth Warrens for example, the medicare proposal . I think every answer to every question youve ever asked me is honest let me put that on the record. I think shes an exciting candidate. Shes certainly taking a very different theory of the case than the Vice President. You know, his theory of the case is that there is a large untapped segment of the democratic electorate, including primary electorate, that wants to kind of go back to the way things were and take a more moderate path while hers is plotting new ground to the far left of center and so whats interesting is that the polling data suggests that there are significant camps in support of both of those concepts so i think weve got a couple of good and different candidates there youre so tactful i kind of heard a slam there, i think. Phil, what are your comments on what jared just said or whether the warren presidency could really, you know, get some traction with some of these plans . I dont know, im sitting on a different side on a lot of these issues is it possible we could start pursuing some of these initiatives . Very doubtful in terms of the politics of it its just amazing for me what Elizabeth Warren, a leading president ial candidate, is proposing. Its a complete joke and i dont think shes adequately being called out often it. The plan that she is putting out to socalled pay for her proposal, she claims its going to cost 20 trillion. The urban institute, which is a liberal think tank, thinks it will cost 34 trillion. She also relies heavily on all of these magic administrative savings from instituting such a plan, but even if you acknowledge there are some administrative savings, what the urban institute also found is logically there would be a massive increase in consumption if youre giving everyone Free Health Care with no deductible, co payments, no charges on them at any time which even canada doesnt do canada has copayments and so forth. So on top of that shes creating wildly magic, you know, revenue raisers. She claims shes going to raise 2. 9 trillion from fighting irs fraud. Nobody with a straight face believes thats possible jared, how do you react to that, all of the comments phil just made . Well, first of all, you know, i really think its kind of not very useful or insightful to have, you know, washington pundants decide whats politically palatable. I agree with some of the criticisms and ill get to them. You know, the 20,000 cheering people that she literally that shes drawing to crowds are not sitting there thinking, gee, wait a second, i dont think, you know, the appendix 2 lines up with proper accounting methods. So shes clearly an inspiring candidate to a chunk of the electorate whether that chunk of the electorate is as large as she thinksing it going back to the first comment, well see i think phil mischaraterized it. Quick fact check once you factor in some of the savings. They say 32 trillion, not 34 jared, what is your honest opinion of the plan . And broadly . I think you have a lot of misgiving about it and youre being very generous. I appreciate what youre trying to do. Tell us what you actually think . My biggest misgiving about the plan is it is really hard to transition 160 Million People from employerprovided coverage, many of them, im one of them, really like that coverage without a much longer transition plan than im seeing here. In terms of making the numbers add up, yeah, there are definitely some questions there. I think shes done a good job of focusing the debate on those very questions what i dont see is a transition plan for people who like their current coverage i was in the Obama Administration. Do we have a double standard here. Let me just finish. I was in the Obama Administration when we worked on the Affordable Care act. It was very important for us to talk about the extent to which people would be able to hold on to their own plans. If you like your plan, you can keep it. That is not the case. Talking about this plan in context of the deficit and my question is do we have a double standard do we evaluate social programs based upon their impact on the deficit and not do so when it comes to corporate and other individual tax cuts . I would throw that story that question to phil and to jared. Is there a double standard when it comes to the importance of the deficit on social programs versus when it comes because we did have, phil, right, an unfunded Corporate Tax cut, right . Yeah. I mean, i think that i argued that that should have been offset. Me, too however, lets not mix up order of magnitude here. Theres a big difference between 1. 5 trillion and 32 trillion in order of magnitude one is something that but thats not a 30 trillion increase in the deficit, increase in federal spending. Yeah. If you take 100 let me finish this. Take 100 that you paid in your Insurance Premium to your employer and instead give that as a payment to the government for medical care, all things being equal, you should be indifferent to that, right no, but the issue is that even if you account and take that framework. Right. The urban institute says National Health spending would increase by 7 trillion over what it otherwise would have. Okay. It looked at administrative costs, savings from cutting doctors payments and hospital payments it said even if you account for that it would increase 7 trillion because if you give people a blank check, Free Health Care, no premiums, no copayments, no deductibles, no skin in the game at all, it will massively increase health care consumption. There are reasons why people like Elizabeth Warren like to say, look at other countries there is cost sharing. There is not this. I think the plans crazy but i dont want to evaluate it on the same scale as a social program. Why do you think not enough most people if you go on watch tv, read articles, people are not running around saying, its crazy, even though the math makes no sense. Makes no sense. The real problem is how many people dont understand math. You take too much spending and put it into government and thats not tied to productivity. Whether you like it or not or believe it or not, Elizabeth Warren is not waiving her hands. Shes saying here is a set of paper wars she is not saying im going to put this on the deficit. A good question are you taking the side that this would work, jared if were going to have this debate. No, im not a good question for her given that neither this nor the next congress will enact your plan, dont tell us about what youd like to do, tell us what you will do, what you would do, what you think is in the realm of the possible thats thedebate we should be having this is saying im going to buy a unicorn and im going to pay for it with a un corn. Its an important aspirational debate but in terms of getting down to what were going to do, thats financial illiteracy epidemic in america and its right here. Phil, thanks. Well see you again. When we come back, the dow set to open at a record high plus, the sudden ceo switch at mcdonalds and what it means for your portfolio stay tuned well be right back. Dont forget to subscribe to our podcast. Youll get interviews, original content and behind the scenes access look for us on apple pcaodsts or your favorite podcast ach and subscribe to squawk pod today. Sometimes, the pressures of todays world can make it tough to take care of yourself. But natures bounty has innovative ways to help you maintain balance and help keep you active and wellrested. Because hey, tomorrows coming up fast. Natures bounty. Because youre better off healthy. Squawk box this morning. President trump tweeting stock market hits record highs spend your money well. Take a look at futures they indicate the dow will set a record the dow would be up 147 points stauch looki s p looking to open up 17 points higher. Mcdonalds ousting Ceo Steve Easterbrook. The stock was up about 92 and thats compared to the competitors. You can see wendys is the closest competitor up 90 . You have chipotle up by 15 during that time period. Lets get wall streets reaction to todays news joining us is r. J. Hanabe also will slaybaugh restaurant analyst at stevens r. J. , lets start with you your concerns about the new ceo or do you have any no, im pretty comfortable with Chris Kempczinski he coauthored a lot of the velocity initiative. Honestly, he did a lot behind the scenes so i think well see a lot of continuation of steves initiatives with chris at the helm im excited to see what we can do with the drive through initiatives. Both the technology, dynamic yield and printed. I think theres a real opportunity is particularly if youre a longterm holder still a little transition as they wrap up the experience of the future initiative in the u. S. Next year and roll out some new initiatives. I think the longterm play, this is still a name worth keeping in your portfolio. Will, what are your thoughts . I think all thats fair but also i think it is important to keep in mind that whenever steve came in, mcdonalds was somewhat stagnant around the world. Over the past five years, we have seen record results internationally, the uk, france, the u. S. Had a tremendous turn around, so investors, franchisees made a lot of money with steve at the helm hes a dynamic personality i think he had an agenda and he got a lot of things done so i wouldnt say we have an issue with chris at all. And obviously the u. S. Has done well under his leadership, but if youre a longterm investor, today makes you take some pause and reassess has the thesis changed here i dont think it fundamentally has. You have more questions today than yesterday and i expect the market to reflect that. You think basically it is just a reflection that the low hanging fruit has already been taken down at this point i think thats true to a certain degree you look at some of the things that has happened with all Day Breakfast and value bundles that worked really well, some Product Innovation i think there is room for more of that to happen and mcdonalds best days are likely ahead of it but, eah, there were some easier paths whenever steve came in, because of some, i think errors in judgment from prior management. We looked at how the competitors fared over the last several years since we have seen easterbrook in charge at mcdonalds, up 92 , the biggest of the gainers piper is saying that they would recommend people rotate out of mcdonalds and into chipotle you see chipotle over that period of time up 15 . What do you think . Im a little concerned on that front i like the chipotle story, what brian has done with the brand and talking about picking low hanging fruit, hes done a great job on that front, implementing someeasy marketing changes, better utilizing the second make line you start to lap that big delivery hump the company had last year in december and january, my concern is even if we start to decelerate to mid to high digit comcomps, the marketa look at this one i prefer a name like mcdonalds, if we start to see any slowdown in the economy, it works pretty well and has a healthy dividend yield to the same time. Thank you, both good to see you. Want to get down to the new york stock exchange, jim cramer joins us now so much to talk about, maybe want to start with mcdonalds. Want to get your thoughts on under armour. Yeah, look, i think both these are not so hot i think there is some continuity, hes involved with the technology, which had been one of easterbrooks issues. Easterbrook energized the franchisees. I have to believe his number two will understand that too under armour, how do you have the Justice Department crawling all over you and not talk about it im aghast there there is that we didnt hear about this earlier which part of it i just think you have to i dont know what lawyers they have, i dont know who felt they could get away with not talking about it, you cant have the fbi, Justice Department, whoever it is, crawling all over your books and not say we have a revenue recognition problem. The idea you have to wait until the day you report, everybody can have an explanation for anything people can theyll say jim doesnt know what hes talking about. Ive been involved with an s. E. C. Problem and i can tell you, you dont do it the way they say theyre doing it. You come clean instantly. While on the topic of investigations, the report over the weekend that tesla is facing another investigation. This time over the batteries and the spontaneous or seemingly spontaneous fires that have combusted. The short sellers are all over twitter talking about it well, short sellers have been right and they have been wrong short sellers dont buy their cars people keep buying the cars. Im focused on china because i do think thats if you read that last Conference Call, hes talking about record time, china build, hes no longer the spokesperson but theyre making a lot of cars and doing well i know the bears hate anyone saying that. But it is true you know, lets say youre ford. I think i would be jealous of tesla. Ford, youre worried about the dividend, tesla worried about making cars. Would rather be wot the latter. Your bet into the uber earnings, well be hearing about later today . You know, i think that it is hard to they softened it pretty much. If they talk about the ecosystem, theyll be good they have to talk about the ecosystem. Jim, thank you. Well see you in a couple of minutes. Dont miss tomorrow on squawk box with David Rubenstein who will join us that will happen at 8 00 a. M. Eastern time when the Greenwich Economic Forum stay tuned squawk box returns in a moment or the beginning of something even better . When you prepare for retirement with pacific life, you can create a lifelong income. So you have the freedom to keep doing whatever is most meaningful to you. A reliable income that lets you retire, without retiring from life. Thats the power of pacific. Ask your financial professional about pacific life today. Whether your beauty routine is 3or 57,. Make natures bounty hair skin and nails step one. Its the number one brand uniquely formulated for silky hair, glowing skin and healthy nails. Natures bounty, because youre better off healthy. The amount of Student Loan Debt i have, im embarrassed to even say. We just decided we didnt want debt any longer. I didnt realize how easy investing could be. Im Picking Companies that i believe in. I think sofi money is amazing. Thank you sofi. Sofi thank you, we love you. Welcome back to squawk box. Our guest host, peter trias, chairman and ceo of aperture investors. We have a minute and a half left i did want to get a little bit of your thought, particularly as were getting sort of at the tail end of earnings and it seems like they have been better than we have thought or maybe not the earnings, but the guidance Going Forward the question is do you believe the guidance we have seen over the past couple of quarters people have raised their guidance and then invariably lowered guidance later. I think that what were seeing is slower Revenue Growth and a little more increase in expenses than what people had anticipated. They have to invest more to actually make the revenues actually grow. That means their earnings estimates are probably a little bit squishier, harder for Forward Guidance. Some people said that revenue actually got to an inflexion point of growth to where it was actually a positive. But and maybe that we have the slowdown might be in the rear view mirror at this point and we could be reaccelerating. I think what you are seeing in some companies is consistent Revenue Growth, but with an increase in investment to get there. Earnings per share may not grow but the point this person made is that you can gain the nongap eps but cant gain revenue. Cant gain ref new. People look at revenue and revenue driving multiples and thats where people invest to get the revenues but i think thats where it is a little bit the multiple expansion story i think the multiple expansion story is in trouble. In trouble. Yeah. For the high multiples, were seeing multiple expansion in low multiples. It is rotating. Berkshire hathaway had 120 billion in cash on hand. Theyre not spending it. You think prices are too high here great investor, hell spend it when he sees value. And i think you cant look at his cash forward and say thats determinant of one thing or another. Peter, thank you, for being with us. Thank you thank you, all. Make sure you join us tomorrow what are you talking about squawk on the street begins right now. Good monday morning, welcome to squawk on the street. A look for new highs at the open, including the dows first record high in about four months as trade Optimism Reigns despite turbulent corporate headlines today. Stock downgrades europe up. Tenyear 1. 76. Road map begins with a shakeup at mcdonalds, firing Ceo Steve Easterbrook for violating policy over a relationship with a