Transcripts For CNBC Squawk Box 20140926

I am here in nantucket. Later on throughout the weekend, you wont be hearing from them, but i hopefully will be giving you news on monday. Chris matthews, they are all here in nantucket talking big ideas. So we will bring you that throughout the next couple of hours. Becky, back to you. Looking forward to it. Andrew, well talk more in just a moment. But in the meantime, lets get everybody caught up on wall street. It is waking up to green arrows this morning, a welcomed sight for the bulls after yesterdays selloff. Take a look at what the u. S. Equity futures are doing at this point. Nasdaq futures up by 20 points on the s p futures up by just over 6 points. Volatility, definitely jumping back into the markets this week. The vix soaring nearly 18 yesterday, all the way back to above 15. 5 . It seemed as though no one was spared from the carnage yesterday. All 30 dow components finished lower. The blue chip index dropped below 17,000. This was its biggest decline in about two months. You can see that drop of about 1. 5 . Technology stocks were hit particularly hard. The nasdaq dropping by nearly 2 . And tech was the worst performing of the s ps ten main industry groups. The s p down by about 32 points. In asia overnight, youll see that they picked up on some of our keys, at least the nikkei was down by 0. 8 . The hang seng was weaker and in the european stocks early this morning and some of the early trades, youll see that right now things are mixed. The best performers to the cac in front up by over 0. 6 . The dax and the ftse have barely budged. I thought they would call it one of the biggest losses of the year. But when you see it, i think they have feet of clay when it comes to stock market iraqis. They havent done anything yet. Were getting closer and closer to the enof qe. Eventually youre going to raise rates. This market story isnt just about stocks. The dollar trading near a fouryear high against a basket of currency. Thats one reason. Safety. The other reason is because were tightening and everybody else is easing. This is what is causing oil to stay where it is and the dollar to go up. Were up 3. 8 or something against the euro over the last six weeks. If you look at the yen, its up 8 since july. I was thinking yesterday, if we had money and we were able to invest, for about eight months, thats the trade. Euro dollar . Yes. I was smart enough to where if i had money and did commodities, thats one of those big trades like soros or thats where they see something thats going to last a while and its a big idea that is not going to reverse itself anytime soon. 128, if its going par 127, we were at a twoyear low yesterday at one point. 127 and its sitting right around that level. 11 weeks in a row that the dollar has made a weekly gain. That is a feat it hasnt achieved in 40 years. The greenback is near twoyear highs against the euro, against the yen. The tenyear note is back down to 2. 5. There were a lot of things that sparked the fears in the market yesterday, one of them being russia ruling the scene considering that will allow them to confiscation property. I didnt even hear about it. And that made a lot of people rush into treasuries, too. Well see the gdp number today and see what it is. But we dont feel flush. U. S. Treasury us now have the largest yield advantage over german bund thats weve seen in 15 years. And the driver here is speculation about u. S. Interest rate hikes compared to the chance of mormon tear stimulus in the eurozone. Light sweet crude is headed for a modest gains for a second straight week. Meantime, brent is on track for its second largest decline. Still hovering around that key 1200 an ounce level. Economic data is on top today coming at 8 30 a. M. Forecasters say growth is likely to be revised higher from 4. 6 to 4. 2 . Then at 9 55 a. M. , we get consumer sentiment. Take a close here at the markets and whats going on, we know this is thats the other thing, historically a dangerous time of year for stocks. Everything always happens in october, dominic. But the other thing that always happens in october is not surprisingly, if you have a big selloff, its a good entry point. But october just gives everyone the creeps. But here are some of the biggest winners and looszers from dominic chu who did his own hair this morning. I took a page out of your book, joe. You did. There were six people. I said what a pri madonna. Most people dont trust me to have control over my own hair. I would just say that its more our network here wants me to make sure i dont do my hair. The tag could be here or the seam can be there oh, you do . No. I retrofitted the rug. Im still getting that. The liberals that hate me still say i wear an ugly toupee. I dont know, ive seen your hair. It looks pretty good. Thank you. Like you said, it is a scary time during this Third Quarter when we go into the fourth quarter. Thats when things start to pick up, that santa claus rally. Yesterday we saw that big move. We talk about it at the top of the state of ohio. The doe, 264 points, the worst loss for the dow. The s p down 32 points and the nasdaq down 88. Thats a 2 drop pap big deal there for the s p, but more so for the nasdaq composite where tech stocks make up a lot of that particular index. Take a look here at the s p 500. 500 stocks in there. 486 of them were down on the day. That means it was a broad based selloff. Just about he ever stock there. Only one was flat and just 13 showed positive moves on the day. So yes, a very broad based selloff. If we dig a little deeper into some of the winners and losers here, winners, there were bright spots, right snt motorola solutions, if you can call it a bright spot, up 0. 5 . Same thing with auto nation. But the big losers here, Allegheny Technologies for one. Metals, a Specialty Metals company. Also apple. Its the most valuable company in america and is down 3. 8 . Thats one of the reasons why. As you take look at the winners and losers, we know theyve gotten their Shopping List together. But maybe, just maybe there are those who feel as though there could be maybe the beginning of something deeper. Weve only seen 4 . No, no, no. Its not october yet. No, its not october. Its not october. And we need something scary before its an entry point. I mean, to fit in with the historical i would say, though, i added a little bit to the kids College Funds yesterday. Index trade. I thought, well, maybe an opportunity. Some investors are saying there are similarities between this selloff, the circumstances, as well as what happens july 31st. Back then, we were worried about ukraine, russia, some tensions there. There was a middle east Crisis Brewing at that point, as well. It wasnt just iraq and syria. It was israel, the palestinians. Then you have the argentinians, the debt default issue. That is still on the table right now. There are concerns. A lot of these strategyist have said they are pinning this more on the idea that qe, quantitative easing, is coming off the table sometime soon and that that rate mobilization is going to happen. That is something we havent had to deal with in five years. Since euro Interest Rates have gone into full effect, weve realized nothing. Thats kind of a policy. And the next question is when the fed should be out entirely of the markets at that point. Next month is when theyll be out of the additional qe. Right. Well see how the markets stand on their own two feet. And nobody knows how theyve done it. This will be the real test of it. But remember, 666, the intra day lows. Were at 2,000 again, near 2,000. Maybe you take some profits and thats the reason why some are saying this could be that motion. As dom mentioned, the major markets are trying to recover after getting slammed. The dow, s p and nasdaq all dropping during yesterdays session. Is this the beginning of a larger down turn or end of quarter profit taking . Joining us now is paul christopher, chief international strategist. Rich steinberg is president and chief Investment Officer of steinberg global asset management. Rich, what do you think . I think we have to be careful not to well, blow this too far out of proportions. Yesterday was a bit of a skeleton day. What is a skeleton day . The skeletons are on the trading day because a lot of people are off for the holiday. You tend to have more volatility there. What weve been talking about for a while, i still think were in a trading range and investors should be using these opportunities, taking their points just like we talked about you get for your kids. I think theres a lot of that mentality on both the institutional and retail side. 1975 might have been an entry point, 1950. And we think, you know, the market settles back in at 1925. Youre going to have ups and downs here. Its a bit of a mosaic. We have all of these tiles starting to come together. But the picture isnt totally bearish. You have great earnings coming out. The big worry will be whether or not Companies Use the Dollar Strength as an excuse to bring down analyst estimates going into next year. Thats to be seen. Yeah been it was a little dicey yesterday. It was great for yesterday, but the day before was big. I think we have to the day before followed two down days of a hundred points. Absolutely. I mean, you know, but you dont save your am mow to buy after a 2 or 3 break, do you . Especially with october coming. Were going to do 10 one of these days, arent we . We havent done 10 in three years, joe. Doesnt mean that it cant happen, but you have the u. S. Economy strengthening, the dollar has a double edged southward to it. You have european markets that may come back into the u. S. Market because theyre going to get the currency at their back like weve had for years. And Interest Rates may not go um as fast when the fed starts to raise rates because Institutional Investors and Insurance Companies in europe are, again, going to get that dollar at their backs. So i think were going to be in this trading range for a while. Paul, you seem to think that even the slightest pullback is usually a buying opportunity. And that is usually true in a market thats going to you know, thats sort of in the middle innings of a bull run because it never gives anyone the opportunity to get a 10 discount on whats eventually headed higher. But the worry the worry is that a lot of this is just, you know, maybe even kind of an asset bubble or a i wont say bubble, but appreciated asset orchestrated by the fed. And if its not really theres not anything fundamental underpinning the move. But you still think there is and you should buy these dips. Yeah, we do. We think earnings growths is going to continue to be good. Were looking for 6 to 8 for this current quarters worth of earnings estimates. We think next year will be similar. As rich said, the fundamental is that the underlying economy is still good. As you pointed out, in the middle innings of this bull, youll get these opportunities to buy just as becky did yesterday. But never that much . I dont think people do buy because theyre like me. Theyre thinking, im not buying when its down 3 . Im saving my powder for when its down 10 and weve never gotten it. Thats why for three years you should have bought but its difference with the Kids College Fund is you have a limit you can put in every year. I think just buy every three months for that thing. You cant even i wouldnt even it wouldnt matter what i put in steadily, but i try to buy on days you see down a few hundred points. Its worked so far. Well, you know joe, everybody saving for their own college. Why is this your problem . You know, if were all dead at 75, what does she. I am not in camp on that. Did you see the post piece on that . No. Oh, my god. Scathing. Scathing. Sorry, rich. Go ahead. Joe, everybody wants to ring the bell when its time to make that buy at the lows. Its very hard to do that. You really investors have to have a strategy to leg their money and cash into the market here. Were going to have some spits and starts here. You have to have comfortable that at you put your cash to work, its okay if the market pulls back further. You have to know what youre going to own and whether or not the weres will be supported by strong u. S. Growth and a strong dollar. So what do you like, rich . We like the big industrials that dont have that much exposure to europe. Some of the consumer names may start to get into trouble that have 40 or 50 of overseas sales in europe. But the dividend res very high, becky. So if rates stay low, youre going to have money going into those dividend names. We just want to avoid overweight utilities because Investor Perception with rates going up with will start to affect those. We also like the health care sector. And energy is super cheap right now. You may have to wait with oil as low as it is. But we could get some spikes again in geopolitics. And you have a lot of dividends underlying those names. Paul, let me ask you, we were talking about the strong dollar and how much its moved over the last two months. Do you think that is a good trading thesis . Assume that the dollar will continue from here . Yeah, i do, into next year, sure. But not at this pace. Largely because we think people have anticipated too much fed tightening too soon. We think its going be a flat yield curve next year and the dollar may have taken much of its gains already. Paul, rich, thank you very much for talking to us today. Great talking to you. Coming up, a storm in the no, what is a storm . A storm . Oh, the storm chart. Oh, storm chart. Well, there was a storm in the dow yesterday. But it is holding on to a 2 gain for the year, which is a few sessions left in the Third Quarter, the markets are going to see perhaps some dips and some swings. First, though, the ryder cup teeing off earlier this morning. Were going to check if with our friend at the golf channel to get the early read on whats happening in the matches over there. Im not even sure we call it a leaderboard. Squawk box will be back in just a moment. Announcer before you hit the road, here is your travelers check. Today in 1973, the concord set a transatlantic flight record traveling from washington, d. C. To paris in just three hours and 32 minutes. The plane was retired in 2003. Whats next for high speed Business Jets inspect thats next after the break. O you are. Solver of the slice. Teacher of the unteachable. You lower handicaps. And raise hopes. And you. Rent from national. Because only national lets you choose any car in the aisle. And go. You can even take a fullsize or above, and still pay the midsize price. pro nice drive. vo well played, business pro. Well played. Go national. Go like a pro. Ameriprise asked people a simple question in retirement, will you have enough money to live life on your terms . I sure hope so. With healthcare costs, who knows. Umm. Everyone has retirement questions. So ameriprise created the exclusive confident retirement approach. Now you and your ameripise advisor. Can get the real answers you need. Start building your confident retirement today. Now airbus and rion will have a jet capable of flying at 1217 miles per hour. Welcome back, everybody. A storybook ending to derek jeters last game in pinstripes. Bottom of the ninth, one man on and he gets a single to drive in the gamewinning run. His family, former teammates and manager joe torre were all on hand for that last home game. The yanks do have three home games versus the red sox where jeter is expected to be the dh. Not going to be wearing pinstripes this. What a great life he has to look forward to, as well. Hes almost 40, right . Hes so young. Good for him. The ryder cup teeing off this morning. The u. S. Players taking on europes finest in this historic competition. Joining us now from scottland, steve burk on owski, reporter for the golf channel. Correct me if i am wrong, steve, i saw them nicholson had to putt about a sixinch putt in for a win. Is this can you can you tell us, is this pretty contentious so far . Well, good morning, guys. Its certainly a different type of animal we dont see very often in the game of golf. You wont see a lot of short putts concreconsidecededonceded. The ball ball matches are all on the golf course right now. The americans leading into the europeans and others. When you look at that matchup of Keegan Bradley and phil mick yolson against rory mcilroy and sergio garcia, theyre getting after it, shall we say. I play with phil been you know, its fair to do its fair to say things and to, you know, little innuendos here and there. And sergio is well known as one of the biggest stone busters . I dont know what you would call it. But there might be some behind the scenes things going on there. Ill be there on tuesday. Whats the temperature that theyre playing in today . Just give me an idea. I have to bring some long underwear. Oh, yeah, you need to pack warmly. About 54 degrees right now. Winds between 15 and 20 miles per hour. I was out on the range this morning and probably felt like low to mid 40s. This is just something different. Thousands more down both side oes of the fairway this year. Some of the strong europe support that they here in scotland. It is Something Like we dont see very often. And when you come over here, keep in mind, the americans have not won in europe since 1993. The captain of that last Victorious American team, tom watson was leading up the American Team here. You just showed derek jeter, swan song at yankees stadium. The walk off, so to speak. It was a final day charge two years ago for the europeans at medana, the americans hoping to write a storybook ending, as well, by the end of this one come sunday. We have an eightsecond delay so i have to ask you a couple of questions. Theres a homefield advantage. When they come over here, weve got some drunk, rude fans that say stuff you cant believe. So when we can over there, they start with that i hate that, that chant that they do. And we all do because they only do it when theyre winning. And the other thing, did bubba do the getting people to cheer at the top of their lungs when he teed off . Did he do that this time or was that a onetime thing . Oh, no, he did it. And bubba hit the ground with everybody yelling and screaming. A different type of atmosphere when you come over here to europe, but bubba was encouraging them to be vocal. Instead of cheering, hit it out of bounds, it would be a little different, maybe, over there. All right. Steve, when we talk to eunice yoon in china, its like a twosecond delay. With steve its like 14 seconds. So we appreciate it, steve. Theres an he did it well. Its hard to deal with that heavy of a delay. You just have to wait and just sort of look into but, you know within im not as afraid of silence as i used to be. Me, neither. Whats the worst thats going to happen . Nothing. No one has ever died. No. Yet. But they make fun of us a little. Thats okay. Were used to that. When can he woman back, apple introducing a new fix to update the software. Well is ask if thats enough to give the shares a boost. First, lets get to andrew in nantucket. Andrew, what do you have coming up for us this morning . Hey, guys, when we return, we have bob diamond here looking very nantucket. One of the founders, part of the founding circumstancing of the nantucket project. Were going to talk about markets, well talk about the dollar, well talk about the euro, well talk about the future of wall street. Were going to talk to mr. Bob diamond, former ceo of barclays in just a minute. When change is in the air you see things in a whole new way. Its in this spirit that ing u. S. Is becoming a new kind of company. One that helps you think differently about whats ahead, and whats possible when you get things organized. Ing u. S. Is now voya. Changing the way you think of retirement. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Right here. With a control pad that can read your handwriting, a widescreen multimedia center, and a headup display for enhanced driver focus. All inside a newly redesigned cabin of unrivaled style and comfort. The allnew cclass. At the very touch point of performance and innovation. The ultimate arena for business. Hour after hour of diving deep, touching base, and putting ducks in rows. The only problem with Conference Calls eventually they have to end. Unless you have the comcast business voiceedge mobile app. It lets you switch seamlessly from your desk phone to your mobile with no interruptions. Ive never felt so alive. Get the future of phone and the phones are free. Comcast business. Built for business. Good morning and welcome back to squawk box here on krpz. Im joe kernen along with becky quick and Andrew Ross Sorkin who is in nantucket today for the nantucket project conference. Ice going to be with a guy ive played some golf with. Andrew, youve got to ask him about that. Barclays chief bon bob diamond. Im sure he has one eye on the ryder cup this morning, as well. When i played with mickelson, it was because mickelson was a big barclays and bob was playing when he was allowed to play. I think he sooner or later with what was happening, i dont think he felt comfortable and he didnt. But, you know, he was a big golf fan. But andrew is also has the top five nantucket jokes about i once met a girl from nantucket. You know how he delivers a joke. First, lets check on the markets. The future is bouncing back after yesterdays selloff. Well see whether they last the session because fridays are scary. Hopefully if you are a bull, it is bullish. Hopefully it stays. Europe, it was flat earlier. Up a little been france gaining a little. The ftse not even up a pull point. In asia, take a quick look. Asia, japan probably responding and reacting to what happened here. Although a lot of people with what kyle bass said about japan, that opened my eyes on some of the potential pit falls that that Company Still faces. Check out oil, which has been really held hostage by what happens in the currency markets. Which is the next after the ten year, well look at that. 2 2. 499 . The dollar, a good time to start thinking about going to europe. Its like at a twoyear low. What do they use in scotland . The pound, right . Because they voted to stay in. Ive got to get some of those. Theres the pound, 1. 63. And then gold, 1223 on the session this morning. On Corporate News, apple releasing a new Software Update yesterday after some new iphone 6 users complained about call disruptions and other issues after the ios 8 rollout. This raised regular flalg flags for investors. Shares off about 3 since the iphone 6 went on sale just about a week ago. But, of course, there was a run up leading into that. Shares of nikkeiky soaring this morning. The Worlds Largest sports wearmaker posted better than expected results. Right now, lets get back to andrew, who is sitting down with a very special guest. Andrew, good morning again. Thank you, becky. We are on the island of nantucket at the nab tukt project. Theres the theme art and commerce this year and im here with bob diamond, former ceo of barclays now the founder of Atlas Merchant Capital and golf partner of joe kernen. Golf partner of joe kernen. And i was noticing that you were wearing docksiders to have the feel of i dont have nantucket reds on. Talking about red, help us with this. The market down severely yesterday and in particular the dollar at a fouryear high. The euro, you were a ceo of a major european bank, really showing weakness. What is your take on where we are . I think theres a lot of things in the market that are reasonably in balance. I think oil price res in balance. I think gold, joe was just giving an update on joe is in balance. But i think one of the factors that were seeing directionally here is that im not surprised at is weaker economic results in the eurozone. Weaker currency in the eurozone. Relative to the u. S. , stronger economy, stronger currency. So i think directionally, thats exactly what i was u. S. Market, though, did it bubble . Too inflated . Are we in the right place, the wrong place . Are you investing any money in the United States . Am i investing any money in the United States. Thats a funny way for me to think about it. Atlas Merchant Capital is a merchant bank. We try to think of ourselves not just as investing, but operating. Its all about Financial Services. I would say the best opportunities in Financial Services today are not necessarily in the u. S. Because theyre more fairley priced. You talked about wanting to buy lots of banks in europe and there are a lot of banks now selling pieces. Yes. Longterm, what do you think of the european markets . Are you buying right now . Are we at the bottom . I think its a tremendous opportunity. But i think, you know, if you step back for a second and think about it in Financial Services, not across the whole economy, Financial Services in the developed economies and the u. S. , in the uk, in europe are down about a third from precrisis level in equity values. The rest of the markets are up over a third. But financials are over 20 of the economy. So if you think about that value proposition, theyre really beating up a big sector of the economy. I dont think you and i could name five people who would invest in Financial Services professionally. Few investors. And i think here is the rub, andrew. The strategic guyer of Financial Services assets for the last 20 or 30 years has been the big banks. And for a variety of reasons that weve talked about, the big banks now are sidelined from buying, but theyre also sellers. Implications of the scottish vote, the vote on scotland. Do you have a take on that . Are we going to see votes like this throughout the rest of europe . I was not surprised with the results of that vote. I think the lead up to it and the debate that ensued is was really what the event was. But i think, you know, if you go back to kind of the eurozone economy and the weakness that was driving the market down in the last couple days, the genesis of the currency changes that you talk about, for all the positives in europe, post the financial crisis, and at the top of that list, theres some of the things that Central Bank Governor dral draghi has done. But europe has not dealt with the structural issues around Capital Markets reform. Most of the loans still end up on the Balance Sheets of the banks. Theres not a buoyant, deep capital market. Even with the crisis coming . I think the i think the opportunities well, just think of what was announced recently. 1. 4 trillion in noncore assets, businesses, companies, 1. 4 trillion euros in noncore assets for sales just from the eurozone banks. Would you invest in russia right now . You saw the news yesterday about potential confiscation by putin. No. I dont know enough about russia to be an investor there. But you are investing in africa. Yes. Quite heavily. We had one of your partners on this week who i believe is here. She is right here. Keeping an eye on me. Hiding in the back there. Your take on how big a potential opportunity that is, but also what are the risks . We dont talk enough about those, perhaps. You know, i think clearly there are opportunities in africa. If you look at Subsaharan Africa in terms of Economic Growth, the number of countries that are kind of in the top ten of Economic Growth over a period of time, the growth of urbanization, the development of the middle class, its an enormous opportunity. For us, Financial Services are at the very, very front of that because Financial Services across Subsaharan Africa are very disaggregated. They have reasonably high profit margin webs but they need disruption in the Business Models to get more lending to consumers and more lending what about the politics of africa . Rwanda, the place youve spent a lot of time. Talked to the president there. Polarizing figure. Some people say he saved that country. Other people say that you does awful things and, you know, has to be malicious. Your take . My take is very, very clear. As you travel around africa, kgame is a verb. Its about laying fiber optic cable so people have access to information, its about creating a businessfriendly environment. We hope to close in the next couple of weeks in our first acquisition in rwanda. Its a great business environment. Your golf partner mr. Kernen . Yes, mr. Kernen back at hq has a question for you. I hear youre playing in the dunn hill. I dont know how much to ask you. I want to ask you a serious question and then ill ask you a personal question. Youre doing all these things on. We have to keep it on, you know what i mean . We have to keep investing and keep doing things. Do you worry in the back of your mind that theres another wall coming up . I mean, smart people say no, theres only like buffett, theres only one of those in a generation where Something Like that happens, the financial crisis. But then theres others that think that could have even be a preshock to whats happening with all the Central Banks around the world, just, you know, debasing every currency around the world and playing everything forward, it seems like, living beyond our means. When you do this, do you worry there might be something thats going to affect everything coming down the pike and it makes you worried or do you just have to do what youve got to do . I think this is a as i said earlier, i think theres a lot of aspects of the markets that are fairley priced. But in Atlas Merchant Capital, were very focused on financials and were focused on being operators. So were taking control positions, majority positions and focused on running the businesses and improving the businesses. Its very different than kind of investing in the broad markets. So take yourself out of it though just as an investor. Yeah. Putting aside the at lease piece and the financials piece. Do you think that there is another potential crisis coming . I think its more reasonably priced than that. I think a lot of the key factors in terms of theres still inexpensive money, i think oil prices at a reasonable level, i think gold is at a reasonable level. I dont see a big crash coming. I have to ask a quick barclays question and then joe can get a personal question. There was news yesterday about an investigation. After 2008, the financial crisis, about the investment that qatar had made in barclays and whether there was either kickbacks or some kind of Service Agreements to pay qatar money in exchange for the capital that they invested. Can you speak to that . What happened . I think if there was any investigation, i wouldnt be able to speak to it. But that was before the time i was chief executive, as well. That was before i thought that you had bought that investment. No, i became chief executive in 2011. Oh, so that happened after. Okay. Do you have five jokes for joe kernen . For the nantucket ive got a question and then ill ask my final question after becky. Bob, quickly, there was news on eye boar yesterday. The uk government digging into the libor scandal trying to figure out if it impacted others in america, as well, gold and beyond that. What theyre doing with these moves is trying to shore up investors credibility and ks in the market. And i just wonder where you think that stands right now, how much Investors Trust us, how much they should trust it, what the state of the entire benchmark setting practices are in the uk right now. To be honest, becky, i havent followed that at all. Okay. Bob, my question, i guess, has to do with the you know, what youve sort of been through over the past six, seven, eight years. It was tough enough in this country for bankers, obviously. And then i think about you being over i mean, in france, what is it, they even cap the salary of bankers. And i used to tell you in england, youre never going to make these people like you. You turned down some graemt great invites because of the perception, trying to please them. Do you regret that now that you could not have pleased them now no matter what you did. Do you regret that now, not listening to me . No. I loved every single moment, every single year i spent at barclays and building the Investment Bank and building the investment management. I think, joe, i put a different perspective on it. I had an opportunity to join the Financial Services industry with Morgan Stanley in the early 1980s. There was a number of decades of global growth, consolidation, globalization as i said. I think that period is over for a while. I think with big banks, the Regulatory Environment is different. Were going to see limitations of complexity. I think the good news, joe, is there is an opportunity now for new, purely models like Atlas Merchant Capital that are incredibly exciting. We are going to leave it there. Bob diamond on his next venture, Atlas Merchant Capital. He gave me some insight into your golf game, joe. Andrew, the guy that im trying to get some help from is three quarter psychiatrist and a quarter golf coach. Especially when you get older and the nerves go. And, bob bob diamond thank you for helping start the nantucket project. Bob saw some ive messed up his swing. Bob saw some things that nobody should see. Phil just turned his back whenever i was because of his tempo. He would just go like this. Anyway, when squawk returns, were going to have a september were in the middle of what could we a september swoon for the markets. The s p 500 gave up points yesterday. But the index is still up more than 6 yeartodate. Later, how the small and midcap stocks have weathered this stormy september. 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Now we invite smokers to quit, too, with our comprehensive program. We just want to help everyone, everywhere, breathe a little easier. Introducing cvs health. Because health is everything. Introducing cvs health. Your customers, our financing. Your aspirations, our analytics. Your goals, our technology. Introducing synchrony financial, bringing new meaning to the word partnership. Banking. Loyalty. Analytics. Synchrony financial. Enagage with us. Can you start tomorrow . Yes sir. Alright. Lets share the news tomorrow. Today we failrly busy. Tomorrow were booked solid. We close on the house tomorrow. I want one of these opened up. Because tomorow we go live. Its a day full of promise. And often, that day arrives by train. Big day today . Even bigger one tomorrow. When csx trains move forward, so does the rest of the economy. Csx. How tomorrow moves. Cnbcs Million Dollar home competition is going back to school. Our reporters visited their college alma maters to find milliondollar homes in the area. But you get to determine which home is the best bang for your buck by logging onto cnbc. Com vote to cast your pick. The winner moves on to the next round and the loser gets eliminated. Remember, the locations are not revealed until after we get a look. This contemporary one and a half story home stretches over nearly six country acres. Theres a three bedroom guest cottage. The main house is nearly 5200 square feet and that doesnt include the guest house. The kitchen here, newly updated. Oak floors with cherry cabinets. Theres a home gym, a game room, and a spacious floor plan that includes five bedrooms and four and a half baths. Get this. There are two master suites. The expansive deck overlooks the pool and it all features spectacular valley views. The price 1. 1 million. This 1890s queen ann victorian sits on a nearly half acre corner lot. The inviting wraparound porch is the perfect spot to soak in the prime location, walk to campus, and to the water. The newly rebuilt three story staircase. Thats just the start of the renovations in this 2700 square foot home except of course for the kitchen which is an open palate. This master suite is one of four bedrooms and three and a half baths in the home. You can wake up for school to the wide bay windows then come to this added space to exercise. After all, the home was built for the founder of the ymca. And who wouldnt want to do their homework in this third floor study with original wood floors and glass front built ins. All for the price of 1. 1 million. Its up to you to select the winner. Go to cnbc. Com vote to crown a winner. Lets bring in dolly the super broker for the rich. First of all, i know where one of the homes is because i know where brian went to school. Virginia for brian. Somewhere in connecticut for the second . Do you have a guess . Im with becky on this one. And i just i was distracted by rory mcilroy for a second. Im allowed to do this because its golf channel. If youre not watching us its okay to do that. Its a comcast property. Its evanston, illinois. Hey, dolly is here. When did you get okay. And i have to tell you she did the most amazing job of touring that house. That was a tough lift. Yes. I liked the way she did the kitchen. She has another career in the future. Ive never seen a better job of showing a house. Amazing. Does that mean you like which do you like better . I like both houses. Theyre both terrific houses in their own right. Ones a Country Estate and ones a city dwelling. For my money, even though the taxes are high in the city, its walking distance to everything, to the water. And in blacksburg, virginia, there hasnt been a Million Dollar sale yet. Ever . Thats usually not a good sign. Unless were reducing this price dramatically, i think the money bang for your buck is going to be diana and her amazing show. So there hasnt been a milliondollar home sold ever and theyre asking 1. 1 million . Correct. And there are quite a few in competition. Its really tough. So you can see the next round unfold in squawk on the street. Lets see who the winner is. Country retreat won. Its beautiful. To the house is absolutely stunning. Thank you so much. See you again next hour. Get back to golf. Okay. Next, stocks in the danger zone. September is traditionally a tough time for the markets. But should we be worried for a full blown correction . Well see. Stocking in the danger zone. A massive selloff for the markets. But should investors fear the bears. The dow component running from the bears this morning. How much further can the stock go. Bulls, bears, hawks, and doves. The stock market zoo is crowded today. The second hour of squawk box starts right now. Good morning, everybody. Welcome back to squawk box here on cnbc. Im becky quick along with joe kernen along with Andrew Ross Sorkin joining us from nantucket. We are here on the nantucket project. We just heard from bob donovan last hour. In just a moment to my right we will have Barry Sternlicht on the program to talk about potential asset bubbles, the dollar, and all sorts of things. Then coming up at 8 30 i should also tell you well have Larry Summers on the program whos going to be talking about perhaps some of the same issues as well as reaction to some of the gdp numbers well get at 8 30 as well. Back to you. Well come back with barry in a moment. In the meantime, if you are a student of investing history, you know this is traditionally a dangerous time of the year for the markets. We call this is the weakest week of the year for stocks. Historically selling starts in august or september and then bottoms out in october. After yesterdays selloff, though, the stocks are pointing to a bounceback. Looks like the futures are up about 70 points above fair value. S p futured up by about five points. Lets talk performance. Check out some of these statistics. Month b to date the dow is lower. The nasdaq and s p are off by about 2 . The small cap russell is down an eye popping 5 . The dow, s p, and nasdaq are all positive for this quarter. As for 2014 so far, the dow is up by 2 . S p more than 6 . And nasdaq nearly 7 . The russell, though, is still a loser over that period of time. Down by about 5 . Joining us now is Rebecca Patterson chief Investment Officer. We were talking about how very few times in your life do you see trades that seemed as obvious as long dollar a year ago. Did you tell us that . Well, currency is something near and dear to my heart. Its how i grew up in Investment Banking. We have been overweight dollar in our clients portfolios for over a year. But it gained momentum in july. That was both a combination of people looking more at the fed, were going to raise rates. Europe and japan continuing to take steps. In addition, keep in mind capital account. But the u. S. Is importing less energy, our trade deficit narrows, we have to were keeping more dollars at home is the bottom line. I think all of that is helping push the dollar up. Very rarely do big trades and big moves that have trends that are going to be there for awhile rarely do they come along where you can do so well and it is it seems so obvious to me. Normally the opposite is what happens. True. This is different. I mean, if you were one of these guys that has a lot of money and you knew that we were tightening and europe was going to be more accommodative, it seems almost too good to be true. But youve cleaned up. I think theres a lot of global macrohedge funds out there today breathing a huge sigh of relief. Theyve been waiting for a trend. Whos on the other side of the trade . Youre always going to have corporations. That are hedging. Hedging or needing cash for a deal. Something like that. There is always someone else on the other side of the trade. When you were on four, five months ago were you telling us this . I mean, we have been short yen, short euro, long dollar in our accounts for quite some time. Year or more. Is your husband now one of the people he covers because of the trades you cover . Robert frank covers the rich and famous. You should be rich and famous now, right . I am a symbolic client. I dont meet our minimum. But i like to eat my own cooking. Its all in roberts name apparently. Definitely not. Rebecca, let me ask you. We had a trader who joined us today who said we have seen momentum play on it. He doesnt think the move is over, but he thinks the momentum may slow down for awhile. Sure. It definitely could. I do think this trend with the stronger dollar is likely to last for awhile. These moves in currencies can last five to seven years. At some point and i dont think were there yet youre going to start hearing some pushback. Maybe in the guidance area from ceos, a little chatter about currency. Further around the election, maybe after the election youll start getting lobbyists for u. S. Exporters maybe start making noise. But were in the early innings of this. I think we could see this go on for a couple of years before it has a big impact. Okay. The thing at the bottom said there were head winds for the dollar but theyre starting. Head winds for the dollar. It just said that on the thing. Did you say that . I didnt say that, they extrapolated. Maybe its an exaggeration of what i meant. You could get coes talking about the dollar. But this trend is going to continue . Yeah, i think so. Where on the euro. We as everyones estimates are different. We think 1. 20 is fair. Were still around 1. 27. I wouldnt be shocked to see it head that way. Still a lot of money to be made there. Exactly. Youre not too late to get in on this. Are there etfs. Oh, gosh. Dont do an etf for currency. Well, you cant. Youre not allowed. If i could, what would i do . Be careful with currencies. Because even though its a very theres a lot of volume in the market, it you have a lot of volatility. You could get handed your shirt. But there are etfs you can use. You have to be careful of liquidity with them. And you can play the currency market directly. Look at whos going to benefit from this. In the u. S. You want to look more at domestic stocks. Most are small cap and those are not doing well right now. So large u. S. Companies, large cap that are more domestically focused is how id play this. Rather than b the currency itself for the average viewer today. Thanks, rebecca. Thank you. And youre going to be here until 9 00. Lets get back now to andrew in nantucket. Hey, andrew. Hey, joe. We are on the island of nantucket at the nantucket project. And joe, we are here with one of our favorites. Our legitimate favorites. Barry sternlicht is here. Founder of starwick capital group. Theres so much to talk about. But quick perspective on the market drop yesterday and sort of where we are. Ive been talking for months about the lack of liquidity in the market. It feels so good on the way up. But we get really worried on the way down. Its healthy for the market to shake and to get loose hands out of stock. But i do think weve been were up here on the top of the lake and the lake is getting fissures and its cracking. Do we have a lot more to go . Is this going to be a brutal october . Do you have cash on the sideline waiting to jump in . Ive raised a little cash personally. I think weve been chasing its been a oneway road. Its dangerous whenever it feels like they have to be in everything. They have to buy everything. And the alternative classes are popular. But they have this liquidity at least in some instances they have liquidity. Its not that stocks are so compel, its theres no place else to put the cash. And in real estate and other Asset Classes to put capital out. Prices have risen. So the pace of investing is good, but its harder to put money out. You told our producer yesterday in the context of alibaba and the internet that there is going to be a blood bath there in the internet space. That was a bit dramatic. I do think i was at a conference on the west coast and we were talking about the money raised in the venture world. Looking backwards chart showed the money raised today still pales in comparison to the money raised in 00. Every one of these can take an hour of your day. If you look back at the money raised and look forward, funds were raising 20 million are raising 100 million. A 400 million fund is oversubscribed to 2 billion. So theres a ton of capital being raised. Everybody looks and says ive got to be in the next one. They cant all be like that. You cant have 50 alibabas. So theres going to be a lot of train wrecks. Theres going to be a lot of big missed companies. The burn rates on some of these companies are going to explode. Joust like the equity markets yesterday, theyll shake. Its not a oneway road up. I think investors have to understand theres no free lunches. Im old enough to have seen so many cycles its scary. When it feels this easy, its like its the time to be cautious. There were people in 2005 and 06 saying the world was going to end. They were right. But you had to wait a couple years. I hope were in 05. So there are more obvious light switches today that are ticking time bombs. The whole situation of the macro Global Situation is not good. It affects how we think about the world. For example, should you have a blanket buy on new york city . Whats the shot in your investment horizon that god m forbid something happens in new york. Do you want all your eggs in new york City Real Estate now. Thats not something you would have thought about two years ago. Then this very Major Movement of the currencies. The dollars strengthening, the euro basically at a free fall. Does that make sense to you . Yeah. Weve been waiting years for this. The only thing we thought could save europe was a weak currency. Everyone would be competitive and make the continent competitive against the world. Weve been waiting. And finally the differential between the euro rates and dollar Interest Rates are wide enough that the collapse seems to be taking place. But weve been waiting five years for this as you point out doesnt happen overnight. But where it stops, nobody knows. Is that a song or Something Like that . It is a song. Your pal joe has a question. We had paul of pimco come on saying the fed has conquered inflation, theyve saved the economy, its over, and they can take a victory lap. To me it just sounded too good to be true at the time. Then i see Something Like yesterday. And if they were to, like, unravel a little because its october, i just wonder whether the feds resolve whether they theyd whats the word im looking for . Whether they wouldnt follow through on some of the plans. And they wouldnt have the nerve to remove all the stimulus. And i wonder if thats how this beautiful scenario also pollyanna scenario youre allowed to do it this way and theres no repercussions. I wonder is that how it happens so they cant get out. You have two hawkish governors leaving the fed. I think short rates will go up. They should go up gently. I think they will do it. But telling you theyll do it, i believe them at face. Its good. And itll take some of the froth out of the market. Perhaps theyre lucky strengthening the dollar should weaken the u. S. Economy as well. So less pressure on inflation. And i think youll see i think the economy is fine. Its not great. Doesnt induce a ton of new supply. The curve probably flattens. I think people forget that the u. S. Government cant pay 4 on 17 trillion of debt. Thats going to be a break on rates too. Since the Global Economy is not that strong, i dont expect rates to go up much. I think the curve will flatten. So, you know, were headed north but i think its going to be theyre lucky. I mean, theyre kind of lucky the way the world is set up this way. You just mentioned something we talked about yesterday with a guest about. The whole idea that rates cant go up that drastically because at 4 the National Debt becomes unimaginable. All the senators go home. Weve always said the fed doesnt have or supposedly the fed isnt acting in a political way, but you think their hands are tied to some extent because we cant afford to pay more interest on what we owe. I think theyre smart enough by the way, theyre doing what a really a structural way to get congress together. Mentor partnerships. Real fundamental tax reform that would help the economy. In lieu of that, the fed has done everything they can with the tool kit to help the economy along. I think absolutely its political. Youd be foolish to think they didnt know that congress was going to get stuck in their own pants and couldnt get anything done. You own a lot of property, Housing Market. Where are we . I hear you cant find enough people down in texas to build people. We hear about the Housing Market to be slowed down by poor credit of buyers. But the issues are labor. In texas you can build all the homes you want, but there are no workers. You know the average income to live in odessa is 200,000. 3 unemployment rate. All of our guys are making 24 an hour building a house are now making 100 an hour living. Theyre not even living in our apartments. The apartments are 60,000 incomes. I guess those are the teachers and guys working at mcdonalds. The fracking guys are all construction guys. They left the Housing Market to go to that sector. The jobs are getting filled and is impacting the housing starts. Not enough of those jobs to fix the jobs market. Actually, the people are in the wrong places. Some of the blue state guys have to go to the red states to find jobs. I think it was yesterday or the day before they passed a job in l. A. To pay 15 to the hotel workers. Its just interesting. The ramifications of these will get passed on social engineering. Its interesting. Its not exactly a free market we might have thought about. The job market looks better or worse to you, though, in truth . The job market well, i was out again on the west coast talking to some venture guys. Many of the innovation is going to displace even todays low wage workers. And i worry that they dont that the Current Situation isnt going to get much better. Drones delivering pizzas. Right . But they dont have the skills for todays economy. We keep talking about the same thing. Joe, youre not going to disagree with barry on this . Why would he disagree . Because ive made the same argument, that technology is going to displace workers. Joe thinks Longterm Technology creates jobs. It does, but you have to train the people to take them. They have to have if you can code, you can get a job anywhere in the country today. You should teach coding. Theres a fundamental shift for education to prepare people in this country. Or theyll do it in places like mexico where theyre graduating more engineers than in the United States. Andrew, i dont think anyone that says you want to grow up to deliver a pizza. You know . Thats my goal. Ive set it high and i hope to be a pizza delivery. If a drone displaces pizza delivery guys, those arent the jobs we want in the first place. I want to grow up and deliver pizza on the island of n nantucket. Youre never going to grow up. Barry sternlicht, thank you for being here. Were doing the art of commerce here. Thank you for being here. Appreciate it. Thank you, peter pan. Up next, how the small and the big cap weathered the storm. The russell 2000 index has been struggling this year. Down 5 this month alone. Facebook shares have been trading during an alltime high. And the man who brought google maps will tell us where the innovation will come from next. Squawk box will be right back. Welcome back, everybody. Small and midcap stocks. Dominic chu comes back to look at that. Whether some traders and investors think they will lead to other losses in the market overall. Lets take a look at what happened first of all with the russell 2000 its down about 5 . Its off about 8 off its highs we saw earlier in july. The russell 2000. Weve talk sod much about that technical chart pattern that may or may not signal times ahead. You look at midcap stocks and theyre down there. Were seeing this possible bleedout from these small midcaps into the larger part of the market. If you look elsewhere around the world, the dax is important here because its around its 200 day moving average. Thats a signal its trading down towards the trend line. Whether it bounces, thats a key here for International Markets taking a hit here as well. Then finish off on the emerging markets. This has been a trade thats been very negative. Its off about 8 of its highs. Emerging market stocks, this could be dollar stocks or something different. But they have at least seen the most weakness out of Asset Classes. Some of those Asset Classes youre going to want to watch. Back to you. The taper tantrum affected those the first time around. Were seeing a strong relationship between the emerging market stocks, the 2year yield and the dollar. Theyre all moving together right now. We used to be creating it. It found its way all the way to them. Dont forget, too, we have a brazilian election not this sunday but the following sunday. While its going to a second for sure, a large emerging market. I did forget that. Thank you for reminding me. Its too late for me not to forget that. Now i will remember it. Dom, write that down. Brazilian election two weeks. Runoff. Coming up, blackberry out with result stock is higher. Next. P breath in. And. Exhale. Aflac and a gentle wavelike motion. Aahhh ahhhhhh. Liberate your spine, ahhhahhhhhh aflac and reach, toes blossoming. Not that great at yoga. Yeah, but when i slipped a disk he paid my claim in just four days. Ahh four days . Yep. Find out how fast aflac can pay you, at aflac. Com. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Thank you. Ordering chinese food is a very predictable experience. I order b14. I get b14. No surprises. Buying business internet, on the other hand, can be a roller coaster White Knuckle thrill ride. Youre promised one speed. But do you consistently get it . You do with comcast business. And often even more. Its reliable. Just like kung pao fish. Thank you, ping. Reliably fast internet starts at 89. 95 a month. Comcast business. Built for business. Shares of blackberry getting a boost this morning. The company posting a smaller than expected quarterly loss. Revenue did fall short though. Blackberry says it looks to break results by the end of fiscal 2015. That was a gain of about 4 . The companys ceo will be joining squawk alley. When we come back, nike surging 7 this morning. Do they have more room to run . Well answer that after this. You used to sleep like a champ. Then boom. What happened . Stress, fun, bad habits kids, now what . Lets build a new, smarter bed using the dualair chambers to sense your movement, heartbeat, breathing. Introducing the sleep number bed with sleep iq™ technology. It tracks your sleep and tells you how to adjust for a good, better and an awesome night. The difference . Try adjusting up or down. Youll know cuz sleep iq™ tells you. Only at a sleep number store, mattresses with sleepiq start at just 999. 98 know better sleep with sleep number. Base hit to right field here comes richardson heres the throw from markakis richardson a safe derek jeter ends his final game with a walkoff single and derek jeter is a nike team member and played his last game in pinstripes last night from front of a sold out crowd ending the game with a walkoff single to win in the bottom of the ninth. Nike meanwhile also reported better than expected results. 2015 results for the first quarter. Beat the wall street estimate on the bottom line and on the top line. The shares are soaring this morning. The strong results attributed to good demand and a gross Margin Expansion plus a lower tax rate. Joining us to break it down is paul swinnon. Whats your lowest rating . Its 51. One is the lowest. Fives the highest. You mean why i dont know at morning star . Seriously. Oh, youre being facetious. Youre the the first one to give me a hard time. Because you have a 73 fair value and its going to be at 85. You got to adjust. Are you using, paul . 73 and its at 86. I thought we were going to talking about nike and not the morning star methodology. I wouldnt want to talk about your methodology either when youre wrong by that much. But go ahead and talk about nike then. They did were saying they were only going up 70 basis points. They went up 170. They then said we pulled back on demand because the world cup was so strong. Im not saying that nikes not a great company. We rated them with the highest rating for the longterm. They had a great quarter. A lot of things firing all at the same time. Are people going to be able to buy it at 73 at some point in the future . You know, this is the whole thing, joe. If you buy a stock at 85 when its a 52week high and the company themselves says we think we can do low double, maybe high single top line growth in the long run, well, youre kind of counting on 15 growth going on forever if you buy the stock at a 52week high. We love the company. Theres obviously brand momentum. So the year looks like its setting up pretty well. Were just being cautious about buying a stock at a 52week high. Id also add that, you know, Athletic Apparel has been hot for about three, four years right now. Vf is even saying we want to get into Athletic Apparel. Usually by the time Everybody Knows that its a trend, its already in the stock. Longterm its hard to find were looking at charts of nike. It electric looks like you can buy at any time. But there were some breaks in the last year we can see its pulled back six or seven points a couple of times. Just seems like its hard. You know, stocks that hit new highs yesterday at 8 78. But stocks that hit new highs seem to hit more new highs like nike has over the past ten years. Im not sure not bying it on 52week highs will work. Id go back two years ago when Gross Margins were shrinking and had everybody calling me saying how can they expand Gross Margins, this is going to take a few years. They said chinas 0 growth. You have a growth forecast in china, hows that going to work . Theyre not growing in china. Look at the numbers, china has turned around. But it took a year or two. One thing we were talking about earlier on the show is the stronger dollar. And nike obviously is having to deal with a global market. How much of a risk do you think that is as we look at the quarters ahead . Well, in the past its been a big risk. I think they talked about this a little bit on the quarter that theyre seeing some offsets. They do hedge, but that should unwind. I think theres a bit of a lag. Theres always a lag in the hedging just because they cant pay forever. I think theyre doing a great job of using their global sourcing, using their global footprint to have some natural offsets. So when the dollar rises, theyre not going to see as big a head wind as they have in the past. So that is actually some potential upside if they can, you know, improve that in the long run. Longterm people should try to get into this stock. But maybe between 5 and 10 cheaper than where its indicated today. Nike is one of the highest returns on Capital Companies in the whole consumer. Universe. Were just cautious that when the stock is up, everybodys discovered that right now for example, adidas has messed up the world cup, the opposite of nike. But thats also a good company. Hay make half the returns of nike but theyre also a strong company. Theyre not a brand thats going away. We buy stocks when theyre out of favor. Okay. All right. Appreciate your time. Thank you. So two is less than a five is what i get. You are right. Its not like golf where you want the low score. No, you want the low score. Why are you talking about golf . No reason. Let me tell you about other Corporate News this morning. Google is firing back at news corp. Now a point by point rebuttal committing to fighting online crime. Two firms are firing up the heat in the brawl. Both recommending the chains investors. And moodys is warning that the public pension gap has tripled. It now stands at 2 trillion or more. When we come back this morning, the man behind google maps and former facebook officer helps collaborate on any device by combining with documents. Well hear more from brett taylor after the break. And at the top of the hour, rough day for the markets but there are still signs of life for the bulls. Well track the money flows. Squawk box will be right back. How do you beat the number one seed . You just have to win 70 of your points at net. And keep unforced errors under 10 . On the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. Data can help show you how to win, no matter what business youre in. Today theres a new way to work. And its made with ibm. Today could be the day. The day we give you hope. Relief. A cure. Today, we believe every life deserves worldclass care. As one of the top four hospitals in the nation, over 100,000 people from around the world come to Cleveland Clinic for care each year. And were ready for you with a Second Opinion or a sameday appointment today today today and everyday. Call today, for an appointment today. Welcome back. Big lebowski. My god. Welcome what . When he meets the girls in another league, mack means she bowls on a different night. Right, mack . Look at that shurt. Charlie sheen has nothing on you, my friend in two and a half men. Welcome back to squawk box. Checking the futures at this hour. They are still up 76 points which would be a good rebound if it holds up. As the Third Quarter comes to a close, the bulls are being put through some trepidation yesterday a you take into account yesterdays selloff. Heres how things stand for the quarter. Each up about a percent. Not such a good story, though, for small cap stocks. The dow is down 7 which is really not i mean, you can see on a relative basis how much weaker that has been. By the way, its not correcting some huge run it had earlier in the year. For the year its down over 5 . Makes you wonder what we can draw from that. Were getting further along in the Economic Cycle and they are over valued when you look at them versus the large and especially the megacaps. I think its those two things more than anything else. Theyre further out on the yield on the risk curve. Yes. Liquidity. So if the fed is starting to pull back a little bit for things way out there, you might expect them to they had a great run. Before this year, small cap if im looking just at the s p 600, i know theres different measures, but small cap had outperformed large cap 10 out of the 14 years. For them to give it back this year, its a little surprising. Again, given some growth momentum in recent months and given the stronger dollar. Given the valuation, i dont think its that surprising. We started trimming our position in the spring. At least we moved in the right direction. Lets Talk Technology now. Hardest hit sector, our guest knows the industry well. He is behind google maps and the Facebook Like button. He left facebook to start quip. Thats a productivity suite that enables you and your team to collaborate on any device. His name is brett taylor and he joins us on set right now. Great to have you here. Thank you for having me. Lets talk about quip first. I think this is a needed, necessary tool ive been waiting for Something Like this. I write columns still on my phone. Can you make it easier for me . That was the insight. I think theres not many kinds of technology where the entire industry shifts at the same time. The shift from the pc to the internet. And now the shift to mobile. At entrepreneur in Silicon Valley is just like all those other shifts were going to wake up a decade from now and there will be the next microsoft, the next google. I think it is because it is disruptive. I think we overuse that term in Silicon Valley a bit, but its true. Some peoples habits are changing. Your usage of email, when people first got their phones said ill never send email on this. Now almost everybody does. And our theory is the whole productivity suite is going in that direction. We tried to create something that was designed for that. Where you could go from your pc to your tablet to your phone and it was seamless. So were not going to have to print out things and share them anymore. Or email each other documents or store them in a share drive . We got rid of the entire concept of a file. With quip you all work together. No email attachments. When youre on this long email chain and its sort of comical how broken collaboration is. And when you think about it, the first word processer was mac right. If you look at a screen shot of that, its comically similar. It was invented by the internet and certainly before smartphones. So we kind of blew everything up and started from scratch. I think you just end up doing things differently. Its not optimized for printing. For a touch screen. You all see the same things. We built messaging into it so you can talk about what youre working without bouncing back and forth to email. Which i think is if youve been in a company nowadays and look at peoples email boxes, theyre drowning in email. I have thousands of unread emails right now and at any moment in my email box. I think the key to it, it sounds great, but the key is execution. You come with a great track record. You developed google maps. You did it and other people thought they could copy it. Didnt work so well for apple. What did apple mess up when they were looking at maps . Thats a good question. The fundamental product that Technology Companies produce is innovation. Meaning their goal is to constantly sort of create. Google had a bunch of failures. We just dont put it high on the resume. I put google maps up there. I dont list all the ones that didnt work out. I think apple has just produced a number of Amazing Products and had a bunch of missteps. I think the top level thing is i wouldnt overrotate on companys failures. I think apple has shown an ability to pivot and fix failures. At the same time i think mapping is really complex. Its an interesting mix of data quality and Data Processing and software and obviously in apples case hardware as well. One thing google has, an asset no one else has, is the street view cars. Which drive around to take the street view imagery. They also collect map data that no one else has. They also acquired a Company Called waze which collects data from individuals opting into it. They have great traffic data as well. Thats where google and mapping is leaps and bounds ahead of everyone else. They have better data than anyone else. You just want to make sure theyre accurate and want the traffic accurate. I think you know, i think im totaled biased, but i think google maps will be challenging for someone to catch up. Andrew has a question from nantucket. Hey bret, all businesses that seem to have defensive motes but now may not. When you look at a google or a facebook, both former employers. And we had eric schmidt on the show yesterday. Do you say five, ten years from now someone is going to leave and create something that displaces them completely . I dont think its quite so simple. When the mainframe was transitions to the pc, microsoft became sort of the most Important Company in the world. But its not like ibm went away. And when the internet grew, Companies Like amazon and google became extremely important companies. But its not like microsoft went away either. In technology, were momentum based for better or for worse. Right now with the transition to mobile, i think there will be a company like a microsoft, like an amazon for mobile. Meaning theyre kind of setting the agenda. Theyre the Company Everyone looks to when theyre trying to think whats next. Whos sort of driving the next great Product Development forward. Ang thats whats going to happen with mobile. I dont think these companies will go away. They have great management teams. Its just hard to disrupt yourself. I bring up getting rid of files. Microsoft cant get rid of the word file. Theyve been building on that for years. Its not an easy position to be in. Thats the famous innovators dilemma. To fully embrace this platform, they need to disrupt their existing customer. Windows 8 is ill lusttive about what happened when you do this perhaps in an elegant way. They try to embrace the new tablet metaphors and their customers werent happy about it. I dont think you can understate how challenging it is. Let me bring up the challenges apple has had with ios 8. I dont mean to pick on apple. This is the way with Technology Companies. They roll things out. I dont want the first version of it because i know there are going to be bugs with anything any Company Rolls out the first time. Why is it that way in Silicon Valley . On one hand on somebody that develops on the platform. Its anxiety ridden. You cant point the finger at apple. We say just wait a couple months. But on the other hand i think whats going on is intense competition between google and apple. Whats going on, were just seeing new versions of android and ios almost on a yearly cycle now. I think net its great for users and for Companies Like mine. Because were seeing such innovation. Really compelling new features on a regular cadence. If you compare that to after microsoft won the browser wars, everything sort of stagnated. We didnt see new features and new development because there wasnt competition. I think were going to see a little bit of instability but i think its great theres such healthy competition between these companies. Were going to see a lot of developments on those plot forms we wouldnt have otherwise seen. You still own google . Yes. Did you sell any . Ive sold some, but i own google and facebook. I dont i left those companies because of an irrational desire to start my own company. But i really believe in them both. You tell me how much you have . No, no, i will not. Weve been talking a lot, this technology as it disrupts the economy, how do we make sure the American Workforce is trained to work in this new technologydriven economy . Is that something that gets discussed in Silicon Valley or are you so busy building stuff youre like theyll catch up. It gets discussed a lot. Mark zuckerberg is very interested in education. Theres also another that is trying to fix and sort of distribute Computer Science education around the world. I do think that as we move to not just the economy but a technologydriven economy, we have to change what were teaching and to whom. I think its an important issue. But my sisters a Public School teacher. Im very confident that we can change the way we educate people for this new economy. I dont believe in the pessimist. I believe we have shown resilience as a culture to respond to change. And i think were just at this transition moment where its extremely awkward. Where the lessons we were taught by our parents about how to get a job are not right. And were collectively learning, you know, how to fix that. But im confident that we will. For someone that designs a product as important as google maps, what would the normal amount of shares granted be to you dont have to tell me what you have. One or two. It is a very expensive stock. Thats right. Thats it . Im going to remain vague on this point. You sure are. Could you be more vague . Bret, thank you so much for coming in. We cant way to see more of quip. Thank you for your time. Thank you. Still to come this morning, we will head back to nantucket where andrew is talking to the brightest minds in business. Next on his list, Larry Summers. But next, stocks to watch as we count down to the final trading day of whats been a very rocky week. This morning the futures are indicated higher. Thats after a decline for the dow. Squawk box will be right back. Ameriprise asked people a simple question in retirement, will you outlive your money . Uhhh. No, that cant happen. Thats the thing, you dont know how long it has to last. Everyone has retirement questions. So ameriprise created the exclusive. Confident retirement approach. Now you and your ameripise advisor can get the real answers you need. Well, knowing gives you confidence. Start building your confident retirement today. Thats keeping you from the healthcare you deserve. At humana, we believe the gap will close when healthcare gets simpler. When frustration and paperwork decrease. When grandparents get to live at home instead of in a home. So lets do it. Lets simplify healthcare. Lets close the gap between people and care. Take a look now at stocks to watch. This morning blackberry shares trading a higher. Posting a quarterly loss. Revenues were short of expectations. And the Company Continues to target break even cash flow by the end of fiscal 2015. Companys ceo will join at 11 20 eastern. Shares of nike soaring this morning. The Worlds Largest sportswear maker posting better than expected quarterly results. The company benefitting from demand and higher margin products. And linkedin upgraded. The stock rising in early trading. Rebecca patterson is here. You know a lot about technology, too, i see. You have a real interest youre like a renaissance person. I think technology is fascinating. Although i admit i still have a blackberry. I dont know why you its the thumb typing thing. Its an old habit. You havent tried dictating with siri. How has your success been with that . I do all my emails. You have to speak slowly and clearly. Unlike what i do around here. You do have to enunciate and speak slowly and clearly. Okay. So do you are you handicapping november . Or you dont care in terms of obviously i care. And were watching the election, but i dont see it as a big market catalyst this time around. What is the biggest market catalyst globally . You see how sensitive the market is to the fed. At the end of the day our view is the fed is going to raise rates alongside better growth. And if we have better growth and inflations low, it might be easier. The thing i worry about more really is if we have worse than expected outcome in europe and it feeds through to the u. S. I see that as a higher probability than a disruptive fed in the near term. Okay. All right. Thank you. Well have a chance to talk more for the next hour. Shell be with us for the rest of the show. Back to andrew now in nantucket. Andrew . Andrew . There he is. Im right here. When we come back in the 8 00 hour, we are going to have Larry Summers here. Were going to get those gdp numbers here at 8 30. We will have him react to those. Were also going to talk about tax inversions, the dollar, and where the markets are heading. All of that when squawk box returns. The quietest or nothing. The sleekest. Sexiest,. Baddest,. Safest,. Tightest,. Quickest,. Harshest. Or nothing. At mercedesbenz, we do things one way or we dont do them at all. Introducing the allnew cclass. The best or nothing. Sometimes they just drop in. Always obvious. Cme group can help you navigate risks and capture opportunities. We enable you to reach Global Markets and drive forward with broader possibilities. Cme group how the world advances. Whenwork with equity experts who work with regional experts thats when expertise happens. Mfs. Because there is no expertise without collaboration. Welcome back to squawk box here on cnbc, first in business worldwide. Im jimmy walker im joe kernen. Along with becky quick. Andrew ross sorkin im not jimmy walker. And Andrew Ross Sorkin is in nantucket today attending the conference built around big thinkers and decision makers. Youre both of those things, andrew. Youre both of those things. Thank you. You make decisions. You made a decision to go to nantucket. And youre a big thinker as we have seen. Movies, scripts, tv shows. Thats right. Deal book, columns, and on and on and on. Thank you, thank you, thank you. Continue, continue. Dont, stop. Dont stop. Larry summers will be joining andrew in just a minute. We look forward to that at 8 35. Also weve been watching the markets this morning. Stock futures are pointing to a higher open on wall street. Of course thats pretty welcomed news for the bulls after yesterdays selloff on wall street. This morning the dow futures are up by about 70 points. S p futured up by five points. But comes after the decline for the dow. Gone are the quiet days of summer. Volatility is back. The vix soaring up. All dow components dropped. But nike shares are soaring today. That should help today because its a dow component. The nasdaq dropping nearly 2 . And again you can see it was down by about 88 points yesterday. Weve got green arrows as we count down to the final opening bell of the week. Equity futures up about 70 points or so. Our dominic chu is here checking out the fear factor in the factors forecast. Remember that show . Used to eat worms and stuff. That was an nbc show. It was. It was a great show. Thanks. Sleep with snakes. Yeah. Creepy. The vix up 18 yesterday. Thats one fear factor, right . Some traders may feel like were sleeping with snakes right now, but a couple of macro factors people are watching are the dollar and Interest Rates. The dollar index if you watch whats happening there, its been an interesting move for them. Like you said, 3 to the upside in one month here. As the dollar rises in strength, it has an impact on the profits of companies that generate those sales outside the u. S. Think about all the Big Multinational Companies that operate in the United States. You have the Procter Gambles of the world, own cocacola. Thats one fear factor. Number two is the 10year yield slowly creep up. Around 2. 40 before. Now back up to 2. 5. Thats going to be a big problem for a lot of investors. That rising rate environment may signal again there may be tougher times ahead for some of the markets. That is rippling to other parts of the market. You look at whats happening we the emerging markets. The rising dollar also impacts emerging markets. A lot of these are commodity based. Sometimes those are a lot more expensive for other people to buy. Those emerging market stocks taking a big hit on this one. Then well finish off on one more. The high yield bond market. They have been at least falling in value, trending down over the past couple months or so here. You can see thats down about 3 over the last month. When you see signs of a rising rate environment, they take their hit sometimes with these noninvestment grade bonds. And if you watch those junk bond markets, you could see a little more weakness here as people start to grapple with this idea that as Interest Rates go higher, sometimes the value of these go down. Again, dollar, Interest Rates, high yield debt. Those are four places youll want to keep an eye on in the next few months here to see where these flash points are going to happen. That same risk curve weve been talking about of people pulling their horns a little. Its going to affect all. Anyway, thank you, dom. What are investors doing in this historically tough time of the year for stocks . Charles beeterman is a founder of trim tabs investor research. Last time you were on, we talked about demand of stock. If people are buying back a lot of stock, theres still nowhere else to go. So i immediately was thinking of alibaba. I thought about you because that was the biggest ipo ever. A lot of stock became available and you could see it. Its not a zero game but you could see some people that wanted to participate in alibaba and had to sell some stuff to get into alibaba. So did supply increase immensely because it was the biggest ip o rks ever . Sure. That was 25 billion. I think its about 15 billion so far this week. This month september is going to be the biggest month for new offering when all the banks took advantage of the free money the fed was giving away. According to you, thats increasing the supply. And if the demand were to stay the same or even go down, that would explain why the market is running into trouble. Supply and demand is Pretty Simple here. We entered last week, shortterm bearish. Was still a little shortterm bearish, but that could turn. Particularly heres the key metric. In addition to what dominic said just a few minutes ago, as long as buybacks announcements which is the only thing you can track in realtime stay at 2 billion and as long as new offerings are less than 3 billion a day or 45 billion a month, the market should keep rising solely based on supply and demand. Forgetting about the nongrowing economy that everybody seems to have taken the koolaid in believing the economy is definitely growing sustainably now. You know, that is pretty interesting. We try to figure how the fed operates and how they orchestrate higher asset prices. A lot of people have criticized this recovery. It allows Companies Instead of investing in plant and equipment and manufacturing theyre able to borrow so low they buy back their own stock. And youre saying that is something that they keep doing. And that also is sort of being orchestrated by the fed and that makes in your view that makes the market go up. So this is a fed effect as well. And believe it or not, if you look in the market today, youll never see any earnings. All youll see are transactions. Stock being bought for cash. So if you track the amount of shares, you track the amount of cash, youll be able to predict what the markets going to do over the near term. Thats what we do. Okay. So shortterm bearish. But you point out as long as companies and you know ceos still get paid on performance. Yes. They make more money in the stock market when the stock market goes up than their salaries. So why do you think they care more about stock price . Remember, stock price goes up more per buyback than per dividend. So companies are doing more and more buybacks rather than dividends. As to your first point if i can go back as to why companies are not investing in plant and equipment, if there were demand out there, if the u. S. Economy were really growing dont you think these guys would rather grow the business than just reduce the share count . Of course they would, but theres no demand growing. Yeah. Thats interesting. I mean, its funny because you can have a huge Conspiracy Theory about Wealth Distribution and the fed causing it and ceos taking advantage of it and reducing the number of outstanding shares which makes the earnings per share number go up which makes the stock trade higher. But you can have quite a conspiracy that the little guy just isnt participating at all. Well, little guy is not putting any money in. All the new money is coming from float shrink. Were shrinking on average 2 a month app about a half a trillion a year. Thats like on a 26 trillion market cap. Thats like 2 a month. Thats a and thats leverage. So for every 40 billion 50 billion of new buying that raises the market cap a multiple a month historically. So thats what has driven the market. The Obama Administration complaining about income inequality has caused the greatest amount of income inequality ever by keeping the lid on Economic Growth and spiking asset prices. Wow. Okay. With the you be careful out there. Youre in san francisco. Just saying stuff like that, you better put sunglasses on when you leave the studio. Thank you. Good to see you. Up next, chicago becoming the tech hub of the midwest. Its attracting startups and lots and lots of capital. So much its being called silicon prairie. One of the key Players Behind the surge is j. P. Pritsker. Hell be joining us to talk about techs big move to the midwest. The two biggest underperformers in yesterdays big selloff, tech and financials. He knows both of those well. Hell take on investing when we come back. Theres a difference when you trade with fidelity. One you wont find anywhere else. Onesecond trade execution. Guaranteed. Did you see it . In one second, he made a trade, we looked for the best price, and the trade went through. Do the other guys guarantee that . Didnt think so. Open an account and find more of the expertise you need to be a better investor. Welcome back, everybody. We have a developing story. A fire at a air Traffic Control center in chicago could delay travel. Lets get to phil lebeau. He has an update with this. Whats happening . What we have at the ground stop at Ohare Airport as well as midway airport. There was a report of a fire at the traffic approach center. Basically the faa inroute center. This is the center where air Traffic Controllers are monitoring and guiding in flights as well as those coming into the two busiest airports here in the midwest as well as leaving those airports. Because of reports of firing in the building, they had to evacuate the building, pull all of the faa air Traffic Controllers out of that building. That resulted in a ground stop including all airplanes that were on the runway at ohare and at midway. They basically shut down. Theyre moving that staff to an adjacent facility, another faa building. Its going to take some time for this to work out. Its going to be a travel nightmare at ohare and midway for a good chunk of this morning. That will have effects all over the country. We know when things slow down in a big hub like ohare, that definitely does have impacts in the country. If youre business travelers, check things out before you head to the airport this morning. Phil, thank you very much. The midwest taking the tech world by storm now the home to well known startups like groupon. Its now being called silicon prairie. Joining us now j. B. Pritzker of the pritzker group. He is a big investor in chicago startups and chairs the chicago Mayors Council on technology. Thank you for being here today. Glad to be here. We know chicago is a big business city. Its snuck up on us the idea this is a home for startups. You occasionally hear steve case talking about the rise of the rest. Chicagos at the top of that heap. Weve had tremendous development over the last five years. You talked about groupon and grub hub. Apartments. Com. Brain tree which sold for 800 million. Field glass for a billion. Weve had a lot of development. And underneath those, probably 30 companies that id describe as latestage preipo types and hundreds below those. Venture capital has been a hard thing to come by in chicago. Were one of the few Venture Capital firms in there. But as a result of that, many of the Companies Getting developed are focused on profitability. Theyve got to get there faster than a typical Silicon Valley based company that can find a lot of Venture Capital. Whats different though . Whats changed to bring all of these companies here . So chicagos sort of a 15year overnight success. Its been a creeping up upon us as you described. Lots of development in the ecosystem of chicago. Now you can find seed capital where you couldnt before. Now you can find mentors and customers. You can find, you know, the help that you need to get going. Weve got 1871 for the pure startup. The couple of guys, two dogs in a garage. Dont have to be in a garage anymore. You can do it with others in there. And now chicago venture summit where were bringing all of the Venture Capitalists from around the country to chicago. Not to mention the ones that are in the chicago area to see the best of chicago. I think of mark andriysa who left years and years ago. Its worse than that. Not only did we lose netscape, we lost paypal, we lost two or three other companies. Youtube is another great example. You know, thats not happening anymore. People are choosing to start their companies in chicago. Thats a big difference. One of the big celebrated, you know, entrepreneurs in chicago starting a new company, a guy named doug kitlas, the investor of siri. He built that company and sold it to apple. Hes now building another company, a next generation of siri. So were excited. Weve got tons of those. Groupon, thats not his first company. Hes got four or five companies. Has colleagues working on others. J. B. , is the governor is the state are there different taxes in are there ways to get around what we view as sort of noncompetitive rates in illinois . I mean, weve heard that that a lot of Companies Want to leave. Are there tax breaks for startups so it induces them to come . Or are they subject to different its just easier for startups . Not enough. But as you know most startups arent making money in the first few years. But then do they have to leave when they start making money . No. What ends up happening is the talent in chicago is attracted to those companies. Once theyre doing that, youre talking about families in upheaval, upheaval of your entire operation in order to pick up and go. I gra e with you, by the way, that if taxes are too high, people are going to get up and leave. But its been the case in chicago that that hasnt affected its too bad. They have to say its not perfect but im going to stay because of the other advantages. It would be nice. If that were the theory, then why are all the Huge Companies in the tech world based in Silicon Valley . Californias got the worst rates in the country. What lessons can other cities take from what chicagos done . The success here. If we talk about unemployment around the country and how theres pockets its still very depressed. How can other cities try to get the momentum that chicagos been able to create . Theres a variety of things that have come together in chicago that are different than a lot of other places. We have a cohesive business community. The mayor of chicago whether it was richard m. Daley or rahm emanuel, they are able to get people to focus on those. Thats one big thing in the chicago tech company. Big corporations, theyre all working with the tech community. Thats a big deal. Thats one thing. Second thing is having those leaders like rahm emanuel and like the governor of illinois, governor quinn. You know, be leaders of the tech community. Theyre using the bully pulpit to promote it. And thats hugely important. Rahm emanuel, every time he stands up in front of a crowd talks about chicago as a startup city. As a place people should come and build their businesses. Remember, weve got great institutions in chicago and in illinois. University of illinois is one of the top five engineering schools in the country. University of Chicago Northwestern University producing terrific companies. Iit, all thattal i want they never really had a place to go to thats in the center of the city. Now they do. They feel like this is a place we can build a company. They were getting up and going to Silicon Valley. J. B. , you mentioned walgreens. It reminded me of the inversion situation. Weve had all kinds of companies that have looked to these inversions as a way to lower their tax rate. Walgreens being one of them. What do you think about it . Some in washington have called them unpatriotic. Do you think they are . You may be asking the wrong pritzker. My sisters in government. I saw this in commerce. You may want to ask her what her views are. Look, i think i have sort of two minds about it. Obviously i dont Like Companies picking up and leaving. Thats bad for the United States. On the other hand, the more regulation and the higher the taxes, the more difficult it is to operate in the United States. You know, the more likely we are to lose companies. You are not a republican, j. B. I am not. Theres never been a pritzker thats a republican. Thats not true. Was it back in the 17th century or something . Quickly become a republican when you have to leave ukraine. The truth is that its very, very difficult the more regulation taxes. But youve got to find the balance here. Remember, it is not the world that it was 20 years ago where, you know or 30 maybe. Where you could operate in a fashion for the United States. That we could close our borders and still do okay. You cant do that anymore. Youve got to think of yourself as one of a number of places that people can start businesses and grow businesses. And so if you think of china as a competitor and think about what their Regulatory Environment is. And again, i think there are a lot of reasons not to be in china, but if you think of that, if you think of whats happened in a number of other countries that are looking to develop their economies, brazil, the brick countries across. Theyre really focused on growth. And so theyre trying to attract our companies. So weve got to think of ourselves, what is the big advantage . Promote those advantages and not put so many burdens on companies. But im with you or with those who say, you know, its not good for the United States if were losing companies. J. B. , thank you so much. Stepping out on a big limb there. Not good for the United States if were losing companies. Youre a big sector guy. Kudos. And im a democrat. Thank you. Still to come in nantucket with andrew standing by with Larry Summers. Our Business Inside and out today. At cognizant, we help forwardlooking Companies Run better and run different to give your customers every reason to keep looking for you. So if youre ready to see opportunities and see them through, we say lets get to work. Because the future belongs to those who challenge the present. Im spending too much time hiring and not enough time in my kitchen. [ female announcer ] need to hire fast . Go to ziprecruiter. Com and post your job to over 30 of the webs leading job boards with a single click; then simply select the best candidates from one easy to review list. You put up one post and the next day you have all these candidates. Makes my job a lot easier. [ female announcer ] over 100,000 businesses have already used zip recruiter and now you can use zip recruiter for free at a special site for tv viewers; go to ziprecruiter. Com offer2. At a special site for tv viewers; machines will be sprayed to be made. And making something stronger. Will mean making it lighter. One day, factories will work with the cloud. One day. Is today. U. S. Features are trading at their highs of the morning. The dow futures are up by 99 points. S p futures up by just over 9 points. Again, this is coming after a day where the dow declined by 264 points but you are seeing a bit of a bounceback today. Its been a pretty choppy week overall for stocks. That has led many Global Investors to flee to safe havens. The dollar index is on its track for 11 straight weeks of gains. Thats something we havent seen in four decades. Its at 127. 31. The yen has gained to 109. 16. U. S. Treasuries now have the biggest yield advantage weve seen in about 15 years. The driver here is speculation about u. S. Interest hikes compared to the monetary stimulus. That is kwut a chart to check out. Still to come this morning, we have much more. Serial entrepreneur from eyeglasses to shaving prices and ray source. Youll meet the man taking on the Mens Grooming market. Plus we heard from bob diamond on the economy. Our next guest is Larry Summers. 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Zplmplgts welcome back to squawk box, everybody. We are a few seconds away from the gdp data revision. Lets look at the futures. We were looking at the futures trading at near the highest level of the session. The s p futures up by about eight points. The 10year note earlier this morning we saw the yield dip below 2 . Now just at 2. 506 . Rick santelli is standing by in chicago and has the numbers of the morning. Rick, take it away. Good morning. Our last swish around the block on Second Quarter gdp pegs it at 4. 6 which is pretty much where all the estimates were. Our last look was 4. 2. So its moved up a bit. Of course we hope that we see lots of quarters like that. The last time we had a quarter that settled out at 4. 6, it was exactly 4. 6, happened in the last quarter of 2011. The sustainability is really the issue. You know, that was probably a bit of a, you know, a Spring Loaded reaction to what happened in the first quarter. Con sujs was 2. 5. That was down close to a half percent. If you look at final sales for q 2 they were up 3. 2 versus 2. 8. 2. 1 versus 2. 2. No big deal. Corporate profits from 8. 3 to 8. 6. Of course thats good. And once again, joe, i didnt listen to your discussion regarding profits and stocks and charles biedermann. We didnt want to necessarily go through. But the issue is what it is. Profits running pretty large. Are they going to hire more people with profits and the current landscape the way it is . Thats what many people continue to think about. What are your thoughts, joe . I thought it was interesting because leisman gauf me another way to blame steve and the fed for income inequality. Youre if favor of increasing no im not. Isnt that the point of trickle down economics to help the rich . Yeah to make the rich get richer but yeah, but youre let me finish. This is why you have trouble with santelli. Its got nothing to do with it. Dont tell me what im saying. Its good for everyone. Its good for everyone. Just because i say i dont have a problem with the wealthy getting wealthier doesnt mean im happy with income inequality. I want everyone to come up. Theyre not helping everyone down here. Rick, the point that biedermann was making supply and demand. Ive talked to him about it a million times. People say when you make those comments that the feds goosing stocks, thats not true. Of course supply and demand of stocks, what the float is, how much ends up leaving the market, how much less out there a tradeable in ten years. Theres something in it for steves side too. You can blame ceos whose compensation is on stock performance. If they buy back stock in a 0 environment, the earnings per share goes up. Their stock appreciates and they get bigger bonuses. You can even blame it on the greedy ceos, steve. Theres something in it for you too. Theres a whole pot of stuff thats moved. Stocks have gotten richer. Bonds have gotten assets. And the people who own the assets. What about the savers . Who are the savers to . They are also the wealthy. So the wealthy to the extent they help treasuries have seen that appreciate. You also had the Federal Reserve provide lower mortgage rates. Theres a whole thing joe, honestly the jury as far as i can tell is out in this in ive not seen a good economic jurys not out. I hate the word provide. [ overlapping speakers ] hold on. Guys, breaking news. Breaking news. Just a second. Just a second. Let me tell you about breaking news. Theres a press release thats out right now saying that william h. Brose is joining Janus Capital. He will be joining on a bond fund and related strategies. Yeah. Mr. Gross will be based in a new janus office to be established in newport beach, california. Will be responsible for building out the firms efforts and global macro fixed income strategies. Thats a huge story. That is a huge story. A huge move. Heres a quote. Well, hes not all pimco is not just bill gross, but that is amazing he would say screw it im going somewhere else after everything thats happened. Is he being treated badly by the people that thats my guess reading into it. Pimcos been challenged the last couple years. Theyve seen a lot of outflows are rates going up. There were constraints put on him. But thats wow. Thats unexpected. Monday he starts. I look forward to returning my full focus to the fixed income markets. I chose janus as my next home because of my long standing respect for ceo dick wile. Thats been the story at pimco is all the management turmoil thats gone on with it. So this allows him to just invest. I think theres another story there that size, bigger is not always better. Pimco, im not saying anything negative about the firm. But any large firm like pimco, you have to put a lot of capital thats hard to get returns. This is weird. Has he got a boss, andrew . He says with bill leading our macro efforts and our credit based income team wow. Thats crazy. Have you talked to anyone, andrew . Im literally im trying to get on the phone right now. Im baffled. Im actually sitting here with Larry Summers. He seems just as baffled as i do. Was he pushed out . By the way, remember there was a story just in the past couple days about the s. E. C. Looking into pricing issues on their etf. The whole thing going back to take over, andrew . We will endeavor to find out in the next couple minutes. But i literally when it ran across, larry and i looked at each other like really . I had to read through to make sure william h. Gross was one in the same. And its also sort of in your face too. Isnt he 70 . And hes got a billion dollars. Now im going to work for a competitor. A competitor that competes with pimco. Wow. Larry, since youre sitting right here, you know bill gross. What do you make of this . I dont have anything for you on that. It seems like a surprising development. But i dont have any knowledge of it one way or the other. I mean, he seems like hes been a frustrated guy at pimco. When you look at that, do you think someone like that gets pushed out . Is that something where ive got ive got enough problems commenting on the life of Larry Summers without trying to comment on stuff in other organizations. Okay. Guys, any more insight back at hq . No. Were going to do some digging around. Whats left at pimco after its another william h. Gross. No. Its the pimcos. Its one of these things where william who . I was like what are you talking about . Thats a great flag. But whats left at pimco after gross leaves . I think macaulays there. He came back. Well see what he has to say about this. But this may be one of those things where you know its more trouble than its worth in terms of alliance kept getting a black eye. Or was this gross saying forget it im out of here. Right. Youve been a manager before. And when youre a manager in the business you love, you dont get to do the business you love when youre a manager there. So theres the taking him at face value on this. Theres another angle here. The big pension funds, big endowment to invest. When you get a key man or woman leaving a firm, your red flag goes up. They may have to question some of their allocations to them. People take their money out of pimco. Theres going to be a lot of Due Diligence meetings. People will want to ensure the people overseeing their money is still in place and theres not more change. Whats he worth then . How big is pimco . How much is bill worth . How much does pimco have in assets and rebecca brings up an amazing point here. How much in the way of assets come out of pimco . Its over a trillion, isnt it . Itll take quarters before the money moves because theres a process to Due Diligence. But its something id want to keep an eye on. They want to reassure everyone the rest is stability. They still have people who are smart managing that money. Its weird. Hes you know, if youve read all the scuttlebutt and theres a lot of gossip in all those things. He does get prickly and a little defensive. And you could i mean, im not totally shocked. Andrew, youve read it too where his feathers get a little ruffled and obviously got ruffled to the point by either by people at pimco where he said take this job and shove it. I aint working here no more. We can play that song, i think. Jeff cox tells me theres 1. 97 trillion at pimco. And how much leaves because gross is leaving . And there was the how about the latest thing this week with the you know, that was i dont know how that ends up with the etf thing. No one likes to be accused of, you know, putting the wrong asset values down to make you performance look better. This makes the apple thing yesterday look small. If bill gross had anything to do with the s. E. C. Investigation and there truly was trouble, that would have an implication on janus. You have to imagine either janus has done its diligence or hasnt. But that unto itself would be an issue going forward. All right. Were going to go to a break to get back with Larry Summers. So we will be back with you in nantucket. Were going to have more on the developing story, bill gross leaving pimco and headed for Janus Capital. How do you beat the number one seed . You just have to win 70 of your points at net. And keep unforced errors under 10 . On the ibm cloud, the us open analyzes 41 million data points from 8 years of competition to uncover key insights. Data can help show you how to win, no matter what business youre in. Today theres a new way to work. And its made with ibm. Know that chasing performance and fewer choices in retirement. Know that proper allocation could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. Welcome back to squawk box this morning. Were broadcasting live from the island of nantucket. The nantucket project. Some news just crossing moments ago about bill gross leaving pimco. Surprising my next guest. Larry summers is here. We want to get your thoughts on all sorts of things. Obviously this news just coming surprising both of us and were trying to make sense of it. I wont go there because i know as you said, you have enough on your plate. But let me put one other thing on your plate which is theres a debate thats been going on on our set for a long time. You saw it play out before the bill gross news about economic income inequality in our country and whether it is fed induced or not. Where do you land on that issue . I dont think its fed induced. I dont think thats actually remotely plausible. First of all, a Strong Economy is the best thing for people who have been left behind. The people who are first who are last hired are the people who are first fired. You look every time the economy recovers, the employment gains are disproportionately among those with less education, disproportionately among africanamericans, among women. So a stronger economy, its operating closer to full capacity, the a major source of inequality reduction. Thats the first point. Second point is it stands to reason that on average poorer people borrow from richer people. And so lower Interest Rates benefit the poorer people who borrow. So i dont think plenty of questions one can always ask about both inequality and about the fed. But the thesis that somehow the fed is a principle or major cause of inequality in the United States, i dont think stands i dont think stands up to remote scrutiny. You can make good arguments. Ive been probably supportive of the posture of the fed, but you can make arguments against it that it causes more inequality and is just a policy to help the rich. I think its a little crazy. But arguably savers lose. Those with assets if you own real estate or assets, youve done better. How do you square that piece of it . Youve done better in a short run sense. But youve done worse in a sense that the expected return on those assets is now much lower. So think about somebody who owns a bond. The Interest Rate goes down, so first moment they get a higher capital gain. But after Bond Investors are going to earn a lower return. It used to be that you could put capital away and without taking any risk expect to earn 2 . Today you can expect to earn a much lower return. I mean, you can perhaps the best proxy for it is to look at tips yields. Years ago it was 3 or 4 . Now theyre much, much lower. Are we in an asset bubble . Specifically are we in an equity bubble . Weve heard janet yellen say in the technology sector, theyre in a bubble. I think that was a fed report rather than the chairman speaking. And i dont think the fed should be in the business of making stock picks on sectors. I dont think theyre i dont think thats where their core expertise is. Look, theres no question that assets are more fully priced than they were 18 months ago. But it seems to me that if you look for the kind of indicators that were prevalent in 1999 and 2000 in the stock market or the kind of indicators that were prevalent in the Housing Market in 2006, i dont see them there. Yes, price earnings ratios are a little high by some measures, but thats what youd expect when real Interest Rates were low thats what youd expect. When volatility was low. Do you expect a pullback . Yesterday we had a severe pullback. I know better than to make near term stock market projections. There are two kinds of people when it comes to near term stock market projections. Those who dont know that they dont know. And those who do know that they dont know. And ive always tried to be in the second category. Policy question for you. You talked about a lot of things recently, but i havent heard you on inversions. We have a debate on our table regularly about what the president has just done. Will it be enough to stop them . Should this be the approach . Should it be a larger tax reform package . I think this is a case of both and rather than either or. What the president did was instructive. You listen to what the president and his people said. They dont regard it as sufficient to address the problem. Nor if you look carefully in a world where there are going to be countries with the 12 , 10 , 8 Corporate Tax rate. Nor should anyone oppose without any other measures will address this problem satisfactorily. What we need is a comprehensive tax reform. And its not viable to continue for five more years with the tax system we now have. And as part of that comprehensive tax reform, theyre going to need to be issues that address the treatment of foreign income in very fundamental ways including measures that reduce the incentive for inversions. Okay. We have to leave the conversation there. We want to thank you. This bill gross news has come up in the midst of what were doing. We are in nantucket. I thank you. Youre speaking a little bit later today i believe bob diamond is interviewing you. He is. Good to be with you. Good to be with you. Back to the hq. Im going to try to get more news about the bill grows news. For those of you joining us, bill gross is leaving pimco. Hes heading to Janus Capital and will be opening a new office for Janus Capital in newport beach, california, starting on monday. Weve been watching this monday. Weve been watching this very closely. Is there a look at shares of Janus Capital. Still a lot we are trying to figure out because this news release hit the wires in the last ten minutes or so. It comes after much upheaval thats been well documented in the press about what happened there. Some back and forth, even a pimco trustee, an independent trustee publically criticizing bill gross earlier this year about his salary and way called his mediocre performance over late. It might be a situation where bill gross said, forget it. Im out of here. The s. E. C. Has been investigating pimco, taking the look at the pricing of certain assets. Its been a whirl wind at that place the last 18 months. Its been a media circus. Its been backbiting. Sources saying this about this and this is the situation and mohammed left. There is carping on both sides. Prickly as a manager. And we, with pimco, when we deal with their people, you can almost hear it sometimes. It starts wearing on an organization, i think. Time to start fresh. We should point out bill gross in his Statement Today in this press release from janus says, i look forward to returning to my full focus to the fixed income markets and investing, giving up many of the complexities that go with managing a large, complex organization. Pimco is bill gross. Its hard to imagine. Well have more when we come back. Also, take a look at the u. S. Equity futures. Theyve been trading higher. Right now, we are up by about 77 points. The highest was gains about 99 points above fair value for the dow after a decline of 264 points yesterday. We asked peopl, how much money do you think youll need when you retire . Then we gave each person a ribbon to show how many years that amount might last. I was trying to, like, pull it a little further. [ woman ] got me to 70 years old. Im going to have to rethink this thing. Its hard to imagine how much well need for a retirement that could last 30 years or more. So maybe we need to approach things differently, if we want to be ready for a longer retirement. Opinions. Theres no shortage in this world. Who do you trust . Whose analysis is accurate . How do you make sense of it all . A simple, unbiased stock score consolidated from the opinions of independent analysts. Is that too much to ask . Nope. Equity summary score, powered by starmine, will help you execute your ideas with speed and conviction. And its only on fidelity. Com. Open an account and find more of the expertise you need to be a better investor. You cant get any thbetter than that. Trains. Siemens trains are not your grandparents technology. Theyre something thats gonna change the cities we live in today. I find it so fascinating how many people ride this and go to work every single day. Im one of the lucky guys. I get to play with trains. People say, wow, we still build that in the United States . And we say, yeah, we do we wanted to know how big this fund was. Bill gross is leaving the total return fund at pimco with 222 billion in assets. This janus new fund he is going to was just created in may of this year. It has 12. 86 million right now in assets under management. This is an opportunity for them to build that up. Yes. Yes. Whats 12 million divided by 240 billion . I dont know. We call this an emerging manager. Its less than a percent, isnt it . Thats crazy. Bill gross, emerging manager. He needs Seed Investments now. To the new york stock exchange, jim cramer, your take on bill gross leading pimco . Hes the greatest bond manager of all times. Janus move seems to make sense. To speculate what happened with allianz and him without him, we dont know. We cant get an answer. I dont want to say he was forced out or he quit. There was an s. E. C. Investigation. He was clearly interviewed, but the s. E. C. Never brought anything from what we can tell so far. Best fund manager ever. Some guys have cold streaks. Jeter did too, until he walked off last night. Janus is a buy up three points. Its never a dull moment. How about yesterdays oneday wonder or are we in a little bit of a period of proven showandtell . Im going to give you my wrap. Hedge funds come with this 4 figure. They want a recession. They want the fed to act quickly. The hedge funds are saying, listen, we are in just a terrible moment. The economy here is so strong. Well use this gdp thing. It is very easy to knock this market down. I listened to people. I heard barry this morning. Maybe you want to shoot yourself for years with some of the hedge fund guys. Lets take it with a grain of salt. The world is slowing. Russia, ukraine is the most fundamental thing happening. Its easy to slit your throat here. Im not a throatslitter. You want to raise capital, fine. The world has come to an end so much since my first trade in 79. Okay, jim. See new a couple of minutes. More on the big breaking news. Bill gross leaving pimco for janus. Janus Capital Stock jumping on the news. Could help increase returns so you can enjoy that second home sooner. Know the right Financial Planning can help you save for college and retirement. Know where you stand with pnc total insight. A new investing and Banking Experience with personalized guidance and online tools. Visit a branch, call or go online today. All right. That does it for us today. Rebecca, thanks for being here. Now its time for squawk on the street. Good morning and welcome to squawk on the street. Im david faber along with jim cramer live from the new york stock exchange. Carl quintanilla is off today. Lets give you a look at futures one day after a very big selloff on wall street with the s p and dow negative by well more than 1 . The nasdaq in particulately, as we