Transcripts For CNBC Squawk Box 20161019

Doctor p dollar per barrel level. Brent up to 52. Is it still linked to the dow the way it had been in. Seems every other day. Every other day. Not like every day. Among todays top stories, china reported gdp of 6. 7 matching forecasts, retail sales rose. Urban investment rising 8. 2 . Industrial output only growing 6. 1 . Markets in asia overnight, lets see. Up on the nikkei, down slightly on the hang seng. And just call it unchanged on the shanghai. Back in the u. S. , another busy day for earnings and economic data. September Housing Starts are out at 8 30 a. M. They are expected to have rebounded after falling 6 in august. At 2 00 p. M. , the monthly beige book report tracking conditions in the feds 1 districts. A trio of fed speak today. San francisco fed john williams, dallas fed president rob kaplan and new york fed president bill dudley. Look for results from Morgan Stanley before the bell. American express and ebay after the close. Apple is launching a new imac at an event on october 27th, according to re code. The new models will be on sale in time for the Holiday Shopping season. Updates would be powered by the new sierra operating system, which added some support for the siri voice assistant. We talked about that yesterday. Shes needing some work. It needs some work. Not really shes getting there. Wouldnt you say . No. No. No. Shes shes what has she not done for you lately . When i dictate, i say very, very clear the third, fourth, fifth time at this point, im i mean my ps and my cts, the things im saying are so clear, anyone could understand it. And she says things. I look and i just end up typing it. Shes not even close. Do you like anyone better . Do you like alexis or cortana . Alexa. I am afraid of alexa even when shes turned off. When i say i made a tee time for 9 30. She puts tea. Like im having tea and krumpets. Shares of intel are sliding. The stock declined on intels guidance for sales, which came in short of where the consensus was. The chipmakers executive Vice President stacy smith pressing the positives. We had a clean beat this quarter. We were higher on revenue. Our best ever revenue quarter, up 17 versus last quarter. A 65 gross margin and 18 profit growth. A fantastic quarter. Smith highlighted the companys success with noncomputer devices and that it aims to reduce dependence on selling chips for pcs. The other big tech name to watch today, yahoo. Earnings last night beating estimates while revenues met forecast. Issuing a stronger than expected outlook for the current quarter. The core advertising business continued to see declines. We found out from the report that the usage of yahoos email service has increased slightly since the company disclosed that massive data breach last month. Yahoo didnt have the from traditional Earnings Conference Call this time, but in a statement Marissa Mayer says she is confidence in yahoos core business as the firm preparing to integrate with verizon. The email portion of the business is one key portion that would be integrated with verizon. Thats why we care about that statistic. This must be this must be sort of your tech your squawk alley expertise. I try to be i think that the tech savvy liesman, you know, he knows about the fed. Other than that, i wouldnt and the grateful dead. If you have a question about the grateful dead. I can answer that. If you know a lot about the grateful dead, i dont know what that means if youve been following them for a long time, you dont know whether youve been following about them. If you know a lot about the grateful dead, means you killed some brain cells along the way. Not necessarily. Their music sounds better if you some people say that. Some people enjoy it sober. A federal judge in california says he is strongly inclined to approve volkswagens 10 billion settlement over its diesel emissions scandal. His final ruling will be next week. Vw is offering to buy back vehicles and pay up to 10,000 to each of the 475,000 affected owners. The white house and the department of transportation rolling out new rules to spur competition in the Airline Industry. Phil lebeau joins us with the details of a story bandied about on squawk box for months and months. You dont like the way the airline prices are announced right now . Do you feel like youre not getting the full story . Pretty much. We talked a lot about competition and how competitive the business is. Let me show you what the announcements are that were made by the white house last night and officially being announced this morning. Essentially it has to do with airfares, how the information is distributed to the public, and how we see those airfares as well as how the Airlines Report information about certain things, such as how they handle bags and refunds for delayed bags. You will now get a refund for a del delayed bag. If the past you could get a refound if it was lost. If it was delayed a day or two, the airline didnt have to give you the bag fee back. Now theyll be required to. They will also have to stop selecting posting of airfares this has more to do with third party firms, whether its kayak or trip adviser, they dont always post every single airfare. They are telling the airlines you have to give every single airfare. They have to protect travelers with disabilities and has to be a clear picture of how many bags are delivered, not just a percentage but how many are delivered. The d. O. T. May require also this is a possibility all inpricing of tickets. Instead of telling you the fare, they with have to tell you the fees, everything added on so it would be priced at a much higher price. They are also studying more transparency in fare details. Heres the secretary of transition. The actions were announcing today will help consumers know how airlines are performing. Will make sure consumers dont have to pay for services they dont receive and help consumers find the best Flight Options for them. As you can imagine, as you look the Airline Index over the last year which has been under pressure as the airlines themselves the stocks have been under pressure. The Airline Industry is not crazy about these proposals. In part because when you look at the possibility, guys, of saying well advertise a fare from chicago to l. A. Right now theyre advertising the fare, not the fees, not the taxes added in. It might say 120. When in reality youll pay 145, 155 depending on the tax, the airport, what they might be. If they go to allin pricing the Airline Industry is saying that makes it look much more expensive to people and may deter people from booking a flight. The counter argument is if im paying 155, i should know thats what it is going to be. Dont tell me its going to be 125. I want punitive damages for delayed luggage. You want somebodys head. You want somebody to pay for that. Because it happens all the time. My other question, is it always the airlines fault or i dont know. Im telling you, the baggage handling at newark, just in general, they have major issues. The baggage handlers work for the airlines. They do. Unless they hire a Third Party Contract the whole belt system at newark has been messed up at times. Now youre talking about a different issue. Now youre talking about the infrastructure of some airports in the country. Given the number of flights, theyre handling so many more flights than they used to, that means things get backed up. Luggage gets delayed or lost. If im going to chicago and bringing a bag on board, my price might be 120 bucks. If im checking a bag, its 145. Why is that correct. Why does that help anybody . Im assuming the taxes tend to be included in the ticket price. No, no, not what you see advertised. What you see advertised typically is here is what the fare is. But if i go to buy a ticket the taxes get added on. At the end. Theyre talking about but if youre sorting the search results and you wanted to sort by price, the taxes wont be included in that search result. But are the taxes different . Yes. Depending on the airport and what landing fees might be and where youre going. So thats one thing. How many connections you have within there. The d. O. T. Is looking at whether or not if kayla is plying from new york to orlando, when she goes on to a Third Party Website or the airlines website, will it say all n heres what you are going to pay, or as it is right now, heres the fare for where are flying. Then she has to pick ofigure ou will be another 20. Is it better to leave the market to itself or better for the government to impose a rule here . Thats a tough call. You can make the argument that the the airlines will make the argument that airlines continued to fall because of competition. The more regulation you add in here, the more you will ultimately drive up the cost to the airlines. And it could be faharmful to th demand out there in the market. I know people who have booked tickets, when they ultimately get this this is more on International Flights where you see fuel surcharges added n people are like, whoa, i thought i was getting something for 380, now im paying 445, whatever it might be. I understand both sides of the argument. I dont think its as elastic as you make it sound. Its like, would i buy it at 140 and not by it at 160 . If youre going to chicago to. L. A. , are you going to drive . Well, the argument from consumer advocates, joe, is if im ultimately going to pay 160, tell me im going to pay 160. But the argument is if its too high, you might decide not to fly. Then youre deciding not to go to l. A. But you might decide to fly into John Wayne Airport or somewhere else if its cheaper. Like any industry, any time you advertise higher prices, you will get people doing stuff. I would think i tried to drive places recently. Drove to ohio. With the kids in the car . Its not the kids problem . You . No, just passing people, trucks. You got to be you got to be really alert the entire time. Its tiring. But you have so much patience. Is now the time they roll the video of you driving . No. No. Just its a big car. You know, i just you drive, try it, phil, if you havent done it, in a while, like an eig eighthour drive. I tried cruise control. You cant make that drive to boulder across the countrylike you used to . I used to with a 58 ford missing a front of fenderment. Throw the coors in the trunk because you cant get it out east. Made it to denver and blew a transmission in denver, once. Thanks. You bet. Solid Quarterly Results helped the markets close higher. Our next guest says what is unfolding here is part of the seasonal reporting patterns. Here is explain is eurin timmer. I wasnt under the impression that this earnings season was going so well. Its early, but your view is it will be the same old thing . People have underpromised and overdeliver and we might actually get to a positive. Right now were at minus 1. 4 . We might get to positive for the first time in five, six quarters. Exactly. We have a consistent seasonal pattern where the analysts start way too high. Numbers come down about 800 basis points into the end of the quarter. Thats the low point, then it balances by 300 basis points because the companies underpromise and overdeliver. That bounce of 300 basis points right now at the low point, about a week ago, the number was minus 1. 6, i think. So we bounce 300 basis points from there, we end up at plus two. Last quarter we were at minus 2 1 2, q1 minus 7. I look at it from a rate of change, you see a sequential improvement after five quarters of negative growth that we may see our First Quarter of positive growth. Thats a good thing for the market and for a market that is bracing for a fed hike. Thats where i wanted to go next. You answered that. Let me set it up. I dont know if earnings matter. I dont know if the election matters. They do. Maybe they do. I think youre right about what matters. Were in the middle of a paper tantrum is what youre calling it. Not tapering qe, but talking about the slightest tightening move, but the market up one day, down the next. Up the next. Down the next. Oil up. Theres no correlation anymore. You were asking that earlier. Yeah. Its like been around 50. The market goes up or down based on not being able to get out of its own way because of a quarter point possible hike in december. Its frustrating because its so meaningless. You think at zero when you go from zero, it is meaningful if its going up. When you look at equity valuation, the impact of changes in the discount rate, the Interest Rate against which earnings are discounted, usually doesnt have much intlufluence earnings are growing at 6 . In the absence of growth, if the rate goes up, it has a huge impact. At zero earnings growth, if the tenyear were to rise 100 basis points, the market would be 20 overvalued. Its the enumerator and denominator of the valuation model is sensitive to Interest Rates when theres not enough in the numerator to offset it. Its basic math in a way. The market keeps telling the fed wait until we have growth and then you can raise all you want. The market can handle it. People are waiting for the hike, and therefore not doing what they would normally do thats why you argue to get it out of the way. You say they may not do it again indecember. The odds are 65 that they will the fed had three dissenters in september. I think if the fed ends up not going in december, they may look back at september as a missed opportunity to take the control back. Like having a dance partner, both your partner and you want to lead. Nine fed banks wanted to raise the discount rate in september. That tells you where the Bank President s are. Yeah. Remember, the transmission mechanism for the least problems when the fed raised rates last december or when it was going to raise rates a year ago in september was that the chinese yuan was overvalued, that went down. You had the capital flight thing, tightening of financial conditions. This time the yuan devalued. Thats out of the way. I think the market can handle it. I have to ask about your notes. You talked about the quality of the earnings has gone down. As a journal reporter in 1999, i did some reporting on the quality of the earnings going down. It was not very long until the market went down as a result in part that they were lousy quality earnings. Whats going on with that now . 68 of operating earnings are generated through buy backs. When you look at earnings per share, which is how most investors look at earnings, they have gone sideways for two years. If you look at dollar earnings, they have gone down 16 . The only reason earnings per share have not gone down is because the share count has gone down. The hurdle of generating earnings to keep your eps up is lower. We dont have a good organic growth story. In that environment, its hard for the market to do well. It also means investors should be careful when they see earnings per share growth. Quality of earnings is not strained. The drop from dental heaven you dont know that . No, i dont. Last but not least, before we you do love that french i love him, right . Its almost like a seinfeld episode. Theres a seinfeld episode for every situation. Theres a quote from shakespeare. Oh. My question was going to be to you, since youre here. 65 . In the last couple of years, whats the highest fed funds probability that weve had and then disappointed on . I look at the front month, it hasnt gotten above not front. Out . Yeah. Youve been 70 , 80 . And when it finally came around we didnt do it. December 2015 they were up in the 70, 80, 90 percentile. Outside of that it reminds me of a call option. If it doesnt go up, the time premium comes out of every single george busin sing single the numbers have gone up and then gone down. On the evening of the fed hike, 70 . But many times not in the front month but in outer months weve been at 70 and 80 and disappointed. Thats what i was talking about the other day, if you look at the twoyear, we had to experience the fear and the economic affects of everrising rates that never rise. Yes. So the fed should have hiked or gotten off the pot is what ive been trying to say for the last year. We got to go. Thanks. Coming up, intels earnings beat the street but the stock trading down because of disappointing guidance for the quarter. Well go over that with an analyst next. Intel reports a 9 increase in the quarters results but shares fall almost 3 after disappointing revenue guidance. Joining us with more on what this means is chris casso. Good morning. Good morning. It looked like a good report. Up 9 , the revenue was close in line. Right. The guidance went that bad, right . Well, it was below where consensus was a little below. Right. Then the market sells off 3 . Does that make sense to you . Does. Expect takes had been high coming into the report. They had positively preannounced consensus had gotten positive. But i think the more important thing that people looking at, perhaps the bigger concern just for the radio people. Its off 4 . Off 4. 2. The data center group. Specifically enterprise server. The reason why people own intel now is because of data center, not because of pc. Explain what data center is. Theres two parts. One is the standard enterprise server that you have. And that part of the business has been the area of head wind. The other part of the business, more than 60 , is hyper scale data center, facebook, amazon. Right. So the key for intel is thats the part that theyre concentrating growth. And the issue is, you know, how much of the traditional Enterprise Business is cannibalizing that and providing he headwind. Also some commentary about failures when it comes to keeping pace with the pc chip market . That that continues to decline faster then people thought . Actually pc, over the last couple of months, pc stabilized somewhat. You know, i think everyone understands that pc is generally a flat declining market at this point. Its actually shown some stabilization over the past couple of months. In this particular report you saw a stronger q3 in pc, but part of the mild disappointment that you saw in the report was the fact they pulled some inventory forward from q4 to q3, which now leaves the question of will that inventory sell through. How well is the restructuring going . Thats such a huge part of this story and what investors are looking for middle of next year. Is everything on track . It is. I would characterize intel management as doing the right thing in the context of half the business is pc, thats not a growing market. So theyve been moving their efforts to other things. Data center is one of them. Also looking at the Automotive Market strongly. Things like internet of things, moving into memory. Diversifying the business. Part of restructuring and cost structure of that is moving resources out of the pc area into the better growth areas. Is there too much worldwide capacity in chips . Not at the moment. Theres different segments of the market. Right. And in intels case, intels capacity, they are the whole pc market. They usually do a good job of moderating matching capacity and supply. In other areas of the chip market were seeing a shortage. Let me tell you why i ask that question. One note said that they did some work on the iphone. It wasnt a profitable business. It looked to me like intel went hat and hand to am rather than with Pricing Power and with Authority Just got in and said here, take my chips. Intel supplies the base band chip, the chip that connects to the Cellular Network for about half the iphones now. Thats a business that qualcomm used to have 100 . Its important for intel to participate in the market. Not just because of handsets. The handset market, if you ask intel, they would say handsets are not strategic for them. Apple does a lot of their own chips. Yeah. But when you look, think five years from now. The pc that youve got there, probably doesnt connect to the l. T. Network. Five years from now its inconceivable that thats the case. Every Computing Device that doesnt connect to the Greater Network that you cant pick it up outside and use it, thats an unusable device. I agree, they probably did have to go hat in hand to get that piece of business from ap ple. Is this selloff right or overdone . I think its right. I think there are other places i want to put my money within the group and for the factor that the pc market being half of the revenue, thats a large headwind. But, again, from an earnings standpoint, stock is about normally valued now. Thanks for joining us. Chris caso. Visa hiking Quarterly Dividend by 18 to 16. 5 Cents Per Share. This after the ceo is announced to be stepping down and ahead of its earnings reports on monday. Asml reporting a 23 jump in Third Quarter profit that missed forecasts. The chip equipmentmakers revenue Beat Estimates on the back of higher sales of new machines. Asml posting higher than expected new orders. And nissan will reportedly appoint ceo carlos ghone chairman of Mitsubishi Motors in may. Nissan announced it would buy a controlling stake in mitsubishi for 2. 3 billion after mitsubishi admitted to falsifying the mileage on several seconds. Stand dard and poors revising the outlook for wells fargo going to negative from stable. Citing the risks of reputational damage with the whole saga of the Retail Account sales misconduct. Following the announcement wells fargo delayed a tenyear bond, which it will have going today. And massachusetts has suspended business with the lender. The states treasurer said she is not convinced that wells has grasped the level of seriousness of its actions or addressed the systemic failures within the organization. Homestate of elizabeth warren. Wonder if theres a coincidence there. I dont know how you can grasp it much more. Maybe a pound of flesh 679 im on the merchant of venice here. Do they need an actual pound of flesh . Stumpf is gone. I cant think of a way that wells fargo could have handled this worse than they did. Terrible. They dont grasp the seriousness of it. It took them a while to get there. Dont you think . I still love the just the the politicians, the just watching the faux outrage from politicians with what they preside over in their own daily life. What is different about this situation, its not wonky derivatives, its something that everybody can understand. It was lowhanging fruit. Yahoo this is like squawk alley in the morning. Presquawk alley. Yahoo, questions remain about the sale of the companys core assets to verizon. And a live report from vegas where final preparations are underway for tonights president ial debate. As we ed head to break, heres yesterday s p 500 winners and losers. Guess what guys, i switched to sprint. Sprint . Im hearing good things about the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your Small Business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. Switch your business to sprint and save 50 on most current verizon, at t and tmobile rates. Dont let a 1 difference cost you twice as much. Whoooo for people with hearing loss, visit sprintrelay. Com. This is my retirement. Retiring retired tires. And i never get tired of it. Are you entirely prepared to retire . Plan your never tiring retiring retired tires retirement with e trade. Im in vests and as a vested investor in vests i invest with e trade, where investors can investigate and invest in vests. Or not in vests. Sign up at etrade. Com and get up to six hundred dollars. Thiswell we thought geench programmed machines to talk. Ge is an Industrial Company that actually builds worldchanging machines. Machines that can talk to each other digitally. Hello . They dont talk to each other like that, ricky. Shhhh, youll anger it. He looks a little ticked off now. Okay, so you launched your banks app. Now what . How will you keep up with the new demands of todays Digital Economy . The fact is some believe they wont need a Traditional Bank down the road, so at cognizant, were helping banking and Financial Services Companies Think digital, be untraditional, and reimagine what the bank of the future can be. Our clients can now leverage customer intelligence to predict their financial needs and provide more contextualized products and services. Were creating new platforms across channels so customers can effortlessly invest, borrow, lend, transactwhereverwhenever they choose. And were digitizing the way banks run, driving efficiencies and delivering new value for their customers in return. Digital works for banking and Financial Services. Lets talk about how digital works for your business. The third and thankfully final president ial debate kicks off tonight from las vegas. John harwood is there and joins us with more. The people im talking to, theyre wondering whether or not to watch it. If they can actually take another excruciating 90 minutes. The key word is thankfully. We are less than three weeks out. I think everyone is pretty exhausted with this campaign. The final debate tonight. We expect it to be as aggressive a performance from donald trump as weve seen in any of the previous ones. Hes significantly behind in the polls. I sat down the other day in new york city with chuck schumer, who will be have to work with whoever wins the presidency. Hes likely to be the majority leader because democrats are now favored to win the senate. Talked to him a bit about the nature of the race. He said that the emotion, the volatility of the race, of key sectors of the electorate has to do with declining middle class incomes. Thats put the country in a bad mood, but also has personal relationships with donald trump and Hillary Clinton. Donald trump has been a doenor and constituent. I asked him is this the donald trump you knew over the years in new york . Surprisingly more so. Everyone knew he had a big ego, would like to talk about himself. The extreme of it surprised me. He likes to say when he donates to politicians, he owns them and they do what he wants. Did he own you . No i dont recall him asking me for something. What would be your candid assessment of Hillary Clintons laws as a candidate . I served with her for eight years. This is the only place where two people in the federal government for sure and most governments anywhere, where two people have the exact same job. Were both type a personalities. Took us about a year to figure out how to work with each other. Then we worked very closely. Im from brooklyn. I can tell a bs artist pretty good. She is not. Shes a straight person in the sense that she doesnt try to say one thing and mean another. I did not find her doing that at all. Shes more cautious than i am. Thats her nature. Whats who she is. Thats not a bad trait for a president with difficult decisions. What do you mean by that . How is she more cautious than that . I wouldnt even try to tweeze it. More scared of political consequences . No, a very careful person. Very careful. So that, in essence, is the two candidates well see tonight. Donald trump, somewhat more extreme version of what weve seen in past president ial elections, and a careful and cautious Hillary Clinton who will be trying to protect her lead. John, thank you very much for joining us. Yahoo is out with Quarterly Results. The company posting an earnings beat. Revenue from mobile, social advertising rose by 24 . Questions linger over the companys sale of its core assets to verizon. Joining us is ronald josie from jmp securities. The company did not hold a Conference Call. They probably thought they wouldnt need to. What questions were left unanswered, though . They actually did a good job. The number one question that we thought going into it or we were expecting going into it was did the Security Breach have any impact, that they announced in september, have any impact on engagement . They provided Additional Information there. We have context on that. Some of the key questions that may have went unanswered is about the trends in the business. Results seem similar to q2. Search and display are challenged. Profitability is somewhat better. Core business seems to be what was expected. At least we got information on engagement post the Security Breach. If youre rverizon and parsig results, is this a company you would want to buy . Nothing changed from a results perspective. You talked about the mobile business what they call the mavens business, mobile, video, search. It was down 6 taking out accounting issues. Verizon knows this. The big challenge is can verizon do a better job out mating and monetizing yahoo s overall audience of 700 billion plus users on a monthly basis and therefore the big concern was around the Security Breach and what that did to engagement. Mavens was a novel idea when the Company First strategized about it. Even with the year over year and quarter over quarter gains, its so small on the scheme of things what do you think the company can actually accomplish in that space given how much of that traffic facebook and google have gobbled up. At the end of the day facebook is doing a tremendous job on monetizing assets and providing tools that assets want. Most importantly they have the distribution. When you think about mavens, mobile is the largest part of that mantra, if you will. The challenge that yahoo what is getting the right distribution on mobile. That includes search distribution, having the right apps and the right content for users. One thing maybe taking a step back and talking Security Breach, if we learned anything, engagement was strong post Security Breach mainly because people liked to communicate. So male engagement remains steady. Reading content remains steady. Distribution on mobile is hard. That is something yahoo is challenged and needs to do a better job of getting apps outs there to drive engagement higher a and moneyization should follow. Thats something that hopefully they can fix or hope to fix, particularly if you merge aol into that. You dont think this was a situation where the breach gets disclosed, all of a sudden people are saying, wait, i have a yahoo email address, i should go back and log in and make sure everything is okay, and then reengaging with Yahoo Properties . Or that wasnt nif ofenough of material part of the activity . You would think most people who have a yahoo mail account would think i have to change my password. This happened back in 2014. Yahoo did not force people to change passwords after logging in again after the breach. Unlike ebay, which required everyone to change their password and oftentimes user name, too. Yahoo was different. They didnt require people to change their password. It happened two plus years ago. The experience was relatively seamless. I imagine most people changed their password given the fact it was in the news and people are aware of it. The fact that traffic, engagement and page views across the site and mail has not changed in the several weeks following the announcement, thats telling how important and how sticky communications are and really your networks are on the web. Good news unless youre verizon and trying to renegotiate this for a lower price. Coming up, give your dating life a boost. Joe, you listening . Tinder coming up with a new way to monetize its dating service. More people could be swiping right on your profile. I dont even know what i just read. I dont know i dont understand your jokes either. Keep going. As we head to break just dont economists dont be funny. That wasnt an economist joke. A quick check of whats happening in european markets right now. In other news, facebook wants you to back a political candidate. If youre worried about backlash from your circle of friends, dont fret, theres a way to limit the audience of who would see your political pick. They also will have an issues tab which will feature quotes and clipspolicy. If you dont already know who on your circle of friends are voting, you are not on facebook. Im not on facebook. Did you see people unfriending each other . Oh, hes for this person. Im not a friend anymore. Every four years, a good fall cleaning mechanism. Tinder is now letting you bump your profile to the front of the feed, but it will cost you. The feature is called tinder boost. Its going live worldwide today. When activated matches within the area will see your profile before anyone elses. The cost ranges from 199 to 399 per boost. Cheap. Thats not bad. I wonder what you get. Front of the line. Wonder what you get. Might just mean people are swiping left right by you. Steve didnt know i dont know what youre talking about. You dont need tinder. Obviously. Any way, but you dont i guess its been becky has when she gets all those ridiculous tweeter comments, twitter comments, she knows what it is. What it is. Yeah. Just a tech reporter. Swiping left is good or bad . Swiping left is bad. I will have to cant you isnt it just looking through a catalog or something . Yes. Coming up lets get out of this chinas gdp matching forecasts as retail sales tick up 10 . A live report from beijing up next. This car is traveling over 200 miles per hour. To win, every millisecond matters. Both on the track and thousands of miles away. With the help of at t, Red Bull Racing can share critical information about every inch of the car from virtually anywhere. Brakes are getting warm. Confirmed, daniel you need to cool your brakes. Understood, brake bias back 2 clicks. Giving them the agility to have speed precision. Because no one knows like at t. Just like that, a moment turns romantic. So why pause to take a pill . 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Ask your doctor about cialis for daily use. And for a 200 savings card, go to cialis. Com its been over 100 years since ask your doctor about cialis for daily use. The first stock index was created, as a benchmark for average. Yet a lot of people still build portfolios with strategies that just track the benchmarks. But investing isnt about achieving average. Its about achieving goals. And invesco believes doing that today requires the art and expertise of highconviction investing. Translation . Why invest in average . China out with the latest reading on china gdp. Euni eunice yoon joins us with more. Thanks. To some economists the numbers today looked a little too stable. Q3 gdp came in at 6. 7 . Thats exact same number as the First Quarter. Exact same number as the Second Quarter. That raised some skepticism about the voracity of the numbers. That said, most economists here were focused on the september data to get a better sense of the growth momentum. The industrial output dropped off slightly, but retail sales and fixed Asset Investment did improve. Now, what was driving the growth behind the q3 numbers . Well, it was Government Spending as well as recovery and the property sector. Thats because the government has been green lighting several investment projects and Infrastructure Projects as well as unleashing a record amount of credit. Thats helped to lift the housing sector. Now, as much as these Government Policies have helped to support Economic Growth, theres a lot of concern now that these policies can lead to new danger. Even though many authorities have been trying to rein in those prices with various measures. Another concern has been rising debt. They continue to worry about it and in fact, the imf in a working paper said that the government here needs to really address the corporate debt problem. Otherwise its going to face potentially sharply slower growth. Banking crisis or possibly even both. Guys . Thanks very much, eunice. All right. Morgan stanley reporting earnings. Wilfred frost we the numbers. How do they look . They look pretty good. Revenue 8. 9 billion versus expectations of 8. 2 billion. 81 Cents Per Share expected at 62 cents a share. Where are they similar to Goldman Sachs . Largely on those two beats. Also, quote, Strong Performance across sales and trading. Something we saw throughout all of the other banks. Its a big beat on fixed income and a slight positive performance in equities. So thats a familiar theme for both goldmans and Morgan Stanley. These guys managed to hold onto slight gains. 8. 7 but nice move in the share price there at 1. 6 yesterday. Theyre up 2. 6 today. Decent performance. More on the details after this break. All right. Wilfred, yeah. Thanks. Seem to be learning how to operate in this, finally. Or maybe the expectations are just low enough. Exactly. Coming up, breaking news on real estate. The latest mortgage app data hits the tape at the top of the hour. So do not leave to go to the bathroom. Later well get the governments read on Housing Starts in september. Stay with us. At guys, i switched to sprint. Sprint . Im hearing good things about the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your Small Business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. Switch your business to sprint and save 50 on most current verizon, at t and tmobile rates. Dont let a 1 difference cost you twice as much. Whoooo for people with hearing loss, visit sprintrelay. Com. Recengrand prix race carsbenz made history when it sold for a record price of just under 30 million. And now, another mercedesbenz makes history selling at just over 30,000. And to think this one actually has a surroundsound stereo. The 2016 cla. Lease the cla250 for 299 a month at your local mercedesbenz dealer. Mercedesbenz. The best or nothing. Earnings alert. Morgan stanley is the latest of the big banks to roll out Quarterly Results. Well dig through the report next. Fight night in vegas. Donald trump and Hillary Clinton will go headtohead for the last time. The wall street journals Holman Jenkins will join us with what he wants to hear from the candidates. Plus move over tesla. Another highend electric car is hitting the road and its veering into elon musks lane. Were going to go behind the wheel as the second hour of squawk box begins right now. Live from the beating heart of business, new york city, this is squawk box. Welcome back to squawk box here on cnbc. Im joe kernen along with Kayla Tausche and steve leisman. Were going to hear from our guest host in just a bit. I can wait. Im going to give you my im going to tell you what i think. Then you can tell me whether im wrong. Then leismans here too. And kayla. Thanks for that. Yeah. The futures do we really need to . Nasdaq down about ten points. And flat but down, really, over across europe. Oil prices were up slightly. Morgan stanley rolling out results moments ago. So we got revenues 8. 9 billion versus expectation of 8. 2 billion. A big beat on the bottom line. 81 earnings per share versus expectations of 628 per share. Similar to a lot of other investment. And also that comes very much on the fixed income line more than the line. Where do they differ from Goldman Sachs . We saw goldmans underwhelming a little bit there. Morgan stanley doing better on that line. Where does it do worse than Goldman Sachs . On the returns line. Roe of 8. 7 . Thats a nice for them but not such a big relative out performance as we saw from goldmans yesterday. On the expense line to hit theyre aiming to cut 1 billion in expenses by 2017. Theres some decent numbers in wealth management. Slightly disappointing numbers in investment management. Not too different from blackrock. Overall, were up about 1 in the premarket following gains of 1. 6 yesterday alongside Goldman Sachs Strong Performance. Wilfred, its going to be hard for these banks given the numbers theyre reporting to complain too loudly. This is pretty good numbers. Looks like despite because of or irregardless of the dodd frank regulation they found a way to make money. Well, i think thats a fair point, steve. You said with all the banks despite the relatively difficult macroenvironment for the quarter and the pressures you point to, theyve all made profits. Yes, theyve improved their position and actually speaking to harvey schwartz, the cfo, he did make that point. Overall we kind of applaud what the regulators and fed have done. Theyve done a much better job of course than the european banks which are under much, much more pressure. And at higher capital levels. So these banks, many of them are bigger which is a huge issue. But theyre less risky given they have more capital. And theyre operating according to leverage ratios that didnt exist before the crisis. Absolutely right. Their Balance Sheets are much stronger than they were. And their returns are better. Weve seen Deutsche Bank do its Balance Sheet a number of times. But its returns are so low, it has to come back and do it again. Thats not the case here. Certainly not the case with goldmans and wells fargo which is why theyre able to do that. But goldmans the standout investment. Theyre making returns that a decent and i think weve got to see a rate hike as a bonus. Its one quarter. Its eight years after everything happened. And you got one quarter where goldman hasnt had a return on equity above 10 . You dont know what the counterfactual is. Im talking with leisman with oh, dodd frank im able to how about small banks . How about a Financial System thats generated less than 2 growth for eight years . Im going with what with wilfred just said. Do you want to be the european banks . Do you prefer that . I dont want to be the european economy either. The banks. Weve never been that economy. Thats true. Thank god. Doesnt make me feel that great about things. Anyway, wilfred. Better than europe, joe, only in terms of banks earnings. Yeah, yeah. Banks in general. And rich creamy sauces and wine. You know, theres advantages. Chocolates. Bread. Ive been to the coast. I love it. Im not saying that. Im talking about the economy. You know . Entrepreneurialship. Private sector growth. The ability to move from class to a higher class. You know, were not all born in it, wilf. Okay . Im not going to respond to that. All right. Were going to talk to wilf a little bit later on as we go through the Bank Earnings. In other headlines this morning, data on the u. S. Housing industry. Analysts are expecting a 3. 5 jump in september Housing Starts partially reversing that 5. 8 decline in august. Also plenty of fedrelated activity on todays calendar. John williams, rob kaplan, and bill dudley all have appearances today. And the fed releases its beige book at 2 00 p. M. Eastern time. All of that could be market moving. And andrew left has been banged from the Hong Kong Market for five years. He was found guilty of market misconduct in connection with a Research Report pub established four years ago and ordered to repay 206,000 in profits. Lefts lawyer says all appeals options are being considered. All right. Earnings, fed speak, all these things could drive markets today ahead of the last president ial debate tonight. Joining us now, steven dudash, and our guest host jason trenert. I guess what the conclusion i came to i wanted to run by you earlier, jason, was okay we got the election. Were in earnings season. But again, were watching every data point for this stupid december meeting again and the market has had very trouble making headway. We go up one day, down the next. Gone nowhere for months. And i think its all based on more waiting for the fed which i think again proous the point theyve got to get off of there. Get out of our life and let us move on without thinking about them. Im with you, completely. I think the best thing that happened this year my opinion is that japan went to negative Interest Rates and it was a disaster. To use trumps term. And it showed you the limits of what you could expect. Im of the view that Monetary Policy cant create growth. It can just create the conditions upon which you can have growth. Its a very imperfect tool to create Economic Growth as weve seen. If that was the worst that it did, what if it hampers growth . You could make the case especially with negative Interest Rates now that Monetary Policy has gone from being ineffectual to being harmful. Thats deflationary. People are taking money out of the Banking System. The velocity of money has gone down. And the velocity of money has gone down. You can get paid to have a mortgage. You can get paid to you think maybe you could cause another housing boom that makes no sense if you get paid to why not buy a hundred houses and get paid for every mortgage . Regardless of what part of the political aisle youre coming from, you can very strongly make a case. I think thats where theres a populous movement here. A lot of these have largely benefitted the wrong people. With all due respect to the people watching this program. Speak for yourself. Its not benefitted the average person that has a deposit account. Leisman will tell you about the counterfactual again. How terrible things would have happened without this stuff. Why did sanders and trump have done so well. If tha steven, whats your take on this . Not you, leisman. Its time for the fed to get moving. Weve been ready for awhile. Its not completely in their control because we are in a global environment. Youve got to believe they wanted to raise rates in the past. Our economys ready for it. Our employment numbers are the right spot. Underemployment is coming up too. In a bubble, were ready. But because of japan and whats going on in europe, i think theyve been held back a bit. But id love to see them get out of it. Now that the election stuff is settling down and we have an idea where thats going to end up, between that and getting the policies done, we might finally in e the first time in eight or nine years not have politics driving the markets. We could get back to the fundamentals and the fun stuff of why markets are going up. Yeah. Its time. But you cant believe theyre going to jump, like, a point or two in the next year. Its just they dont have control to that degree to do it. If they did it, it would destroy whats going on overseas more so than the problems theyve been having. Steven, you would think its a given looking at whats happened to yields recently having backed up. Whats happening to the dollar. And whats happening to fed funds probability. But what are the odds you think they blink and just dont do it . They blink . They cant blink at this point. Unless theres another brexit event, how could they possibly justify . Weve been hitting the numbers theyve asked for for eight years. Were there. If it wasnt for what happened overseas over the summer, you got to believe they would have done it at that point. What would their possible excuse be right now . Take your pick. Take your pick. I know. But thats the point. Were trying to get them out of the game. Theyre running out of excuses to be in the game. Its theyve been artificially low for too long at this point. Like you guys said, its not helping the lower middle class. Its helping the people that can buy lots of Properties Like you were saying. Thats the people who have been can i just can i must you . Yeah, i must. I think its not right to have a onesided conversation. Steven, how will higher Interest Rates benefit the low and the middle class . Im not saying it will benefit the lower whats that . I agree with what youre saying. Im not trying to tell you its going to magically make their world better. But we need more ammo for future problems. There will be another bump down the road. But thats moving the argument from one i get that Government People have benefitted from the lower rates. But theres been another side to this. Its lower Mortgage Rates. Its some Capital Investment that has led to some job growth. Decent job growth but theres been weak Capital Investment. But what we were trying to do. Im sorry. Im sorry, steven. And i agree with the points youve made. Capital spending has been quite weak. Id say it hurts lower middle class people. Thrilled with permanent growth because its better than the rest of the world. Thats what we deserve. Thats all were ever going to get. Its a different world. People are old. And were never going to do better and we got to live with it. Its not the fed. We need to do something though. He was talking about me, not you. But go ahead. I like you, steve. Yeah. Thrilled with one point. Its the new normal. Why even try . You know, the point you made thats so great, jason, is that these guys if they hadnt seen it not work in japan, those 15 how many really there . 17 now. These 17, theyd be at the next meeting. I mean, if there was any chance of doing something elsewhere they could be part of the solution. This is all on us. Its all what we have to do as the masters of the universe. Lets do negative rates. I mean, if they had the slightest idea it worked, theyd be throwing that at us next. I think youre right. Theres 900 ph. D. S at the Federal Reserve board. Nothing good can happen. Exactly. And were going to break and leisman cannot correspondent. Thank you. Lets not do higher education. Lets not do higher education. Its done so well in everything. Lets not do lets got net smarter. A bs and ms and piled deeper. Piled higher and deeper. Then ph. D. Piled higher and deeper. Coming up on squawk, Morgan Stanley the last to report. Shares of Morgan Stanley right now, take a look where they are. Slightly positive. Rest of the group, slightly lower. Well dig inside the report coming up. Were drowning in information. Where, in all of this, is the stuff that matters . The stakes are so high, your finances, your future. How do you solve this . You dont. You partner with a firm that advises governments and the fortune 500, and, can deliver insight person to person, on what matters to you. Morgan stanley. Welcome back to squawk box. Check out the shares of wells fargo. Standard and poors the outlook from negative to stable based on like pr i think. The agency citing the magnitude of the reputational damage from the sales, misconduct. And following the downgrade, wells fargo following the 10year bond. In other wells fargo news, the state of massachusetts is the latest to stop using wells fargo and a bond underwriter. Its going to be for a year i guess for standarders. They join a growing list of states and local governments that wont do business with the lender. A suspended business. The states treasurer says she is not convinced that wells has grasped the level of seriousness of its actions or addressed the systemic failures within the organization. And interestingly, john stumpf did have to resign from the boards of chevron and target. That happened in the last day. The Companies Said it was a personal decision, but hes basically been stripped of all of his titles across the corporate sector. And fbr just downgraded wells fargo a couple minutes ago. Cut target to 45. Hits keep coming. But Morgan Stanley is the last of the major u. S. Banks to report its earnings. All of which beat expectations. Here to discuss is dick bove at rafferty capital. Whats the metric at this point that you think we should be judging this peer group . In the beginning of earnings it was loan growth. Now people are talking about return on equity. How are you comparing apples to apples . You mentioned two good ways to do it. If you dont mind, id like to throw a few facts at you relative to your prior discussion. Wells fargo made more money in 2009 because you look at a banks earnings under pretax, preprovision basis that its made in any year since then and ill take to 2019 as it made in 2009. Goldman sachs hasnt come close to because dodd frank has been so great. Theyre kicking ass, doing wonderful. Im agreeing with you, joe. Thank you. You know, Morgan Stanley also, you know, had a much bigger year about ten years ago than it had at the present time. You know, the banks have been forced to siphon staggering amounts of money into the u. S. Government directly and through the Federal Reserve as a result of all of these regulations that theyve been throwing at them as a result of velocity of money. And the u. S. Economy has gone down consistently year after year, quarter after quarter which has slowed Economic Growth and banks right now are firing tens of thousands of people and theyre getting rid of branches. And if you take a look at what is in the Bank Earnings in this can quarter, you cant understand what the fed is saying. Because banks are sitting here with staggering amounts of money which they cant lend to anybody because presumably the borrowers dont want it. So dodd frank is having a bad effect on the Banking Industry. And banks are not making a huge amount of money relative to ten years ago. The other thing thats interest, dictatorship of the fed on the regular side that has basically taken away capitalism. The fed makes a decision as to what the cost of money should be. This isnt a new phenomenon. These companies have had to learn how to operate under this environment for quite some time. Its new to say theyre doing great under dodd frank. Thats new. But were not saying that. Yeah we did. Yes, you did. Thats what the stocks have gone up. The streets the stocks have not gone up. Im sorry. The stocks have not gone up. Just because they went up, you know, in the last couple of years doesnt mean that theyve gone up over a tenyear period. You know, youre not if you bought Goldman Sachs, wells fargo, and Morgan Stanley ten years ago, you wouldnt be sitting on a huge pile of crash. Because youd be buying them into the financial crisis. Whether you bought them into the financial crisis. Whether you bought them a year and a half ago, you wouldnt be sitting on a huge pile of cash. Basically the change in e the return on equity in this business, the massive amount of excess equity which is not needed. The massive amount of liquidity which has created a liquidity trap. Its all there. And the fed, you know, not only does the fed set the price and quantity of money. But youve got relatively 200,000 people in the United States that are employed to make sure that the banks do what the fed tells them to do and the fed tells them what to do about everything. Regulators are jobs, right . Well, thats right. Theyre in the banks and theyre in the government. But the fact is, what theyve done to the Banking Industry is theyve nationalized it. And not only have they nationalized it. But nationalizing it, theyve stopped the growth of private sector lending because the government is grabbing all the money that the banks are taking on. Thats not good. Dick, on wells fargo specifically, we could debate for hours about dodd frank, its implications for banks. You were the first bank to put accelerating after the sales scandal reached a fever pitch. Im wondering if you think the bottom has been put in the stock or if you think theres more pain. No, i mean, wells fargo is not making money. Thats the bottom line. If you want to look at the company over the past ten years, you can see what they did is they bought wachovia in 2008. They put a huge reserve up in 2009. And from 2009 to the present time, theyve been reducing that reserve. But theyre operating earnings have not gone up. What did they do . They panicked and put on this extreme Sales Program to get revenue from that side. Because their Net Interest Margin is less than half today of what it was, you know, ten years ago. But the point is because they werent making money, they went out and did extreme things. Now the company has to be restructured right from the base. Okay. I just want to go on record. Dick, i have known you for a number of years and i think the world of your analysis and we mostly agree. I think that regulations have gone too far. But i think where we disagree is i think its better that the Banking System operates with more capital than with less capital. And i think were in a better place now for that particular reason. That would have been one page instead of 16,000 pages. Fair enough. And leverage ratios. Well, you know, if you want to get into the capital thing, take a look at the end of the 19th century and youll find that so much capital was put into the Banking Industry that we had depressions in 1873, 83 93 and 1907. And no credit coming out of the sector. Well see you soon. Thank you for coming and as always, we think youre one of the best Bank Analysts out there. Coming up, more frappuccinos and lattes coming to china. Were going to tell you why. Squawk box will be ragt become. Lac pays cash. Aflac isnt Major Medical enough . No whos gonna help cover the holes in their plans . Aflac like rising copays and deductibles. Aflac or help pay the mortgage . Or child care . Aflaaac and everyday expenses . Aflac learn about one day pay at aflac. Com boat blurlbrlblrlbr whats going on here . Im val, the orange money retirement squirrel from voya. Were putting away acorns. You know, to show the importance of saving for the future. So youre sort of like a Spokes Person . More of a spokes metaphor. Get organized at voya. Com. Sprint . Im hearing good things about the network. All the networks are great now. Were talking within a 1 difference in reliability of each other. And, sprint saves you 50 on most Current National carrier rates. Save money on your phone bill, invest it in your Small Business. Wouldnt you love more customers . I would definitely love some new customers. Sprint will help you add customers and cut your costs. Switch your business to sprint and save 50 on most current verizon, at t and tmobile rates. Dont let a 1 difference cost you twice as much. Whoooo for people with hearing loss, visit sprintrelay. Com. The Conference Call. 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. Comcast business. Whats Critical Thinking like . A basketball costs 14. Whats team spirit worth . cheers whats it worth to talk to your mom . Whats the value of a walk in the woods . The value of capital is to create, not just wealth, but things that matter. Morgan stanley welcome back to squawk box. Among the stories front and center this morning, crude oil prices are rallying after the American Petroleum institute reported a drawdown in inventories and saudi arabias oil minister said Market Conditions were improving. Microsoft surface Tablet Computers have received what one might call a celebrity not endorsement. Great story. New England Patriots coach Bill Belichick said he wont use those tablets on the sidelines. He said they dont perform consistently. Microsoft says it stands by the reliability of the devices. He says hes been bilked out of profits for years from the classic comedy film this is spinal tap. In addition to damages, he also wants control of the trademarks for the spinal tap name. You could say hes taking the lawsuit to 11. Yeah. No . Yeah, no. But how did what happened over there . I mean, with spinal tap . How did he not get compensated . I havent read the filing. I thought it was going to be about the simpson. The simpsons are going to pass gun smoke. The most episodes ever. What was the number . 600 . Yeah, it did already. It did . I thought it was this week. Little joe. Little joe was bonanza. I tried. Peter phelps, mr. Phelps brother. No, michael landon. All right. They told me to jump in. Im trying. Can you help with this . Its hollywood accounting. Where its like a movie can gross a billion dollars then they say for actor purposes it only earned 89. And thats what happened here. They said the movie over that 20year time frame only earned, like, 89. So thats the battle. All right. Glad you were here. What do you know about that . Im a big spinal tap and simpsons fan. Got to know these things. You think simpsons are still funny . The writing is great. Used to watch every episode. Havent watched in a long time. Homers my idol. Homer and al bundy. Some combination of the two. Three weeks until election day and the candidates will be spending more cash on attack ads. Really . We want to look at how much donald trump is spending out of his own run for the white house and robert frank is going to join us. You know Holman Jenkins is going to be on a little later. His point is that, you know, he hasnt spent enough. And his heart hasnt necessarily been in it as much as holman wishes. Hooefs always been a careful investor of his own capital. Thats what has made him what many say is a great business person. When you look at when he announced his run, he said he will spend up to a billion dollars of his own money. As of yesterday that number was down to 100 million. Remember by the time this ends i will have spent over 100 million on my campaign. Hillary spent nothing. She gets all her money from the special interests and donors. All right. So went from a billion to a hundred million. How much has he actually spent so far . According to the federal Election Commission filings, trump has spent less than 60 million of his money through september. Now, take a look at this chart. His own contributions to his campaign have actually been falling over the past six months. Now, in the First Quarter he was giving his campaign more than 5 million a month peaking at 11 million in march. July and august, that was down to 2 million a month. Now, even trumps 60 million may be slightly overstated because his campaign has spent more than 8 million to reimburse trumpowned or trumprelated companies. So some of the money hes spent on his own campaign will go right back to his businesses. He still has 19 days left to go from 60 million to 100 million. Of course as he said, Hillary Clinton hasnt spent any or certainly a small amount of her own money. Mr. Trumps contribution has covered the cost of any reimbursement to him or his companies. And quote, he has contributed an unprecedented amount to his campaign. Its not exactly unprecedented. Lets take a look at who has spent the most in president ial races. Ross perot spent 64 million in his 92 campaign. Steve forbes spent a combined 70 million for his runs in 96 and 2000. And Michael Bloomberg running for mayor spent 160 million. What about jon corzine . 60 million. That was the most expensive for a senate race. Romney used 45 million in 08 of his own money. But next to nothing in 2012. Interesting. Robert, great report. Ross perot. Thanks, ross. 92. Thank you for doing that. We appreciate it. Thanks. Were still living with that. Thought about that the other night. We owe you. Coming up, the wall street journals Holman Jenkins here with his latest candidate. Squawk box coming right back. Is it because so many go after it the same way . Chasing after short term returns. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, teaming specialized active investing with riskmanagement rigor, to seek out global opportunities. We manage over a trillion dollars this way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential now that fedex has helped us we could focus on bigger issues, like our passive aggressive environment. Were not passive aggressive. Hey, hey, hey, there are no bad suggestions here. No matter how lame they are. Well said, ann. Ive always admired how you just say whats in your head, without thinking. Very brave. Good point ted. Youre living proof that looks arent everything. Thank you. Welcome. So, fedex helped simplify our ecommerce business and this is not a passive aggressive environment. I just wanted to say, you guys are doing a great job. Whats that supposed to mean . Fedex. Helping Small Business simplify ecommerce. Welcome back to squawk box. Third and last president ial debate is tonight. Donald trump says the election is rigged. Joining us now Holman Jenkins of the wall street journal who writes twice weekly Business World column. His column this week is called rigged was Hillary Clintons fbi case. Anyway, i was going to ill intro it a different way. When do you write your pieces typically . When did you finish this one which i loved reading this morning . When did you finish it . Nighttime . No, it was probably early afternoon. I start the day writing an article about the nfl. Decided it was the wrong time. I read it this morning and looked for, like, i wanted to throw back a couple of shots. I got to so depressed reading it. When you write Something Like that, do you throw a couple back because its so depressing what you just wrote . No. The conclusion you come to here, i guess, over 90 for hillary. A lot of people are assuming its going to be Hillary Clinton. Youre saying dont look for any great period of prosperity to be ushered in or political harmony to be ushered in for four years. Its not going to be fun under this government. Yeah. Im in a pessimistic mood about that this week. All these leaks and information coming out about the fbi investigation and the thing bs that went on there. Basically theres going to be leaks and more subpoenas. And this whole server issue will drag into the administration. Its not reagan or not going to be a hopeful not even hope and change. Its going to be like nixon. Especially because republicans have to keep all those trumpistas on board. What happened with jim comey . Have you figured that out yet . There are a lot of important people who didnt want hillary to get charged. Obama. Loretta lynch the head of the justice department. As it played out and there are probably a lot of reasons for this im not aware of, but it all came to a fruition just before the Democratic Convention putting it all on the head of the fbi to point out the nominee against donald trump. Is he going to do that . Is it possible he said he was john roberts and im not going to put myself in the position of getting rid of the democratic nominee and this is for the good of the country. Im a bigger person because of it . Its not working out for him. Yeah. And any fbi chief would not want to do that during a president ial election. Your point in the piece is also that trump talks about finally showing some heart and why hes doing this. But in your view, he has not. He hasnt bought enough advertising time. Do you think that hes he was not going to blow his fortune or businesses and buildings in order to Fund President ial campaign to the tune of a billion dollars. Decide to run a cheap campaign that flies from rally to rally. That doesnt reach the people who arent your natural followers. Who are sitting on the fence. You have to put out tv there that give them a picture of you as president that they find okay. He doesnt want to spend the money to do that. Its not like he has stupid people advising him at this point. So they probably have been urging him to do that. And theres been outside people who wanted to raise money to do that and have gotten no encouragement from the campaign. Its not about launching trump tv afterwards, is it . Its not some machiavellian thats always been in the back of his mind . I dont know if he ever really wanted to be president and serve in the job. But the whole point of rigged is this is an argument you can continue afterwards. How do you defend democracy and our democratic process on november 9th . Oh, i think a blowout will take care of that. Oh, our system has shown we cannot count votes down to a narrow margin of error as in florida. But its a 5 or 10 win for hillary, who cares. Your column was great with the idea you could have a candidate potentially win big and yet have no mandate and yet have her presidency mired in investigation. Nothing is solved by this. I was very disappointed hillary took no step at all to the right. She continues or continued to run the Election Campaign as if she was running in the democratic primary. Yeah. I think thats never pivoted. Every time i hear one of these debates, i hope to hear her say im sure me and paul ryan could get together and make things happen for the country. If she did that, i think she could quash a lot of this. Talk about entrepreneurship she doesnt do. Its like it doesnt exist. Is there any reason to think that she suddenly feels the nobility of serving as president and i dont i think shes trying to win the house. I think shes going for running the table. Is it for her legacy or does she actually want to help the country . It seemed the 30year history of the clintons and what its all about serving, who it serves. When democrats do good things when theyre in power. So its not just selfserving and corruption and Everything Else weve seen the last 30 years . People can justify anything, basically. All right. See you in a couple weeks or next week. Makes me want to need a drink. Programming note. Catch all the action from the third and final president ial debate tonight right here on cnbc. Coverage beginning at 9 00 eastern. Coming up, a new read on the state of real estate. Well dig inside the mortgage numbers. Thats coming up next. For decades, investors have used a 60 40 stock and bond model, with little in alternatives. Yet alternatives can tap opportunities that traditional assets cant. And even though theyre called alternatives, theyre actually designed to help meet very traditional goals. Thats why invesco believes people should look past conventional models and make alternatives a core part of their portfolios. Translation . Goodbye 60 40, hello 50 30 20. Im the company data hog. I do the sales, the marketing. I have to do that from my phone. We use tons of data. I really dont have to worry about it cause everything is unlimited. I need data and i need it now. Its the end of data limits for your business. Get unlimited 4g lte data as low as 30 bucks per line. Switch your business to tmobile work. Rising 0. 6 last week, the mortgage apps. No one knows more about it than diana olick. She joins us now with a closer look at todays data. Diana . Well, steve, thanks for the intro there. There are plenty of things scaring homeowners but Interest Rates are not one of them. Take ka look. Mortgage application volume eked out a 0. 6 gain ending october 14th. That compared to the previous week. This despite climbing Interest Rates. Now, the 30year fixed rate averaged 3. 73 . Thats for conforming loan balances with 20 down. Thats the highest rate since june of this year which was right around brexit. Mortgage applications seasonally adjusted and are now higher than the same week one year ago. There are more mortgage dependent buyers in the market compared to a year ago. And that may count for the increase in applications. Investors who largely use cash have been slowing their purchases this year overall. As for the refis, refinance applications fell 1 from the previous week. Seasonally adjusted. But theyre still up 20 from a year ago when rates were slightly higher. Housing starts will be out and we need more Single Family Housing Starts. Weve got demand. Thats right. Joe introduced the concept of elasticity, the economic concept. We can use that and i wont be blamed for being the geek on the show. So what about the elasticity of mortgages to Interest Rates versus the elasticity of mortgages to jobs . And i would say that youre much more likely to have people come out because they want jobs on the Mortgage Rate. It doesnt have to do with the Mortgage Rate. Really what it has to do is that home prices are rising far faster than income growth. And the Mortgage Rate popping up. Nobodys expecting rates to go over 4 any time soon. What it really has to do is that home prices are rising so fast right now because of that supply issue. That the rates arent really mattering as much. Also, its mortgage availability. I can quote the 3. 73 and say thats fabulous. But if you dont have the right credit score and you dont have the 20 down. Youre not getting that 3. 73 . Youre getting something higher. Okay. Thank you very much. Coming up on squawk, the mornings biggest movers. Plus a car that is back from the dead. Phil lebeau takes a ride in the hybrid called the karma. But will it survive a very competitive road . That storys up next. The world awaiting another announcement from tesla and elon musk. In the meantime, our phil lebeau got an exclusive test drive. So it is a hybrid. A new luxury hybrid from an automaker. So the karma, stupid name is about if you get good karma. Thats a im sure theyre watching you right now and love hearing you a call it a stupid name. Thats the whole idea. This thing. Huh . Let me show you the car before you say anything else, joe. Remember the karma it was an electric car that was built in 2012 and a lot of people said lets have well, that company went bankrupt. But coming out of that there is a new company. It was basically who bought the assets of the car pa. And now this is the first model. It is the rovero. If it looks like the fister karma, its because it largely is. Theres been slight tweaks. But generally speaking it looks close to that. Price will be 130,000. It is expensive. Its an extended range electric car. Not a hybrid. The target buyer also has several other luxury models. Its probably one of several that you have in your garage. The reason that were showing you this is because we want to g back to 2012. So remember the fisker karma . There are only about 2,000 that were built. But they had a passionate if not somewhat strange collection of fans, if you will. People who said it was a great car even though it had poor range. When the company went bankrupt, people thought thats it the karmas gone for good. Now theres a second version of that, if you will. Were bringing a brand back. You know, its a renaissance of some degree. There were a lot of passionate owners that bought these vehicles for a reason. The reason is the car is gorgeous. And the electricification of the vehicle is good. With success in a short period of time we can replicate that discuss and then some. They will start delivering the first reveros. There is a niche audience who found the fisker karma attractive and theyll find this attractive. That is a sneak peek. You know, karma, it depends on whether its good or bad, number one. Thats right. Definitely a word that you can depending on the situation you say, whoa, thats karma. And thats usually bad karma. So im not sure that you know, if they need another name for another model, how about the karma chameleon. The Karma Karma Karma chameleon. Huh . Remember that . Were going to play that on the way out if we can. A little boy george. I would love to hear that. If they do have another model, steve, its ready. For that name. You want me to bail you out on this joke . If you can bring up boy george in any context, its worth it. Can i ask what the range of the new car is . Phil, still there . I believe the range is going to be close to 250 miles. About tesla competitive then. Its extended range electric which means youve got the gas assist engine which then powers the motor for the electric vehicle. So good karma while youre electric. Bad karma usually use as a positive term. Right. But when you go too far, then the bad karma kicks in when you switch over to the gas. When you switch over to the gas power, then you feel bad about yourself. Okay, phil. Thank you. Whats coming up, steve . Ill tell you. Your money, your vote. Senator mark warner is going to join us with what is expected at the debate. Plus the repercussions of concussions. Joan weill is here as we learn more about the longterm effects of head injuries. Well be right back. I got it, dad. Ow we love to keep them safe. So we made the Nest Protect Smoke and Carbon Monoxide alarm. It speaks up and can alert your phone if theres a problem. Or let you know if everything is just fine. Because, ya know, we worry. This is the rx. Elevated. Rx hybrid and rx f sport. Get up to 5,000 customer cash on select 2016 models. See your lexus dealer. Gilman go get it, marcus. Go get it. Coach gilman used his cash rewards credit card from bank of america to earn 1 cash back everywhere, every time. At places like the batting cages. [ crowd cheers ] 2 back at Grocery Stores and now at wholesale clubs. And 3 back on gas. Which helped him give his players something extra. The cash rewards credit card from bank of america. More cash back for the things you buy most. A showdown just off the strip. Hillary clinton and donald trump get ready to square off in las vegas. Senator warner joins us on the squawk set to talk president ial politics. Morgan stanley becomes the latest to beat the street. Well go beyond the bottom line. Plus key data on housing as the final hour of squawk box begins right now. Live from new york city, this is squawk box. Welcome back to squawk box here on cnbc. Im joe kernen along with Kayla Tausche and steve leisman. The equities indicated the dow up five. The s p down 0. 6. Theres the 10year. I dont know, leisman. This is something we havent talked about. I wanted to talk about it. Now were back down. Same with the 2year. The 2year was up at 88. Whether we go do we go back under 1. 5 or above 2 . Your buddy mark grant. I know if i could just know one thing, though. I dont even care who wins the election. I dont think it matters all that much. Really . If it goes back down below 1. 5 with that means that this is all a fake start for this supposedly recovery were now in. People started talking about a recession not being out of the question. Do you think that says more about whats going on here . I dont agree that the 10year has this define ability to figure the future out. The fed has been so involved. Of course the 10year used to be an important thing to Pay Attention to until the fed started buying 60 of but 2 . As a matter of fact i think it would be good for the economy to the extent to which the yield curve would steepen. It would be good. I just want to know whether it does. If you could tell me im not optimistic about what that would mean. It would be a bad sign for the economy. Dont you think . And i dont think its i dont think we can blame it on the rest of the world anymore. Its going to be dependent on about the election, how it reacts from the election. Shes in charge now . A key economic report now 30 minutes away. September Housing Starts are due at 8 30 eastern. Theyre expected to have rebounded last month after falling itll be 6 in august. Speaking of housing, Mortgage Applications were up. Applications now 18. 5 higher than they were a year ago. Well stay on the economic theme here. This afternoon well get the monthly beige book report. That tracks conditions in the feds 12 districts. Also worth watching a trio of fed officials. John williams, rob kaplan, and bill dudley. A few of the stocks were watching this morning. Morgan stanley beating the street on the top and bottom lines. Among the positive factors, a surge in bond trading activity. Stock still up about 1. 2 . Intels latest results, shares under pressure because apparently the street is disappointed over Data Center Business growth rates and some guidance that the company gave their stock is off 5 . And halliburton posting a surprise profit of 1 cent per share compared to analysis of 6 cents loss. Stock up 1. 5 premarket. And were watching oil prices this morning like every morning but maybe a little more. The Energy Information administration is going to release official crude and fuel storage data at 10 30 a. M. Eastern. Data out late yesterday showed a drop in u. S. Crude stockpiles. Okay. Now to politics. Third and final president ial debate is just hours away and youll be able to see it live on cnbc. That begins at 9 00 p. M. Eastern. John harwood covering the main event. He now joins us from las vegas. John . Reporter its windy in las vegas, steve. Were going to have a lot of wind in this debate a few hours from now. Final 90 minutes, weve had two president ial debates. One Vice President ial debate. Want to step back and set the scene of where the race is now. You look at the real clear politics averages of recent polls among likely voters. They tell a consistent story. Youve got Hillary Clinton in these averages just over 46 . In our poll she was 48 in a fourway race. In the mid to high 40s. Youve got donald trump at 39 . Thats a level hes had a tough time getting out of. He hasnt topped 40 in most polls recently. Then johnson and stein. Lets take a look at the sources of the lead shes built which is now more in the clear politics average. First of all, the key thing is College Educated white voters are favoring clinton narrowly. Thats usually a republican group. You look at women, substantial 20point advantage for Hillary Clinton. Voters under 50 years old also a 20point advantage. Huge advantage among nonwhites, almost 60 points. And among voters in urban areas, the major cities and the immediate areas around the cities, Hillary Clinton is also having a significant lead of 30 percentage points. Those are the barriers that donald trump whos got strength in the south among rural voters, among noncollege white voters. But those have not been enough for him. And well see whether he can do anything to expand his base. He hasnt lately been acting in a way that looks like hes trying to expand the base. But well see which donald trump shows up tonight. John, thanks very much for your coverage this evening. Joining us to talk more about the election and the challenges facing washington, virginia senator mark warner who has endorsed secretary clinton. I want to have a real meeting of the minds here, senator. Because i wish you had run you know, i register as an independent. But as far as democrats go, i always liked you. Even 90 you vote party line most of the time. But youre a private sector guy so you understand the private sector. And i think youre a public servant. You dont have to do this for personal selfenrichment. Not calling out anyone else that may have done that. But where we are as a country right now, are you at all depressed, pessimistic . How did we get to this point . I dont know who finally wins this election. But the democrats had to run Hillary Clinton, even in the Podesta Emails said we better hope for trump because shes not going to beat anybody else. Even in those emails they cop to that. This is somebody whos got 30 years of service to our country. You said at the top of the hour the thing that you cared about more than even the results of the election were where the spread was going to be on the 10year. I can tell you this much. You want the answer . Elect trump and see 70, 80, 90 basis point drop. That wasnt what i meant. I just meant no, no. Ill give you your answer. I said give me one data point youre moving further from a meeting of the minds. Go ahead. No, no. To judge where were going to be economically and marketwise, i said its more important for me to know where that is than who wins the election. Because i think, you know, thats sort of but i do think marketwise, the disruption that this guy would bring to the markets, to peoples faith in our institutions, not just the electoral system which he is trashing. Hold on. No, no. I dont need you to do it for me. Because let me heres what im okay, fine. So we get stability with Hillary Clinton. And the markets dont freak out. So its almost like, you know, saying that the United States has the best economy based on the rest of the world. Okay. We can do better than this. And just saying, well, it wouldnt be as bad as trump to get Hillary Clinton. Half this country you know what half this country feels about take either candidate. Take what half the country feels about trump, think about him as president. Take half the country how they feel about Hillary Clinton and have her as president. Why are we as a country to be in this position for the next four years . I think in Hillary Clinton weve got somebody whos got a 30year record. You get dinged around. But shes got even when you say 30year record. Im thinking criminal record. I know people with criminal records for 30 years. Just because they have a record doesnt mean its good, senator. Go down her policy list. I dont know what it is. Shes changed. You can go through her plans on structure. Listen. I support tpp. Does she . Do you know . Ill bet you she does but we dont know she does. As a longterm advocate for trade, i think weve got to acknowledge and i can point to parts of my state where after nafta communities got left behind. We have never done anything i tried buttering him up. You go ahead. Youre talking lets talk about policy. Private sector guy. Lets talk about policy. How do we get a trade deal den d. O. Snen. Your candidate is against it. So why are you selling this to me . If were going to get a trade deal done, weve got to look at the communities that have been left behind. If we believe our own rhetoric on trade, its going to add a trillion dollars to the economy. We need to do more than 5 billion on taa. Again, i think that means theres a reset. I think all of us who have been in the private sector need to realize theres a lot of fundamental transitions going on in this country. I have a more fundamental question than trade. Before you get to trade, how do you govern . And this is really the issue. Part of the problem of governance is going to come from the Republican Party because its not entirely clear what that is right now. Another part comes from the Democratic Party because theres this very strong left which Hillary Clinton continues to cater to. We had Holman Jenkins here with an awful but very plausible theory that this is four years of investigation. Four more years of gridlock. Have you thought about because youre a thinking man. How does the next president of the United States govern the United States . Hillary clinton has had a record both particularly in the senate where she was willing to reach across the aisle and get things done. The truth is and this is one of the challenges what about the hatred, the opposition that joe is talking about . Thats where if in the first ten months of a Clinton Administration we dont put some points on the board and show the country can move forward, then yes, youve got a right to make these critiques. But the notion is when the frustration comes from trump and Bernie Sanders saying the system is rigged. When youve got a candidate for president thats basically denigrating the whole integrity of the electoral system. With congress earning its 8 approval rating. Let me just finish this thought. If we dont find a way to move some forward progress and i actually think clinton has got a record of showing she she talks nothing about raising taxes on business when she gave us her hallmark economic speech. Barely mentions private only in passing. And doesnt take a step to reaching out to there are many people out there looking for a reason not to support donald trump because of things hes said. And shes given them no reason to come on board. I think youll see that tonight. If she continues to let trump be trump, the first two debates thats worked well. Go ahead, but, clinton foundation, none of that . Youve seen the underbelly of all the stuff thats gone on for the past eight years from zero to a quarter of a billion dollars. None of that bothers you ethically . Clinton foundation makes sense. Youve had all this, wheres your smoking gun . May i ask a question. I grew up in a democratic household but im a private sector guy and a republican now. And the i grew up in a republican household, im a private sector guy and a democrat. But the Democratic Party has changed dramatically in my opinion in terms of i think a lot of people look at things through the prism of ethnicity, gender, social things. The real issue it seems is the middle class. As a democrat, do you think the democrats have abandoned the middle class . It seems like its a class of professionals. Of elites. And i think some of the things that have been revealed and some of these wikileaks is theres a disdain for average people. I mean thats not the Democratic Party that i believe im part of. Okay. I think there is a progrowth part of the Democratic Party which im proud to be part of. Thats how we started the conversation. There are elements of the where are they . Where were they this time around . I think there are a slew of us. I think that you will see that youve also got to balance that with the fact that with the level of discontent, as somebody who believes strongly in our system, something is a little strange around modern american capitalism. When youve got this tremendous focus on shorttermism versus longterm value creation. I think thats a different capitalism than i grew up in when i started by businesses. You acknowledged the need for clinton. You say she needs points on the board in the early days of her administration. Whats even possible for her infrastructure. I think there is an enormous recognition across both sides of the aisle, youve got donald trump talking about infrastructure. Hes going to make all these things great. He never explains how hes going to pay for them. You dont think infrastructure is code for indiscriminate spending . Weve got variations of the old infrastructure bank, democrats and republicans wondering why were not taking out weve got to go to break and we also have a good song to bump out with here. But before we get to that is boy george back . Before we get to that, can you i mean, pretend the camera is not on. Whisper it to me. Will she really do tpp . Will she bring back the money from abroad . Will she do things her husband would have done in 1992 . I think youll see a renewed effort. I dont think youre going to get a trade deal done without a recognition that weve got to do more for communities and people who have been left behind by trade. I say that as a trade advocate. I also think shes got a record that shell work with people on both sides. Frankly, weve seen none of that. Weve seen trump not even willing to work with his own team. A lot of people think she should have a record. Yeah i support that after trump said he wanted to have a repatriation tax. Were going to get to the senators from my generation. Knew exactly was i right . The karma chameleon. I was just wondering whether you made that up. Made it right up. Thats why you dominate this morning. Team of writers. Begins at 2 00 the day before and they start giving him jokes. What about the Karma Kardashian . Thatd be a good coming up, im the one who has to suffer and read this over boy george. Former secretary general Anders Rasmussen joins us. Well get his take on the candidates Foreign Policy plans and tour the world with him. And tonight dont forget you can catch all the action from the third and final president ial debate right here on cnbc from las vegas. Begins at 9 00 p. M. Hey gary, what are you doing . Oh hey john, im connecting our brains so we can share our amazing trading knowledge. Thats a great idea, but why dont you just go to thinkorswims chat rooms where you can share strategies, ideas, even actual trades with market professionals and thousands of other traders . I know. Your brain told my brain before you told my face. Mmm, blueberry . Tap into the knowledge of other traders on thinkorswim. Only at td ameritrade. Keeping the power lines clear,my job to protect public safety, while also protecting the environment. The Natural World is a beautiful thing, the work that we do helps us protect it. Public education is definitely a big part of our job, to teach our customers about the best type of trees to plant around the power lines. We want to keep the power on for our customers. We want to keep our community safe. This is our community, this is where we live. We need to make sure that we have a beautiful place for our children to live. Together, were building a better california. Welcome back to squawk box. A report in the wall street journal says salesforce considered 14 possible acquisition targets back in may included adobe with a 54 billion market cap. And linkedin, but not twitter which was conspicuously off of that list. The list of potential targets comes from hacked emails from former secretary of state colin powell who sits on the salesforce board of directors. In a statement salesforce told cnbc they landscape across a wide range of companies but acquires very few. Adobe is the one people are picking out of this not only because its so big but because other companies on the list have already been acquired. Even in that time. I think what we should all do now is preemptively release all of our emails. Right . So there wont be any discoveries anymore. That all emails are just public. What do you think . Its getting out of hand. Good Old Fashioned phone conversation. I dont have any exemption to privacy anymore. I think thats long gone. Like you put in an email you got to read a few times. Lets get to wilfred. Now back to Morgan Stanley. Wilfred frost just getting off a call with the companys c fo. Are you willing to release your emails . I came off the back end of that conversation but no my emails will stay private. Let me talk about the stanley numbers that were beat significant lip. He said it was a solid quarter. He, quote, feels good about the results that but they still have more work to do. Lets explore some of that work. Their 2017 target is 9 to 11 . He said they need more client conviction and confidence to hit those targets. But did really make a clear difference to what most of this year has been like compared to january and february. And clearly things have improved since then. In terms of the Competitive Position that they have, he said theyve got good momentum, strong global footprint. We talked about the fact that the beat was led in trading revenues, asked about whether they were making, taking market share and on that he just said you cant comment on market share of a specific quarter. But we feel confident that they can accrue share over time. Very clear key to emphasize their number one global position in equities. I asked whether brexit was an opportunity. Wouldnt really be drawn on that. But did highlight that most of the global banks are headquartered in new york. We did ask about Investment Banking performance. Of course they were pretty much in line for the quarter. Little bit better than Goldman Sachs for that. And he felt that so far the momentum is good. Advisory had helped the overall banking performance and that pipelines are still healthy. But too early to ask about q4. I asked about value act. Of course the stake the activist hedge fund, there was no comment on that. And also asked about regulation. Fear of regulation picking up off the back of wells fargo scandal. Theyre conducting a detailed review to confirm they are following their best practices. Something he said you would expect us all to do and continue to review those. But didnt feel there was anything specific to bring up in terms of notifying or finding anything of any wrong doing at any point. Guys . Thank you, wilfred. All right. Thanks. Now back again to politics. The next president faces a number of global challenges including frosty relations with russia. One former nato secretary general says the next american president should act as a global policeman to restore world order and bring peace in. Anders rasmussen who served as both nato secretary general and danish prime minister, author of the new book the will to lead. Secretary, its good to see you this morning. And this point has been made, i guess, and usually its made in light of what some would see as kind of a retreat from the United States responsibility or at least the way america had acted in the past. Maybe we havent been acting quite as outgoing with these things as we have in the past. Is that your take on this . Yeah. I want to hear the candidates tell us how they want to promote global trade and Economic Growth. How they will counter putin. I think the american relationship with china is much more important than the candidates relationships with women. So what i would like to hear tonight is how will you exercise determined American Global leadership. Yeah. That that has been just thinking about berlosconi. So the relationship might be more important than the relationship with women. Thats a whole new concept. Do you mean, mr. Secretary, in terms of a military adventurism as well as or are you talking about trade for the United States to lead . Because in terms of militarily, there are some people who think we have disappeared from the leadership role. I fully agree. You need a strong american commitment. Both economicicly and militarily. Economicicly im concerned that both candidates have and also the transatlanta trade and investment partnership. Because this is not to introduce productionism and isolationism. On the contrary we need more global engagement. Also when it comes to the military. I do believe that the best way to facilitate. Only spending 2 of their gdp. The u. S. , uk, and estonia, pole land, and greece. So isnt it a twoway street . There are other countries that might need to take more responsibility for their commitments to nato. No . Absolutely. I fully agree. The europeans should pay a bigger part of the total bill for our we decided that all 28 allies will within the next decade reach the 2 edge more in defense than they did in 2015. So of course the United States shouldnt act alone as the worlds policemen. You need someone to help you. Thats why in my book i suggest that the next president will convene all Democratic Leaders from the whole world to establish an alliance for freedom that can counter the still more aggressive autocrats like mr. Putin. I do think both candidates are probably more hawkish in those terms than the last eight years that weve had, probably, mr. Secretary. We appreciate your time today. Thank you. Thank you. Breaking Economic News coming up. Well be right back. Weve just been hearing so much about how youre a digital company, yet here you are building a jet engine. Well, ge is digital and industrial. Like Peanut Butter and jelly. Yeah. Ham and cheese. Cops and robbers. Yeah. Nachos and karate. Ahh. Not that one so much. The rest were really good. Socks and shoes. Ok, ricky. All right. September Housing Starts hitting the tape. Rick santelli standing by at the cme in chicago. Rick, drum roll. The numbers . 1. 047 million seasonally adjusted annualized units. That follows 1. 15. So obviously were back tracking a bit. As a matter of fact were back tracking to the tune of close to 9 . Lets look at permits, shall we . We were expecting a number 1. 16 area. We ended up with 1. 22. And that follows 1. 15. So thats a plus. Thats up over 6 . So a little over 6 on permits. Down 9 on starts. And 1. 047 million, that sticks in my mind. Thats the lowest level for the year. Boy, we have to go back a ways. We have to go back to about march of last year to find a lower number. And of course housing could be the poster child for all the programs, all the policies, all the imf claims, all the u. N. Claims, all the big growth claims. Because at current rates whether you go up or down 25 basis points, this mortgages, obviously whats wrong with housing isnt what the level of Interest Rates are. Its most likely how credit is allocated or even a desire to own a home. Of course, at some point the government will get reinvolved like they did in the early 90s. At some point, what are the markets doing . 180 were rejected. The 150 were overpopulated in august. Here the market sits. Maybe the best thing is to keep track of the dollar index. Look at the 15year chart. Well have to wait and see and of course the other issue we want to be cognizant of is whats going on overseas. Some of that uk data looks pretty good. Whether it was brexit or maybe its our election. Sometimes the smart people arent as smart as they think they are. Back to you. All right. Thanks, rick. Lets get more on this data here. And on the big debate on wall street for outlook on gdp growth. Joining us, Deutsche Bank u. S. Economist along with chief economist at amherst. Joe, i dont think i saw a smile on your face, but i think i saw a smile in your brain when this number came out. Right . Because youve been saying things are weaker for awhile. This is in line with your thoughts. Is this a sign of weakness out there in the economy . The permits actually is a better series. And thats up. My guess is housing will do okay. But we dont have this cyclicality and were not getting the multilier we typically saw. To me the reason we get into q3 is because Consumer Spending which was strong in the Second Quarter now is reversing and slowing quite dramatically. Whats your number . Ive seen between 2. 5 and 3 for Consumer Spending. First, let me show the rapid update chart. This is the range. Were looking at a median of 2. 6 of the economists we tracked. Joe is at the bottom there. Hes at 1. 9 . Youre at 1. 3 now on your forecasts right now. And ive been hesitant to change. The thing is were in a low nominal growth world with relatively stability product. Forecasters should be looking at growth in the low ones. And they consistently over the past year had numbers above two and it hasnt played out. Youre also part of the survey. You represent the top end of that range. 3. 1 . Tell why is joe wrong about the is . Well, for what i can see most of the disagreement about the forecast for the Third Quarter is really in the trade and inventory pieces. I think most of us agree that domestic demand is pretty steady. Which is exactly what it was in Second Quarter. And i have real domestic demand which is gdp minus inventories of trade at 2 . Which is actually a little weaker than the Second Quarter. So i dont have across the board strength. But what i do see is i see a rebound in inventories after liquidation in Second Quarter. Joe, i checked what you were talking about yesterday and i cant you are talking to me joe this time . Youre not talking to oh, that joe. Right, right. Because i started listening for a second i started listening to what you were saying to him. But now you are joseph kernen. We have been starting off with these very optimistic quarters then moving back down. That seems to be the case. I dont know why that is, joe. Is it just that economists continue to believe that theres symptom great i dont know golden ring out there to reach for when it comes to this recovery that always slips away . Seems that way. Partly as the fed has helped shape consensus expectations of economists and the rebound and the recovery and the acceleration is around the corner. So part of its just old habits die hard. The inventory cycle has gone on for a long time. However, id argue theres a risk Consumer Spending is up in the quarter. Thats a big deal. Listen. One of the things i would maybe make a comment and ask you guys is two things. One is productivity. Not just this quarter but for longer term. One of the things that has been shocking among our shop and economists is how low productivity has been. Almost to the extent people wonder whether its not being calculated correctly. I dont know if you have a strong opinion on that. But certainly theoretically if its employment growth and productivity, if you have productivity at 0. 3, its hard. Its not the underlying growth trend. This is the thing. Growth has been 2 every year for the last four years in a row. Low numbers in the first half of the year. Now i think were going to get something a little above 2 . But i think well be around 2 for the year. Its something ive been talking about for years. I think joes right. The fed kind of was very slow to recognize what was going on with productivity. And its made a fundamental difference in the way we see the economy. Potential growth as a result is low. And it turns out weve been probably at 2 we thought that was below trend for most of the expansion. Turns out its probably above trend. Which is why the labor market is where it is. But there is a question if you address this that joe . Yeah, that joe. Okay. Youre saying joe again. I was trying to address it i said joe. Oh, im joseph . No. Joe. Go ahead. Is there when you say 1. 3 , are you marking what you believe the trend growth to be . Or do you believe were weaker than trend and that we come back . Is it 2 thats the right in you remember . So, yeah, so steve mentioned since the cycle ended, its been since june of 09. But the last quarter its been 1. 3 . My guess is thats the new trend. Steve, if you look at the unemployment, its been we dont have time for why that trend is so low and now youre talking to me again. Because ann is asking us and you know i like ann so were going to move on. Thanks to both of you. Coming up, Microsoft Surface tablet has been sidelined by one nfl coach. Well tell you why on the other side of this break. Its your tv, take it with you. With directv and at t, watch all your live channels, on your devices, datafree. Switch to directv and lock in your price for 2 years, offer starting at 50 month. We had to think a little more seriously about saving money for the future and for the kids and for their college funds. We thought, well this airbnb is actually a great way to pay those extra bills. Every bit of extra money helps these days. We have a Retirement Fund of our own and i take a draw on it. I dont want to take too much either because i dont know what life is going to bring to me. I get to keep 97 of my rental price. The extra income i get from airbnb has been a huge help. Airbnb has helped me so much financially especially starting my own business. San francisco is such an expensive place to live. The way people work and travel is changing. 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Be a bengals fan. Did microsoft say theyre looking into any issues and looking into a major Consumer Complaint . An investigation. Rather than saying standing by saying belichicks wrong. Coming up, new thinking on treatments for concussions. Joan weill will join us ahead of todays Womens Health symposium in new york as we learn about the longterm effects of head injuries. First as we head to break, though, quick programming note. Dont miss starbucks ceo Howard Shultz on closing bell today at 4 00 p. M. Eastern time. Go after it the same way . Y chasing after short term returns. Instead if getting caught up with the crowd, the Investment Managers at pgim take a long term view, teaming specialized active investing with riskmanagement rigor, to seek out global opportunities. We manage over a trillion dollars this way, attracting many of the worlds leading investors. Partner with pgim. The Global Investment management businesses of prudential theno one surface. Out there. No one speed. 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Whoooo for people with hearing loss, visit sprintrelay. Com. Were used to hearing about concussions in professional football, hockey, also were now hearing kids suffering some of these violent head injuries while playing sport. Meanwhile researchers working to learn more about the longterm effects from concussions as well as possible connections to a neurological disease like alzheimers later in life. Joining us is joan weill. She is cochair of this years Womens Health symposium being held in new york city by Weill Cornell medicine. Its focusing this year on concussions as well as alzheimers. Joining us also is one of the institutions top neurologists. Concussion not as much alzheimers but you can speak to concussions. Correct. And joan, my first thought also was Womens Health. Okay. What about everybodys health. But it is different. Because in the past women have been treated as you put like small men. Which i thought exactly. And there are definitely different parameters and different ways to approach the health. Absolutely. I mean, we present so differently in for instance, in a heart attack. Women present completely different symptoms than men do. And also, you know, its very important because women are really very often the gateway to the health of the whole family. That is true. If i had to pick one person, id have her healthy. You have to drag your husband or spouse or partner to the doctor. Your children or your nieces, nephews, whatever. Again, you know, women are very important as far as the health care goes. I dont think people know. Girls are more subject in playing sports as young people to concussions. I dont think you immediately think of that. Research is now showing in gender match sports such as soccer and basketball, women have an increased risk of having concussion over men . Over men. And we think thats related to weaker neck moususcleture. Both the numbers of symptoms and duration following concussion. That may just be the way the brain is built or the way impact to the brain following a concussion alters their function. So in terms of the future and prognosis, what is the state . Does it matter which part of the bra in . Its always important which part of the brain gets affected. What were learning is that we need to educate the trainers an the coaches and i think this speaks to joans point and the parents and families. Parents. That the the conversation is sports good for children. But theres a risk and how do you min nice that risk . And i think one of the parts is having the mother in the conversation. They have to help the children balance what is safe and when in doubt, sit it out. One of the important components here is you dont want to play through a concussion or through a headache. And youve got to be respectful of those symptoms. And a lot of times athletes dont want to take a break. The sports component of this seems somewhat preventable. Awareness of symptoms, wear helmets and some of the higher combat sports. I had two concussions. One was a car accident and one i was a college cheerleader. Is there a way you should be working out your neck or taking certain vitamins . Is there anything you can do to lower the instance rate of a concussion . You see, thats what part of our symposium is about. What we try to do at the symposium is have our audience walk out with things they can actually learn to do to prevent exactly what happened with you. And thats really part of what we do. And again, to say that, you know, difference in young girls again women are not small men. We are different. Very different. I think at the national level, prevention is a high priority. And one thing we can do is change the rules of sports. So given the unique vulnerability of the developing brain, to limit tackle football to players that are older than 14. To limit heading the ball in soccer to players who are older than 14. Those are steps you can take. But i think as emphasized by the symposium, things like nutrition as well as relaxation, decreasing stress, as well as exercise. Were starting a program at Weill Cornell to introduce graded shown to be effective especially in athletes to getting them back on the field sooner. So while you cant prevent every injury, you can promote recovery. What were doing on this particular Health Symposium is we have dr. Gregg pesko, who is a ph. D. And does a lot of research in alzheimers disease so we are showing the gamut of, you know, people are aging more and living much longer, so they are getting more diseases of the brain. And so thats what we are trying to prevent and people to learn how to prevent that kind of thing. Right. And its complicated the difference between dementia and alzheimers. Its an organ. Its an aging organ when youre 95 you understand your kidneys dont work as well, those are all semantics. And how do we prevent that from happening. Relationships are very important. And use it or lose it is one of the mantra we have. Were going to do jumble. A word game were going to do in a second. What has been shown is early concussion and earlier the injury the more likelihood of some neurodegenerative problems but theres only a small fraction of people that go on to have those problems, and its decades later. Its hard to connect the dots, but there is some biology to people with genetics with increased symptoms, same factor that increases risk of alzheimers. Also whats happening with neuroscience now is fantastic because now they can actually look into the brain. You dont have to wait for a person to die. And this is really very, very helpful thing. Thanks for all youve done. Well, thank you. For the institute and everything. Thanks for coming in. Thank you, appreciate the time. Thank you very much. Coming up, well talk to jim cramer live from the new york stock exchange. Well be right back. An creates , used by this bank, to protect this customer, who lives here and flies to hong kong, to visit this company that makes smart phones, used by this Vice President , this little kid, oops, and this obstetrician, who works across the street from this man, who creates software. They all have insurance crafted personally for them. Not just coverage, craftsmanship. Not just insured. Chubb insured. As long as you love me, its alright. Shape the best sleep of your life. Sleep number beds with Sleepiq Technology adjust any way you want it. The bed th moves you. Only at a sleep number store. Ebecause the ultimate expression of power is control. Get up to 5,000 customer cash on select 2016 models. See your lexus dealer. Get down to the new york stock exchange. Jim cramer joins us now. You know, we dont really intel used to be so cool to talk about, jim. Its still almost a 200 billion company, and i guess it still is, but i thought that company was going to take over the world 15 years ago. And it basically same market cap it was back then. We need it though, right . Yes. Its funny. You say they do a tenyear review in the Conference Call where basically talking about the incredible things theyve done towards raise Gross Margins and revenue bursts. But in the end theyre still tied too much to personal computers and tied to the enterprise for the cloud. The enterprise hasnt billed out. Look, it was a great quarter. Stacey smith was right when he came on the air and said that, but the guidance was by their own take lower than the median. I always expect a Fourth Quarter blowout for intel. Theyre just not going to give you one. And that really just was the buzz kill. Other than that that stock would have been through 40. Jim, you think salesforce is going to buy adobe . What did you make of that target list . No, they are very good friends. They have a lot of look, these are very Complimentary Companies in the same way workdays on that list. And marc benioff has a great relationship with both workday and adobe. If those companies were to combine, it would be rather amazing because both ceos of workday and adobe love their companies. And i just dont think in the experience ive had with benioff hes not about to take over a company and make it so that a guy like the cfo of adobe leaves, neil bushery, these guys are great friends. Excuse me. One thing thats interesting is tablo, i know marc doesnt like, but said its in play. Even had a code name for it. And tablo happened to have a bad quarter. So remember tablo and linkedin had bad quarters at the same time. Linkedin gets bought, tablo nothing happened. I was going to ask you whether happy days were here again, im told for all the banks because of dodd frank things are going swimmingly. Thank you. Dorm dont miss Lloyd Blankfein. 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Fedex. I am benedict arnold, the infamous traitor. And i know a thing or two about trading. So i trade with e trade, where true traders trade on a trademarked trade platform that has all the. Get off the computer traitor i wont. cannon sound all right. Trenner, thank you for joining us. Steve liesman, thank you too. Oh, come on. It was great, joe. Great, steve. Make sure you join us tomorrow. Squawk on the street is next. Even flow good wednesday morning. Welcome to squawk on the street. Im Carl Quintanilla with jim cramer at the new york stock exchange. David faber is at the Goldman Sachs builders and innovators conference in santa barbara, california. Hes going to talk exclusively to Lloyd Blankfein later today. Futures in a range meanwhile ahead of the final president ial debate tonight plenty of earnings, europe relatively flat, road map begins with the debate